<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1999
REGISTRATION NO. 333-82923
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TENNECO PACKAGING INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3086 36-2552989
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION) NUMBER)
</TABLE>
1900 WEST FIELD COURT
LAKE FOREST, ILLINOIS 60045
847-482-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KARL A. STEWART
VICE PRESIDENT AND SECRETARY
TENNECO INC.
1275 KING STREET
GREENWICH, CONNECTICUT 06831
(203) 863-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
JERRY J. BURGDOERFER, ESQ. GERARD M. MEISTRELL, ESQ.
JENNER & BLOCK CAHILL GORDON & REINDEL
ONE IBM PLAZA 80 PINE STREET
CHICAGO, ILLINOIS 60611 NEW YORK, NEW YORK 10005
(312) 222-9350 (212) 701-3000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this registration
statement and all other conditions to the exchange offers described in the
enclosed prospectus have been satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number or the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS DOCUMENT IS NOT COMPLETE AND MAY BE CHANGED. TENNECO MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS DOCUMENT IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS AND CONSENT SOLICITATION (Subject to Completion; Dated October 4,
1999)
$[ ]
TENNECO PACKAGING INC.
Exchange Offers and Consent Solicitation
Outstanding Debt Securities of Tenneco Inc. (to be renamed Tenneco Automotive
Inc.)
exchanged for
New Debt Securities of Tenneco Packaging Inc. (to be renamed)
<TABLE>
<CAPTION>
Tendering Holders Will Receive the Following
Principal Amount of Tenneco Packaging's New
For Each: Securities:
-------------------------------- -----------------------------------------------
If the Valid Tender is If the Valid Tender is
Aggregate Made Before the Made After the
Principal $1,000 Principal Amount Consent Solicitation Consent Solicitation
Amount of Tenneco's Original Securities Expires Expires*
- ----------- -------------------------------- ---------------------- ----------------------
<S> <C> <C> <C>
[To be provided by amendment]
</TABLE>
- ---------------
* The valid tender must also be received before the applicable exchange offer
expires. Tenneco will only issue new securities with principal amounts of
$1,000 or integral multiples of $1,000. Tenneco will: (1) aggregate the new
securities to which a tendering registered holder would otherwise be entitled;
(2) round this amount down to the nearest $1,000 and issue new securities to
that holder in the rounded amount; and (3) compensate that holder for this
rounding by paying cash in an amount equal to the principal amount of the
fractional new security.
Each of the exchange offers expires at 5:00 p.m., New York City time, on
, 1999, unless extended. The consent solicitation expires at 5:00
p.m., New York City time, on , 1999, unless extended.
- - Tenneco intends to spin-off Tenneco Packaging after the exchange offers.
- - Your tender is an automatic consent to amend the terms of the original
securities, as described in this document.
- - Tenneco expects that any original securities outstanding after the exchange
offers and spin-off will not maintain investment-grade ratings.
- - Tenneco expects the new securities to have an investment-grade rating.
- - Your right to withdraw tendered securities is limited, as described in this
document.
- - Your exchange should not be taxable for U.S. federal income tax purposes,
except for any accrued interest or cash received in lieu of a fractional
interest in new securities.
- - The new securities will not be listed on any securities exchange or market.
See "Risk Factors," beginning on page 24, for a description of factors that you
should consider in evaluating the exchange offers and consent solicitation.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this document. Any representation to the contrary is a
criminal offense.
---------------------
The dealer managers for the exchange offers and consent solicitation are:
MORGAN STANLEY DEAN WITTER CREDIT SUISSE FIRST BOSTON
, 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY..................................................... 4
RISK FACTORS................................................ 24
Risk Factors if You Exchange.............................. 24
Risk Factors if You Do Not Exchange....................... 27
Risks Factors Relating to the Spin-off.................... 32
FORWARD-LOOKING STATEMENTS.................................. 34
WHERE YOU CAN FIND MORE INFORMATION......................... 35
INCORPORATION OF INFORMATION BY REFERENCE................... 35
THE EXCHANGE OFFERS AND CONSENT SOLICITATION................ 37
Terms of the Exchange Offers.............................. 37
The Consent Solicitation.................................. 38
Expiration Time; Early Exchange Time; Extensions;
Termination; Amendments................................ 38
Effect of Tender.......................................... 40
Acceptance of Consents and Original Securities; Delivery
of Exchange Consideration.............................. 40
Procedures for Tendering Original Securities and Giving
Consents............................................... 41
Conditions to the Exchange Offers and Consent
Solicitation........................................... 45
Withdrawal Rights......................................... 46
Dealer Managers........................................... 47
Exchange Agent............................................ 47
Information Agent......................................... 47
Trustee................................................... 48
Fees and Expenses......................................... 48
MARKET AND TRADING INFORMATION.............................. 48
ACCOUNTING TREATMENT OF THE EXCHANGE OFFERS................. 48
THE PROPOSED AMENDMENTS..................................... 49
Elimination of Operating Covenants........................ 49
Waiver.................................................... 50
DESCRIPTION OF THE NEW SECURITIES........................... 52
General................................................... 52
New Securities............................................ 52
Some Important Covenants of Packaging..................... 52
Consolidation, Merger and Sale of Assets.................. 54
Events of Default......................................... 55
Modification of the New Indenture......................... 55
Defeasance and Covenant Defeasance........................ 56
The New Trustee........................................... 56
Book-Entry System......................................... 57
Physical Securities....................................... 58
Payment................................................... 58
THE SPIN-OFF................................................ 59
Reasons for the Spin-off.................................. 59
Manner of Spin-off........................................ 59
Corporate Restructuring Transactions...................... 59
</TABLE>
------------------------
THIS DOCUMENT INCORPORATES BY REFERENCE IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT TENNECO INC. AND TENNECO PACKAGING INC. THAT IS NOT PRESENTED
IN OR DELIVERED WITH THIS DOCUMENT. THIS INFORMATION, EXCLUDING EXHIBITS TO THE
INFORMATION UNLESS THE EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
THE INFORMATION, IS AVAILABLE WITHOUT CHARGE TO ANY HOLDER OR BENEFICIAL OWNER
OF ORIGINAL SECURITIES UPON WRITTEN OR ORAL REQUEST TO KARL A. STEWART, VICE
PRESIDENT AND SECRETARY, TENNECO INC., 1275 KING STREET, GREENWICH, CONNECTICUT,
06831, TELEPHONE NUMBER (203) 863-1000. IN ORDER TO OBTAIN TIMELY DELIVERY,
HOLDERS OF ORIGINAL SECURITIES MUST REQUEST THIS INFORMATION NO LATER THAN
, 1999. Notwithstanding any disclosure to the contrary in documents
incorporated by reference, no safe harbor protection under Section 27A of the
Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934
extends to forward-looking statements that appear in this document directly or
by incorporation.
2
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Debt Realignment.......................................... 60
Relationship Between Automotive and Packaging After the
Spin-off............................................... 61
Conditions to the Spin-off................................ 65
Amendment or Termination of the Distribution Agreement.... 65
DESCRIPTION OF PACKAGING.................................... 66
General................................................... 66
Capitalization............................................ 66
New Financing............................................. 67
Unaudited Pro Forma Combined Financial Statements of
Packaging.............................................. 69
Supplemental Financial Information of Packaging........... 75
Combined Selected Financial Data of Packaging............. 76
Industry Overview and Key Terms........................... 79
Products and Markets...................................... 80
Growth Strategy........................................... 81
Marketing, Distribution and Customers..................... 84
Analysis of Revenues...................................... 85
Competition............................................... 85
International............................................. 85
Properties................................................ 86
Raw Materials............................................. 86
Environmental Regulation.................................. 86
Other..................................................... 87
Legal Proceedings......................................... 87
Containerboard Packaging Interest......................... 88
Management................................................ 89
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 98
Principal Stockholders.................................... 115
DESCRIPTION OF TENNECO AFTER THE SPIN-OFF/AUTOMOTIVE........ 116
Capitalization............................................ 116
Unaudited Pro Forma Consolidated Financial Statements of
Tenneco................................................ 117
Supplemental Financial Information of Tenneco............. 123
Tenneco and Consolidated Subsidiaries Selected Financial
Data................................................... 125
Overview of Automotive Parts Industry..................... 129
Analysis of Automotive's Revenues......................... 129
Emissions Control Systems................................. 131
Ride Control Systems...................................... 132
Sales and Marketing....................................... 133
Manufacturing and Engineering............................. 133
Industry Trends........................................... 134
Business Strategy......................................... 137
Properties................................................ 139
Legal and Environmental Proceedings....................... 140
Strategic Acquisitions and Alliances...................... 140
Other..................................................... 141
Management After the Spin-off............................. 142
New Financing............................................. 151
U.S. FEDERAL INCOME TAX CONSEQUENCES........................ 153
Tax Considerations if You Exchange........................ 153
Tax Considerations if You Do Not Exchange................. 155
Backup Withholding........................................ 155
LEGAL MATTERS............................................... 155
EXPERTS..................................................... 156
INDEX TO COMBINED FINANCIAL STATEMENTS AND SCHEDULE OF THE
BUSINESSES OF TENNECO PACKAGING........................... F-1
</TABLE>
3
<PAGE> 5
SUMMARY
Tenneco is offering to exchange Packaging's new securities listed in the
table below for Tenneco's original securities listed in the table below and is
soliciting consents with respect to the original securities on the terms and
conditions described in this document and the accompanying letter of consent/
transmittal. The following is a brief summary of the information included in
this document and may not contain all of the information that is important to
you. You should carefully read and review this entire document and the other
documents to which it refers to fully understand the terms of the new
securities, exchange offers and consent solicitation.
You should rely only on the information contained or incorporated by
reference in this document. Tenneco and Packaging have not authorized anyone to
provide you with information different from that contained in this document or
incorporated by reference into this document. The exchange offers and consent
solicitation are not being made to, and Tenneco will not accept tenders for
exchange from, holders of outstanding original securities in any jurisdiction in
which the exchange offers or consent solicitation, or the acceptance thereof,
would not be in compliance with the securities or blue sky laws of that
jurisdiction.
Unless the context otherwise requires, in this document:
- "Tenneco" refers to Tenneco Inc., a Delaware corporation, and its
subsidiaries. Tenneco is currently engaged in the automotive, packaging
and administrative services businesses, but plans to spin-off the
packaging and administrative services businesses to its stockholders.
When the spin-off is completed, Tenneco will be engaged in only its
automotive business.
- "Packaging" refers to Tenneco Packaging Inc., a Delaware corporation and
those companies that will be its subsidiaries when the spin-off is
completed. Packaging will be renamed in connection with the spin-off.
- "Automotive" refers to Tenneco Inc. and those companies that will be its
subsidiaries when the spin-off is completed, which will own and operate
its automotive business. When the spin-off is completed, Tenneco will be
renamed Tenneco Automotive Inc.
THE EXCHANGE OFFERS AND CONSENT SOLICITATION
THE EXCHANGE OFFERS: For each $1,000 principal amount of original
securities validly tendered and accepted for
exchange, Tenneco is offering (1) $1,000
principal amount of the corresponding series of
Packaging's new securities for holders who
validly tender their original securities before
the consent solicitation expires, as shown in
the applicable column of the table below, or
(2) [$ ] principal amount of the
corresponding series of Packaging's new
securities for holders who validly tender their
original securities after the consent
solicitation expires but before the applicable
exchange offer expires, as shown in the
applicable column of the table below.
Notwithstanding the foregoing, Tenneco will
only issue new securities with principal
amounts of $1,000 or integral multiples of
$1,000. Tenneco will: (1) aggregate the new
securities to which a tendering registered
holder would otherwise be entitled; (2) round
this amount down to the nearest $1,000 and
issue new securities to that holder in the
rounded amount; and (3) compensate that holder
for this rounding by paying cash in an amount
equal to the principal amount of the fractional
new security. See "The Exchange Offers and
Consent Solicitation -- Terms of the Exchange
Offers" beginning on page 37. For these
purposes, a registered holder includes a
participant in The Depository Trust Company
with new securities credited directly to its
account. See "The Exchange Offers and Consent
Solicitation -- Procedures for Tendering
Original Securities and Giving Consents"
beginning on page 41.
4
<PAGE> 6
<TABLE>
<CAPTION>
YOU WILL RECEIVE THE FOLLOWING PRINCIPAL
FOR EACH: AMOUNT OF PACKAGING'S NEW SECURITIES:
-------------------------------- ----------------------------------------------
AGGREGATE IF YOU VALIDLY TENDER IF YOU VALIDLY TENDER
PRINCIPAL $1,000 PRINCIPAL AMOUNT BEFORE THE CONSENT AFTER THE CONSENT
CUSIP NO.* AMOUNT OF TENNECO'S ORIGINAL SECURITIES SOLICITATION EXPIRES SOLICITATION EXPIRES**
- ---------- ----------- -------------------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
</TABLE>
[To be provided by amendment]
- ---------------
* The terms of the exchange offers shall not be affected by any defect in or
omission of CUSIP numbers.
** The valid tender must also be received before the applicable exchange offer
expires. See description above regarding payment of cash in lieu of a
fractional interest in new securities.
IMPORTANT DATES: The following timeline summarizes important
dates for the exchange offers and consent
solicitation. You should read this timeline in
conjunction with the rest of this document,
which describes, among other things, Tenneco's
right to extend, amend and/or terminate any of
the exchange offers and the consent
solicitation.
TIMELINE GRAPH SHOWING:
- - COMMENCEMENT DATE - Tenneco begins the exchange offers and consent
solicitation
- - WITHDRAWAL TIME - You may not withdraw tendered securities after the first to
occur of:
- the consent solicitation expiration, or
- 5:00 p.m., New York City time, on the date Tenneco publicly announces it has
received the required consents
- - CONSENT SOLICITATION EARLY EXCHANGE TIME - Consent solicitation expires; you
must tender before 5:00 p.m., New York City time, to be eligible to receive
$1,000 principal amount of new securities for each $1,000 principal amount of
applicable original securities
- - EXCHANGE OFFER EXPIRATION TIME - Exchange offers expire; you must tender
before 5:00 p.m., New York City time, to be eligible to participate in the
exchange offers
- - ACCEPTANCE DATE - Tenneco accepts for exchange original securities that are
validly tendered and not withdrawn
- - ISSUANCE/EXCHANGE DATE - Packaging's new securities are issued in exchange for
Tenneco's original securities; the exchange agent delivers new securities, any
applicable accrued interest and any applicable cash for fractional new
securities
- ---------------
* May be extended as described in this document.
CONCURRENT CASH TENDER OFFERS: Tenneco is also making cash tender offers and a
consent solicitation for all series of its
public debt not subject to the exchange offers.
Tenneco will commence these tender offers at
the same time as the exchange offers, and
expects to complete the tender and exchange
offers at substantially the same time. The
securities subject to these cash tender offers
total $ in aggregate principal amount.
5
<PAGE> 7
Tenneco will offer to pay cash for those
securities accepted in the tender offers at
either (1) a fixed price or (2) a price
determined two business days before the tender
offer expires based on the yield to maturity of
a reference U.S. Treasury Security plus a fixed
spread, depending on the series of debt.
Holders will be required to consent to the
proposed amendments in order to tender their
securities. The price Tenneco offers will
include a premium for those holders who tender
securities before the related consent
solicitation expires.
THE CONSENT SOLICITATION: Tenneco is soliciting consents from the holders
of original securities to amendments to the
original debtholder contract under which
Tenneco issued those securities, commonly
referred to as an indenture. These proposed
amendments will eliminate the restrictions on
Tenneco's operations currently included in this
original indenture. See "The Proposed
Amendments" beginning on page 49.
If you want to exchange your original
securities, you will be required to consent to
the proposed amendments. YOUR PROPER TENDER OF
ORIGINAL SECURITIES USING ONE OF THE PROCEDURES
DESCRIBED IN THIS DOCUMENT WILL CONSTITUTE YOUR
AUTOMATIC CONSENT TO THE PROPOSED AMENDMENTS
AND TO THE EXECUTION OF A SUPPLEMENT TO THE
ORIGINAL INDENTURE TO EFFECT THE PROPOSED
AMENDMENTS.
REQUIRED CONSENTS: The aggregate principal amount of securities
outstanding under the original indenture is
$2,459,848,000, consisting of $ of
original securities that are subject to the
exchange offers and $ of other debt
securities that are subject to Tenneco's
concurrent cash tender offers. To amend the
original indenture, Tenneco must receive
consents from the registered holders of at
least a majority of that amount, voting as a
single class. In addition to the consent
solicitation described in this document,
Tenneco is soliciting consents to the proposed
amendments in connection with its concurrent
cash tender offers. See "The Exchange Offers
and Consent Solicitation -- The Consent
Solicitation" beginning on page 38.
Tenneco may receive the required consents
before the exchange offers expire. The proposed
amendments will not take effect, however,
unless Tenneco accepts for exchange or purchase
debt securities issued under the original
indenture that represent at least the required
consents, whether tendered in the exchange
offers or cash tender offers. See "The Proposed
Amendments" beginning on page 49.
PURPOSE OF THE EXCHANGE OFFERS
AND CONSENT SOLICITATION: Tenneco intends to spin-off Packaging to its
public stockholders. Upon completion of the
spin-off, Packaging will become an independent,
publicly held company engaged in Tenneco's
current packaging businesses. At that time,
Tenneco's sole remaining business will be its
current automotive business. See "The Spin-off"
beginning on page 59.
6
<PAGE> 8
The exchange offers are one component of a plan
to realign Tenneco's debt before the spin-off.
As part of this debt realignment, Tenneco is
also making the cash tender offers described
above. See "The Spin-off -- Debt Realignment"
beginning on page 60.
The purpose of the exchange offers is to
acquire all of Tenneco's outstanding original
securities. The purpose of the consent
solicitation is to eliminate the restrictions
on Tenneco's operations currently included in
the original indenture. This includes
eliminating a covenant that might, if held to
apply to the spin-off, otherwise require
Packaging to become the obligor of the original
securities. Tenneco and Packaging believe the
application of that covenant is uncertain in
these circumstances. See "The Proposed
Amendments" beginning on page 49.
RISKS IF YOU EXCHANGE: An investment in the new securities involves
risks. See "Risk Factors -- Risks if You
Exchange" beginning on page 24. These risks
include:
- Once the spin-off is completed, Packaging
will have fewer assets and less revenues and
cash flows than Tenneco currently does.
- Tenneco and Packaging cannot assure you that
the new securities will have or maintain an
investment-grade rating.
- A liquid trading market may not develop for
the new securities, which could adversely
affect their value.
RISKS IF YOU DO NOT EXCHANGE: You could suffer adverse consequences if you
choose not to tender your original securities.
See "Risk Factors -- Risk Factors if You Do Not
Exchange" beginning on page 27. These adverse
consequences include:
- The operating restrictions presently included
in the original indenture will no longer
apply. This will permit Tenneco, which at
that time will consist solely of its
Automotive business, to make new borrowings
in connection with the spin-off that are
secured by its assets, including the capital
stock of its various subsidiaries. This will
allow the lenders to enforce their rights by
taking control of the assets and/or
subsidiaries. As a result, any original
securities that remain outstanding after the
spin-off will effectively rank behind these
new borrowings with regard to payment.
- Once the spin-off is completed, Automotive
will have a substantial amount of debt. This
may adversely affect its ability to meet its
payment obligations to you under the original
securities if you do not exchange.
- Tenneco expects that the original securities
will not maintain an investment-grade rating
after the exchange offers and spin-off. This
could adversely affect their value.
- Tenneco expects the original securities to
have a limited trading market after the
exchange offers. This could also adversely
affect their value.
7
<PAGE> 9
EXPIRATION OF THE EXCHANGE
OFFERS: Each exchange offer will expire at 5:00 p.m.,
New York City time, on ,
, 1999, unless extended by Tenneco
in its sole discretion or terminated at an
earlier time.
EXPIRATION OF THE CONSENT
SOLICITATION: The consent solicitation will expire at 5:00
p.m., New York City time, on ,
, 1999, unless extended by Tenneco
in its sole discretion or terminated at an
earlier time.
WITHDRAWAL RIGHTS: You may withdraw your tender of original
securities for exchange any time before the
withdrawal time described below by following
the procedures described in this document. A
valid withdrawal of original securities will
also revoke the related consent. You may not
revoke a consent without withdrawing the
related original securities. See "The Exchange
Offers and Consent Solicitation -- Withdrawal
Rights" beginning on page 46.
In general, you may not withdraw tendered
original securities after the withdrawal time
unless the related exchange offer is terminated
without any original securities being accepted
for exchange. Subject to applicable law, this
is true even if Tenneco waives any condition to
the exchange offers or extends any exchange
offer or the consent solicitation. If, however,
after the withdrawal time Tenneco reduces the
principal amount of original securities subject
to any exchange offer, or Tenneco reduces the
consideration offered in that exchange offer,
then the original securities tendered in that
exchange offer may be validly withdrawn for the
following ten business days.
As used in this document, the term "withdrawal
time" refers to the earlier of --
- the expiration of the consent solicitation,
and
- 5:00 p.m., New York City time, on the date
that Tenneco publicly announces that it has
received the required consents.
A public announcement shall be deemed to have
been made as and when Tenneco issues a press
release to the Dow Jones News Service
indicating receipt of the required consents.
CONDITIONS TO THE EXCHANGE
OFFERS
AND CONSENT SOLICITATION: The exchange offers and consent solicitation
are subject to satisfaction or Tenneco's waiver
of several conditions, including:
- the receipt of the required consents;
- any and all conditions to Tenneco's cash
tender offers; and
- any and all conditions to each other
component of the debt realignment, and any
and all material conditions, other than
completion of the debt realignment, to the
spin-off.
See "The Exchange Offers and Consent
Solicitation -- Conditions to the Exchange
Offers and Consent Solicitation" beginning on
page 45.
Because the exchange offers are part of the
realignment of Tenneco's total debt before the
spin-off, Tenneco plans to
8
<PAGE> 10
complete the exchange offers before to the
spin-off. See "-- The Spin-off." Tenneco
expects, however, to complete the spin-off
within one business day after the exchange
offers expire, or as soon thereafter as
practicable. For this reason, Tenneco has
conditioned the exchange offers on the
satisfaction of all material conditions to the
spin-off, other than completion of the debt
realignment. See "The Spin-off -- Debt
Realignment" beginning on page 60.
HOW TO TENDER YOUR ORIGINAL
SECURITIES AND GIVE
CONSENTS: For a description of how to tender your
original securities and give consents, see "The
Exchange Offers -- Procedures for Tendering
Original Securities and Giving Consents"
beginning on page 41. THERE ARE NO GUARANTEED
DELIVERY PROCEDURES. YOU MUST COMPLETE THE
PROCEDURES FOR TENDERING ORIGINAL SECURITIES
DESCRIBED IN THIS DOCUMENT BEFORE THE CONSENT
SOLICITATION OR EXCHANGE OFFERS EXPIRE, AS
APPLICABLE. For more information, you should
contact the information agent or dealer
managers at their addresses on the back cover
of this document, or consult your broker,
dealer, commercial bank or trust company for
assistance.
ACCEPTANCE OF ORIGINAL
SECURITIES; DELIVERY
OF EXCHANGE CONSIDERATION: Upon the terms and subject to the conditions of
the exchange offers and applicable law, Tenneco
will (1) accept for exchange original
securities validly tendered before the
applicable expiration time, and not properly
withdrawn, and then (2) pay for accepted
original securities by delivering new
securities in book-entry form, plus cash for
any applicable accrued interest and fractional
interest in new securities, to the exchange
agent on the next New York Stock Exchange
trading day. The date new securities are
delivered to the exchange agent is referred to
in this document as their issuance date.
NEW SECURITIES WILL BE ISSUED ONLY IN
BOOK-ENTRY FORM THROUGH THE DEPOSITORY TRUST
COMPANY. THIS MEANS THAT YOU WILL NOT RECEIVE
CERTIFICATES FOR ANY OF YOUR NEW SECURITIES. If
you plan to tender original securities which
are not held through DTC, you are urged to
contact a custodian that can hold securities
through DTC to arrange delivery of the new
securities on your behalf. This custodian
should also provide you with the required DTC
participant and account information that you
will be required to submit in the accompanying
letter of consent/transmittal.
The exchange agent will deliver new securities
in book-entry form, plus cash for any
applicable accrued interest and fractional
interest in new securities, to exchanging
holders on the issuance date for those new
securities or as soon thereafter as
practicable.
ACCRUED INTEREST ON ORIGINAL
SECURITIES; INTEREST ON NEW
SECURITIES: Tenneco will pay accrued but unpaid interest on
original securities exchanged through the date
Tenneco accepts them for exchange. If, however,
Tenneco accepts for exchange any particular
series of original securities after an interest
record date for that series and on or before
the related interest payment date,
9
<PAGE> 11
accrued but unpaid interest will instead be
paid to the holder of those original securities
as of the record date, if different from the
tendering holder. See "The Exchange Offers and
Consent Solicitation -- Terms of the Exchange
Offers" beginning on page 37.
Interest on the new securities will accrue
from, and including, their issuance date.
WAIVERS; EXTENSIONS;
AMENDMENTS: Tenneco expressly reserves the right to:
- terminate any or all of the exchange offers
or the consent solicitation upon the failure
of any of the conditions to the exchange
offers and consent solicitation;
- waive any condition to any of the exchange
offers or the consent solicitation;
- extend the expiration of any of the exchange
offers or the consent solicitation;
- amend the terms of any of the exchange offers
or the consent solicitation; and
- not accept original securities as a result of
an invalid tender, withdrawal or the
occurrence of other events described in this
document.
If Tenneco makes a material change to the terms
of or information concerning the exchange
offers or consent solicitation, including any
waiver of a material condition, Tenneco and
Packaging will, to the extent required by law:
(1) amend and recirculate this document; and
(2) extend the expiration of the exchange
offers and/or consent solicitation. See "The
Exchange Offers and Consent
Solicitation -- Expiration Time; Early Exchange
Time; Extensions; Termination; Amendments"
beginning on page 38.
TAX CONSEQUENCES: Tenneco intends the exchange offers to be part
of a tax-free reorganization under the Internal
Revenue Code of 1986, as amended. You should
generally not have income tax liability if you
exchange original securities for new
securities, except on any accrued but unpaid
interest and except with respect to cash
received in lieu of a fractional interest in
new securities. You should also not have income
tax liability in connection with the exchange
offers if your original securities are not
exchanged. See "U.S. Federal Income Tax
Consequences" beginning on page 153 for
circumstances in which all or part of your
exchange could be taxable.
NO RECOMMENDATION: Tenneco and Packaging are not, and no other
person acting on behalf of either of them, is
making any recommendation about tendering
original securities in the exchange offers or
providing consents to the proposed amendments.
NO DISSENTERS' RIGHTS: You will not have any right to dissent and
receive an appraisal of your original
securities in connection with the exchange
offers or consent solicitation.
10
<PAGE> 12
EXCHANGE AGENT: The Chase Manhattan Bank is the exchange agent
that will receive tenders of original
securities on Tenneco's behalf and distribute
any payments made.
INFORMATION AGENT: Georgeson Shareholder Communications Inc. is
the information agent that you may contact for
assistance or additional copies of this
document.
DEALER MANAGERS: Morgan Stanley Dean Witter and Credit Suisse
First Boston are acting as dealer managers for
the exchange offers.
\
11
<PAGE> 13
TERMS OF THE NEW SECURITIES
The terms of the new securities will be substantially identical to the
current terms of the original securities except that (a) Packaging will issue
the new securities, and (b) the interest rate on each series of new securities
will be _____ than the interest rate on the corresponding series of original
securities. See "Description of the New Securities" beginning on page 52.
ISSUER: Tenneco Packaging Inc., which will be renamed.
If you exchange your original securities for
new securities, you will be entitled to look
only to Packaging's businesses and operations
for the payment of principal and interest,
rather than to the consolidated operations of
Tenneco, which included both Packaging and
Automotive. See "Risk Factors -- Risk Factors
if You Exchange" beginning on page 24.
RANKING: The new securities will be senior unsecured
obligations of Packaging. This means they will
rank equally in right of payment with all
existing and future unsecured and
unsubordinated debt of Packaging and
effectively junior to any secured debt of
Packaging. In connection with the spin-off,
Packaging will be making borrowings under new
credit facilities that will rank equally in
right of payment with the new securities. See
"Description of Packaging -- Unaudited Pro
Forma Combined Financial Statements of
Packaging." Packaging currently has no debt
securities outstanding that are senior or
junior to the new securities.
NEW SECURITIES:
<TABLE>
<CAPTION>
NEW CUSIP NO. SERIES OF NEW SECURITIES INTEREST PAYMENT DATES
------------- ------------------------ ----------------------
<S> <C> <C>
[To be provided by amendment]
</TABLE>
LISTING: The new securities will not be listed on any
domestic or international securities exchange
or market.
BASIC PACKAGING COVENANTS: Packaging will issue the new securities under a
new indenture with The Chase Manhattan Bank, as
trustee. The new indenture will restrict
Packaging's ability to:
- borrow money that is secured by liens on
principal manufacturing or research and
development facilities or on the capital
stock of subsidiaries;
- sell all or substantially all of its assets
or merge with another person; and
- sell and then take an immediate lease back of
principal manufacturing or research and
development facilities.
These restrictions are subject to important
exceptions described under the heading
"Description of the New Securities" beginning
on page 52.
12
<PAGE> 14
THE COMPANIES
TENNECO BEFORE THE SPIN-OFF
Tenneco is a global manufacturing company whose major businesses currently
consist of (a) Automotive -- the manufacture and sale of automotive emissions
control and ride control products and systems, and (b) Packaging -- the
manufacture and sale of specialty packaging and consumer products for the
foodservice, consumer, protective, flexible and institutional/industrial
markets. Tenneco's headquarters are located at 1275 King Street, Greenwich,
Connecticut, 06831, and its telephone number at that location is (203) 863-1000.
For further information about Tenneco, see "Where You Can Find More Information"
on page 35 and "Incorporation of Information by Reference" beginning on page 35.
Tenneco was incorporated in 1996 under the name "New Tenneco Inc." as a
wholly owned subsidiary of the company then known as Tenneco Inc. At that time,
the company's major businesses were shipbuilding, energy, automotive and
packaging. On December 11, 1996, the former Tenneco completed the transfer of
its automotive and packaging businesses to the current Tenneco, and spun off the
current Tenneco to its public stockholders. In connection with that spin-off,
the former Tenneco also spun off its shipbuilding division to its public
stockholders and the remaining energy company was acquired by El Paso Natural
Gas Company. Unless the context otherwise requires, for periods prior to
December 11, 1996, the term "Tenneco" also refers to the company formerly known
as Tenneco.
PACKAGING
Packaging is a global supplier of specialty packaging and consumer
products, with 1998 revenues of approximately $2.8 billion. Packaging operates
89 manufacturing facilities throughout the world and employs over 15,000 people.
Packaging is currently owned by Tenneco and will become an independent, publicly
traded company upon completion of the spin-off.
Packaging manufactures and sells plastic, aluminum and paper-based consumer
products, such as disposable tableware, plastic food storage bags and plastic
trash bags. Packaging sells these products under such recognized brand names as
Hefty(R), Baggies(R), Hefty One-Zip(R) and E-Z Foil(R). Packaging also offers
food/foodservice packaging products such as molded fiber cartons, foam meat
trays and plastic, pressed paperboard and aluminum containers for frozen food,
bakery and deli applications. Its products also include sponge-like foam and
other packaging to protect and cushion a variety of goods during storage and
shipment and flexible plastic bags for medical, pharmaceutical, chemical,
hygiene and industrial applications. When the spin-off is completed, Packaging
will own Tenneco's administrative services operations, but is currently
analyzing its alternatives with respect to these operations. See "Description of
Packaging -- Management's Discussion and Analysis of Financial Condition and
Results of Operations" beginning on page 98.
Packaging also owns a 43% common equity interest in a joint venture that
operates Packaging's former containerboard packaging business. Containerboard is
material derived primarily from wood pulp and recycled paper that is used to
make cartons, boxes and other containers. The joint venture manufactures
containerboard, as well as corrugated containers and lumber and related wood
products. The joint venture had 1998 pro forma revenues of $1.57 billion.
Packaging plans to sell its interest in this containerboard joint venture and
expects the sale to be completed before the spin-off. See "Description of
Packaging -- Unaudited Pro Forma Combined Financial Statements of Packaging"
beginning on page 69.
Packaging's headquarters are located at 1900 West Field Court, Lake Forest,
Illinois 60045, and its telephone number at that location is (847) 482-2000. For
more information about Packaging, see "Description of Packaging" beginning on
page 66.
TENNECO AFTER THE SPIN-OFF/AUTOMOTIVE
When the spin-off is completed, Tenneco's remaining operations will consist
solely of Automotive. Automotive is a worldwide manufacturer and marketer of
automotive emissions control and ride control products and systems for vehicle
manufacturers and the repair and replacement market, or aftermarket. With 1998
revenues of approximately $3.2 billion, approximately 23,500 employees worldwide
and 106
13
<PAGE> 15
facilities in 25 countries, Automotive is a global business that sells its
products in over 100 countries. Automotive manufactures and markets its
emissions control products primarily under the Walker(R) brand name and its ride
control products primarily under the Monroe(R) brand name. Among its products
are Sensa-Trac(R) shock absorbers and weight bearing struts, Rancho(R) ride
control products, Walker Quiet-Flow(TM) mufflers and DynoMax(R) performance
mufflers, Walker(R) and Gillet(TM) exhaust systems and Monroe Clevite(TM)
elastomeric vibration control components.
Automotive's headquarters are located at 500 North Field Drive, Lake
Forest, Illinois 60045, and its telephone number at that location is (847)
482-5000. For more information about Automotive, see "Description of Tenneco
After the Spin-off/Automotive" beginning on page 116.
THE SPIN-OFF
The spin-off of Packaging is the final step in the transformation of
Tenneco from a highly diversified industrial corporation to independent
companies focused on their core businesses. In July 1998, Tenneco's board of
directors authorized management to develop a broad range of strategic
alternatives which could result in the separation of its automotive, paperboard
packaging and specialty packaging businesses. Earlier this year, Tenneco
separated the paperboard packaging business from the rest of its operations.
First, Packaging contributed its containerboard packaging business, which
constituted the majority of its paperboard packaging segment, to a new joint
venture for approximately $2 billion plus a 45% common equity interest.
Packaging currently plans to sell its remaining interest in this joint venture,
which is now 43% due to subsequent equity issuances to management, through an
initial registered public offering. Second, Packaging sold the balance of its
paperboard packaging business, the folding carton business, for $72.5 million.
The cash proceeds of these transactions were used to repay a portion of
Tenneco's short-term debt. The spin-off will complete the separation of
Tenneco's businesses and create two independent, public companies -- Automotive
and Packaging.
Tenneco's Board of Directors has determined that the spin-off is in the
best interests of Tenneco's stockholders because divergent industry trends
increasingly require Tenneco's packaging and automotive businesses to pursue
different strategies. The spin-off is designed to separate Tenneco's packaging
business from its automotive business, which have distinct financial, investment
and operating characteristics, so that each can adopt strategies and pursue
objectives appropriate to its specific needs.
The following describes the principal transactions that Tenneco and
Packaging will undertake to complete the spin-off. The spin-off is subject to a
number of conditions, including completion of the corporate restructuring
transactions and debt realignment. See "The Spin-off" beginning on page 59.
- Corporate Restructuring Transactions. As Tenneco is currently organized,
ownership of its subsidiaries is based on geographic location and tax
considerations rather than on the businesses in which the subsidiaries
are involved. Therefore, Tenneco will need to restructure the ownership
of its existing businesses before the spin-off so that the assets,
liabilities and operations of (a) its packaging business and
administrative services operations will be owned directly and indirectly
by Packaging and (b) its automotive business will be owned directly and
indirectly by Tenneco and its non-packaging subsidiaries. See "The
Spin-off -- Corporate Restructuring Transactions" beginning on page 59.
- Debt Realignment. Tenneco's historical practice has been to incur debt
for its consolidated group at the parent-company level or at a limited
number of its subsidiaries, rather than at the operating-company level,
and to manage centrally various cash functions. Therefore, before the
spin-off, Tenneco will realign substantially all of its existing debt
through some combination of tender offers, exchange offers, prepayments
and other refinancings. The purpose is to allocate this debt between
Automotive and Packaging before the companies are separated. The exchange
offers and Tenneco's cash tender offers are components of this debt
realignment. Tenneco also expects to repay other non-public debt and to
repurchase subsidiary preferred stock. To finance the cash tender offers
and other cash payments, Packaging and Automotive will each make
borrowings under new credit
14
<PAGE> 16
facilities and Automotive expects to issue new senior subordinated debt.
See "The Spin-off -- Debt Realignment" beginning on page 60.
If the debt realignment and spin-off had occurred on June 30, 1999,
Packaging would have had debt for money borrowed of about $2.2 billion
and Automotive would have had debt for money borrowed of about $1.7
billion on a pro forma basis. This pro forma debt amount for Packaging
does not reflect the application of any proceeds from Packaging's planned
sale of its remaining interest in the containerboard joint venture. See
"Description of Packaging -- Unaudited Pro Forma Combined Financial
Statements of Packaging" beginning on page 69 and "Description of Tenneco
After the Spin-off/Automotive -- Unaudited Pro Forma Consolidated
Financial Statements of Tenneco" beginning on page 117.
- Distribution of Packaging Common Stock. Tenneco will complete the
spin-off by distributing all Packaging common stock to the holders of
Tenneco common stock at a ratio of one share of Packaging common stock
for each share of Tenneco common stock. The spin-off is conditioned on
Tenneco's receipt, and the continued effectiveness, of a determination
that the spin-off will be tax-free to Tenneco and its stockholders.
Tenneco received a letter ruling from the Internal Revenue Service to
that effect on August 20, 1999.
15
<PAGE> 17
SUMMARY HISTORICAL AND PRO FORMA COMBINED
FINANCIAL DATA OF PACKAGING
The following summary combined financial data as of December 31, 1998 and
1997, and for the years ended December 31, 1998, 1997, and 1996, were derived
from the audited Combined Financial Statements of The Businesses of Tenneco
Packaging. The following summary combined financial data as of December 31,
1996, 1995, and 1994, and for the years ended December 31, 1995 and 1994, are
unaudited and were derived from Tenneco's accounting records. The following
summary combined financial data as of and for each of the six months ended June
30, 1999 and 1998 were derived from the unaudited Combined Financial Statements
of The Businesses of Tenneco Packaging. In the opinion of Packaging's
management, the summary combined financial data of Packaging as of December 31,
1996, 1995, and 1994, and for the years ended December 31, 1995 and 1994, and as
of and for the six months ended June 30, 1999 and 1998, include all adjusting
entries, consisting only of normal recurring adjustments, necessary to present
fairly the information set forth. You should not regard the results of
operations for the six months ended June 30, 1999 as indicative of the results
that may be expected for the full year.
The following summary unaudited pro forma combined financial data as of and
for the six months ended June 30, 1999, and for the year ended December 31,
1998, reflect the effects of:
- the debt realignment; and
- the spin-off of Packaging and related transactions.
The unaudited pro forma combined statement of income data have been
prepared as if these transactions occurred on January 1, 1998; the unaudited pro
forma combined balance sheet data have been prepared as if these transactions
occurred on June 30, 1999. The summary unaudited pro forma combined financial
data are not necessarily indicative of what Packaging's results of operations
would have been had these transactions described above actually been consummated
on the dates assumed and are not necessarily indicative of the results of
operations for any future period.
Packaging's debt balances in the summary unaudited pro forma combined
financial data do not reflect the application of any proceeds from Packaging's
planned sale of its remaining interest in its containerboard joint venture.
Packaging expects the sale to be completed before the spin-off, with the net
proceeds used to retire the Tenneco debt that would otherwise be allocated to
Packaging in the debt realignment. If the sale occurs after the spin-off, the
net proceeds will be used to retire Packaging debt.
There is other information Packaging believes is relevant to understanding
its results of operations following the spin-off. These items relate to
corporate overhead costs incurred by Tenneco and its administrative services
operations that Packaging expects will differ for it following the spin-off. For
further information you should see "Description of Packaging -- Supplemental
Financial Information of Packaging" beginning on page 75.
You should read all of this information in conjunction with the following
each of which is included elsewhere in this document:
- Unaudited Pro Forma Combined Financial Statements of Packaging on page
69;
- Combined Selected Financial Data of Packaging on page 76;
- Management's Discussion and Analysis of Financial Condition and Results
of Operations of Packaging on page 98; and
- Combined Financial Statements and Schedule of the Businesses of Tenneco
Packaging on page F-1.
(continued on next page)
16
<PAGE> 18
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
Pro Forma
1998 1998(a) 1997(a) 1996(a)
--------- ------- ------- -------
(Dollars in millions except per share amounts)
<S> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA(b):
Net sales and operating
revenues --
Specialty............. $ 2,785 $ 2,785 $ 2,553 $ 1,987
Other................. 6 6 10 --
----------- ----------- ----------- -----------
Total............... $ 2,791 $ 2,791 $ 2,563 $ 1,987
=========== =========== =========== ===========
Income from continuing
operations before
interest expense, income
taxes, and minority
interest --
Specialty............. $ 328 $ 328 $ 308 $ 249
Other(c).............. (40) (45) (2) (15)
----------- ----------- ----------- -----------
Total............... 288 283 306 234
Interest expense(d)....... 160 133 124 102
Income tax expense
(benefit)............... 58 67 75 67
Minority interest......... 1 1 1 --
----------- ----------- ----------- -----------
Income (loss) from
continuing operations... 69 82 106 65
Income (loss) from
discontinued operations,
net of income tax(e).... NA 57 21 71
Extraordinary loss, net of
income tax(f)........... NA -- -- (2)
Cumulative effect of
changes in accounting
principles, net of
income tax(g)........... NA -- (38) --
----------- ----------- -----------
Net income (loss)......... NA $ 139 $ 89 $ 134
=========== =========== ===========
Average number of shares of
common stock
outstanding(h) --
Basic..................... 168,505,573 168,505,573 170,264,731 169,609,373
Diluted................... 168,834,531 168,834,531 170,801,636 170,526,112
Earnings (loss) per average
share of common stock(h)--
Basic:
Continuing operations... $ .41 $ .49 $ .63 $ .38
Discontinued
operations(e)......... NA .34 .12 .42
Extraordinary loss(f)... NA -- -- (.01)
Cumulative effect of
changes in accounting
principles(g)......... NA -- (.23) --
----------- ----------- -----------
$ .83 $ .52 $ .79
=========== =========== ===========
Diluted:
Continuing operations... $ .41 $ .49 $ .63 $ .38
Discontinued
operations(e)......... NA .34 .12 .42
Extraordinary loss(f)... NA -- -- (.01)
Cumulative effect of
changes in accounting
principles(g)......... NA -- (.23) --
----------- ----------- -----------
$ .83 $ .52 $ .79
=========== =========== ===========
BALANCE SHEET DATA(b):
Net assets of discontinued
operations(e)........... NA $ 366 $ 423 $ 459
Total assets.............. NA 4,798 4,618 4,028
Short-term debt(d)........ NA 595 158 123
Long-term debt(d)......... NA 1,312 1,492 1,073
Debt allocated to
discontinued
operations(d)........... NA 548 473 394
Minority interest......... NA 14 15 --
Combined equity........... NA 1,776 1,839 1,843
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
------------------------- ---------------------------------------
Pro Forma
1995 1994 1999 1999(a) 1998(a)
---- ---- --------- ------- -------
(Dollars in millions except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA(b):
Net sales and operating
revenues --
Specialty............. $ 845 $ 636 $ 1,404 $ 1,404 $ 1,361
Other................. -- -- -- -- 10
----------- ----------- ----------- ----------- -----------
Total............... $ 845 $ 636 $ 1,404 $ 1,404 $ 1,371
=========== =========== =========== =========== ===========
Income from continuing
operations before
interest expense, income
taxes, and minority
interest --
Specialty............. $ 39 $ 68 $ 190 $ 190 $ 175
Other(c).............. (6) 17 (43) (46) (2)
----------- ----------- ----------- ----------- -----------
Total............... 33 85 147 144 173
Interest expense(d)....... 91 48 80 68 67
Income tax expense
(benefit)............... (3) 19 20 24 37
Minority interest......... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Income (loss) from
continuing operations... (55) 18 47 52 69
Income (loss) from
discontinued operations,
net of income tax(e).... 224 75 NA (163) 37
Extraordinary loss, net of
income tax(f)........... -- -- NA (7) --
Cumulative effect of
changes in accounting
principles, net of
income tax(g)........... -- -- NA (32) --
----------- ----------- ----------- -----------
Net income (loss)......... $ 169 $ 93 NA $ (150) $ 106
=========== =========== =========== ===========
Average number of shares of
common stock
outstanding(h) --
Basic..................... 172,764,198 162,307,189 166,937,362 166,937,362 169,341,555
Diluted................... 173,511,654 162,912,425 167,319,412 167,319,412 169,936,676
Earnings (loss) per average
share of common stock(h)--
Basic:
Continuing operations... $ (.32) $ .11 $ .28 $ .31 $ .41
Discontinued
operations(e)......... 1.30 .46 NA (.98) .22
Extraordinary loss(f)... -- -- NA (.04) --
Cumulative effect of
changes in accounting
principles(g)......... -- -- NA (.19) --
----------- ----------- ----------- -----------
$ .98 $ .57 $ (.90) $ .63
=========== =========== =========== ===========
Diluted:
Continuing operations... $ (.32) $ .11 $ .28 $ .31 $ .41
Discontinued
operations(e)......... 1.29 .46 NA (.98) .22
Extraordinary loss(f)... -- -- NA (.04) --
Cumulative effect of
changes in accounting
principles(g)......... -- -- NA (.19) --
----------- ----------- ----------- -----------
$ .97 $ .57 $ (.90) $ .63
=========== =========== =========== ===========
BALANCE SHEET DATA(b):
Net assets of discontinued
operations(e)........... $ 393 $ 236 $ 133 $ 133 $ 382
Total assets.............. 3,358 1,630 4,749 4,486 4,788
Short-term debt(d)........ 205 49 1,196(i) 367 335
Long-term debt(d)......... 880 478 1,000(i) 1,494 1,488
Debt allocated to
discontinued
operations(d)........... 369 285 -- -- 479
Minority interest......... -- -- 14 14 15
Combined equity........... 1,531 703 1,286 1,340 1,829
</TABLE>
(continued on next page)
17
<PAGE> 19
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
Pro Forma
1998 1998(a) 1997(a) 1996(a)
--------- ------- ------- -------
(Dollars in millions except per share amounts)
<S> <C> <C> <C> <C>
STATEMENT OF CASH FLOWS
DATA(b):
Net cash provided (used)
by operating
activities............ NA $ 577 $ 405 $ 263
Net cash provided (used)
by investing
activities............ NA (514) (654) (669)
Net cash provided (used)
by financing
activities............ NA (67) 239 399
Capital expenditures for
continuing
operations............ NA (194) (229) (216)
OTHER DATA:
EBITDA(j)................. $ 463 $ 458 $ 469 $ 365
Ratio of earnings to fixed
charges(k).............. 1.71 1.99 2.31 2.15
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
------------------------- ---------------------------------------
Pro Forma
1995 1994 1999 1999(a) 1998(a)
---- ---- --------- ------- -------
(Dollars in millions except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF CASH FLOWS
DATA(b):
Net cash provided (used)
by operating
activities............ $ 479 $ 283 NA $ (45) $ 288
Net cash provided (used)
by investing
activities............ (1,791) (146) NA (866) (221)
Net cash provided (used)
by financing
activities............ 1,327 (142) NA 920 (66)
Capital expenditures for
continuing
operations............ (265) (134) NA (75) (101)
OTHER DATA:
EBITDA(j)................. $ 78 $ 121 $ 241 $ 238 $ 261
Ratio of earnings to fixed
charges(k).............. NM 1.72 1.76 2.00 2.45
</TABLE>
- -------------------------
(a) For a discussion of the significant items affecting comparability of the
financial information for the years ended December 31, 1998, 1997, and 1996,
and for the six months ended June 30, 1999 and 1998, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
Packaging included elsewhere in this document.
(b) During the periods presented, Packaging completed numerous acquisitions, the
most significant of which were the acquisitions of Mobil Plastics for $1.3
billion in late 1995, Amoco Foam Products for $310 million in August 1996,
and the protective and flexible packaging business of N.V. Koninklijke KNP
BT for $380 million in April 1997. See Note 6 to the Combined Financial
Statements of The Businesses of Tenneco Packaging. See also "Description of
Packaging -- Growth Strategy" and "Description of Packaging -- Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(c) Historical and pro forma income from continuing operations before interest
expense, income taxes and minority interest for "Other" includes costs which
were incurred by Tenneco's corporate and administrative services operations
which were not allocated to Tenneco's operating segments. Because these
functions will be a part of Packaging upon the spin-off, they are included
in Packaging's historical combined financial statements. Packaging expects
its costs for these functions will differ following the spin-off. See
"Supplemental Financial Information of Packaging" included elsewhere in this
document for further information.
(d) Tenneco's historical practice has been to incur indebtedness for its
consolidated group at the parent company level or at a limited number of
subsidiaries, rather than at the operating company level, and to centrally
manage various cash functions. Accordingly, historical amounts include debt
and related interest expense allocated to Packaging from Tenneco based on
the portion of Tenneco's investment in Packaging which Tenneco deemed to be
debt. This allocation is generally based upon the ratio of Packaging's net
assets to Tenneco's consolidated net assets plus debt. An allocation of debt
and its related interest expense has also been made to Packaging's
discontinued operations based on the ratio of the discontinued operations'
net assets to Packaging's combined net assets plus debt. Management believes
that the allocation of corporate debt and related interest expense for the
historical periods is reasonable. This historical allocation, however, is
not indicative of the total amount of debt that Packaging will have upon
completion of the debt realignment or of the debt and interest that may be
incurred by Packaging as a separate public entity. See "Combined Financial
Statements of The Businesses of Tenneco Packaging" included elsewhere in
this document.
(e) Discontinued operations for the periods presented consist of Packaging's
paperboard packaging segment, which was discontinued in June 1999 following
the decision to sell Packaging's remaining common equity interest in its
containerboard joint venture. Loss from discontinued operations for the six
months ended June 30, 1999 includes an after-tax loss of $178 million, or
$1.07 per diluted common share, resulting from the contribution of
Packaging's containerboard assets to the containerboard joint venture. See
Note 7 to the Combined Financial Statements of The Businesses of Tenneco
Packaging included elsewhere in this document.
(f) Represents Packaging's costs related to prepayment of debt. See Note 7 to
the Combined Financial Statements of The Businesses of Tenneco Packaging
included elsewhere in this document.
(g) In 1999, Packaging implemented the American Institute of Certified Public
Accountants Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities." In 1997, Packaging implemented the Financial Accounting
Standards Board's Emerging Issues Task Force Issue 97-13, "Accounting for
Costs Incurred in Connection with a Consulting Contract that Combines
Business Process Reengineering and Information Technology Transformation."
See Note 3 to the Combined Financial Statements of The Businesses of Tenneco
Packaging included elsewhere in this document for additional information
regarding changes in accounting principles.
(h) In the spin-off, Tenneco stockholders will receive one share of Packaging
common stock for each share of Tenneco common stock outstanding.
Accordingly, basic and diluted earnings per share for Packaging were
calculated using Tenneco's historical weighted average shares outstanding
and weighted average shares outstanding adjusted to include estimates of
additional shares that would be issued if potentially dilutive common shares
had been issued, respectively.
(continued on next page)
18
<PAGE> 20
(i) Packaging's pro forma debt balances reflect debt allocated to Packaging in
the debt realignment before application of any proceeds from Packaging's
planned sale of its remaining interest in its containerboard joint venture.
Packaging expects the sale to be completed before the spin-off, with the net
proceeds used to retire the Tenneco debt that would otherwise be allocated
to Packaging in the debt realignment. If the sale occurs after the spin-off,
the net proceeds will be used to retire Packaging debt. See "Description of
Packaging -- Unaudited Pro Forma Combined Financial Statements of
Packaging."
(j) EBITDA represents income from continuing operations before interest expense,
income taxes, minority interest and depreciation and amortization. EBITDA is
not a calculation based upon generally accepted accounting principles. The
amounts included in the EBITDA calculation, however, are derived from
amounts included in the Combined Statements of Income of The Businesses of
Tenneco Packaging or Unaudited Pro Forma Combined Statements of Income of
Packaging included elsewhere in this document. EBITDA should not be
considered as an alternative to net income or operating income as an
indicator of the operating performance of Packaging, or as an alternative to
operating cash flows as a measure of liquidity. Packaging has reported
EBITDA because it believes EBITDA is a measure commonly reported and widely
used by investors and other interested parties as an indicator of a
company's ability to incur and service debt. Packaging believes EBITDA
assists investors in comparing a company's performance on a consistent basis
without regard to depreciation and amortization, which can vary
significantly depending upon accounting methods, particularly when
acquisitions are involved, or nonoperating factors. However, the EBITDA
measure presented in this document may not always be comparable to similarly
titled measures reported by other companies due to differences in the
components of the calculation.
(k) For purposes of computing this ratio, earnings generally consist of income
from continuing operations before income taxes and fixed charges, excluding
capitalized interest. Fixed charges consist of interest expense, the portion
of rental expense considered representative of the interest factor and
capitalized interest. The historical ratios are based upon the amount of
interest expense on corporate debt allocated to Packaging by Tenneco as
discussed in (d) above. The pro forma ratios are derived from the Unaudited
Pro Forma Combined Financial Statements of Packaging included elsewhere in
this document. For the year ended December 31, 1995, earnings were
inadequate to cover fixed charges by $59 million.
19
<PAGE> 21
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA OF TENNECO
The following summary consolidated financial data as of and for each of the
fiscal years in the five years ended December 31, 1998 were derived from the
audited financial statements of Tenneco and its consolidated subsidiaries. The
following summary consolidated financial data as of and for each of the six
months ended June 30, 1999 and 1998 were derived from the unaudited condensed
financial statements of Tenneco and its consolidated subsidiaries. In the
opinion of Tenneco's management, the summary consolidated historical financial
data of Tenneco as of and for the six months ended June 30, 1999 and 1998
include all adjusting entries, consisting only of normal recurring adjustments,
necessary to present fairly the information set forth. You should not regard the
results of operations for the six months ended June 30, 1999 as indicative of
the results that may be expected for the full year.
The following summary unaudited pro forma consolidated financial data set
forth below as of and for the six months ended June 30, 1999, and for the year
ended December 31, 1998, reflect the effects of:
- the debt realignment;
- the spin-off of Packaging and related transactions; and
- the April 1999 contribution of Packaging's containerboard assets to a new
joint venture and the June 1999 sale of Packaging's folding carton
assets. These two transactions are reflected only in the pro forma
balance sheet data since they were completed before the date of the pro
forma balance sheet.
The unaudited pro forma consolidated statement of income data have been
prepared as if these transactions occurred January 1, 1998; the unaudited pro
forma consolidated balance sheet data have been prepared as if the debt
realignment, spin-off and related transactions occurred on June 30, 1999. The
summary unaudited pro forma consolidated financial data are not necessarily
indicative of what Tenneco's results of operations would have been had these
transactions described above actually been consummated on the dates assumed and
are not necessarily indicative of the results of operations for any future
period.
There is other information Tenneco believes is relevant to understanding
its results of operations following the spin-off. These items relate to
corporate overhead costs incurred by Tenneco and its administrative services
operations that Tenneco expects will differ following the spin-off. For further
information you should see "Description of Tenneco After the
Spin-off/Automotive -- Supplemental Financial Information of Tenneco" beginning
on page 123.
You should read all of this information in conjunction with the:
- Unaudited Pro Forma Consolidated Financial Statements of Tenneco
beginning on page 117 of this document; and
- Management's Discussion and Analysis of Financial Condition and Results
of Operations of Tenneco and the Financial Statements of Tenneco Inc. and
Consolidated Subsidiaries for the year ended December 31, 1998, and for
the six months ended June 30, 1999, each of which are contained in the
Tenneco Current Report on Form 8-K, dated August 20, 1999. The Form 8-K
is incorporated by reference into this document. See "Where You Can Find
More Information" and "Incorporation of Information By Reference" on page
35 of this document.
(continued on next page)
20
<PAGE> 22
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
PRO FORMA
1998 1998(A) 1997(A)
----------- ------- -------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA(b):
Net sales and operating revenues from
continuing operations................... $ 3,237 $ 3,237 $ 3,226
=========== =========== ===========
Income from continuing operations before
interest expense, income taxes, and
minority interest --
Automotive.............................. $ 248 $ 248 $ 407
Other................................... (26) (21) (12)
----------- ----------- -----------
Total................................. 222 227 395
Interest expense(c)........................ 161 69 58
Income tax expense (benefit)............... (26) 13 80
Minority interest.......................... -- 29 23
----------- ----------- -----------
Income (loss) from continuing operations... 87 116 234
Income (loss) from discontinued operations,
net of income tax(d)...................... NA 139 127
Extraordinary loss, net of income tax(e)... NA -- --
Cumulative effect of changes in accounting
principles, net of income tax(f).......... NA -- (46)
----------- -----------
Net income (loss).......................... NA 255 315
Preferred stock dividends.................. NA -- --
----------- -----------
Net income (loss) to common stock.......... NA $ 255 $ 315
=========== ===========
Average number of shares of common stock
outstanding--
Basic................................... 168,505,573 168,505,573 170,264,731
Diluted................................. 168,834,531 168,834,531 170,801,636
Earnings (loss) per average share of common
stock--
Basic:
Continuing operations................. $ .52 $ .69 $ 1.37
Discontinued operations(d)............ NA .83 .75
Extraordinary loss(e)................. NA -- --
Cumulative effect of changes in
accounting principles(f)............ NA -- (.27)
----------- -----------
NA $ 1.52 $ 1.85
=========== ===========
Diluted:
Continuing operations................. $ .52 $ .68 $ 1.36
Discontinued operations(d)............ NA .83 .75
Extraordinary loss(e)................. NA -- --
Cumulative effect of changes in
accounting principles(f)............ NA -- (.27)
----------- -----------
NA $ 1.51 $ 1.84
=========== ===========
Cash dividends per common share............ NA $ 1.20 $ 1.20
BALANCE SHEET DATA(b):
Net assets of discontinued
operations(d)........................... NA $ 1,739 $ 1,771
Total assets.............................. NA 4,759 4,682
Short-term debt(c)........................ NA 304 75
Long-term debt(c)......................... NA 671 713
Debt allocated to discontinued
operations(c)........................... NA 2,456 2,123
Minority interest......................... NA 407 408
Shareowners' equity....................... NA 2,504 2,528
STATEMENT OF CASH FLOWS DATA(b)
Net cash provided (used) by operating
activities.............................. NA $ 532 519
Net cash used by investing activities..... NA (754) (887)
Net cash provided (used) by financing
activities.............................. NA 216 354
Capital expenditures for continuing
operations.............................. NA (195) (221)
OTHER DATA:
EBITDA(g)................................. $ 372 $ 377 $ 505
Ratio of earnings to fixed charges(h)..... 1.36 2.16 4.80
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1996(A) 1995 1994
------- ---- ----
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA(b):
Net sales and operating revenues from
continuing operations................... $ 2,980 $ 2,479 $ 1,989
=========== =========== ===========
Income from continuing operations before
interest expense, income taxes, and
minority interest --
Automotive.............................. $ 249 $ 240 $ 223
Other................................... (7) 8 7
----------- ----------- -----------
Total................................. 242 248 230
Interest expense(c)........................ 60 44 33
Income tax expense (benefit)............... 79 91 52
Minority interest.......................... 21 23 --
----------- ----------- -----------
Income (loss) from continuing operations... 82 90 145
Income (loss) from discontinued operations,
net of income tax(d)...................... 564 645 307
Extraordinary loss, net of income tax(e)... (236) -- (5)
Cumulative effect of changes in accounting
principles, net of income tax(f).......... -- -- (39)
----------- ----------- -----------
Net income (loss).......................... 410 735 408
Preferred stock dividends.................. 12 12 60
----------- ----------- -----------
Net income (loss) to common stock.......... $ 398 $ 723 $ 348
=========== =========== ===========
Average number of shares of common stock
outstanding--
Basic................................... 169,609,373 172,764,198 162,307,189
Diluted................................. 170,526,112 173,511,654 162,912,425
Earnings (loss) per average share of common
stock--
Basic:
Continuing operations................. $ .49 $ .52 $ .90
Discontinued operations(d)............ 3.25 3.67 1.52
Extraordinary loss(e)................. (1.39) -- (.03)
Cumulative effect of changes in
accounting principles(f)............ -- -- (.24)
----------- ----------- -----------
$ 2.35 $ 4.19 $ 2.15
=========== =========== ===========
Diluted:
Continuing operations................. $ .49 $ .52 $ .89
Discontinued operations(d)............ 3.23 3.65 1.52
Extraordinary loss(e)................. (1.38) -- (.03)
Cumulative effect of changes in
accounting principles(f)............ -- -- (.24)
----------- ----------- -----------
$ 2.34 $ 4.17 $ 2.14
=========== =========== ===========
Cash dividends per common share............ $ 1.80 $ 1.60 $ 1.60
BALANCE SHEET DATA(b):
Net assets of discontinued
operations(d)........................... $ 1,883 $ 1,469 $ 700
Total assets.............................. 4,653 3,635 2,315
Short-term debt(c)........................ 74 109 31
Long-term debt(c)......................... 639 469 303
Debt allocated to discontinued
operations(c)........................... 1,590 1,454 813
Minority interest......................... 304 301 301
Shareowners' equity....................... 2,646 3,148 2,900
STATEMENT OF CASH FLOWS DATA(b)
Net cash provided (used) by operating
activities.............................. 253 1,443 450
Net cash used by investing activities..... (685) (1,162) (113)
Net cash provided (used) by financing
activities.............................. 147 (356) (151)
Capital expenditures for continuing
operations.............................. (188) (208) (114)
OTHER DATA:
EBITDA(g)................................. $ 336 $ 331 $ 282
Ratio of earnings to fixed charges(h)..... 2.33 2.62 5.36
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
---------------------------------------
PRO FORMA
1999 1999(A) 1998(A)
----------- ------- -------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA(b):
Net sales and operating revenues from
continuing operations................... $ 1,657 $ 1,657 $ 1,664
=========== =========== ===========
Income from continuing operations before
interest expense, income taxes, and
minority interest --
Automotive.............................. $ 156 $ 156 $ 219
Other................................... (7) (4) (12)
----------- ----------- -----------
Total................................. 149 152 207
Interest expense(c)........................ 80 42 30
Income tax expense (benefit)............... 28 44 55
Minority interest.......................... -- 13 16
----------- ----------- -----------
Income (loss) from continuing operations... 41 53 106
Income (loss) from discontinued operations,
net of income tax(d)...................... NA (111) 106
Extraordinary loss, net of income tax(e)... NA (7) --
Cumulative effect of changes in accounting
principles, net of income tax(f).......... NA (134) --
----------- -----------
Net income (loss).......................... NA (199) 212
Preferred stock dividends.................. NA -- --
----------- -----------
Net income (loss) to common stock.......... NA $ (199) $ 212
=========== ===========
Average number of shares of common stock
outstanding--
Basic................................... 166,937,362 166,937,362 169,341,555
Diluted................................. 167,319,412 167,319,412 169,936,676
Earnings (loss) per average share of common
stock--
Basic:
Continuing operations................. $ .25 $ .32 $ .62
Discontinued operations(d)............ NA (.67) .63
Extraordinary loss(e)................. NA (.04) --
Cumulative effect of changes in
accounting principles(f)............ NA (.80) --
----------- -----------
$ (1.19) $ 1.25
=========== ===========
Diluted:
Continuing operations................. $ .25 $ .32 $ .62
Discontinued operations(d)............ NA (.67) .63
Extraordinary loss(e)................. NA (.04) --
Cumulative effect of changes in
accounting principles(f)............ NA (.80) --
----------- -----------
$ (1.19) $ 1.25
=========== ===========
Cash dividends per common share............ NA $ .60 $ .60
BALANCE SHEET DATA(b):
Net assets of discontinued
operations(d)........................... -- $ 1,421 $ 1,793
Total assets.............................. 3,192 4,416 4,829
Short-term debt(c)........................ -- 206 168
Long-term debt(c)......................... 1,673 832 747
Debt allocated to discontinued
operations(c)........................... -- 1,861 2,302
Minority interest......................... 17 411 407
Shareowners' equity....................... 659 2,122 2,559
STATEMENT OF CASH FLOWS DATA(b)
Net cash provided (used) by operating
activities.............................. NA $ (181) $ 178
Net cash used by investing activities..... NA (976) (314)
Net cash provided (used) by financing
activities.............................. NA 1,170 125
Capital expenditures for continuing
operations.............................. NA (70) (80)
OTHER DATA:
EBITDA(g)................................. $ 220 $ 223 $ 279
Ratio of earnings to fixed charges(h)..... 1.56 2.28 3.82
</TABLE>
(continued on next page)
21
<PAGE> 23
- -------------------------
Note: The Financial Statements of Tenneco Inc. and Consolidated Subsidiaries
referred to in the following notes are included in and incorporated by
reference from the Tenneco Current Report on Form 8-K dated August 20,
1999. They cover the three years ended December 31, 1998 and the six
months ended June 30, 1999 and 1998.
(a) For a discussion of the significant items affecting comparability of the
financial information for the years ended December 31, 1998, 1997, and 1996,
and for the six months ended June 30, 1999 and 1998, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in Tenneco's Current Report on Form 8-K dated August 20, 1999.
(b) During the periods presented, Tenneco completed numerous acquisitions. The
most significant acquisition was Automotive's acquisition of Clevite for
$328 million in July 1996. See Notes to the Financial Statements of Tenneco
Inc. and Consolidated Subsidiaries for additional information. See also
"Description of Tenneco After the Spin-off/Automotive -- Strategic
Acquisitions and Alliances" included elsewhere in this document.
(c) Debt amounts for 1998, 1997, and 1996, and for June 30, 1998, are net of
allocations of corporate debt to the net assets of Tenneco's discontinued
specialty packaging and paperboard packaging segments. Debt amounts for June
30, 1999, are net of allocations of corporate debt to the net assets of
Tenneco's discontinued specialty packaging segment. Debt amounts for 1995
and 1994 are net of allocations of corporate debt to the net assets of
Tenneco's discontinued specialty packaging, paperboard packaging, energy and
shipbuilding segments. Interest expense for all periods is net of interest
expense allocated to income from discontinued operations. These allocations
of debt and related interest expense are based on the ratio of Tenneco's
investment in the specialty packaging, paperboard packaging, energy and
shipbuilding segments' respective net assets to Tenneco's consolidated net
assets plus debt. See Notes to the Financial Statements of Tenneco Inc. and
Consolidated Subsidiaries for additional information. The pro forma debt
balances reflect Tenneco's debt after allocation of a portion of its debt to
Packaging in connection with the spin-off. See "The Spin-off" and
"Description of Tenneco After the Spin-off/Automotive -- Unaudited Pro Forma
Consolidated Financial Statements of Tenneco" included elsewhere in this
document.
(d) Discontinued operations reflected in the above periods consist of Tenneco's
(1) specialty packaging segment, which was discontinued in August 1999, (2)
paperboard packaging segment, which was discontinued in June 1999, (3)
energy and shipbuilding segments, which were discontinued in December 1996,
(4) farm and construction equipment segment, which was discontinued in March
1996, and (5) chemicals and brakes operations, which were discontinued
during 1994. See Notes to the Financial Statements of Tenneco Inc. and
Consolidated Subsidiaries for additional information.
(e) Represents Tenneco's costs related to prepayment of debt, including the 1996
loss recognized in the realignment of Tenneco's consolidated debt preceding
its 1996 corporate reorganization and the 1999 loss recognized in connection
with the contribution of the containerboard assets to a new joint venture.
See the Notes to the Financial Statements of Tenneco Inc. and Consolidated
Subsidiaries.
(f) In 1999, Tenneco implemented the American Institute of Certified Public
Accountants Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities." In addition, effective January 1, 1999, Tenneco changed its
method of accounting for customer acquisition costs from a deferral method
to an expense-as-incurred method. In 1997, Tenneco implemented the Financial
Accounting Standards Board's Emerging Issues Task Force Issue 97-13,
"Accounting for Costs Incurred in Connection with a Consulting Contract that
Combines Business Process Reengineering and Information Technology
Transformation." In 1994, Tenneco adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits." See
the Notes to the Financial Statements of Tenneco Inc. and Consolidated
Subsidiaries for additional information regarding changes in accounting
principles.
(g) EBITDA represents income from continuing operations before interest expense,
income taxes, minority interest and depreciation and amortization. EBITDA is
not a calculation based upon generally accepted accounting principles. The
amounts included in the EBITDA calculation, however, are derived from
amounts included in the consolidated historical or pro forma statements of
income data. EBITDA should not be considered as an alternative to net income
or operating income as an indicator of the operating performance of Tenneco,
or as an alternative to operating cash flows as a measure of liquidity.
Tenneco has reported EBITDA because it believes EBITDA is a measure commonly
reported and widely used by investors and other interested parties as an
indicator of a company's ability to incur and service debt. Tenneco believes
EBITDA assists investors in comparing a company's performance on a
consistent basis without regard to depreciation and amortization, which can
vary significantly depending upon accounting methods (particularly when
acquisitions are involved) or nonoperating factors. However, the EBITDA
measure presented in this document may not always be comparable to similarly
titled measures reported by other companies due to differences in the
components of the calculation.
(h) For purposes of computing this ratio, earnings generally consist of income
from continuing operations before income taxes and fixed charges excluding
capitalized interest. Fixed charges consist of interest expense, preferred
stock dividend requirements of subsidiaries, the portion of rental expense
considered representative of the interest factor, and capitalized interest.
For purposes of computing these ratios, preferred stock dividends are
included in the calculations on a pre-tax basis. The pro forma ratios are
derived from the Unaudited Pro Forma Consolidated Financial Statements of
Tenneco included elsewhere in this document.
22
<PAGE> 24
RECENT DEVELOPMENTS
PACKAGING
Tenneco currently expects that operating income from its Packaging business
for the third quarter of 1999 will be $10 to $15 million below operating income
from this business for the third quarter of 1998. Based on Packaging's forecast
of resin costs, and pricing actions taken, Packaging's management expects the
negative impact on margin from increased resin costs to begin to be offset
sometime in the fourth quarter of 1999. During the third quarter of 1999,
Packaging also incurred increased advertising and promotional expenditures to
meet competitive market initiatives in its consumer business.
Packaging's management is evaluating Packaging's strategy in light of its
competitive position as a new stand-alone public company and, as part of this
evaluation, is analyzing its business operations and assets. Specifically, the
evaluation includes a review of Packaging's strategic and competitive position
in market segments and operations where results are not meeting management's
expectations. Although plans are still being developed and have not been
finalized or approved, potential options could include the disposition,
restructuring or rationalization of assets and operations. Packaging expects to
complete its evaluation in the fourth quarter of 1999. Based on its continuing
analysis, Packaging has revised its original estimate of the potential charge it
could expect to take upon final approval of the plan. Packaging currently
estimates that its evaluation could result in an aggregate pre-tax charge of up
to approximately $175 million, of which approximately 10% could be cash.
AUTOMOTIVE
Tenneco currently expects that operating income from the Automotive
business for the third quarter of 1999 will be $20 to $25 million below
operating income from this business for the third quarter of 1998. Also,
Tenneco's third quarter income from continuing operations is expected to include
additional tax costs of $15 to $20 million related to repatriation of overseas
earnings in connection with the spin-off. This repatriation allows Tenneco to
leverage its overseas operations, creating interest deductions in foreign tax
jurisdictions.
Automotive's management expects that revenues from its North American
original equipment business will continue to improve in the third quarter based
on a strong vehicle build in the original equipment market, especially in the
light truck market. In the North American aftermarket, revenues are expected to
be lower than in the third quarter of 1998 due primarily to declining exhaust
replacement rates. The favorable impacts of Automotive's earlier restructuring
efforts in its North American aftermarket operations are expected to fully
offset the negative impact on operating income caused by the weakness in
aftermarket exhaust sales.
Automotive's European operations are expected to be negatively impacted by
higher costs, primarily relating to a first quarter 1999 change in accounting
for platform start-up costs from a capitalization to an expense basis, changes
in the mix of its revenues in the original equipment market to lower margin
business and softness in ride control aftermarket sales due primarily to an
increase in private label and non-premium product business. The South American
operations continue to be negatively impacted by the troubled economic
conditions in Brazil and Argentina and currency weakness.
Automotive has initiated an action plan which includes management changes,
brand repositioning and new product offerings. For example, Automotive plans to
introduce a new premium shock absorber product for the aftermarket in November
1999, and plans expanded introductions of Mega-Flow(TM) heavy duty mufflers and
its recreational vehicle shock line. Automotive is also evaluating a
supplemental restructuring plan which could involve the closure of additional
manufacturing and distributions facilities in North America and Europe. If the
plan is approved, it could result in a third or fourth quarter pre-tax charge of
$45 to $55 million, of which approximately 50-60% could be cash.
23
<PAGE> 25
RISK FACTORS
You should carefully consider the following risk factors, in addition to
the other information contained in this document, before deciding to tender
original securities for exchange in the exchange offers. When you evaluate the
forward-looking statements in this document, you should carefully consider the
factors discussed below and the cautionary statements referred to in
"Forward-Looking Statements." Neither Tenneco nor Packaging makes any
representation as to the future value of either the new securities or the
original securities.
RISK FACTORS IF YOU EXCHANGE
RISKS RELATING TO THE NEW SECURITIES
HOLDERS OF PACKAGING'S NEW SECURITIES WILL BE SUBJECT TO RISK BECAUSE
PACKAGING WILL INITIALLY HAVE LESS REVENUES, CASH FLOWS AND ASSETS TO HELP
IT SATISFY ITS DEBT OBLIGATIONS THAN TENNECO CURRENTLY DOES.
Once the spin-off is completed, Packaging will have fewer assets and less
revenues and cash flows than Tenneco, the obligor of the original securities,
currently does. Tenneco is engaged in the automotive, packaging and
administrative services businesses. Packaging, however, will be engaged only in
Tenneco's current packaging and administrative services businesses. The cash
flows and assets of Tenneco's automotive business will not be available to
satisfy Packaging's obligations under its new securities. Tenneco will not
guarantee the new securities, and holders who receive new securities in exchange
for original securities will no longer be creditors of Tenneco. See "The
Spin-off."
PACKAGING CANNOT ASSURE YOU THAT ITS NEW SECURITIES WILL HAVE OR MAINTAIN
INVESTMENT-GRADE RATINGS, AND A REDUCTION IN THE NEW SECURITIES' RATINGS
WOULD ADVERSELY AFFECT THEIR VALUE.
Packaging expects that, based on and subject to discussions with debt
rating agencies, its new securities will have an investment-grade rating that
will be at the lower end of the possible investment grade ratings. However,
Packaging cannot assure you that the new securities will actually have or be
able to maintain these ratings. The failure of the new securities to have an
investment-grade rating, or a reduction in the rating of the new securities,
would have an adverse effect on their value.
A LIQUID TRADING MARKET FOR PACKAGING'S NEW SECURITIES MAY NOT DEVELOP AND
THE MARKET PRICE OF THE NEW SECURITIES COULD BE ADVERSELY AFFECTED.
There is no established trading market for Packaging's new securities. A
liquid trading market may not develop for the new securities, which would
adversely impact their market price. Packaging does not intend to apply for
listing of the new securities on the NYSE or any other securities exchange, or
for quotation through the National Association of Securities Dealers Automated
Quotation System.
The liquidity of any market and the market price for the new securities
will depend on, among other things: (a) the number of holders of the new
securities; (b) Packaging's performance; (c) the market for similar securities;
and (d) the interest of securities dealers in making a market in the new
securities. Even if a market for the new securities does develop, the new
securities may trade at a discount, depending on the factors described above.
UNDER SPECIFIED CIRCUMSTANCES, YOUR EXCHANGE OF TENNECO'S ORIGINAL
SECURITIES FOR PACKAGING'S NEW SECURITIES WILL BE TAXABLE.
Counsel to Tenneco is of the opinion that your exchange of original
securities for Packaging's new securities should be tax-free for U.S. federal
income tax purposes, except for any accrued interest and except with respect to
cash received in lieu of a fractional interest in new securities. If, however,
the spin-off does not qualify as tax-free for specified reasons, you will
recognize gain or loss as a result of your receipt of Packaging's new securities
in the exchange offers. You will also recognize this gain or loss if either
Tenneco's original securities or Packaging's new securities do not qualify as
"securities" for U.S. federal income tax purposes. In addition, a portion of the
new securities could be treated as a consent payment, resulting in ordinary
income to you. See "-- Risk Factors Related to the Spin-off" for a
24
<PAGE> 26
description of circumstances under which the spin-off may not qualify as a
tax-free distribution. See also "U.S. Federal Income Tax Consequences."
THERE ARE GENERALLY NO TERMS OF THE NEW SECURITIES THAT WILL PROTECT OR
COMPENSATE YOU IN THE EVENT OF A HIGHLY LEVERAGED OR SIMILAR TRANSACTION
INVOLVING PACKAGING.
There will be no covenants or other provisions in the terms of the new
securities providing for a put or increased interest or that would otherwise
provide you with additional compensation or protection in the event of a
recapitalization transaction, a change of control or a highly leveraged
transaction involving Packaging, except that the terms of the new securities
will provide that Packaging may not merge or consolidate with any other person
or entity, or sell, lease or convey all or substantially all of its assets to
any person or entity, unless specified conditions are satisfied. These
conditions are limited and relate generally to the assumption of the obligations
by the surviving or successor entity under the new securities and the absence of
defaults. For a description of these conditions, see "Description of the New
Securities -- Consolidation, Merger and Sale of Assets."
RISKS RELATING TO PACKAGING'S BUSINESS
THE CYCLICAL DEMAND FOR PACKAGING PRODUCTS COULD ADVERSELY AFFECT ITS
OPERATING RESULTS BECAUSE LESS DEMAND FOR PACKAGING'S PRODUCTS COULD REDUCE
PACKAGING'S PROFITABILITY.
Demand for Packaging's products is cyclical in nature because it follows
the demand for the goods that are packaged with its products or the demand for
services such as construction. Accordingly, Packaging's demand is subject to
general economic conditions that affect demand in the durable goods, consumer,
building, construction and automotive markets. Growth in the economy generally
stimulates demand for these products or services, while a weakening economy
tends to decrease demand. Consequently, adverse economic conditions could have a
material adverse effect on Packaging's operating results because less demand for
Packaging's products would reduce Packaging's profitability.
VOLATILE RAW MATERIAL PRICES COULD ADVERSELY AFFECT PACKAGING'S OPERATING
RESULTS BECAUSE HIGHER COSTS TO MANUFACTURE ITS PRODUCTS WOULD LIKELY REDUCE
PACKAGING'S PROFITABILITY.
Plastic resins, aluminum rollstock, linerboard and recycled fiber are the
basic raw materials used in the manufacture of most of Packaging's products. The
costs of these materials may be volatile and are a function of, among other
things, the manufacturing capacity for those materials and the costs of their
components. If Packaging fails to obtain price increases for its products in a
timely manner following a raw material cost increase, reduces its product prices
without a corresponding reduction in raw material costs or is unable to
renegotiate favorable raw material supply contracts, Packaging's operating
results could be adversely affected because higher costs to manufacture its
products would likely reduce Packaging's profitability. See "Summary -- Recent
Developments -- Packaging."
PACKAGING CANNOT ASSURE YOU THAT IT WILL SUCCESSFULLY INTEGRATE ACQUIRED
BUSINESSES OR THAT FUTURE ACQUISITIONS WILL NOT ADVERSELY AFFECT ITS
OPERATING RESULTS AND FINANCIAL CONDITION.
Packaging's growth strategy contemplates further acquisitions of specialty
packaging and consumer products businesses, as well as related businesses.
Pursuing an acquisition strategy could adversely affect Packaging's operating
results and financial condition because of:
- unanticipated liabilities;
- the diversion of management attention;
- increased goodwill amortization;
- higher interest costs; and
- dependence on retaining or hiring and training key personnel and
integrating the acquired business.
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See "Description of Packaging -- Growth Strategy."
IF PACKAGING DOES NOT ADAPT TO TECHNOLOGICAL ADVANCES IN ITS INDUSTRY AS
QUICKLY AS ITS COMPETITORS, ITS OPERATING RESULTS AND FINANCIAL CONDITION
COULD BE ADVERSELY AFFECTED BY HIGHER OVERHEAD AND MANUFACTURING COSTS AND
REDUCED APPEAL OF ITS PRODUCTS.
Packaging competes in markets and industries that require sophisticated
manufacturing systems and other advanced technology to deliver state-of-the-art
specialty packaging solutions. These systems and technologies will have to be
refined and updated as the underlying technologies advance. Packaging cannot
assure you that, as systems and technologies become outdated, Packaging will be
able to replace them, to replace them as quickly as its competitors or to
develop and market new and better products in the future. Higher overhead and
manufacturing costs due to a failure to update and improve processes could limit
Packaging's ability to compete favorably as to price. In addition, Packaging's
failure to make technological advances could adversely affect its ability to
provide attractive packaging solutions for customers.
IF NOT FULLY RESOLVED, THE YEAR 2000 ISSUE COULD ADVERSELY AFFECT
PACKAGING'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Many computer software systems, as well as some hardware and equipment
utilizing date-sensitive data, were designed to use two-digit date fields.
Consequently, these systems, hardware and equipment will not be able to
recognize dates properly beyond the year 1999. If Packaging is unable to
complete on a timely and cost-efficient basis the remediation or replacement of
critical systems or equipment not yet in compliance, or develop alternative
procedures, or if Packaging's major suppliers, financial institutions or others
with whom it conducts business are unsuccessful in implementing timely
solutions, Year 2000 issues could have a material adverse effect on Packaging's
financial condition and its results of operations. This adverse effect could
result from interruptions in Packaging's ability to manufacture its products,
process and ship orders and properly bill and collect accounts receivable. For
more information, see "Description of Packaging -- Management's Discussion and
Analysis of Financial Condition and Results of Operations."
PACKAGING CANNOT ASSURE YOU THAT IT WILL BE ABLE TO SUCCESSFULLY TRANSITION
TO AN INDEPENDENT PUBLIC COMPANY.
Upon completion of the spin-off, Packaging's major operations will consist
of Tenneco's packaging business. Packaging has never operated as a stand-alone
company and historically has been able to rely, to some degree, on the earnings,
assets and cash flow of Tenneco's other businesses for capital requirements and
certain administrative services. Accordingly, Packaging's pro forma combined
financial statements included in this document may not necessarily reflect the
results of operations and financial condition that would have been achieved if
Packaging had operated independently during the periods presented.
PACKAGING IS SUBJECT TO RISKS RELATED TO ITS INTERNATIONAL OPERATIONS.
Packaging has manufacturing and distribution facilities in many countries,
principally in North America and Europe. For 1998, about 21% of Packaging's
revenues were derived from its international operations. International
operations are subject to various risks which could have a material adverse
effect on those operations or Packaging's as a whole, including:
- exposure to local economic conditions;
- exposure to local political conditions, including the risk of seizure of
assets by a foreign government;
- currency exchange rate fluctuations;
- controls on the repatriation of cash; and
- export and import restrictions.
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RISK FACTORS IF YOU DO NOT EXCHANGE
RISKS RELATING TO THE ORIGINAL SECURITIES THAT REMAIN OUTSTANDING
WHEN THE SPIN-OFF IS COMPLETED, ANY OF TENNECO'S ORIGINAL SECURITIES NOT
EXCHANGED WILL BE UNSECURED AND EFFECTIVELY RANK BEHIND NEW AUTOMOTIVE
SECURED BORROWINGS, WHICH COULD LIMIT THEIR COLLECTIBILITY IN THE EVENT OF
BANKRUPTCY.
The new borrowings to be made by Automotive in connection with the spin-off
will be secured by a substantial amount of Automotive's assets, including by
stock pledges and/or guarantees of various Automotive subsidiaries. See
"Description of Tenneco After the Spin-off/Automotive -- New Financing." The
original securities that remain outstanding after the exchange offers and
spin-off are not and will not be supported by similar security. Because this
security will allow the lenders to enforce their rights directly against the
subsidiaries or by taking control of Automotive's assets, original securities
that remain outstanding after the exchange offers will be structurally
subordinated to the rights of the lenders for Automotive's new borrowings. In
other words, the original securities will rank behind these borrowings as to
payment. This could limit their collectibility in the event of bankruptcy.
TENNECO EXPECTS THAT THE ORIGINAL SECURITIES WILL NOT MAINTAIN
INVESTMENT-GRADE RATINGS AFTER THE EXCHANGE OFFERS AND SPIN-OFF, AND THAT
THEIR VALUE COULD BE ADVERSELY AFFECTED.
Tenneco expects that the ratings of the original securities that which
remain outstanding after the exchange offers and spin-off will be lower than the
current ratings of the original securities and will not be investment-grade. Any
reduction in the rating of these securities could adversely affect their value.
TENNECO EXPECTS THAT A LIMITED TRADING MARKET FOR THE ORIGINAL SECURITIES
WILL EXIST AFTER THE EXCHANGE OFFERS AND THAT THE VALUE OF THESE SECURITIES
COULD BE ADVERSELY AFFECTED.
Tenneco expects that a limited trading market will exist for the original
securities that remain outstanding after the exchange offers. A limited trading
market could adversely affect the liquidity, market value and price volatility
of these securities. Tenneco expects the market for these securities to become
more limited because there will be fewer holders and a smaller outstanding
principal amount available for trading. In addition, some of the original
securities are listed on the NYSE. Under current NYSE rules, debt securities may
be delisted if the aggregate market value or principal amount of publicly held
debt securities is less than $1 million. Tenneco plans to apply for delisting of
any original securities that remain outstanding after the exchange offers. These
factors could further reduce the trading market for these securities.
WHEN THE SPIN-OFF IS COMPLETED, YOUR CREDIT RISK COULD INCREASE IF YOU DO
NOT TENDER BECAUSE AUTOMOTIVE WILL HAVE A SUBSTANTIAL AMOUNT OF DEBT. THIS
DEBT COULD ADVERSELY AFFECT AUTOMOTIVE'S OPERATING FLEXIBILITY AND PUT IT AT
A COMPETITIVE DISADVANTAGE.
When the spin-off is completed, Tenneco -- in other words,
Automotive -- will have a substantial amount of debt. Tenneco expects that
Automotive would have had indebtedness for money borrowed of $1.7 billion at
June 30, 1999 if the spin-off had occurred on that date. See "Description of
Tenneco After the Spin-off/Automotive -- Unaudited Pro Forma Consolidated
Financial Statements of Tenneco."
Automotive's substantial debt after the spin-off could have adverse
consequences for Automotive and increase your credit risk if you do not tender
in the exchange offers. These consequences may include:
- making it more difficult for Automotive to satisfy its obligations under
the original securities;
- making it more difficult for Automotive to obtain additional financing
for working capital, capital expenditures, acquisitions or general
corporate purposes;
- requiring a substantial portion of Automotive's cash flow to be dedicated
to debt service payments instead of other purposes;
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- increasing Automotive's vulnerability to general adverse economic and
industry conditions;
- limiting Automotive's financial flexibility in planning for and reacting
to changes in the industry in which it competes;
- placing Automotive at a disadvantage as compared to less leveraged
competitors; and
- limiting Automotive's ability to borrow additional funds and increasing
the cost of borrowing.
After the spin-off, Automotive's ability to pay principal and interest on
the original securities and satisfy its other debt service obligations will
depend on its future operating performance. If Automotive is unable to generate
sufficient cash flow or make future borrowings, it may be unable to service its
debt or to fund its other liquidity needs.
AUTOMOTIVE'S OPERATIONS AFTER THE SPIN-OFF MAY BE SUBSTANTIALLY RESTRICTED
BY THE TERMS OF ITS DEBT, WHICH COULD ADVERSELY AFFECT AUTOMOTIVE AND
INCREASE YOUR CREDIT RISK IF YOU DO NOT TENDER IN THE EXCHANGE OFFERS.
The agreements governing the new borrowings that Automotive will be making
in connection with the spin-off will include a number of significant financial
and other restrictive covenants. These covenants could adversely affect
Automotive, and adversely affect holders of original securities remaining after
the exchange offers, by limiting Automotive's ability to plan for or react to
market conditions or to meet its capital needs. Tenneco expects that these
covenants will, among other things, restrict Automotive's ability to:
- - dispose of assets;
- - incur liens, guarantees or additional debt;
- - engage in sale-leaseback transactions;
- - pay dividends or make distributions;
- - enter into investments or acquisitions;
- - engage in transactions with affiliates;
- - repurchase or redeem capital stock; and
- - engage in mergers or consolidations.
IF YOU DO NOT TENDER, THE PROPOSED AMENDMENTS COULD INCREASE YOUR CREDIT
RISK BY ELIMINATING OPERATING RESTRICTIONS CONTAINED IN THE ORIGINAL
INDENTURE.
Original securities not purchased in the exchange offers will remain
outstanding after the spin-off as obligations of Tenneco -- in other words,
Automotive. If the required consents are received and the proposed amendments
take effect, the original indenture will be amended to eliminate the
restrictions on Automotive's operations. Any actions that Automotive may take as
a result of these amendments could increase your credit risk or otherwise
adversely affect your interests if you do not tender. This is because the
original indenture, as amended, will continue to govern the terms of all of the
original securities that remain outstanding after the exchange offers.
For example, the proposed amendments will permit the spin-off of Packaging
without compliance with a covenant that might, if held to apply to the spin-off,
require Packaging to become the obligor of Tenneco's original securities.
Tenneco and Packaging believe the application of this covenant is uncertain in
these circumstances. The proposed amendments will also allow Automotive to make
new borrowings in connection with the spin-off that are secured by Automotive's
assets. For a description of the proposed amendments, see "The Proposed
Amendments."
AUTOMOTIVE MAY BE ADVERSELY AFFECTED IF IT IS UNABLE TO COMPLY WITH
FINANCIAL COVENANTS IN ITS NEW FINANCING ARRANGEMENTS BECAUSE IT COULD BE
REQUIRED TO REPAY BORROWINGS EARLY.
The new borrowings Automotive will be making in connection with the
spin-off will require it to comply with many specified financial ratios.
Automotive's failure to comply with these financial ratios could result in an
event of default which, if not cured or waived, could result in Automotive being
required to repay these borrowings before their due date. If Automotive were
unable to make this repayment or otherwise refinance these borrowings, the
lenders could foreclose on Automotive's assets that secure these
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borrowings. If Automotive were able to refinance these borrowings on less
favorable terms, Automotive's results of operations and financial condition
could be adversely impacted by increased costs and rates.
DESPITE ITS DEBT LEVELS AFTER THE SPIN-OFF, AUTOMOTIVE MAY STILL BE ABLE TO
INCUR SIGNIFICANTLY MORE DEBT.
Despite the restrictions and limitations described above, Automotive may be
able to incur significant additional indebtedness after the spin-off. The new
credit facility Automotive has entered into in connection with the debt
realignment is expected to permit additional borrowings of approximately $377
million after the spin-off, based on Automotive's expected level of drawings
under the facility at the spin-off date, and the indenture governing the
subordinated debt Automotive will issue in connection with the spin-off will
also permit Automotive to incur additional indebtedness in specified
circumstances. If new debt is added to Automotive's debt levels after the
spin-off, the related risks that Automotive faces could increase.
AFTER THE SPIN-OFF, AUTOMOTIVE WILL INITIALLY HAVE LOWER REVENUES, CASH FLOW
AND ASSETS TO HELP IT SATISFY ITS DEBT OBLIGATIONS THAN TENNECO CURRENTLY
DOES.
Upon the spin-off, Automotive will have fewer assets and less revenues than
Tenneco currently does. Tenneco, the obligor under the original securities,
currently has an automotive and packaging business and administrative services
operations. When the spin-off is completed, however, Automotive will be engaged
only in Tenneco's current automotive business. The cash flow and assets of
Tenneco's packaging business and administrative services operations will not be
available to satisfy obligations under the original securities that remain
outstanding. See "The Spin-off."
RISKS RELATING TO AUTOMOTIVE'S BUSINESS
CONSOLIDATION AMONG AUTOMOTIVE PARTS CUSTOMERS AND SUPPLIERS COULD MAKE IT
MORE DIFFICULT FOR AUTOMOTIVE TO COMPETE FAVORABLY.
Automotive's financial condition and results of operations could be
adversely affected because the customer base for automotive parts is
consolidating in both the original equipment market and aftermarket. As a
result, Automotive is competing for business from fewer customers. Due to the
cost focus of these major customers, Automotive has been, and expects to
continue to be, required to reduce prices. Automotive cannot be certain that it
will be able to generate cost savings and operational improvements in the future
that are sufficient to offset price reductions required by existing customers
and necessary to win additional business.
Furthermore, the trend towards consolidation among automotive parts
suppliers is resulting in fewer, larger suppliers who benefit from purchasing
and distribution economies of scale. If Automotive cannot achieve cost savings
and operational improvements sufficient to allow it to compete favorably in the
future with these larger companies, its financial condition and results of
operations could be adversely affected due to a reduction of, or inability to
increase, sales. See "Description of Tenneco After the Spin-off/
Automotive -- Industry Trends."
AUTOMOTIVE IS DEPENDENT ON ITS LARGE CUSTOMERS FOR FUTURE REVENUES.
Automotive depends on major vehicle manufacturers for a substantial portion
of its net sales. For example, during 1998 Ford and DaimlerChrysler accounted
for 12.8% and 10.9% of Automotive's net sales, respectively. The loss of all or
a substantial portion of Automotive's sales to any of its large volume customers
could have a material adverse effect on Automotive's financial condition and
results of operations by reducing cash flows and Automotive's ability to spread
costs over a larger revenue base. Automotive may make fewer sales to these
customers for a variety of reasons, including: (1) loss of awarded business; (2)
reduced or delayed customer requirements; or (3) strikes or other work stoppages
affecting production by the customers. See "Description of Tenneco After the
Spin-off/Automotive -- Analysis of Automotive's Revenues."
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AUTOMOTIVE MAY NOT BE ABLE TO SUCCESSFULLY RESPOND TO THE CHANGING
DISTRIBUTION CHANNELS FOR AFTERMARKET PRODUCTS.
Major automotive aftermarket retailers, such as AutoZone and Advance Auto
Parts, are attempting to increase their commercial sales by selling directly to
automotive parts installers in addition to individual consumers. These
installers have historically purchased from their local warehouse distributors
and jobbers, who are Automotive's more traditional customers. Tenneco cannot
assure you that Automotive will be able to maintain or increase aftermarket
sales through increasing its sales to retailers. Furthermore, because of the
cost focus of major retailers, Automotive has been, and expects to continue to
be, required to offer price concessions. Automotive's failure to maintain or
increase aftermarket sales, or to offset the impact of any reduced sales or
pricing through cost improvements, could have an adverse impact on its business
and operating results.
AUTOMOTIVE MAY BE UNABLE TO COMPETE FAVORABLY IN THE HIGHLY COMPETITIVE
AUTOMOTIVE PARTS INDUSTRY.
The automotive parts industry is highly competitive. Although the overall
number of competitors has decreased due to ongoing industry consolidation,
Automotive faces significant competition within each of its major product areas.
The principal competitive factors are price, quality, service, product
performance, design and engineering capabilities, new product innovation and
timely delivery. For more information about the automotive parts industry, see
"Description of Tenneco After the Spin-off/Automotive -- Overview of Automotive
Parts Industry." Tenneco cannot assure you that Automotive will be able to
continue to compete favorably in this competitive market or that increased
competition will not have a material adverse effect on Automotive's business by
reducing Automotive's ability to increase or maintain sales or profit margins.
AUTOMOTIVE MAY BE UNABLE TO REALIZE ITS BUSINESS STRATEGY OF IMPROVING
OPERATING PERFORMANCE.
Automotive has either implemented or plans to implement several important
strategic initiatives designed to improve its operating performance. The failure
to achieve the goals of these initiatives could have a material adverse effect
on Automotive's business, particularly since Automotive relies on these
initiatives to offset pricing pressures from its customers, as described above.
Tenneco cannot assure you that Automotive will be able to successfully implement
or realize the expected benefits of any of these initiatives or that Automotive
will be able to sustain improvements made to date. See "Description of Tenneco
After the Spin-off/Automotive -- Business Strategy."
AUTOMOTIVE IS SUBJECT TO RISKS RELATED TO ITS INTERNATIONAL OPERATIONS.
Automotive has manufacturing and distribution facilities in many countries,
principally in North America, Europe and Latin America, and sells its products
worldwide. For 1998, about 48% of Automotive's revenues were derived from its
operations outside North America. International operations are subject to
various risks which could have a material adverse effect on those operations or
Automotive's business as a whole, including:
- exposure to local economic conditions;
- exposure to local political conditions, including the risk of seizure of
assets by foreign government;
- currency exchange rate fluctuations;
- controls on the repatriation of cash; and
- export and import restrictions.
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AUTOMOTIVE MAY BE UNABLE TO REALIZE SALES REPRESENTED BY ITS AWARDED
BUSINESS.
The realization of future sales from awarded business is inherently subject
to a number of important risks and uncertainties, including as to the number of
vehicles that Automotive's vehicle manufacturer customers will actually produce,
the timing of that production and the mix of options that Automotive's vehicle
manufacturer customers and consumers may choose. In addition, Automotive's
customers generally have the right to replace Automotive with another supplier
at any time for a variety of reasons. Accordingly, Automotive cannot assure you
that it will in fact realize any or all of the future sales represented by its
awarded business.
EXCHANGE RATE FLUCTUATIONS COULD CAUSE A DECLINE IN AUTOMOTIVE'S FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
As a result of its international operations, Automotive generates a
significant portion of its net sales and incurs a significant portion of its
expenses in currencies other than the U.S. dollar. To the extent Automotive is
unable to match revenues received in foreign currencies with costs paid in the
same currency, exchange rate fluctuations in that currency could have a material
adverse effect on Automotive's business. For example, where Automotive has
significantly more costs than revenues generated in a foreign currency, it is
subject to risk if that foreign currency appreciates against the U.S. dollar
because this appreciation effectively increases its costs in that country.
Automotive generally seeks to mitigate the effect of exchange rate fluctuations
through the use of foreign currency borrowings and derivative financial
instruments, but cannot assure you that it will be successful in these efforts.
The financial condition and results of operations of some of Automotive's
operating entities are reported in foreign currencies and then translated into
U.S. dollars at the applicable exchange rate for inclusion in Automotive's
consolidated financial statements. As a result, appreciation of the U.S. dollar
against these foreign currencies will have a negative impact on Automotive's
reported revenues and operating profit while depreciation of the U.S. dollar
against these foreign currencies will have a positive effect on reported
revenues and operating profit. Automotive does not generally seek to mitigate
this translation effect through the use of derivative financial instruments. For
more information about the impact of exchange rate fluctuations on Tenneco and
Automotive, see "Management's Discussion and Analysis of Financial Conditions
and Results of Operations" of Tenneco included in Tenneco's Current Report on
Form 8-K dated August 20, 1999, which is incorporated by reference in this
document.
THE CYCLICALITY OF AUTOMOTIVE PRODUCTION AND SALES COULD CAUSE A DECLINE IN
AUTOMOTIVE'S FINANCIAL CONDITION AND RESULTS.
A decline in automotive sales and production would likely cause a decline
in Automotive's sales to vehicle manufacturers, and could result in a decline in
Automotive's results of operations and financial condition. The automotive
industry has been characterized historically by periodic fluctuations in overall
demand for vehicles due to, among other things, changes in general economic
conditions and consumer preferences. These fluctuations generally result in
corresponding fluctuations in demand for Automotive's products. The highly
cyclical nature of the automotive industry presents a risk that is outside
Automotive's control and that cannot be accurately predicted.
LONGER PRODUCT LIVES OF AUTOMOTIVE PARTS ARE ADVERSELY AFFECTING AFTERMARKET
DEMAND FOR SOME OF AUTOMOTIVE'S PRODUCTS.
The average useful life of automotive parts has been steadily increasing in
recent years due to innovations in products and technologies. The longer product
lives allow vehicle owners to replace parts of their vehicles less often. As a
result, a portion of sales in the aftermarket has been displaced. Additional
increases in the average useful lives of automotive parts are likely to
adversely affect the demand for Automotive's aftermarket products. Aftermarket
sales represented approximately 39% of Automotive's net sales for 1998. See
"Description of Tenneco After the Spin-off/Automotive -- Industry Trends."
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THE HOURLY WORKFORCE IN THE AUTOMOTIVE INDUSTRY IS HIGHLY UNIONIZED AND
AUTOMOTIVE'S BUSINESS COULD BE ADVERSELY AFFECTED BY LABOR DISRUPTIONS.
Substantially all of the hourly employees of North American vehicle
manufacturers are represented by the United Automobile, Aerospace and
Agricultural Implement Workers of America under collective bargaining
agreements. In addition, vehicle manufacturers and their employees in other
countries are also subject to labor agreements. A work stoppage or strike at the
production facilities of a significant customer, at Automotive's facilities or
at a significant supplier could have an adverse impact on Automotive by
disrupting demand for Automotive's products and/or Automotive's ability to
manufacture its products. The contracts between the UAW and each of General
Motors Corporation and Ford Motor Corporation expired in September 1999. The UAW
has reached a tentative agreement on a four-year contract with General Motors
Corporation. The contract between the UAW and Ford Motor Company has been
extended pending ongoing negotiations between the UAW and Ford. Automotive
cannot assure you that work stoppages or strikes will not occur as part of these
contract negotiations.
AUTOMOTIVE MAY INCUR MATERIAL PRODUCT WARRANTY COSTS.
From time to time, Automotive receives product warranty claims from its
customers. Vehicle manufacturers are increasingly requiring their outside
suppliers to guarantee or warrant their products and to bear the costs of repair
and replacement of these products under new vehicle warranties. Automotive
cannot assure you that costs associated with providing product warranties will
not be material.
TENNECO CANNOT ASSURE YOU THAT AUTOMOTIVE WILL BE ABLE TO SUCCESSFULLY
TRANSITION TO AN INDEPENDENT PUBLIC COMPANY.
Upon completion of the spin-off, Tenneco's major operations will consist
solely of Automotive. Automotive has never operated as a stand-alone company and
has historically been able to rely, to some degree, on the earnings, assets and
cash flow of Packaging's business for capital requirements and some
administrative services. Accordingly, the pro forma consolidated financial
statements for Tenneco included in this document may not necessarily reflect the
results of operations and financial condition that would have been achieved if
Automotive had operated independently during the periods presented.
IF NOT FULLY RESOLVED, THE YEAR 2000 ISSUE COULD ADVERSELY AFFECT
AUTOMOTIVE'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Many computer software systems, as well as some hardware and equipment
utilizing date-sensitive data, were designed to use two-digit date fields.
Consequently, these systems, hardware and equipment will not be able to
recognize dates properly beyond the year 1999. If Automotive is unable to
complete on a timely and cost-efficient basis the remediation or replacement of
critical systems or equipment not yet in compliance, or develop alternative
procedures, or if Automotive's major suppliers, financial institutions or others
with whom it conducts business are unsuccessful in implementing timely
solutions, Year 2000 issues could have a material adverse effect on Automotive's
financial condition and results of operations. This adverse effect could result
from interruptions in Automotive's ability to manufacture its products, process
and ship orders, and properly bill and collect accounts receivable. For more
information, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Tenneco's Current Report in Form 8-K dated August
20, 1999.
RISK FACTORS RELATING TO THE SPIN-OFF
IF THE SPIN-OFF DOES NOT QUALIFY AS TAX-FREE, AUTOMOTIVE AND PACKAGING COULD
BE ADVERSELY AFFECTED BY THE RESULTING CORPORATE TAX LIABILITY.
If the spin-off does not qualify as a tax-free distribution for U.S.
federal income tax purposes, then, in general, a very substantial corporate tax
would be payable by the consolidated tax group of which Tenneco is the common
parent. Each member of Tenneco's consolidated group, including Packaging, would
be
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severally liable for that tax. Packaging and Automotive will enter into a tax
sharing agreement in connection with the spin-off regarding the allocation and,
in some circumstances, sharing of that potential tax liability between them. See
"The Spin-off -- Relationship Between Automotive and Packaging After the
Spin-off." If the spin-off did not qualify as a tax-free distribution, the
resulting tax liability would have a material adverse effect on the financial
condition and, as such, business of Packaging and/or Automotive.
Tenneco has received a letter ruling from the Internal Revenue Service to
the effect that, among other things, the spin-off will qualify as a tax-free
distribution and accordingly will not be taxable to Tenneco or its stockholders.
The ruling is based upon various factual representations and assumptions. If any
of those factual representations and assumptions were untrue or incomplete in a
material respect, or the facts upon which that ruling is based are materially
different from the facts at the time of the spin-off, the spin-off could become
taxable to Tenneco or its stockholders. If the spin-off does not qualify as tax-
free for these reasons, your exchange of original securities for new securities
would become taxable for U.S. federal income tax purposes. See "-- Risk Factors
if You Exchange."
Furthermore, if the spin-off otherwise qualifies as a tax-free distribution
but there is a change in control of Packaging or Automotive that is considered
part of a plan or a series of transactions related to the spin-off,
Tenneco -- which after the spin-off will be Automotive -- would incur a very
substantial tax liability on the distribution of Packaging common stock to its
stockholders. Packaging would be responsible for this resulting tax liability in
the case of a Packaging change of control, and Automotive would be responsible
for this resulting tax liability in the case of an Automotive change of control.
In these circumstances, however, securityholders of Automotive and Packaging
would not recognize gain or loss as a result of the spin-off. See "U.S. Federal
Income Tax Consequences."
PACKAGING AND AUTOMOTIVE COULD BE ADVERSELY AFFECTED IF THE SPIN-OFF, THE
CORPORATE RESTRUCTURING TRANSACTIONS OR THE DEBT REALIGNMENT ARE NOT VALID
UNDER FRAUDULENT TRANSFER OR LEGAL DIVIDEND STATUTES.
In connection with the spin-off, Tenneco will undertake numerous corporate
restructuring transactions and realign its debt, which, along with the spin-off,
are subject to federal and state fraudulent conveyance laws. Under these laws,
if a court determines that one of the parties to these transactions did not
receive fair consideration and, at the time, was insolvent, had unreasonably
small capital or was unable to pay its debts as they came due, the court could
reverse the transactions or the spin-off or impose liability on the parties. The
resulting complications and costs could have a material adverse effect on
Packaging and Automotive.
In addition, the corporate restructuring transactions, debt realignment and
spin-off are subject to state corporate distribution statutes. For example,
under Delaware law, a corporation may only pay dividends to its stockholders
either: (1) out of its surplus, calculated as net assets minus capital; or (2)
if there is no surplus, out of its net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year, subject to some
restrictions. Although all distributions are intended to be made entirely from
surplus, Tenneco and Packaging cannot assure you that a court will not later
determine that the spin-off, one or more of the corporate restructuring
transactions or the debt realignment was unlawful under state corporate law.
This could allow the court to reverse the transactions. The resulting
complications and costs could have a material adverse effect on Packaging and
Automotive.
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FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements. The words "will," "may,"
"designed to," "outlook," "believes," "should," "anticipates," "plans,"
"expects," "intends" and "estimates," and similar expressions, identify these
forward-looking statements. These forward-looking statements are contained
principally under the headings "Summary," "Risk Factors," "The Spin-off,"
"Description of Packaging" and "Description of Tenneco After the
Spin-off/Automotive." Although Tenneco and Packaging believe that the
expectations reflected in these forward-looking statements are based on
reasonable assumptions, these expectations may not prove to be correct. Because
these forward-looking statements are also subject to risks and uncertainties,
actual results may differ materially from the expectations expressed in the
forward-looking statements. Important factors that could cause actual results to
differ materially from the expectations reflected in the forward-looking
statements include those described in "Risk Factors," as well as:
- general economic, business and market conditions;
- operating hazards associated with the Packaging or Automotive business;
- changes in automobile manufacturers' actual and forecasted requirements
for Automotive's products;
- labor disruptions at Packaging, Automotive or any of their significant
customers or suppliers;
- customer acceptance of new products;
- capital availability or costs, including changes in interest rates or
market perceptions of Packaging or Automotive;
- changes by the Financial Accounting Standards Board or the Securities and
Exchange Commission of authoritative generally accepted accounting
principles or policies;
- the impact of laws and regulations, including environmental laws and
regulations; and
- the occurrence or non-occurrence of circumstances beyond the control of
Tenneco or Packaging.
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<PAGE> 36
WHERE YOU CAN FIND MORE INFORMATION
Packaging has filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933 covering the offering of
the new securities. Packaging has also filed with the Commission a registration
statement under the Securities Exchange Act of 1934 covering its common stock,
which will be distributed to Tenneco stockholders in the spin-off. This document
does not contain all of the information included in these registration
statements and their associated exhibits and schedules. For more information
about Packaging and the new securities, you should read these registration
statements and their associated exhibits and schedules. This document summarizes
provisions of contracts and other documents that it refers you to. If Packaging
has filed any contract or other document as an exhibit to the registration
statement covering the new securities, you should read the exhibit for a more
complete understanding of the contract or document involved. Each statement in
this document summarizing the provisions of a contract or other document is
qualified in all respects by reference to the actual document.
Tenneco files annual, quarterly and other reports, proxy statements and
other information with the SEC. Following the spin-off, Packaging also will file
periodic reports, proxy statements and other information with the SEC.
You may read and copy Tenneco's and Packaging's filings with the SEC at the
public reference rooms at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at 7 World
Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. You may also obtain copies of those
filings at prescribed rates by (a) calling the SEC at 1-800-SEC-0330, or (b)
writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may also access the filings electronically on the
SEC's website at http://www.sec.gov. Because Tenneco's common stock is listed on
the New York, Chicago and Pacific Stock Exchanges, you may review reports and
other information concerning Tenneco at these exchanges. Application will be
made to list Packaging's common stock on the NYSE, and you may review reports
and other information concerning Packaging at the NYSE, 20 Broad Street, New
York, New York 10005.
In addition, Tenneco maintains a website where you can find information
about Tenneco, Packaging and Automotive at http://www.tenneco.com.
INCORPORATION OF INFORMATION BY REFERENCE
The SEC allows "incorporation by reference" of information filed with the
SEC into this document. This means that Tenneco and Packaging can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered part of this prospectus,
except that information filed in later-dated documents will automatically update
and supersede the information contained in earlier-dated documents.
The following documents filed with the Commission by Tenneco, File No.
1-12387, or Packaging, File No. 1-15157, as applicable, are incorporated by
reference into this document and shall be deemed to be a part hereof:
(a) Tenneco's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
(b) Tenneco's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1999 and Quarterly Report on Form 10, for the
fiscal quarter ended June 30, 1999, as amended;
(c) Tenneco's Definitive Proxy Statement for the Annual Meeting of
Stockholders held on May 11, 1999 and the Special Meeting of
Stockholders to be held on October 25, 1999;
(d) Tenneco's Current Report on Form 8-K dated April 12, 1999;
(e) Tenneco's Current Report on Form 8-K dated July 14, 1999;
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<PAGE> 37
(f) Tenneco's Current Report on Form 8-K dated August 20, 1999, which
includes financial and other information that supersedes the
comparable information in Tenneco's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998, Tenneco's Quarterly
Reports on Form 10-Q for the fiscal quarters ended March 31, 1999
and June 30, 1999 and Tenneco's Current Report on Form 8-K dated
July 14, 1999; and
(g) All documents subsequently filed by Tenneco or Packaging pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 after the date of this document and prior to the
termination of the offering of the new securities.
Notwithstanding any disclosure to the contrary in documents incorporated by
reference, no safe harbor protection under Section 27A of the Securities Act of
1933 or Section 21E of the Securities Exchange Act of 1934 extends to
forward-looking statements that appear in this document directly or by
incorporation.
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<PAGE> 38
THE EXCHANGE OFFERS AND CONSENT SOLICITATION
Tenneco is offering to exchange Packaging's new securities for any and all
of Tenneco's original securities that are validly tendered before the applicable
expiration time and not withdrawn. The terms and conditions of these exchange
offers are described in this document and in the accompanying letter of
consent/transmittal. Concurrently with the exchange offers, Tenneco is
soliciting consents from the holders of the original securities to the proposed
amendments to the original indenture. Tenneco will accept tenders of original
securities only in principal amounts of $1,000 or integral multiples of $1,000.
If you hold original securities, you may participate in the exchange offers
by following the procedures described in this document. If you tender original
securities, you will be required, as a condition to a valid tender, to consent
to the proposed amendments with respect to the original securities you tendered.
Your proper tender of original securities will constitute your automatic consent
to the proposed amendments and to the execution of a supplement to the original
indenture to effect the proposed amendments. See "-- The Consent Solicitation."
TERMS OF THE EXCHANGE OFFERS
Subject to the terms and conditions described in this document and in the
accompanying letter of consent/transmittal, for each $1,000 principal amount of
original securities validly tendered and accepted for exchange, Tenneco is
offering (1) $1,000 principal amount of the corresponding new securities if for
holders who validly tender their original securities before the consent
solicitation expires, as shown in the applicable column of the table below, or
(2) [$ ] principal amount of the corresponding new securities for holders who
validly tender their original securities after the consent solicitation expires
but before the applicable exchange offer expires, as shown in the applicable
column of the table below. Notwithstanding the foregoing, Tenneco will only
issue new securities with principal amounts of $1,000 or integral multiples of
$1,000. Tenneco will: (1) aggregate the new securities to which a tendering
registered holder would otherwise be entitled; (2) round this amount down to the
nearest $1,000 and issue new securities to that holder in the rounded amount;
and (3) compensate that holder for this rounding by paying cash in an amount
equal to the principal amount of the fractional new security.
<TABLE>
<CAPTION>
TENDERING HOLDERS WILL RECEIVE
THE FOLLOWING PRINCIPAL AMOUNT
OF PACKAGING'S NEW SECURITIES:
FOR EACH: ---------------------------------------------
----------------------- IF THE VALID TENDER IF THE VALID TENDER
AGGREGATE $1,000 PRINCIPAL IS MADE IS MADE
CUSIP PRINCIPAL AMOUNT OF TENNECO'S BEFORE THE CONSENT AFTER THE CONSENT
NO.* AMOUNT ORIGINAL SECURITIES SOLICITATION EXPIRES SOLICITATION EXPIRES**
- ----- --------- ------------------- -------------------- ----------------------
<S> <C> <C> <C> <C>
</TABLE>
[to be provided by amendment]
- ---------------
* The terms of the exchange offers shall not be affected by any defect in or
omission of CUSIP numbers.
** The valid tender must be received before the applicable exchange offer
expires. See description above regarding payment of cash in lieu of a
fractional interest in new securities.
In each case, Tenneco will pay accrued but unpaid interest on the original
securities exchanged in the exchange offers through the date Tenneco accepts
them for exchange. In general, this payment will be made to the holder who
tendered the original securities. If, however, Tenneco accepts for exchange any
series of original securities on or before an interest payment date for that
series but after the record date for that interest payment date, Tenneco will
pay the accrued but unpaid interest to the holder of those original securities
as of that record date, if different from the holder who tenders.
Interest will cease to accrue on original securities exchanged in the
exchange offers from and after the date Tenneco accepts them. Interest on the
new securities will accrue at the applicable rate from and including their
issuance date.
Tenneco reserves the right, in its sole discretion, to purchase or make
offers to purchase any original securities that remain outstanding after the
exchange offers on terms that could differ from the terms of
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<PAGE> 39
the exchange offers. Tenneco will not make any purchase or offer except in
accordance with applicable law.
After the exchange offers, Tenneco will extinguish the original securities
accepted by it for exchange.
THE CONSENT SOLICITATION
As part of the exchange offers, Tenneco is soliciting consents to proposed
amendments to the original indenture under which Tenneco issued the original
securities. Tenneco is making the consent solicitation on the terms and subject
to the conditions described in this document. See "The Proposed Amendments."
YOUR VALID TENDER OF ORIGINAL SECURITIES BEFORE THE EARLY EXCHANGE TIME
WILL CONSTITUTE AN AUTOMATIC CONSENT TO THE PROPOSED AMENDMENTS WITH RESPECT TO
THOSE ORIGINAL SECURITIES. YOU MAY NOT DELIVER CONSENTS WITHOUT TENDERING YOUR
ORIGINAL SECURITIES AND YOU MAY NOT REVOKE CONSENTS WITHOUT WITHDRAWING THE
RELATED ORIGINAL SECURITIES FROM THE EXCHANGE OFFERS. SEE "-- WITHDRAWAL
RIGHTS."
To amend the original indenture, Tenneco must receive consents from the
registered holders of at least a majority in aggregate principal amount of all
series of outstanding securities issued under the original indenture, excluding
securities held at the time by Tenneco or its affiliates, voting as a single
class. The aggregate principal amount of securities outstanding under the
original indenture is $2,459,848,000, which comprises $ of original
securities that are subject to the exchange offers and $ of other debt
securities that are subject to Tenneco's concurrent cash tender offers. Tenneco
is making the cash tender offers by means of a separate offer to purchase and
consent solicitation document. To participate in the cash tender offers, holders
will be required to consent to the proposed amendments. Tenneco will make no
separate payments for consents received in the consent solicitation.
If the proposed amendments to the original indenture become effective, they
will bind all original securities that remain outstanding after the exchange
offers, even if the holder of those securities did not consent to the proposed
amendments. Accordingly, you could suffer adverse consequences if you choose not
to tender your original securities. See "Risk Factors -- Risk Factors if You Do
Not Exchange."
EXPIRATION TIME; EARLY EXCHANGE TIME; EXTENSIONS; TERMINATION; AMENDMENTS
Each of the exchange offers will commence at 9:00 a.m., New York City time,
on , 1999 and will expire at 5:00 p.m., New York City time,
, 1999, unless Tenneco extends any exchange offer in its sole
discretion. As used in this document, the term "expiration time" refers to 5:00
p.m., New York City time, on , 1999 or, if an exchange offer is
extended, the latest date and time to which that exchange offer is extended.
Each exchange offer is subject to Tenneco's right, in its sole discretion, to
the extent that it is legally permitted to do so, to terminate or amend any
exchange offer at any time as discussed below.
The consent solicitation will expire at 5:00 p.m., New York City time, on
, 1999, unless Tenneco extends the consent solicitation in its sole
discretion. As used in this document, the term "early exchange time" refers to
5:00 p.m., New York City time, on , 1999 or, if extended, the
latest date and time to which the consent solicitation is extended. The consent
solicitation is subject to Tenneco's right, in its sole discretion, to the
extent that it is legally permitted to do so, to terminate or amend the consent
solicitation at any time as discussed below.
Tenneco expressly reserves the right, in its sole discretion, subject to
applicable law, at any time or from time to time, to:
- terminate any of the exchange offers or the consent solicitation and
not accept for exchange any original securities if any of the
conditions provided below under "-- Conditions to the Exchange Offers
and Consent Solicitation" are not satisfied and are not waived by
Tenneco;
- waive any condition to any exchange offer and accept all original
securities previously tendered for exchange pursuant to that exchange
offer or waive any condition to the consent solicitation;
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<PAGE> 40
- extend the expiration time of any of the exchange offers or the early
exchange time and retain all original securities tendered in that
exchange offer, subject, however, to any withdrawal rights of holders,
as described under "-- Withdrawal Rights;"
- amend any exchange offer in any respect until the original securities
are accepted for exchange;
- amend the consent solicitation in any respect until the withdrawal
time; and/or
- not accept original securities tendered pursuant to an exchange offer
at any time before the expiration time for that exchange offer as a
result of an invalid tender, withdrawal or the occurrence of other
events as described herein.
The exchange agent may retain your tendered original securities if Tenneco (a)
extends any exchange offer or the consent solicitation, (b) delays the
acceptance of original securities for exchange, or (c) is unable to accept
original securities for exchange pursuant to any exchange offer. You may not
withdraw those original securities, except to the extent you are entitled to
withdrawal rights as described under "-- Withdrawal Rights." However the
exchange agent's right to retain your tendered securities in these circumstances
is subject to Rule 14e-1(c) under the Securities Exchange Act of 1934. Rule
14e-1(c) requires that a bidder pay the consideration offered or return the
securities deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of a tender offer.
Tenneco can extend, terminate or amend any of the exchange offers or the
consent solicitation by giving written or oral notice to the exchange agent,
which will be followed as promptly as practicable by a public announcement. In
the case of an extension, a public announcement will be issued before 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
expiration time of the exchange offer(s) being extended or the previously
scheduled early exchange time, as applicable. Tenneco will have no obligation to
publish, advertise or otherwise communicate a public announcement regarding
extension, amendment or termination other than by making a release to the Dow
Jones News Service or otherwise as required by law. All original securities
tendered pursuant to an exchange offer before any extension and not subsequently
withdrawn will remain subject to that exchange offer.
The terms of any extension or amendment of any exchange offer or the
consent solicitation may vary from the original exchange offers and consent
solicitation depending on factors such as prevailing interest rates and the
principal amount of original securities previously tendered. If Tenneco amends
the terms of any exchange offer before its expiration time, the amendment will
apply to all original securities of the same series tendered pursuant to that
exchange offer but will not, unless expressly provided, apply to any other
exchange offer. Tenneco does not presently intend to change the consideration
currently offered.
If Tenneco makes a material change in the terms of any exchange offer or
the information concerning any exchange offer or waives any condition of any
exchange offer that results in a material change to the circumstances of that
exchange offer, Tenneco will circulate additional exchange offer materials if
and to the extent required by applicable law. In those circumstances, Tenneco
will also extend the exchange offer if and to the extent required by applicable
law in order to permit holders of the original securities subject to that
exchange offer adequate time to consider the additional materials.
If Tenneco makes a material change in the terms of the consent solicitation
or the information concerning the consent solicitation or waives any condition
of the consent solicitation that results in a material change to the
circumstances of the consent solicitation, Tenneco will circulate additional
consent solicitation materials if and to the extent required by applicable law.
In those circumstances, Tenneco will also extend the consent solicitation if and
to the extent required by applicable law to allow holders of the original
securities adequate time to consider the additional materials. If any material
change occurs after the withdrawal time, Tenneco may decide to re-solicit
consents.
If Tenneco decreases the principal amount of original securities sought in
any exchange offer or increases or decreases the consideration offered to
holders of original securities subject to any exchange offer, Tenneco will, to
the extent required by applicable law, cause that exchange offer to be extended
so that it remains open at least ten business days from the date that Tenneco
first publishes, sends or gives notice of the change. For purposes of this
paragraph, "business day" has the meaning set forth in
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<PAGE> 41
Rule 14d-1(e)(6) under the Securities Exchange Act of 1934. The minimum period
that an exchange offer or the consent solicitation must remain open following
any other material change in the terms of or information concerning the exchange
offer or consent solicitation depends upon the facts and circumstances,
including the relative materiality of those terms or information.
EFFECT OF TENDER
Your tender of original securities in the exchange offers will constitute a
binding agreement between you and Tenneco upon the terms and subject to the
conditions of the exchange offers described in this document and the
accompanying letter of consent/transmittal. Your tender of original securities
will also constitute your agreement to deliver to Tenneco good and marketable
title to the tendered original securities free and clear of all liens, charges,
adverse claims, encumbrances, interests and restrictions of any kind.
ACCEPTANCE OF CONSENTS AND ORIGINAL SECURITIES; DELIVERY OF EXCHANGE
CONSIDERATION
Tenneco will purchase by accepting for exchange and will promptly pay for
all original securities validly tendered and not withdrawn or, if withdrawn,
validly retendered, in the exchange offers and the consent solicitation. This
purchase and payment will be made only upon the terms and subject to the
conditions of each exchange offer, the consent solicitation, the terms and
conditions of any extension or amendment and applicable law. Tenneco will make
payment for the original securities by depositing with the exchange agent: (1)
new securities in book-entry form, as described below; (2) cash to be paid for
any fractional interest in new securities; and (3) cash for the payment of any
applicable accrued but unpaid interest on original securities. The exchange
agent will act as agent for the tendering holders for the purpose of receiving
payments and/or new securities from Tenneco and then transmitting payments
and/or new securities to or at the direction of those holders.
New securities will be issued and delivered only in book-entry form through
The Depository Trust Company to the DTC account of the exchanging holder or the
exchanging holder's custodian. You must specify on the accompanying letter of
consent/transmittal the DTC participant and account information to which your
new securities should be delivered.
For purposes of the exchange offers, Tenneco will be deemed to have
accepted tendered original securities for exchange when Tenneco gives oral or
written notice of acceptance to the exchange agent. For purposes of the consent
solicitation, consents received by the exchange agent will be deemed to have
been accepted when (1) Tenneco and the trustee under the original indenture
execute the supplemental indenture containing the proposed amendments, which is
expected to occur promptly after the withdrawal time, and (2) Tenneco has
accepted the tendered original securities underlying those consents for exchange
in the exchange offer.
Subject to Rule 14e-1(c) under the Securities Exchange Act of 1934, Tenneco
may delay acceptance of original securities tendered for exchange or payment for
original securities accepted for exchange if any of the conditions of the
exchange offers are not satisfied or waived or in order to comply, in whole or
in part, with applicable law. Tenneco may do this in its sole discretion.
Tenneco will pay for original securities accepted for exchange only after the
exchange agent receives, at its address on the back cover page of this document:
(1) certificates for all physically delivered original securities in proper form
for transfer or confirmation of a book-entry transfer of original securities
into the exchange agent's account at DTC according to the procedures described
in this document; (2) a properly completed and duly executed letter of
consent/transmittal or properly transmitted "agent's message," as described
below; and (3) any other documents required by the accompanying letter of
consent/transmittal, in each case together with any applicable signature
guarantees. IN NO EVENT WILL INTEREST ACCRUE OR BE PAID TO HOLDERS BY REASON OF
ANY DELAY ON THE PART OF THE EXCHANGE AGENT IN MAKING PAYMENTS TO HOLDERS.
INTEREST ON THE ORIGINAL SECURITIES WILL CEASE TO ACCRUE ON AND AFTER THE
ISSUANCE DATE FOR THE RELATED NEW SECURITIES.
If Tenneco does not accept any of your tendered original securities for
exchange, or if you submit to the exchange agent original securities in a
principal amount greater than the principal amount indicated as being tendered,
Tenneco will issue to you an original security for the principal amount not
accepted for exchange or tendered. Tenneco will issue the original security in
the same form as it was originally
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<PAGE> 42
tendered. Tenneco will do this without expense to you as promptly as practicable
following the expiration or termination of the exchange offers.
Tenneco may transfer or assign, in whole at any time or in part from time
to time, to one or more of its affiliates, the right to acquire original
securities tendered in any exchange offer. No transfer or assignment will
relieve Tenneco of its obligations under that exchange offer or prejudice your
rights to receive new securities and any applicable accrued interest in exchange
for original securities validly tendered and accepted for exchange in that
exchange offer.
PROCEDURES FOR TENDERING ORIGINAL SECURITIES AND GIVING CONSENTS
If you hold original securities and wish to receive $1,000 principal amount
of applicable new securities for each $1,000 principal amount of original
securities, you must validly tender your original securities using the
procedures described in this document and in the accompanying letter of
consent/transmittal before the early exchange time. Your proper tender of
original securities will constitute your automatic consent to the proposed
amendments. If you hold original securities and wish to receive [$ ] principal
amount of applicable new securities for each $1,000 principal amount of original
securities, you must validly tender your original securities using the
procedures described in this document and in the accompanying letter of
consent/transmittal after the early exchange time, but before the applicable
expiration time. See "Terms of the Exchange Offers" for a description of how
Tenneco will pay cash in lieu of interests in new securities of less than
$1,000.
Only registered holders are authorized to tender their original securities
and consent to the proposed amendments. The procedures by which original
securities may be tendered and consents given by beneficial owners that are not
registered holders will depend upon the manner in which the original securities
are held, as described below.
TENDER OF ORIGINAL SECURITIES HELD THROUGH A NOMINEE. If you are a
beneficial owner of original securities that are held of record by a custodian
bank, depositary, broker, trust company or other nominee and you wish to tender
original securities, you should contact the record holder promptly and instruct
the record holder to tender the original securities and deliver a consent on
your behalf using one of the procedures described in this document. A letter of
instructions is contained in the solicitation materials provided with this
document which you may use to instruct the record holder to tender original
securities and deliver consent.
TENDER OF ORIGINAL SECURITIES HELD WITH DTC. Pursuant to authority granted
by DTC, if you are a DTC participant that has original securities credited to
your DTC account and thereby held of record by DTC's nominee, you may directly
tender those original securities and deliver consents as if you were the record
holder. Because of this, references in this document to registered or record
holders include DTC participants with original securities credited to their
accounts. Within two business days after the date of this document, the exchange
agent will establish accounts with respect to the original securities at DTC for
purposes of the exchange offers. Any participant in DTC may tender original
securities and deliver consents by:
- effecting a book-entry transfer of all original securities to be tendered
in the exchange offers into the account of The Chase Manhattan Bank, as
exchange agent, at DTC, using DTC's procedures for transfer; and
- either (1) effecting an agent's message, as described below, or (2)
completing and signing the accompanying letter of consent/transmittal
according to the instructions and delivering it, together with any
signature guarantees and other required documents, to the exchange agent
at its address on the back cover page of this document.
Timely book-entry delivery requires receipt by the exchange agent of a
book-entry confirmation confirming the book-entry transfer of original
securities into the exchange agent's account at DTC. The book-entry confirmation
must be received by the exchange agent before (1) the early exchange time to
receive $1,000 principal amount of applicable new securities for each $1,000
principal amount of original securities, or (2) the applicable expiration time
to receive [$ ] principal amount of applicable new securities for each $1,000
principal amount of original securities, subject to the provisions for paying
cash
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<PAGE> 43
in lieu of fractional interests in new securities. Even if delivery of original
securities is effected through book-entry transfer into the exchange agent's
account at DTC, an agent's message or a completed letter of consent/transmittal
or a facsimile thereof, together with any required signature guarantees and
other required documents, must be delivered or transmitted to and received by
the exchange agent at its address on the back cover page of this document before
(1) the early exchange time to receive $1,000 principal amount of applicable new
securities for each $1,000 principal amount of original securities, or (2) the
applicable expiration time to receive [$ ] principal amount of applicable new
securities for each $1,000 principal amount of original securities, subject to
the provisions regarding payment of cash in lieu of fractional interests in new
securities. See "Terms of the Exchange Offers" for a description of how Tenneco
will pay cash in lieu of interests in new securities of less than $1,000. A
tender of original securities for exchange will not be considered valid until
these items are received by the exchange agent. Delivery of a letter of
consent/transmittal or other documents to DTC will not be considered a valid
delivery to the exchange agent.
If a holder tenders after the early exchange time, the holder could become
entitled to a cash payment in lieu of any fractional interest in new securities.
Because Tenneco will aggregate the new securities to which a tendering
registered holder is entitled before making any such cash payment, registered
holders should in that case submit a separate tender for each of their
beneficial owners. THIS SHOULD BE DONE ONLY IF A TENDER IS BEING MADE AFTER THE
EARLY EXCHANGE TIME.
The exchange agent and DTC have confirmed that the exchange offers are
eligible for DTC's Automated Tender Offer Program. Accordingly, DTC participants
may electronically transmit their acceptance of any exchange offer and thereby
provide consent to the proposed amendments with respect to the original
securities tendered, by causing DTC to transfer original securities to the
exchange agent using DTC's Automated Tender Offer Program procedures for
transfer. DTC will then send an agent's message to the exchange agent. This
electronic acceptance will be in lieu of completing, signing and delivering the
letter of consent/transmittal.
An "agent's message" is a message which states that DTC has received an
express acknowledgment from a DTC participant tendering original securities that
the participant has received and agrees to be bound by the terms of the letter
of consent/transmittal and that Tenneco may enforce the agreement against the
participant. The agent's message is transmitted by DTC to, and received by, the
exchange agent and forms a part of the book-entry confirmation.
All of the original securities held through DTC have been issued in the
form of global notes registered in the name of Cede & Co., DTC's nominee. Upon
consummation of the exchange offers, the aggregate principal amounts of these
global notes will be reduced to represent the aggregate principal amount of
original securities not tendered and accepted.
TENDER OF ORIGINAL SECURITIES HELD IN PHYSICAL FORM. If you hold original
securities in physical form, you must comply with the following instructions to
tender original securities in the exchange offers:
- complete and sign the accompanying letter of consent/transmittal
according to its instructions; and
- deliver the following to the exchange agent at the address on the back
cover page of this document before the early exchange time or expiration
time, as applicable -- (1) a properly completed and duly executed letter
of consent/transmittal or a facsimile thereof, with any required
signature guarantees, (2) any other documents required by the letter of
consent/transmittal, and (3) the original securities in physical form
suitable for transfer.
To validly tender original securities that are not registered in your name,
you must follow special instructions described below under "-- Proper Execution
and Delivery of Letters of Consent/Transmittal."
LETTERS OF CONSENT/TRANSMITTAL AND PHYSICAL SECURITIES MUST BE SENT ONLY TO
THE EXCHANGE AGENT. DO NOT SEND LETTERS OF CONSENT/TRANSMITTAL OR PHYSICAL
SECURITIES TO TENNECO, PACKAGING, THE INFORMATION AGENT, DTC OR THE DEALER
MANAGERS.
THE EXCHANGE OFFERS AND CONSENT SOLICITATION DO NOT PROVIDE FOR THE
TENDERING OF ORIGINAL SECURITIES OR THE DELIVERY OF CONSENTS BY USE OF A NOTICE
OF GUARANTEED DELIVERY.
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<PAGE> 44
PROPER EXECUTION AND DELIVERY OF LETTERS OF CONSENT/TRANSMITTAL. If you
wish to participate in the exchange offers or consent solicitation, delivery of
your original securities, signature guarantees and the other required documents
are your responsibility. Delivery is not complete until the required items are
actually received by the exchange agent. If you mail these items, Tenneco
recommends that you (1) use registered mail with return receipt requested,
properly insured, and (2) mail the required items sufficiently in advance of the
early exchange time or expiration time, as desired, to allow enough time to
ensure timely delivery.
Except as otherwise provided below, all signatures on a letter of
consent/transmittal or a notice of withdrawal must be guaranteed by a recognized
participant in the Securities Transfer Agents Medallion Program, the NYSE
Medallion Signature Program or the Stock Exchange Medallion Program. Signatures
on a letter of consent/transmittal need not be guaranteed if:
- the letter of consent/transmittal is signed by the registered physical
holder(s) of the original securities or by a participant in DTC whose
name appears on a security position listing as the owner of the original
securities and the holder(s) have not completed the portion entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
letter of consent/transmittal; or
- the original securities are tendered for the account of an "eligible
institution." See Instruction 2 in the letter of consent/transmittal.
An "eligible institution" is one of the following firms or other entities
identified in Rule 17Ad-15 under the Securities Exchange Act of 1934, as the
terms are defined in the Rule: (a) a bank; (b) a broker, dealer, municipal
securities dealer, municipal securities broker, government securities dealer or
government securities broker; (c) a credit union; (d) a national securities
exchange, registered securities association or clearing agency; or (e) a savings
institution.
If the letter of consent/transmittal is signed by the registered holder(s)
of original securities tendered, the signature(s) must correspond with the
name(s) as written on the face of the original securities without alteration,
enlargement or any change whatsoever. If any of the original securities tendered
are held by two or more registered holders, all of the registered holders must
sign the letter of consent/transmittal. If any of the original securities are
registered in different names on different original securities, the holders must
complete, sign and submit as many separate letters of consent/transmittal as
there are different registrations of certificates.
In the following cases, the certificates for original securities that are
tendered must be endorsed or accompanied by an appropriate instrument of
transfer, signed exactly as the name of the registered owner appears on the
certificates, with the signatures on the certificates or instruments of transfer
guaranteed:
- if new securities issued in the exchange offers are to be registered in
the name of, or payments are to be made to, a person other than the
person whose signature is on the letter of consent/ transmittal;
- if original securities that are not exchanged are to be returned to a
person other than the registered owner; or
- if a letter of consent/transmittal is signed by a person other than the
registered holder(s) of the original securities tendered.
In addition, a tender of original securities before the early exchange time by
someone other than the registered holder must be accompanied by either a valid
proxy of, or a consent signed by, the registered holder(s). This is because
original securities may not be tendered before the early exchange time without
also delivering a consent with respect to those original securities, and only
registered holders are entitled to deliver consents. The signature on the proxy
or consent must be guaranteed.
Tenneco will not accept any alternative, conditional, irregular or
contingent tenders. By executing the letter of consent/transmittal or facsimile
thereof or transmitting an agent's message, you waive any right to receive any
notice of the acceptance of your original securities for exchange.
You should indicate in the applicable box in the letter of
consent/transmittal the name and address to which payments, certificates
evidencing original securities for amounts not exchanged or not tendered are
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<PAGE> 45
to be issued or sent, if different from yours. To issue securities in a
different name, the exchange agent must receive the employer identification or
social security number of the new person named and a Substitute Form W-9 for
this new person must be completed. If you do not give these instructions,
payments and original securities not exchanged will be delivered to the
registered holder of original securities tendered at the address listed in the
register maintained by the trustee for those original securities. In the case of
original securities tendered by book-entry transfer into the exchange agent's
account at DTC, the original securities will be credited to the account
maintained at DTC from which the original securities were delivered.
DETERMINATION OF VALIDITY. Tenneco will determine, in its sole discretion,
all questions as to the validity, form, eligibility, time of receipt, acceptance
and withdrawal of tendered original securities using the procedures described
above. Tenneco's determination will be final and binding. Tenneco reserves the
absolute right to reject any or all tenders of original securities determined by
it not to be in proper form or the acceptance of which may be unlawful in the
opinion of counsel for Tenneco. Tenneco also reserves the absolute right, in its
sole discretion, subject to applicable law, to waive any defects or
irregularities of any tender of original securities, whether or not similar
defects or irregularities are waived in the case of other tendered securities.
Tenneco's interpretation of the terms and conditions of the exchange offers,
including the instructions in the letter of consent/transmittal, will be final
and binding.
Tenneco, the exchange agent, the information agent, DTC and the dealer
managers are not under any duty to notify you of defects in your tender and will
not be liable if they fail to so notify you. Unless waived, you must cure any
irregularities in your tender within the time Tenneco determines. Your tender of
original securities will not be considered valid until those irregularities have
been cured or waived. The exchange agent will return any original securities
that are not properly tendered if the irregularities have not been cured or
waived. The original securities will be returned to you, unless otherwise
provided in the letter of consent/transmittal, as soon as practicable following
the applicable expiration time.
TRANSFER TAXES. Tenneco will pay all transfer taxes, if any, applicable to
the transfer and sale of original securities to Tenneco in the exchange offers.
If transfer taxes are imposed for any other reason, the amount of those transfer
taxes, whether imposed on the registered holder or any other persons, will be
payable by the tendering holder. Other reasons transfer taxes could be imposed
include: (a) if substitute original securities for original securities not
exchanged are to be delivered to, or new securities or substitute original
securities are to be registered or issued in the name of, any person other than
the registered holder of the original securities tendered, or (b) if tendered
original securities are registered in the name of any person other than the
person signing the letter of consent/transmittal. If satisfactory evidence of
payment of or exemption from those transfer taxes is not submitted with the
letter of consent/transmittal, the amount of those transfer taxes will be billed
directly to the tendering holder.
BACKUP U.S. FEDERAL INCOME TAX WITHHOLDING. U.S. federal income tax law
requires that a holder of original securities that are accepted for exchange
provide the exchange agent, as payer, with the holder's correct taxpayer
identification number or otherwise establish a basis for an exemption from
backup U.S. federal income tax withholding. In the case of a holder who is an
individual, other than a resident alien, this identification number is his or
her social security number. For holders other than individuals, the
identification number is an employer identification number. Exempt holders,
including, among others, all corporations and certain foreign individuals, are
not subject to these backup withholding and reporting requirements. If you do
not provide the exchange agent with your correct taxpayer identification number
or an adequate basis for an exemption, you may be subject to backup withholding
on payments made in exchange for any original securities and a penalty imposed
by the IRS. Backup withholding is not an additional federal income tax. Rather,
the amount of tax withheld will be credited against the federal income tax
liability of the holder subject to backup withholding. If withholding results in
an overpayment of taxes, you may obtain a refund from the IRS. You should
consult with a tax advisor regarding qualifications for exemption from backup
withholding and the procedure for obtaining the exemption.
To prevent backup withholding, you must provide your correct taxpayer
identification number by completing the IRS Substitute Form W-9 provided in the
letter of consent/transmittal and provide either (a) your correct taxpayer
identification number and other information under penalties of perjury, or (b)
an
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<PAGE> 46
adequate basis for an exemption. For a discussion of other federal income tax
consequences of the exchange offers, see "U.S. Federal Income Tax Consequences."
CONDITIONS TO THE EXCHANGE OFFERS AND CONSENT SOLICITATION
Notwithstanding any other provision, extension or amendment of the exchange
offers or consent solicitation, and in addition to, and not in limitation of,
Tenneco's rights to extend or amend any exchange offer or the consent
solicitation at any time in its sole discretion, Tenneco will not be required to
accept, exchange or make any payment for any original securities tendered for
exchange and may terminate any exchange offer and the consent solicitation if,
at or before the applicable expiration time:
- Tenneco does not receive the required consents or Tenneco and the trustee
under the original indenture have not executed and delivered the
supplemental indenture providing for the proposed amendments in the
manner described in this document;
- all conditions to Tenneco's concurrent cash tender offers have not been
satisfied;
- any condition to any other component of the debt realignment remains
unsatisfied;
- any material condition to the spin-off of Packaging remains unsatisfied,
other than completion of the debt realignment;
- any action has been taken or threatened, or any statute, rule,
regulation, judgment, order, stay, decree or injunction has been
promulgated, enacted, entered, enforced or deemed applicable to the
spin-off or any transaction undertaken in connection with the spin-off,
including the debt realignment, exchange offers and cash tender offers
(collectively, the "transactions"), by or before any court or
governmental, regulatory or administrative agency or authority or
tribunal, domestic or foreign, which either:
-- challenges the making of any of these transactions or could
reasonably be expected to directly or indirectly prohibit, prevent,
restrict or delay consummation of any of these transactions or
otherwise adversely affects in any material manner any component of
these transactions; or
-- could reasonably be expected to materially adversely affect the
business, financial condition, income, operations, properties,
assets, liabilities or prospects of Tenneco and its subsidiaries,
taken as a whole, or Packaging and its subsidiaries, taken as a
whole, in each case before and after giving effect to these
transactions, or Automotive and its subsidiaries, taken as a whole,
or materially impair the contemplated benefits of any of these
transactions to Tenneco and/or Packaging;
- any event affecting the business or financial affairs of Tenneco or any
of its subsidiaries has occurred or is likely to occur that could
reasonably be expected to prohibit, prevent, restrict or delay
consummation of any of the transactions described in the preceding
paragraph, or that will, or is reasonably likely to, materially impair
the contemplated benefits of any of these transactions to Tenneco or
Packaging, or could reasonably be expected to be material to holders of
original securities in determining whether to accept the exchange offers
or consent solicitation;
- there has occurred:
-- any general suspension of or limitation on trading in securities on
the NYSE or in the over-the-counter market, whether or not
mandatory;
-- a material impairment in the trading market for debt securities;
-- a declaration of a banking moratorium or any suspension of payments
in respect of banks by federal or state authorities in the United
States, whether or not mandatory;
-- a commencement or escalation of a war, armed hostilities or other
national or international crisis directly or indirectly relating to
the United States;
-- any limitation, whether or not mandatory, by any governmental
authority on, or other event having a reasonable likelihood of
affecting, the extension of credit by banks or other lending
institutions in the United States; or
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-- any significant adverse change in United States securities or
financial markets generally or the material acceleration or
worsening of an adverse change in the United States securities or
financial markets which existed at the time of the exchange offers;
or
- the trustee under the original indenture has either:
-- objected to or taken any action that could reasonably be expected to
adversely affect the consummation of the spin-off or any other
transaction undertaken in connection with the spin-off or Tenneco's
ability to effect the proposed amendments;
-- taken any action that challenges the validity or effectiveness of
the procedures used by Tenneco in soliciting the consents to the
proposed amendments, including the form thereof; or
-- taken any action that challenges the validity or effectiveness of
the procedures used by Tenneco in making or completing the exchange
offers or concurrent cash tender offers.
Tenneco's concurrent cash tender offers are subject to substantially the
same conditions as the exchange offers.
Because the exchange offers are part of the realignment of Tenneco's total
debt before the spin-off, Tenneco plans to complete the exchange offers before
the spin-off. See "The Spin-off." Tenneco expects, however, to complete the
spin-off within one business day after the exchange offers expire, or as soon
thereafter as practicable. For this reason, Tenneco has conditioned the exchange
offers on the satisfaction of all material conditions to the spin-off, other
than completion of the debt realignment. Further, Tenneco has conditioned the
exchange offers on the satisfaction of all conditions to the other components of
the debt realignment. See "The Spin-off -- Debt Realignment.
The foregoing conditions are for the sole benefit of Tenneco and may be
waived by Tenneco, in whole or in part. Tenneco will determine whether the
foregoing conditions have been satisfied, on the basis of the standards
described above. Any determination made by Tenneco concerning an event,
development or circumstance described or referred to above will be final and
binding on all parties.
WITHDRAWAL RIGHTS
Subject to applicable law, you may withdraw tenders of original securities
and revoke the related consents at any time before the withdrawal time, but not
after, except as otherwise described below. A valid withdrawal of tendered
original securities made before the withdrawal time is an automatic revocation
of the related consent. If, after the withdrawal time, Tenneco reduces the
principal amount of original securities subject to any exchange offer or reduces
the consideration offered in any exchange offer, then original securities
previously tendered in that exchange offer may be validly withdrawn for ten
business days after the date that Tenneco first publishes or sends notice to
holders of the reduction. In addition, you may validly withdraw tenders of
original securities if the related exchange offer is terminated without any
original securities being accepted for exchange.
For a withdrawal to be effective, (a) the exchange agent must receive a
written notice of withdrawal at its address on the back cover of this document,
or (b) the appropriate procedures of DTC's Automated Tender Offer Program must
be complied with. Any notice of withdrawal must:
- specify the name of the person who deposited the original securities to
be withdrawn;
- identify the original securities to be withdrawn, including the
certificate number or numbers and principal amount of those original
securities;
- be signed by the holder in the same manner as the signature on the letter
of consent/transmittal by which those original securities were tendered,
including any required signature guarantees, or be accompanied by a bond
power in the name of the person withdrawing the tender, in satisfactory
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form as determined by Tenneco in its sole discretion, duly executed by
the registered holder, with the signature guaranteed;
- specify the name in which those original securities are to be registered,
if different from the person who tendered those original securities using
the instruments of transfer; and
- if original securities have been tendered using the procedures for
book-entry transfer described above, specify the name and number of the
account at DTC to be credited with the withdrawn original securities and
otherwise comply with the DTC procedures.
A purported notice of withdrawal which lacks any of the required
information will not be an effective withdrawal of a previous tender.
Any permitted withdrawals may not be rescinded, and any original securities
withdrawn will not be considered validly tendered for purposes of the exchange
offer. However, withdrawn securities may again be tendered by completing the
procedures for tendering before the early exchange time or expiration time, as
applicable.
Any tendered original securities that are withdrawn will be returned to you
free of charge as soon as practicable after withdrawal. If your original
securities were tendered by book-entry transfer into the exchange agent's
account at DTC, the original securities will be credited to an account
maintained with DTC for the original securities as soon as practicable after
withdrawal.
TENNECO WILL DETERMINE, IN ITS SOLE DISCRETION, ALL QUESTIONS AS TO THE
VALIDITY OF NOTICES OF WITHDRAWAL, INCLUDING TIME OF RECEIPT. TENNECO'S
DETERMINATION WILL BE FINAL AND BINDING. NONE OF TENNECO, PACKAGING, THE
EXCHANGE AGENT, DTC, THE DEALER MANAGERS AND ANY OTHER PERSON ARE UNDER ANY DUTY
TO NOTIFY YOU OF ANY DEFECTS OR IRREGULARITIES IN ANY NOTICE OF WITHDRAWAL. NONE
OF THEM WILL BE LIABLE TO YOU IF THEY FAIL TO NOTIFY YOU OF ANY DEFECTS OR
IRREGULARITIES IN A NOTICE OF WITHDRAWAL.
DEALER MANAGERS
Tenneco and Packaging have engaged Morgan Stanley Dean Witter and Credit
Suisse First Boston to act as dealer managers in connection with the exchange
offers and to provide financial advisory services to Tenneco and Packaging in
connection with the exchange offers. If you have questions concerning the terms
of the exchange offers or consent solicitation, you may contact the dealer
managers at the addresses and telephone numbers on the back cover page of this
document.
Tenneco and Packaging have agreed to pay the dealer managers customary fees
for their services, including reasonable out-of-pocket expenses and fees and
expenses of legal counsel. Tenneco and Packaging have agreed to indemnify the
dealer managers against specified liabilities, including specified liabilities
under the federal securities laws. The dealer managers have provided in the
past, and currently are providing, other investment banking and financial
advisory services to Tenneco and its affiliates.
Morgan Stanley Dean Witter and Credit Suisse First Boston are also acting
as dealer managers in connection with Tenneco's cash tender offers.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as exchange agent for the
exchange offers. You and your broker, dealer, commercial bank, trust company or
other nominee should send letters of consent/ transmittal and all correspondence
in connection with the exchange offers to the exchange agent at the address and
telephone numbers on the back cover page of this document.
If you have questions concerning tender procedures, you should contact the
exchange agent at the address and telephone number on the back cover page of
this document for instructions.
INFORMATION AGENT
Georgeson Shareholder Communications Inc. has been appointed as information
agent for the exchange offers. You may direct requests for assistance or
additional copies of this document or the letter of consent/transmittal to the
information agent at the address and telephone number on the back cover
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page of this document. You may also contact your broker, dealer, commercial bank
or trust company for assistance concerning the exchange offers.
TRUSTEE
The Chase Manhattan Bank is serving as the trustee under the original
indenture and will also serve as the trustee for the new securities. All
deliveries, correspondence and questions sent or presented to the trustee
relating to the exchange offers should be directed to the trustee at 55 Water
Street, Room 234, North Building, New York, New York 10041.
Tenneco and Packaging maintain, or may, in the future, maintain, normal
banking relationships with The Chase Manhattan Bank in the ordinary course of
business.
FEES AND EXPENSES
Tenneco will pay the exchange agent, the information agent and the trustee
under the original indenture reasonable and customary fees for their services
and will reimburse them for their reasonable out-of-pocket expenses in
connection with their services. Tenneco will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this document and related materials to
the beneficial owners of original securities, and in handling or forwarding
tenders for their customers. All these fees and expenses will be paid by
Tenneco, subject to the allocation of consolidated Tenneco debt contemplated by
the debt realignment. See "The Spin-off--Debt Realignment."
MARKET AND TRADING INFORMATION
In general, there has been limited trading of the original securities and
any trading, to the extent it occurs, has taken place primarily in the
over-the-counter market. Prices and trading volumes of the original securities
in the over-the-counter market are not regularly reported and can be difficult
to monitor. Quotations for securities that are not widely traded, such as the
original securities, may differ from actual trading prices and should be viewed
as approximations. YOU ARE URGED TO OBTAIN THE BEST AVAILABLE INFORMATION
REGARDING THE MARKET PRICES OF THE ORIGINAL SECURITIES FROM YOUR BROKER, DEALER,
COMMERCIAL BANK OR TRUST COMPANY.
ACCOUNTING TREATMENT OF THE EXCHANGE OFFERS
The new securities will be recorded by Packaging based on either the fair
value of the new securities or the net carrying amount of Tenneco's original
securities, depending on whether Packaging's new securities are determined to be
"substantially different" than Tenneco's original securities. If the new
securities are "substantially different," the new securities will be recorded at
their fair value and the difference between the fair value of the new securities
and the net carrying amount of the original securities will be recognized as an
extraordinary charge by Tenneco. If the new securities are not "substantially
different," the new securities will be recorded at the net carrying amount of
Tenneco's original securities and no accounting gain or loss will be recognized
by Packaging on the exchange, except for transaction costs. The new securities
will be considered "substantially different" if the present values of the cash
flows, including principal and interest, under the terms of the new securities
are at least 10% different from the present value of the remaining cash flows
under the original securities. For accounting purposes, Packaging will consider
the and series of new securities to be "substantially different" and
the and series of new securities as not "substantially different."
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THE PROPOSED AMENDMENTS
To tender original securities for exchange in the exchange offers, you must
consent to the proposed amendments to the original indenture. The proposed
amendments constitute a single proposal and a tendering holder must consent to
the proposed amendments as an entirety, and may not consent selectively with
respect to some of the proposed amendments.
The proposed amendments will be included in a supplement to the original
indenture that will be signed by Tenneco and the trustee on or promptly
following Tenneco's receipt of the required consents and the withdrawal time.
Accordingly, Tenneco expects to sign the supplemental indenture before the
exchange offers expire. The proposed amendments will not take effect, however,
until Tenneco accepts for exchange or purchase debt securities issued under the
original indenture that represent at least the required consents, whether
tendered in the exchange offers or Tenneco's cash tender offers. See "The
Exchange Offers and Consent Solicitation -- The Consent Solicitation."
As described below, a limited waiver of some provisions of the original
indenture will apply between the time Tenneco executes the supplemental
indenture and the time it closes on the exchange and cash tender offers. This
waiver will terminate if the proposed amendments do not take effect.
ELIMINATION OF OPERATING COVENANTS
The following is a brief description of the proposed amendments to the
original indenture. The summaries are qualified in their entireties by reference
to the full and complete terms of the original indenture, as well as the
proposed supplemental indenture, copies of which can be obtained without charge
from the information agent. A copy of the original indenture and proposed
supplemental indenture is also exhibit 10.3 and 10.4, respectively, to the
registration statement of which this document is a part. These proposed
amendments may have adverse consequences for you if you do not participate in
the exchange offers. See "Risk Factors -- Risk Factors if You Do Not Exchange."
The proposed amendments would eliminate the following restrictive operating
covenants contained in the original indenture.
<TABLE>
<CAPTION>
SECTION OF
ORIGINAL INDENTURE TITLE AND DESCRIPTION OF SECTION
- ------------------ --------------------------------
<S> <C>
Section 3.6 Negative Pledge; Limitation on Sale and Leaseback
Transactions.
Provides that the issuer, Tenneco Inc., will not issue,
assume, incur or guarantee, and will not permit any
restricted subsidiary to issue, assume, incur or guarantee,
any debt upon any principal manufacturing property. A
restricted subsidiary is generally any subsidiary that
operates a principal manufacturing property. A principal
manufacturing property is generally any U.S. manufacturing
plant or research and development facility, unless the
issuer's Board of Directors determines that plant or
facility is not of material importance. Also provides that
the issuer will not, and will not permit any restricted
subsidiary to, enter into any arrangement with any person or
entity providing for the leasing of any principal
manufacturing property, where the property has been or is to
be sold or transferred by the issuer or the restricted
subsidiary with the intention of taking back a lease on the
property.
</TABLE>
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<TABLE>
<CAPTION>
SECTION OF
ORIGINAL INDENTURE TITLE AND DESCRIPTION OF SECTION
- ------------------ --------------------------------
<S> <C>
Section 9.1 Covenant Not to Merge, Consolidate, Sell or Convey Property
Except Under Certain Conditions.
Provides that the issuer will not merge or consolidate with
any other person or entity or sell, lease or convey all or
substantially all of its assets unless (a) the issuer is the
continuing corporation, or the successor or transferee
corporation is organized under United States law and
expressly assumes the payment of principal and interest on
all securities and coupons outstanding under the original
indenture and the performance and observance of all
covenants and conditions of the original indenture, by
supplemental indenture, and (b) the issuer or the successor
or transferee is not, immediately after giving effect to the
transaction, in default in the performance of any of those
covenants or conditions.
Section 9.2 Successor Corporation Substituted.
Describes the substitution of the successor or transferee
corporation for the issuer under the original indenture in
the event of any consolidation, merger, sale, lease or
conveyance described in Section 9.2 of the original
indenture.
Section 9.3 Opinion of Counsel Delivered to Trustee.
Provides that the trustee may receive an opinion of counsel
as conclusive evidence that any consolidation, merger, sale,
lease or conveyance described in Section 9.1 of the original
indenture, and any substitution of the successor or
transferee corporation for the issuer under Section 9.2 of
the original indenture, complies with the applicable
provisions.
</TABLE>
The proposed amendments would also eliminate any references in the original
indenture and the original securities to the sections specified above, including
any sentences or provisions that refer or give effect exclusively to the
sections specified above. The proposed amendments would also eliminate any
defined terms in the original indenture that are used solely in those deleted
sentences, provisions, sections or subsections. The text of the proposed
amendments is set forth in Annex A.
WAIVER
To avoid the possibility of a default under the original indenture in
connection with the spin-off and the transactions that will be undertaken to
complete the spin-off, a waiver of the covenants to be eliminated by the
proposed amendments will take effect immediately upon the execution of the
supplemental indenture as described above. If, however, securities representing
at least the required consents are not accepted for exchange or purchase, as the
case may be, because the related exchange offers, cash tender offers or consent
solicitation are terminated or withdrawn, the proposed amendments will not
become operative. In this event, the waiver will also cease to be operative as
to any transactions that occurred during the period the waiver was in effect.
The text of the waiver is set forth in Annex A.
The waiver will give Tenneco flexibility by allowing it, to the extent
necessary, to begin to consummate various pre-spin-off transactions before the
exchange and tender offers are completed. Tenneco believes this is important in
facilitating its plan to complete the spin-off within one business day after it
accepts securities tendered in the tender and/or exchange offers, or as soon
thereafter as practicable. Based on the timing of the consent solicitation
expiration, the waiver will take effect at least five business days prior to the
acceptance of any securities in the tender and/or exchange offers. For example,
the waiver will allow Tenneco to begin taking the steps necessary to grant
security interests in substantially all of Automotive's domestic assets to the
lenders under the new senior secured credit facility Tenneco has entered into in
connection with the debt realignment. See "Risk Factors -- Risk Factors if
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<PAGE> 52
You Do Not Exchange" and "The Spin-off -- Debt Realignment." Absent the waiver,
these security interests would not be permitted under the original indenture
unless and until the proposed amendments took effect upon the acceptance of
securities in the tender and/or exchange offers. If the waiver ceases to be
operative, Tenneco plans to unwind any such transactions completed in reliance
on the waiver.
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DESCRIPTION OF THE NEW SECURITIES
The new securities will be issued under an indenture between Packaging and
The Chase Manhattan Bank, as the new trustee, as supplemented by supplemental
indentures providing for the terms of the new securities. This indenture, as it
may be further amended or supplemented from time to time, is referred to in this
document as the "new indenture." The terms of the new securities will include
those stated in the new indenture and those made a part of the new securities by
reference to the Trust Indenture Act of 1939.
A copy of the new indenture, including the forms of supplemental indentures
providing for the new securities, are filed as exhibit 4.1 and exhibits
through , respectively, to the registration statement in which this
document is included. The following summaries of provisions of the new indenture
do not include all of the information included in the new indenture and may not
cover information that you may find important. Accordingly, these summaries are
subject to, and qualified in their entirety by reference to, the detailed
provisions of the new indenture.
You should read the new indenture carefully and in its entirety because the
new indenture, and not this description, will define your rights as a holder of
new securities. You may obtain a copy of the new indenture by request directed
to Tenneco's address included on page 2 of this document. As used under this
caption, the term "debt securities" means all evidences of indebtedness for
money borrowed which may be issued under the new indenture and the term
"Packaging" refers only to Tenneco Packaging Inc., and not any of its
subsidiaries.
GENERAL
The new indenture will not limit the amount of debt securities that may be
issued and will provide that debt securities may be issued under the new
indenture from time to time in one or more series. The debt securities will be
unsubordinated and unsecured obligations of Packaging and will rank equally with
all other unsubordinated and unsecured obligations of Packaging. This would
include, for example, accounts payable to suppliers and other general creditors
of Packaging. In addition, the new indenture will generally not limit the amount
of other indebtedness or securities that Packaging or its subsidiaries may
issue. However, the issuance, assumption or guarantee of specified secured debt
will be subject to the restrictions described under "-- Some Important Covenants
of Packaging." There are no provisions of the new indenture that will afford
holders of new securities protection in the event of a highly leveraged
transaction involving Packaging.
NEW SECURITIES
[To be provided by amendment]
SOME IMPORTANT COVENANTS OF PACKAGING
Negative Pledge. The new indenture will provide that Packaging will not,
and will not permit any restricted subsidiary to, issue, assume, incur or
guarantee specified types of secured debt without providing that the outstanding
debt securities be secured equally and ratably with that secured debt. A
restricted subsidiary is generally defined as a subsidiary that operates a
principal manufacturing property, as described below. The restriction applies to
any debt secured by a mortgage, pledge, lien or other encumbrance on any
principal manufacturing property of Packaging or any restricted subsidiary or on
any shares of capital stock or debt of any restricted subsidiary. A principal
manufacturing property is generally defined as any U.S. manufacturing plant or
testing or research and development facility, unless Packaging's Board of
Directors determines that the manufacturing, testing, research and development
activities performed at that plant or facility are not of material importance.
This restriction will not apply if, after giving effect to the contemplated
transaction, the aggregate amount of all such secured debt incurred after the
initial date of the new indenture, together with all Attributable Debt, as
defined below, of Packaging and its subsidiaries in respect of specified sale
and leaseback transactions involving principal manufacturing
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properties, would not exceed 15% of the Consolidated Net Tangible Assets, as
defined below, of Packaging and its consolidated subsidiaries. This restriction
will also not apply in the case of:
(a) the creation of encumbrances on any principal manufacturing
property acquired after the initial date of the new indenture to secure
payment of all or any part of the purchase price of that property or
construction of fixed improvements on that property before, at the time of
or within 180 days after the latest of the acquisition, completion of
construction or commencement of commercial operation of that property, or
existing encumbrances on any principal manufacturing property acquired by
Packaging or a restricted subsidiary, so long as the encumbrance does not
apply to any improved property previously owned by Packaging or a
restricted subsidiary and so long as the amount of debt secured by the
encumbrance does not exceed 100% of the lesser of the cost or fair value of
the property,
(b) encumbrances on any principal manufacturing property of a
corporation that is merged into or consolidated with Packaging or a
restricted subsidiary or substantially all of the assets of which are
acquired by Packaging or a restricted subsidiary;
(c) encumbrances on any principal manufacturing property in favor of
governmental bodies to secure partial, progress, advance or other payments
under any contract or statute, or to secure any debt incurred or guaranteed
for the purpose of financing all or any part of the cost of acquiring,
constructing or improving the property subject to those encumbrances;
(d) encumbrances on particular property to secure or provide funds for
all or any part of the cost of exploration, drilling, mining, development,
maintenance or operation of that property intended to obtain or increase
the production of specified natural resources from that property;
(e) encumbrances securing debt owed by a restricted subsidiary to
Packaging or another restricted subsidiary;
(f) encumbrances on any principal manufacturing property of Packaging
or a restricted subsidiary that were in existence on the initial date of
the new indenture;
(g) specified extensions, renewals or replacements of encumbrances
described above; and
(h) Permitted Mortgages, as defined below.
These covenants are contained in Section 3.6(a) of the new indenture. The new
indenture will not restrict the incurrence of unsecured debt by Packaging or any
of its subsidiaries.
Restrictions on Sale and Leaseback Transactions. The new indenture will
prohibit Packaging and any restricted subsidiary from entering into any sale and
leaseback transaction involving any principal manufacturing property that has
been or is to be sold or transferred by Packaging or any restricted subsidiary,
unless:
(a) Packaging or the restricted subsidiary would be entitled to create
secured debt on that property, as described in clauses (a)-(h) under "--
Negative Pledge," in an amount equal to the Attributable Debt with respect
to the sale and leaseback transaction, without equally and ratably securing
all outstanding debt securities under the new indenture;
(b) since the date of the new indenture and during the period 12
months before and ending 12 months after a sale and leaseback transaction,
Packaging or the restricted subsidiary makes expenditures for principal
manufacturing properties in an amount equal to the net proceeds of the sale
and leaseback transaction and elects to designate that amount as a credit
against the sale and leaseback transaction; or
(c) to the extent not credited as described above, Packaging applies
an amount equal to the Attributable Debt with respect to the sale and
leaseback transaction to the retirement of long-term consolidated debt.
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See Section 3.6(c) of the new indenture. This restriction will not apply to any
sale and leaseback transaction (a) between Packaging and a restricted subsidiary
or between restricted subsidiaries, (b) involving the taking back of a lease for
a period of three years or less, or (c) if, after giving effect to a sale and
leaseback transaction, permitted secured debt, plus Attributable Debt of
Packaging and its subsidiaries in respect of sale and leaseback transactions
involving principal manufacturing properties, would not exceed 15% of the
Consolidated Net Tangible Assets of Packaging and its consolidated subsidiaries.
There will be no covenants or other provisions in the new indenture
providing for a put or increased interest or that would otherwise provide
holders of new securities with additional protection in the event of a
recapitalization transaction, a change of control of Packaging or a highly
leveraged transaction.
The following terms which are used in the new indenture have the meanings
described below:
"Attributable Debt" means the total net amount of the rent required to
be paid during the remaining term of any lease, discounted at the weighted
average rate per year then borne by the outstanding debt securities.
"Consolidated Net Tangible Assets" means the total assets shown on the
consolidated balance sheet of Packaging and its consolidated subsidiaries
for the most recent fiscal quarter, after deducting the amount of all
current liabilities and intangible assets.
"Permitted Mortgage" means:
(a) any governmental, mechanics', materialmen's, carriers' or
similar lien created in the ordinary course of business which is not yet
due or which is being contested in good faith by appropriate proceedings
and any undetermined lien which is incidental to construction;
(b) any right reserved to, or vested in, any municipality or public
authority by the terms of any right, power, franchise, grant, license,
permit or by any provision of law, to purchase or recapture or to
designate a purchaser of, any property;
(c) any lien of taxes and assessments which is (1) for the current
year, or (2) not at the time delinquent or (3) delinquent but the
validity of which is being contested at the time by Packaging or any
Subsidiary in good faith;
(d) any lien arising from or in connection with a conveyance by
Packaging or any subsidiary of any production payment with respect to
oil, gas, natural gas, carbon dioxide, sulphur, helium, coal, metals,
minerals, steam, timber or other natural resources;
(e) any lien to secure obligations imposed by statute or
governmental regulations; or
(f) any lien of, or to secure performance of, leases, other than
leases relating to a sale and leaseback transaction.
These definitions are included in Section 1.1 of the new indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Section 9.1 of the new indenture will provide that Packaging may not merge
or consolidate with any other person or entity, or sell, lease or convey all or
substantially all of its assets to any person or entity, unless (a) either
Packaging is the continuing entity or the successor, transferee or lessee is a
corporation organized under the laws of the United States, any State or the
District of Columbia and expressly assumes Packaging's obligations under the
debt securities and new indenture, and (b) immediately after giving effect to
the transaction, Packaging or the successor, transferee or lessee is not in
default of any of those obligations. Section 9.2 of the new indenture will also
provide that any successor, transferee or lessee corporation in one of those
transactions be substituted for Packaging under the new indenture and the debt
securities.
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EVENTS OF DEFAULT
Any one of the following will constitute an "event of default" under the
new indenture with respect to debt securities of any series:
(a) Packaging's failure to pay any interest on that series when due
and continuance of that default for 30 days;
(b) Packaging's failure to pay principal of that series when due;
(c) in general, Packaging's failure to observe or perform any of its
other covenants in the new indenture for 60 days after written notice as
provided in the new indenture, unless the default is expressly covered by
another provision of the new indenture;
(d) events of bankruptcy, insolvency or reorganization of Packaging;
or
(e) any other event of default provided in the supplemental indenture
with respect to debt securities of that series.
If any event of default occurs and is continuing, either the new trustee or
the holders of at least 25% in aggregate principal amount of the outstanding
debt securities of each affected series, voting as a single class, may by
written notice declare the principal amount of and accrued interest on all the
debt securities of each affected series to be due and payable immediately.
Events of bankruptcy, insolvency and reorganization are deemed to affect all
outstanding debt securities. If the debt securities of an affected series are
original issue discount debt securities, only that portion of the principal
amount as is specified in the terms of that series may be declared due and
payable. The holders of a majority in aggregate principal amount of outstanding
debt securities of that series may, under limited circumstances, rescind and
annul that acceleration. The events of default are described in Section 5.1 of
the new indenture.
Under the new indenture, the new trustee will generally be required to give
the holders of affected debt securities notice of known defaults within 90 days
after the default, unless the default is cured. Except in the case of a payment
default, however, the new trustee may withhold the notice in the interests of
the holders of the affected series of debt securities. See Section 5.11 of the
new indenture. The new indenture will provide that the holders of a majority in
aggregate principal amount of the outstanding debt securities of each series
affected, with all those series voting as a single class, may direct the time,
method and place of conducting any proceeding for any remedy available to the
new trustee for such series, or exercising any trust or power conferred on the
new trustee. See Section 5.9 of the new indenture.
In general, the holders of a majority in aggregate principal amount
outstanding of all series of debt securities with respect to which an event of
default has occurred, voting as a single class, may waive any event of default
with respect to that series. This majority action cannot, however, waive
defaults under specified covenants related to the payment terms of the debt
securities. See Section 5.10 of the new indenture.
The new indenture will require Packaging to file annually with the new
trustee a certificate as to Packaging's compliance with all conditions and
covenants of the new indenture. See Section 3.5 of the new indenture.
MODIFICATION OF THE NEW INDENTURE
The new indenture will permit Packaging and the new trustee to enter into
one or more supplemental indentures without the consent of the holders of any
debt securities in order:
(a) to transfer or pledge any property to the new trustee as security
for the debt securities;
(b) to substitute a permitted successor corporation for Packaging;
(c) to add to the Packaging's covenants further covenants or
provisions to protect the holders of debt securities;
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(d) to establish the form or terms of debt securities;
(e) to provide for successor trustees; or
(f) to cure any ambiguity, correct any defective provisions or to make
any other provisions as Packaging determines necessary or desirable, as
long as the action does not adversely affect the interests of any holder of
debt securities of any series. See Section 8.1 of the new indenture.
The new indenture will also permit Packaging and the new trustee, with the
consent of the holders of a majority in aggregate principal amount of the
outstanding series of debt securities affected, voting as one class, to execute
supplemental indentures that change the terms of the new indenture or modify the
rights of debt holders. However, without the consent of the holder of each
affected debt security, this majority action cannot:
(a) extend the time for payment of principal or interest on any debt
security;
(b) reduce the principal of, or the rate of interest on, any debt
security;
(c) reduce the amount of premium, if any, payable upon the redemption
of any debt security;
(d) reduce the amount of principal payable upon acceleration of the
maturity of any original issue discount security;
(e) change the currency or currency unit in which any debt security or
any premium or interest is payable;
(f) impair the right to institute suit for the enforcement of any
payment on or relating to any debt security; or
(g) reduce the percentage consent required to modify or amend the new
indenture. See Section 8.2 of the new indenture.
DEFEASANCE AND COVENANT DEFEASANCE
The new indenture will allow Packaging to deposit funds in trust and as a
result either (a) be discharged from all obligations under the debt securities
of any series, except for limited administrative obligations ("defeasance"), or
(b) be released from complying with specified covenants of the indenture,
including those described under "-- Some Important Covenants of Packaging" and
"-- Consolidation, Merger and Sale of Assets" ("covenant defeasance"). For
defeasance or covenant defeasance with respect to any series of debt, Packaging
must deposit, in trust with the new trustee, money or U.S. government
obligations that through the payment of interest and principal according to
their terms will provide money in an amount sufficient to make all payments on
that series of debt when they are due. If the defeasance is to occur at least
one year before the debt securities become due and payable or are to be
redeemed, the defeasance may only be established if Packaging delivers an
opinion of counsel stating that the holders of the debt securities will not have
a taxable event for federal income tax purposes as a result of the defeasance.
In addition, the opinion of counsel must be based upon a ruling of the IRS or a
change in applicable federal income tax law occurring after the date of the new
indenture. See Article 10 of the new indenture.
THE NEW TRUSTEE
The Chase Manhattan Bank will be the new trustee under the new indenture.
The Chase Manhattan Bank will also serve as the initial paying agent and
registrar of the new securities. Packaging may also maintain banking and other
commercial relationships with the new trustee in the ordinary course of
business.
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BOOK-ENTRY SYSTEM
Packaging will initially issue the new securities in the form of one or
more global securities that will be deposited with DTC and registered in the
name of Cede & Co., DTC's nominee. Accordingly, beneficial interests in the
global securities will be shown on, and transfer will be effected only through,
records maintained by DTC and its participants. You may hold beneficial
interests in the global securities directly through DTC if you have an account
with DTC or indirectly through an organization which has an account with DTC.
Unless and until it is exchanged in whole or in part for new securities of that
series in definitive form, a global security may not be transferred except as a
whole to a nominee of DTC for that global security, or by a nominee of DTC to
DTC or another nominee of DTC, or by DTC or any such nominee to a successor
depository or a nominee of a successor depository.
DTC has advised Packaging that DTC is a limited-purpose trust company
organized under the Banking Law of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold the
securities of institutions that have accounts with DTC ("participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, eliminating the need for physical movement of
securities certificates. DTC's participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. Access to DTC's book-entry system is also available to others,
such as banks, brokers, dealers, and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly (collectively, the "indirect participants").
Packaging expects that upon the deposit of the global securities with DTC,
DTC will credit on its book-entry registration and transfer system the principal
amount of new securities represented by those global securities to the accounts
of direct participants. Ownership of beneficial interests in the global
securities will be limited to direct participants or persons that may hold
interests through direct participants. Ownership of beneficial interests in the
global securities will be shown on, and the transfer of those ownership
interests will be effected only through, records maintained by DTC, with respect
to direct participants' interest, the direct participants and the indirect
participants, with respect to the owners of beneficial interests in the global
securities other than direct participants. The laws of some jurisdictions may
require that purchasers of securities take physical delivery of the securities
in definitive form. These limits and laws may impair your ability to transfer or
pledge beneficial interests in the global securities.
So long as DTC or a nominee of DTC is the registered holder and owner of
the global securities, DTC or the nominee, for all purposes will be considered
the sole owner or holder of the global securities under the new indenture.
Except as described below, owners of a beneficial interest in the global
securities will not be entitled to have the new securities represented by the
global securities registered in their names, will not receive or be entitled to
receive physical delivery of certified new securities, and will not be
considered to be the owner or holder of any new securities represented by the
global securities. Accordingly, each person owning a beneficial interest in the
global securities must rely on the procedures of DTC and, if a person is not a
direct participant in the book-entry registration and transfer system of DTC, on
the procedures of the direct participant through which that person owns its
interest, to exercise any rights of an owner or holder of the new securities.
Packaging will make principal and interest payments on the new securities
registered in the name of DTC's nominee to DTC's nominee as the registered owner
of the global securities. Under the terms of the new securities, Packaging and
the new trustee will treat the persons in whose names the new securities are
registered as the owners of those new securities for the purpose of receiving
payment of principal and interest on those new securities and for all other
purposes. Therefore, Packaging, the new trustee and any paying agent will not
have any direct responsibility or liability for the payment of principal or
interest on the new securities to owners of beneficial interests in the global
securities.
Packaging expects that DTC will, upon receipt of any payment of principal
or interest, credit direct participants' accounts on the payment date according
to their respective holdings of beneficial interests in
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the global securities as shown on DTC's records. Payments by direct and indirect
participants to owners of beneficial interests in the global securities will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of the direct and indirect
participants. These payments by direct and indirect participants will not be the
responsibility of DTC, the new trustee, or Packaging, subject to any statutory
requirements that may be in effect.
Neither Packaging, the new trustee, any paying agent nor the registrar will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the global
securities, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
Although DTC has agreed to the procedures described above in order to
facilitate transfers of interests in the global securities among participants of
DTC, it is under no obligation to perform or continue to perform these
procedures, and these procedures may be discontinued at any time. None of
Packaging, the new trustee, the registrar, or any paying agent for the exchange
securities will have any responsibility or liability for the performance by DTC
or its direct or indirect participants of their respective obligations under the
rules and procedures governing their operations.
PHYSICAL SECURITIES
Following initial issuance, you may obtain physical new securities in
exchange for global securities in denominations of $1,000 and integral multiples
of $1,000 if:
(1) DTC notifies Packaging that it is unwilling or unable to continue
as depositary for the global securities or if at any time DTC
ceases to be a clearing agency registered under the Exchange Act
and a successor depositary is not appointed by Packaging within 90
days of that notice; or
(2) Packaging in its discretion at any time determines not to have all
of the new securities represented by the global securities.
Subject to the above, the global securities are not exchangeable, except
for global securities of the same aggregate denomination to be registered in the
name of DTC or its nominee.
PAYMENT
Packaging will pay principal of and interest on new securities represented
by a global security in accordance with the applicable requirements of DTC for
the global securities. The payment of principal of and interest on any other new
securities will be made at the office or agency of Packaging maintained for that
purpose or, at Packaging's option, by mailing a check to the holder's registered
address.
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THE SPIN-OFF
Before the spin-off, Tenneco and Packaging will enter into a distribution
agreement to establish the terms of the spin-off and govern various aspects of
the post-spin-off relationship between Packaging and Tenneco, which will be
Automotive after the spin-off. In addition, Automotive and Packaging will enter
into ancillary agreements to facilitate further the separation of Tenneco's
automotive and packaging businesses and to govern additional aspects of the
ongoing relationship between Packaging and Automotive.
REASONS FOR THE SPIN-OFF
The spin-off is designed to separate Tenneco's packaging business from its
automotive business, each of which have distinct financial, investment and
operating characteristics, so that each can adopt strategies and pursue
objectives appropriate to its specific needs. The spin-off will:
- enable each company to concentrate its attention and financial resources
on its own core business and provide independent access to capital
markets;
- permit investors to make more focused investment decisions based on the
specific attributes of each of the two businesses and enhance the
likelihood that each company will achieve appropriate market valuation;
and
- facilitate employee compensation programs custom-tailored to the
operations of each business, including an employee stock ownership plan
for Automotive and stock-based and other incentive programs, which will
more directly reward employees of each business based on the success of
that business.
MANNER OF SPIN-OFF
According to the distribution agreement, the Tenneco board of directors
will formally declare the dividend necessary to effect the spin-off. At that
time, the Tenneco board of directors will also set the effective date of the
spin-off and the date and time for determination of those Tenneco stockholders
entitled to participate in the spin-off. Subject to the conditions described
below, on the spin-off date, those same Tenneco stockholders will each receive
one share of Packaging common stock for each share of Tenneco common stock they
owned as of that determination time.
CORPORATE RESTRUCTURING TRANSACTIONS
Before the spin-off, Tenneco will effect various corporate restructuring
transactions designed to restructure its existing businesses so that, in
general, the assets, liabilities and operations of (a) its packaging business
and administrative services operations, will be owned and operated, directly or
indirectly, by Packaging and (b) its automotive business will be owned and
operated, directly and indirectly, by Tenneco and its non-packaging
subsidiaries.
Packaging's assets upon completion of these corporate restructuring
transactions generally will be:
- those assets related to the conduct of Tenneco's past and current
packaging businesses and administrative services operations, as reflected
on the unaudited pro forma combined balance sheet of Packaging as of June
30, 1999 which will be attached to the distribution agreement as an
exhibit;
- those assets that were acquired after June 30, 1999 and are of a nature
or type that would have been included on Packaging's June 30, 1999 pro
forma balance sheet had they been acquired earlier; and
- all rights expressly allocated to Packaging and its subsidiaries under
the distribution agreement or any of the ancillary agreements.
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Automotive's assets upon completion of these corporate restructuring
transactions generally will be:
- all of Tenneco's assets not expressly allocated to Packaging or its
subsidiaries as described above.
Packaging's liabilities generally will include:
- those liabilities related to the Packaging assets described above and the
current and past conduct of Tenneco's packaging businesses and
administrative services operations;
- liabilities for possible violations of securities laws in connection with
the spin-off related to disclosures or omissions regarding Packaging's
business, results of operations, prospects or management; and
- those other liabilities expressly allocated to Packaging or its
subsidiaries under the distribution agreement or any ancillary agreement.
Automotive's liabilities generally will include:
- those liabilities related to the automotive assets described above and
the current and past conduct of Tenneco's automotive business;
- liabilities for possible violations of securities laws in connection with
the spin-off related to disclosures or omissions regarding Automotive's
business, results of operations, prospects or management;
- those liabilities expressly allocated to Automotive or its subsidiaries
under the distribution agreement or any ancillary agreement; and
- all other liabilities of Tenneco or any of its subsidiaries which do not
constitute Packaging liabilities.
In addition, Packaging and Automotive will each be responsible for one-half
of any third-party liability imposed on either party that is both (1) related to
the transactions undertaken as part of the spin-off, such as the debt
realignment, and (2) based on a claim (a) under Delaware corporate law, such as
a claim for a breach of fiduciary duties, or (b) under applicable securities
laws, but only to the extent the alleged violation is not specifically related
to disclosures or omissions about either party's business operations as provided
by such party.
DEBT REALIGNMENT
After the spin-off, Automotive and Packaging each will, in general, be
responsible for the debts, liabilities and obligations related to the business
or businesses that it owns and operates following completion of the corporate
restructuring transactions. See "-- Corporate Restructuring Transactions."
Tenneco's historical practice, however, has been to incur debt for its
consolidated group at the parent-company level or at a limited number of
subsidiaries, rather than at the operating-company level, and to centrally
manage various cash functions.
Accordingly, the distribution agreement will provide for the realignment of
Tenneco's debt before the spin-off. The purpose of this debt realignment is to
allocate the debt between Packaging and Automotive before the companies are
separated. The exchange offers and cash tender offers are components of this
debt realignment.
The specific goal of the debt realignment will be to reach approximately
the allocation between Packaging and Automotive of Tenneco's debt at the time of
the spin-off, after giving effect to the repurchase of subsidiary preferred
stock and payment of transaction fees and expenses, that is reflected in the
June 30, 1999 pro forma balance sheets of Packaging and Tenneco included
elsewhere in this document. See "Description of Packaging -- Unaudited Pro Forma
Combined Financial Statements of Packaging" and "Description of Tenneco After
the Spin-off/Automotive -- Unaudited Pro Forma Consolidated Financial Statements
of Tenneco." These pro forma balance sheets will also be attached to
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the distribution agreement as exhibits. Packaging and Automotive will agree in
the distribution agreement to use their respective reasonable commercial efforts
to achieve this relative allocation.
If the debt realignment and spin-off had occurred on June 30, 1999,
Packaging would have had pro forma debt for money borrowed of about $2.2 billion
and Automotive would have had pro forma debt for money borrowed of about $1.7
billion. The pro forma debt amount for Packaging does not reflect the
application of any proceeds from its planned sale of its containerboard joint
venture interest, which is not part of the debt realignment. If this sale is
completed before the spin-off, the net proceeds will be used to retire the
Tenneco debt that otherwise would be allocated to Packaging in the debt
realignment. If the sale occurs after the spin-off, the net proceeds will be
used to retire Packaging debt. See "Description of Packaging -- Unaudited Pro
Forma Combined Financial Statements of Packaging" and "Description of Tenneco
After the Spin-off/Automotive -- Unaudited Pro Forma Consolidated Financial
Statements of Tenneco."
The debt realignment is expected to be accomplished through some
combination of tender offers, exchange offers, prepayments and other
refinancings. In addition to the exchange offers described in this document,
Tenneco expects to undertake the following as part of the debt realignment: (1)
Tenneco will offer to purchase for cash approximately $ million of its
public debt pursuant to the cash tender offers; (2) Tenneco will repay in cash
other existing non-public debt; and (3) Tenneco will repurchase outstanding
subsidiary preferred stock. These payments are expected to be financed by (a)
internally generated cash, (b) borrowings by Automotive under a new credit
facility and new subordinated debt financing to be issued by Automotive in
connection with the spin-off and (c) borrowings by Packaging under one or more
new credit facilities entered into by Packaging in connection with the spin-off.
See "Description of Packaging -- New Financing" and "Description of Tenneco
After the Spin-off/ Automotive -- New Financing."
Accordingly, after giving effect to the debt realignment and the spin-off,
Automotive will be responsible for all of Tenneco's existing public debt that
remains outstanding and any borrowings under the new Automotive credit facility
and subordinated debt financing described above. Packaging will be responsible
for the new securities and any borrowings under the new Packaging credit
facilities described above. Completion of the debt realignment is a condition to
Tenneco's obligation to complete the spin-off, although Tenneco may substitute
one or more different financing transactions for any of the components of the
debt realignment described above.
RELATIONSHIP BETWEEN AUTOMOTIVE AND PACKAGING AFTER THE SPIN-OFF
Below are summary descriptions of the distribution agreement and principal
ancillary agreements that Automotive and Packaging will enter into in connection
with the spin-off. These agreements are intended to facilitate the separation of
Tenneco's packaging business from its automotive business and to facilitate the
operation of each of Automotive and Packaging as separate companies.
DISTRIBUTION AGREEMENT
In addition to providing for the terms of the spin-off and the various
actions to be taken before the spin-off, the distribution agreement will contain
other provisions governing the relationship between Automotive and Packaging
before and after the spin-off.
Responsibility for Liabilities. The distribution agreement will provide
that after the spin-off date: (a) Automotive will assume, pay, perform and
discharge its allocated liabilities according to their terms, and (b) Packaging
will assume, pay, perform and discharge its allocated liabilities according to
their terms. See "-- Corporate Restructuring Transactions." The distribution
agreement will provide for cross-indemnities so that: (a) Automotive must
indemnify Packaging and its respective subsidiaries, directors, officers,
employees and agents, and other related parties, against all losses arising out
of or in connection with Automotive's allocated liabilities or the breach of the
distribution agreement or any ancillary agreement by Automotive; and (b)
Packaging must indemnify Automotive and its respective subsidiaries, directors,
officers, employees and agents, and other related parties, against all losses
arising out of or in
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connection with Packaging's allocated liabilities or the breach of the
distribution agreement or any ancillary agreement by Packaging.
Further Assurances. Automotive and Packaging will each agree to use all
reasonable efforts to take all action reasonably necessary or advisable to
consummate the transactions contemplated by and carry out the purposes of the
distribution agreement.
Information Sharing. The distribution agreement will provide for the
transfer and sharing of books and records between Automotive and Packaging and
will grant each party access to specified information in the other's possession,
subject to confidentiality requirements and legal privilege issues.
Intercompany Accounts. According to the distribution agreement, in general
all intercompany receivables, payables and loans between Tenneco's automotive
business, on the one hand, and its packaging business and administrative
services operations, on the other hand, will be settled, capitalized or
converted into ordinary trade obligations as of the close of business on the
spin-off date. Further, all intercompany agreements between these businesses,
other than those contemplated in connection with the spin-off, will be
terminated.
Expenses. Tenneco will use a portion of the funds borrowed by Tenneco and
Packaging as part of the debt realignment to fund the payment of fees, costs and
expenses associated with the spin-off. Accordingly, the allocation of debt
described above under "-- Debt Realignment" includes additional debt incurred to
fund these fees, costs and expenses. Under the distribution agreement, other
specified fees, costs and expenses related to the spin-off but not funded in
connection with the debt realignment will be shared equally by Tenneco and
Packaging. All other fees, costs and expenses will be paid by the party
incurring such fees, costs or expenses.
Directors. When the spin-off is completed, Packaging and Automotive will
share four common directors, Dana G. Mead, Paul T. Stecko, Mark Andrews and
Roger B. Porter. Each company will adopt policies and procedures for its board
of directors to limit the involvement of Messrs. Mead, Stecko, Andrews and
Porter in situations that could give rise to potential conflicts of interest,
including requesting them to abstain from voting as a director of either
Packaging or Automotive on matters which present a conflict of interest between
the companies. Tenneco and Packaging believe that the number of these conflict
situations will be minimal.
HUMAN RESOURCES AGREEMENT
The human resources agreement to be entered into between Automotive and
Packaging will govern labor, employment, compensation and benefit matters in
connection with the spin-off. Under the human resources agreement, after the
spin-off date, each of Automotive and Packaging will:
- continue employment of each of their respective retained employees,
subject to their rights to terminate employees, with the same
compensation as before the spin-off date;
- continue to honor all related existing collective bargaining agreements
in accordance with their terms;
- recognize related incumbent labor organizations, subject to their rights
to seek changes in their relationships with the organizations; and
- continue sponsorship of hourly employee benefit plans in accordance with
their terms.
Packaging will become the sponsor of the Tenneco Retirement Plan and of the
Tenneco Thrift Plan and Tenneco Thrift Plan for Hourly Employees (collectively
the "Tenneco Thrift Plan") on the spin-off date. Automotive will establish one
or more thrift plans similar to the Tenneco Thrift Plan to which the account
balances of retained and former employees of Automotive in the Tenneco Thrift
Plan will be transferred. The benefits accrued by Automotive employees in the
Tenneco Retirement Plan will be frozen as of the last day of the calendar month
including the spin-off date, and Packaging will amend the Tenneco Retirement
Plan to provide that all benefits accrued through that day by Automotive
employees
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<PAGE> 64
are fully vested and non-forfeitable. Generally, each of Automotive and
Packaging will retain liabilities with respect to benefits accrued by its
current and former employees under the Tenneco Inc. Supplemental Executive
Retirement Plan and with respect to the welfare benefits of its current and
former employees and their dependents. In addition, as of the spin-off date,
Packaging will succeed to sponsorship of the Tenneco Inc. Deferred Compensation
Plan; participation by current and former employees of Automotive in that plan
will be discontinued, and Automotive will succeed to liabilities with respect to
its current and former employees under that plan.
Under the human resources agreement, Tenneco common stock options held by
Packaging employees will be replaced by options to purchase shares of Packaging
common stock on terms economically equivalent to the old Tenneco options.
Tenneco common stock options held by Automotive employees will be adjusted to
maintain equivalent economic terms to the options outstanding immediately prior
to the spin-off.
TAX SHARING AGREEMENT
The tax sharing agreement to be entered into between Automotive and
Packaging will provide for the allocation of tax liabilities between the parties
arising before, as a result of and after the spin-off. As a general rule,
Automotive will be liable for all taxes not specifically allocated to Packaging
under the terms of the tax sharing agreement. Generally, Packaging will be
liable for taxes imposed exclusively on Packaging and its affiliates engaged in
the packaging and administrative services businesses (the "Packaging group"). In
the case of U.S. federal income taxes imposed on the combined activities of
Automotive and the Packaging group, Packaging will generally be liable to
Automotive for federal income taxes attributable to the activities of the
Packaging group. Liability for foreign income taxes and non-income taxes will
generally be allocated to the legal entity on which the taxes are imposed. In
the case of state income taxes imposed on the combined activities of the
business groups, Packaging will generally be liable for the tax that would be
imposed if the Packaging group had filed combined returns for its group.
In general, and except as provided below, any taxes imposed on or resulting
from any or all of the spin-off, the corporate restructuring transactions and
the debt realignment ("transaction taxes") will be the responsibility of the
legal entity on which the taxes are imposed. However, if any transaction taxes
arise due to any action taken or permitted by Automotive or Packaging that is
inconsistent with any representations or warranties made in connection with the
IRS letter ruling requested and received by Tenneco in connection with the
spin-off, that entity, either Automotive or Packaging, will be responsible for
the resulting tax liability. Additionally, if any transaction taxes arise under
Section 355(e) of the Internal Revenue Code of 1986, as amended (the "Code"), as
a result of a 50% ownership shift, as defined below, then the resulting
corporate tax burden will be borne by the entity, either Automotive or
Packaging, that experienced the 50% ownership shift. Any income tax liability
that results from the spin-off, corporate restructuring transactions or debt
realignment, but which is not due to either a 50% ownership shift or an action
that is inconsistent with the tax treatment contemplated in the IRS letter
ruling request, will be shared equally by Automotive and Packaging.
Section 355(e) of the Code, which was enacted in 1997, generally provides
that a company that distributes shares of a subsidiary in a spin-off that is
otherwise tax-free will incur federal income tax liability if 50% or more, by
vote or value, of the capital stock of either the company making the
distribution or the spun-off subsidiary is acquired (a "50% ownership shift") by
one or more persons acting together pursuant to a plan or series of related
transactions that includes the spin-off. This provision can be triggered by
certain reorganizations involving the acquisition of the assets of the company
making the distribution or the spun-off subsidiary. There is a presumption that
any 50% ownership shift that occurs within two years before or after the
spin-off is pursuant to a plan that includes the spin-off. However, the
presumption may be rebutted by establishing that the spin-off and the
acquisitions are not part of a plan or series of related transactions.
Each of Automotive and Packaging will agree not to take or permit actions
inconsistent or partially inconsistent with the IRS letter ruling request on or
before the period ending two calendar years from the date of the spin-off,
unless the action has been consented to by the other. These agreements could
restrict
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<PAGE> 65
the ability of Automotive or Packaging to engage in certain corporate
transactions, redeem stock, dispose of assets except in the ordinary course of
business or be the target of an acquisition transaction during that period.
TRANSITION SERVICES AGREEMENT
Tenneco's administrative services operations currently provide a number of
services to Tenneco's operating units. These services include (1) financial
accounting services; (2) employee benefits administration for all major salaried
and hourly benefit plans; (3) human resources and payroll services; (4)
mainframes and distributed systems operations; (5) telecommunications and
network operations and management; (6) help desk support; and (7) disaster
recovery support. When the spin-off is complete, Tenneco's administrative
services operations will be a part of Packaging. Accordingly, Automotive and
Packaging will enter into a transition services agreement under which Packaging
will continue to provide Automotive with specified administrative services for a
term to be determined before the spin-off. Because Automotive will retain a
portion of the administrative support for Tenneco's European operations,
however, Automotive will also agree to provide Packaging with specified
administrative services for its European operations for an initial period of six
months beginning on the date of the spin-off. After the initial six-month
period, Packaging may elect to have Automotive continue to provide specified
services for up to six months on a month-to-month basis. The price for all
services will be negotiated between the parties and be based on the full cost
for the services.
INSURANCE AGREEMENT
The insurance agreement to be entered into between Automotive and Packaging
will provide for the separation and administration of existing insurance
programs and the purchase of "run-off " policies for fiduciaries and directors
and officers. In general, the insurance agreement will provide that Packaging
and Automotive will obtain coverage for the period ending in December 1996
through Tenneco's pre-existing policies. For the period between December 1996
and the spin-off, Automotive and Packaging will obtain coverage through
Tenneco's existing policies plus supplemental coverage to be purchased by
Tenneco. Tenneco also will purchase "run-off" insurance policies that remain in
effect for seven years and provide coverage for acts prior to the spin-off by
directors, officers and fiduciaries of benefit and pension plans. Packaging and
Automotive will each be responsible for administering their respective insurance
programs after the spin-off and for purchasing insurance as necessary to cover
their respective losses arising after the spin-off. The insurance agreement also
allocates responsibility for the payment of premiums and deductibles, and the
distribution of insurance proceeds.
TRADEMARK TRANSITION LICENSE AGREEMENT
After the spin-off, Automotive or one of its subsidiaries will hold the
rights to various trademarks, servicemarks, tradenames and similar intellectual
property, including rights in the marks "Tenneco," "Ten" and "Tenn" alone and in
combination with other terms and/or symbols and variations thereof
(collectively, the "Trademarks"), in the United States and throughout the world.
In connection with the spin-off, Packaging will enter into a trademark
transition license agreement with Automotive. Under this agreement, Automotive
or one of its subsidiaries will grant to Packaging and its subsidiaries a
limited, royalty-free license to use the Trademarks with respect to packaging
businesses, subject to quality standards and other conditions. The license will
expire (1) 60 days after the spin-off, with respect to the use of the Trademarks
in corporate names, (2) 9 months after the spin-off, with respect to stationery
and similar supplies in inventory and (3) 18 months after the spin-off, with
respect to signage.
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<PAGE> 66
CONDITIONS TO THE SPIN-OFF
The spin-off is conditioned on, among other things, formal declaration of
the spin-off by the Tenneco Board of Directors. Other conditions to the spin-off
will include:
- execution and delivery of the ancillary agreements and completion of
various pre-spin-off transactions, such as the corporate restructuring
transactions and the debt realignment;
- a determination to the effect that for federal income tax purposes, (1)
the spin-off will be tax-free to Tenneco and its stockholders under
Section 355(a) and Section 361(c)(1) of the Internal Revenue Code of
1986, and (2) specified internal restructuring transactions involving
Tenneco or its subsidiaries to be effected by the corporate restructuring
transactions will also be tax-free;
- approval for listing on the NYSE of the Packaging common stock;
- registration of the Packaging common stock under the Exchange Act;
- receipt of all material consents to the corporate restructuring
transactions, the spin-off and transactions contemplated in the
distribution agreement; and
- the absence of any prohibition of the spin-off by any law or governmental
authority.
Tenneco received an IRS letter ruling on August 20, 1999 that satisfied the
tax-related condition described above. Even if all the conditions to the
spin-off are satisfied, Tenneco has reserved the right to amend or terminate the
distribution agreement and the related transactions before the spin-off. The
Tenneco board of directors has not attempted to identify or establish objective
criteria for evaluating the particular types of events or conditions that would
cause the Tenneco Board of Directors to consider amending or terminating the
spin-off. See "-- Relationship Between Automotive and Packaging After the
Spin-off -- Distribution Agreement." Although the conditions described above may
be waived by Tenneco to the extent permitted by law, the Tenneco board of
directors presently has no intention to proceed with the spin-off unless each of
these conditions is satisfied.
AMENDMENT OR TERMINATION OF THE DISTRIBUTION AGREEMENT
Before the spin-off, the distribution agreement may be amended or
terminated by Tenneco in its discretion. After the spin-off, the distribution
agreement may be amended or terminated only by a written agreement signed by
Automotive and Packaging. Some amendments or terminations after the spin-off
will also require the consent of third-party beneficiaries to the extent that
the distribution agreement has expressly guaranteed them rights.
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<PAGE> 67
DESCRIPTION OF PACKAGING
GENERAL
Packaging is a global supplier of specialty packaging and consumer products
with 1998 revenues of approximately $2.8 billion. Packaging operates 89
manufacturing facilities throughout the world and employs over 15,000 people.
Packaging is currently owned by Tenneco and will be an independent, publicly
traded company upon completion of the spin-off. See "The Spin-off."
CAPITALIZATION
The following table sets forth the unaudited historical capitalization of
Packaging as of June 30, 1999, and unaudited pro forma capitalization of
Packaging as of June 30, 1999, after giving effect to the debt realignment and
the spin-off and related transactions, each as if they occurred on that date.
The pro forma capitalization reflects debt allocated to Packaging in the debt
realignment before application of any proceeds from Packaging's planned sale of
its remaining interest in its containerboard joint venture. You should read this
table in conjunction with the "Combined Financial Statements of The Businesses
of Tenneco Packaging" and related notes, the "Unaudited Pro Forma Combined
Financial Statements of Packaging" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" of Packaging, each contained
elsewhere in this document.
<TABLE>
<CAPTION>
PACKAGING
------------------------
JUNE 30, 1999
------------------------
HISTORICAL PRO FORMA
---------- ---------
(IN MILLIONS)
<S> <C> <C>
Short-term debt:
Allocated from Tenneco.................................... $ 358(a) $ --
Borrowings under new Packaging credit facilities.......... -- 1,187
Other..................................................... 9 9
------ ------
367 1,196(b)
------ ------
Long-term debt:
Allocated from Tenneco.................................... 1,474(a) --
New securities............................................ -- 980(c)
Other..................................................... 20 20
------ ------
1,494 1,000(b)
------ ------
Total debt.................................................. 1,861 2,196(b)
------ ------
Minority interest........................................... 14 14
------ ------
Common stock................................................ -- 2
Paid-in capital............................................. -- 1,284
Retained earnings........................................... -- --
Combined equity............................................. 1,340 --
------ ------
Total equity......................................... 1,340 1,286
------ ------
Total capitalization........................................ $3,215 $3,496
====== ======
</TABLE>
- -------------------------
(a) Represents debt allocated to Packaging from Tenneco based on the portion of
Tenneco's investment in Packaging which Tenneco deemed to be debt. This
allocation is generally based on the ratio of Packaging's net assets to
Tenneco's consolidated net assets plus debt. Tenneco's historical practice
has been to incur debt for its consolidated group at the parent company
level or at a limited number of subsidiaries, rather than at the operating
company level, and to centrally manage various cash functions. Management
believes that the historical allocation of corporate debt is reasonable.
This historical allocation, however, is not indicative of the total amount
of debt that Packaging will have upon completion of the debt realignment, or
of the debt that may be incurred by Packaging as a separate public entity.
(b) Represents debt allocated to Packaging in the debt realignment before
application of any proceeds from Packaging's planned sale of its remaining
interest in its containerboard joint venture. Packaging expects the sale to
be completed before the spin-off, with the net proceeds used to retire the
Tenneco debt that would otherwise be allocated to Packaging in the debt
realignment. If the sale occurs after the spin-off, the net proceeds will be
used to retire Packaging debt.
(c) Represents the $ million aggregate principal amount of new securities
assumed to be exchanged pursuant to the exchange offers, which will be
recorded based on the net carrying amount of the original securities upon
consummation of the exchange offers. At this time, Packaging and Tenneco
cannot determine the ultimate amount of original securities that will be
exchanged, and that amount could vary significantly. The pro forma
capitalization assumes that 100% of the original securities are tendered
before the early exchange time and exchanged for new securities in the
exchange offers and that such new securities are not "substantially
different" from the original securities. See "Accounting Treatment of the
Exchange Offers."
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<PAGE> 68
NEW FINANCING
In connection with the spin-off, Packaging has entered into the following
credit facilities: (1) a $750 million long-term revolving senior credit
facility; and (2) a $250 million 364-day revolving senior credit facility.
Packaging may also enter into a $1.5 billion term loan facility in connection
with the spin-off, as described below. A definitive agreement for the $1.5
billion term loan facility has not been completed. Accordingly, the terms of the
$1.5 billion term loan are preliminary and may change as a result of the
negotiation of a definitive agreement.
Initial borrowings under one or more of these facilities are expected to
occur on or shortly before the spin-off. See "The Spin-off -- Debt Realignment"
for a description of how Packaging intends to use the proceeds of the initial
borrowings.
$750 MILLION LONG-TERM SENIOR REVOLVING CREDIT FACILITY
Packaging has entered into a senior credit facility with a syndicate, or
group, of banks and other financial institutions. This facility is a revolving
credit facility of up to $750 million, which will terminate on September 29,
2004. Part of the total facility will be a swingline facility of up to $50
million, from only one lender in the group, which provides for borrowings to be
made on shorter notice than for the other loans.
The proceeds of the loans made under this facility will be used by
Packaging for refinancing existing indebtedness of Tenneco or its subsidiaries,
including Packaging, as part of the debt realignment, for working capital and
for other general corporate purposes.
Maturity. This senior credit facility provides that all amounts outstanding
at the termination of the facility in 2004 will become due then. Prior to that
date, funds may be borrowed, repaid, and reborrowed, without premium or penalty.
Covenants. This facility will require Packaging to maintain compliance with
the following financial tests:
- minimum interest coverage ratio, which is the ratio of consolidated
earnings before interest expense, income taxes, minority interest,
depreciation and amortization ("EBITDA") to consolidated cash interest
expense, as of the last day of any fiscal period; and
- maximum total debt to EBITDA ratio, which is the ratio of Packaging's
indebtedness, less certain exclusions, to EBITDA.
The senior credit facility imposes prohibitions and limitations that are
customary for similar facilities and transactions, including, among other
things, on Packaging's ability to incur specified liens, incur subsidiary
indebtedness, dispose of all or substantially all of its assets, and discontinue
its primary businesses.
Interest. At Packaging's option, borrowings under this facility, except for
competitive bid loans and swingline facility loans, will bear interest at a
floating rate based on LIBOR, adjusted for reserve requirements, plus a
specified margin, or based on a specified prime or reference rate plus a
specified margin.
Each competitive bid loan will bear interest at the rate quoted in the
respective bid. Each swingline loan is expected to bear interest at a minimum
rate, which may be negotiated higher, based on the higher of a specified prime
or reference rate and the federal funds rate plus an applicable margin.
$250 MILLION 364 DAY SENIOR REVOLVING CREDIT FACILITY
Packaging has entered into an additional revolving credit facility of up to
$250 million.
This senior credit facility will terminate on September 27, 2000, 364 days
after its signing date, and all amounts outstanding at termination to become due
then.
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<PAGE> 69
Initial borrowings will occur under this facility at the same time as under
Packaging's $750 million Long-Term Senior Revolving Facility described above or
thereafter during its term, and that proceeds of the loans will be used for the
same purposes as the Long-Term Facility. The financial tests, prohibitions and
limitations, interest rates and other material terms of this facility are the
same as for the Long-Term Facility.
$1.5 BILLION TERM LOAN FACILITY
A lender has committed to provide Packaging up to $1.5 billion of term loan
financing which Packaging intends to use in the event it does not sell its
containerboard joint venture interest before the spin-off for general corporate
and other purposes. Although the terms of this financing have not been
finalized, Packaging expects that borrowings under this facility would be due 18
months after funding and bear interest at a floating rate based on LIBOR,
adjusted for reserve requirements, plus a specified margin, or based on a
specified prime or reference rate plus a specific margin, at Packaging's option.
Packaging expects this financing would include covenants similar to those
described above for the revolving credit facilities.
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<PAGE> 70
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF PACKAGING
The following Unaudited Pro Forma Combined Balance Sheet of Packaging as of
June 30, 1999, and the Unaudited Pro Forma Combined Statements of Income for the
six months ended June 30, 1999 and the year ended December 31, 1998, reflect the
effects of:
- the debt realignment; and
- the spin-off of Packaging and the related transactions.
The Unaudited Pro Forma Combined Balance Sheet has been prepared as if
these transactions occurred on June 30, 1999; the Unaudited Pro Forma Combined
Statements of Income have been prepared as if these transactions occurred as of
January 1, 1998. The Unaudited Pro Forma Combined Financial Statements are not
necessarily indicative of the results that would have actually occurred if these
transactions had been consummated as of June 30, 1999 or January 1, 1998, or
results which may be attained in the future.
The Unaudited Pro Forma Combined Financial Statements were derived from the
historical Combined Financial Statements of The Businesses of Tenneco Packaging
included elsewhere in this document. Net assets included in these historical
financial statements that are not already owned directly or indirectly by
Packaging will be transferred to Packaging before the spin-off as part of the
corporate restructuring transactions. The accounting for the transfer of assets
and liabilities pursuant to the corporate restructuring transactions represents
a reorganization of companies under common control and, accordingly, all assets
and liabilities are reflected at their historical cost in Packaging's historical
combined financial statements.
The pro forma adjustments, as described in the Notes to the Unaudited Pro
Forma Combined Financial Statements, are based upon available information and
upon certain assumptions that management believes are reasonable. Packaging's
pro forma debt and interest expense balances do not give effect to the
application of any proceeds from Packaging's planned sale of its remaining
interest in the joint venture. Packaging expects the sale to be completed before
the spin-off, with the net proceeds used to retire the Tenneco debt that would
otherwise be allocated to Packaging in the debt realignment. If the sale does
not occur before the spin-off, the net proceeds will be used to retire Packaging
debt. You should also read the Combined Financial Statements of The Businesses
of Tenneco Packaging, and related notes, included elsewhere in this document.
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<PAGE> 71
PACKAGING
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1999
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------
SPIN-OFF PACKAGING
PACKAGING DEBT AND RELATED PRO FORMA
HISTORICAL REALIGNMENT TRANSACTIONS COMBINED
ASSETS ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
Current assets:
Cash and temporary cash
investments............................................. $ 18 $ -- $ -- $ 18
Receivables............................................... 375 -- 119(b) 494
Inventories............................................... 447 -- -- 447
Prepayments and other..................................... 72 -- -- 72
------ ------ ------- ------
Total current assets.................................. 912 -- 119 1,031
Plant, property, and equipment, net......................... 1,495 -- -- 1,495
Goodwill and intangibles, net............................... 1,028 -- -- 1,028
Other assets and deferred charges........................... 918 59(a) 85(c) 1,062
Net assets of discontinued
operations................................................ 133 -- -- 133
------ ------ ------- ------
Total assets.......................................... $4,486 $ 59 $ 204 $4,749
====== ====== ======= ======
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt........................................... $ 367 $ 829(a) $ -- $1,196(e)
Trade payables............................................ 357 -- -- 357
Other current liabilities................................. 336 -- -- 336
------ ------ ------- ------
Total current liabilities............................. 1,060 829 -- 1,889
Long-term debt.............................................. 1,494 (494)(a) -- 1,000(e)
Deferred income taxes....................................... 380 (52)(a) 34(c) 362
Other liabilities and deferred credits...................... 198 -- -- 198
Minority interest........................................... 14 -- -- 14
Equity:
Combined equity........................................... 1,340 (224)(a) 119(b) --
51(c)
(1,286)(d)
Common stock.............................................. -- -- 2(d) 2
Paid-in capital........................................... -- -- 1,284(d) 1,284
Retained earnings......................................... -- -- --(d) --
------ ------ ------- ------
Total liabilities and equity.......................... $4,486 $ 59 $ 204 $4,749
====== ====== ======= ======
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
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PACKAGING
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1999
(MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------
SPIN-OFF PACKAGING
PACKAGING DEBT AND RELATED PRO FORMA
HISTORICAL REALIGNMENT TRANSACTIONS COMBINED
---------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
REVENUES
Net sales and operating revenues.......... $ 1,404 $-- $-- $ 1,404
Other income, net......................... (18) -- -- (18)
------------ --- --- ------------
1,386 -- -- 1,386
------------ --- --- ------------
COSTS AND EXPENSES
Cost of sales (exclusive of depreciation
shown below)........................... 924 -- -- 924
Engineering, research, and development.... 18 -- -- 18
Selling, general, and administrative...... 206 -- (3)(c) 203
Depreciation and amortization............. 94 -- -- 94
------------ --- --- ------------
1,242 -- (3) 1,239
------------ --- --- ------------
INCOME BEFORE INTEREST EXPENSE, INCOME
TAXES, AND MINORITY INTEREST.............. 144 -- 3 147
Interest expense............................ 68 12(f) -- 80(e)(f)
Income tax expense.......................... 24 (5)(g) 1(g) 20
Minority interest........................... -- -- -- --
------------ --- --- ------------
INCOME FROM CONTINUING OPERATIONS........... $ 52 $(7) $ 2 $ 47(e)
============ === === ============
EARNINGS PER SHARE
Average shares of common stock --
Basic................................ 166,937,362 166,937,362
Diluted.............................. 167,319,412 167,319,412
Income from continuing operations
Basic................................ $ .31 $ .28
Diluted.............................. $ .31 $ .28
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
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PACKAGING
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
(MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------
SPIN-OFF PACKAGING
PACKAGING DEBT AND RELATED PRO FORMA
HISTORICAL REALIGNMENT TRANSACTIONS COMBINED
---------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
REVENUES
Net sales and operating revenues..... $ 2,791 $ -- $ -- $ 2,791
Other income, net.................... (3) -- -- (3)
------------ ---- ---- ------------
2,788 -- -- 2,788
------------ ---- ---- ------------
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)......... 1,870 -- -- 1,870
Engineering, research, and
development....................... 33 -- -- 33
Selling, general, and
administrative.................... 427 -- (5)(c) 422
Depreciation and amortization........ 175 -- -- 175
------------ ---- ---- ------------
2,505 -- (5) 2,500
------------ ---- ---- ------------
INCOME BEFORE INTEREST EXPENSE, INCOME
TAXES, AND MINORITY INTEREST......... 283 -- 5 288
Interest expense....................... 133 27(f) -- 160(e)(f)
Income tax expense..................... 67 (11)(g) 2(g) 58
Minority interest...................... 1 -- -- 1
------------ ---- ---- ------------
INCOME FROM CONTINUING OPERATIONS...... $ 82 $(16) $ 3 $ 69(e)
============ ==== ==== ============
EARNINGS PER SHARE
Average shares of common stock --
Basic........................... 168,505,573 168,505,573
Diluted......................... 168,834,531 168,834,531
Income from continuing operations --
Basic........................... $ .49 $ .41
Diluted......................... $ .49 $ .41
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
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PACKAGING
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
(a) To reflect debt allocated to Packaging in the debt realignment. The
adjustment to equity reflects the net impact of the debt realignment, the
recording of debt issue costs and deferred income taxes related to the
exchange offers and other transaction costs. Pro forma long-term debt
includes $980 million of new securities, $ million aggregate principal
amount, assumed to be exchanged in the exchange offers, and $20 million of
long-term debt of Packaging subsidiaries. Pro forma short-term debt includes
$1,187 million borrowed under Packaging's new credit facilities to be
entered into as part of this debt realignment and $9 million of short-term
debt of Packaging subsidiaries. At this time, Packaging and Tenneco cannot
determine the ultimate amount of the original securities which will be
exchanged into new securities, and this amount could vary significantly.
These pro forma adjustments assume that 100% of the original securities
subject to the exchange offers will be tendered before the early exchange
time and exchanged for new securities and the new securities will be
recorded at the net carrying amount of the original securities. In other
words, the new securities are assumed not to be "substantially different."
See "Accounting Treatment of the Exchange Offers". The results of the
exchange offers could vary based on a number of factors, including the
timing and level of acceptance of the exchange offers, the interest rate of
the exchanged securities and whether the exchanges will be considered
extinguishments for accounting purposes. Based on current interest rate
markets, Packaging expects that the exchange offers will not be
extinguishments for accounting purposes. Therefore, Packaging does not
expect to recognize an extraordinary loss attributable to the debt exchange.
Other costs, including transaction costs related to the spin-off and
contractual employment obligations, are expected to be incurred by Packaging
in connection with the corporate restructuring transactions and the spin-off
which Packaging estimates will be approximately $70 million after-tax. The
effects on Packaging's debt of these costs has been reflected in this pro
forma adjustment. However, these charges have not been included in the
unaudited pro forma combined statement of income.
(b) To reflect the purchase of Packaging accounts receivable at fair value which
had previously been sold to a third party.
(c) To reflect the transfer to Packaging of prepaid pension costs attributable
to Automotive employees and the corresponding reduction in net periodic
pension costs and the increase in prepaid pension cost attributable to the
curtailment of the pension benefits related to Automotive employees.
Automotive employees will no longer participate in the Tenneco Retirement
Plan following the spin-off and Packaging will become the sponsor of this
plan. These prepaid pension costs will be transferred to Packaging in
connection with the corporate restructuring transactions. Packaging
estimates that a curtailment gain of approximately $30 million will be
recognized relating to the freezing of Automotive employees' pension
benefits in connection with the spin-off. This gain has not been included in
the unaudited pro forma combined statements of income.
(d) To reflect the spin-off of Packaging common stock to holders of Tenneco
common stock at an exchange ratio of one share of Packaging common stock for
each share of Tenneco common stock.
(e) The Packaging pro forma debt balances do not give effect to the application
of any proceeds from the planned sale of Packaging's remaining interest in
Packaging's containerboard joint venture. Packaging expects the sale to be
completed before the spin-off, with the proceeds used to repay the Tenneco
debt that would otherwise be allocated to Packaging in the debt realignment.
If the sale occurs after the spin-off, the net proceeds will be used to
retire Packaging debt. In September 1999, the joint venture, Packaging
Corporation of America, filed a registration statement for Packaging to sell
its interest in a registered public offering. Based on indications of value
in that registration statement, estimated net proceeds ranging from $525
million to $600 million are anticipated to be received from the sale of
Packaging's remaining interest in its containerboard joint venture. For each
$50 million of after-tax proceeds received from the sale, pro forma interest
expense would be reduced by
73
<PAGE> 75
PACKAGING
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $3 million on an annual basis and pro forma income from
continuing operations would be increased by approximately $2 million on an
annual basis, or $0.01 per diluted common share.
(f) To reflect the adjustment to interest expense from the allocation of Tenneco
debt to Packaging in the debt realignment as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
---------------- ------------
(IN MILLIONS)
<S> <C> <C>
Interest expense on historical debt(1)....... $(68) $(133)
Interest expense on the new securities(2).... 39 78
Interest expense on Packaging's new credit
facilities(3).............................. 37 75
Amortization of debt financing costs(4)...... 4 7
---- -----
Adjustment to interest expense............... $ 12 $ 27
==== =====
</TABLE>
------------------------
(1) Weighted average outstanding debt and average annual effective
interest rates were $1,836 million and 7.3% for the six months
ended June 30, 1999, and $1,900 million and 7.0% for the year ended
December 31, 1998.
(2) Weighted average outstanding debt and average annual effective
interest rate for the new securities were assumed to be
approximately $980 million and 7 3/4% for the six months ended June
30, 1999 and the year ended December 31, 1998.
(3) Weighted average outstanding debt and average annual effective rate
for Packaging's new credit facilities were assumed to be $1,187
million and 6 1/4% for the six months ended June 30, 1999 and the
year ended December 31, 1998.
(4) Represents the amortization of deferred debt financing costs.
A 1/8% change in the assumed interest rates would change annual pro forma
interest expense by approximately $3 million, before the effect of income
taxes.
(g) To reflect the income tax expense effects of pro forma adjustments at an
assumed statutory tax rate of 40%.
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<PAGE> 76
SUPPLEMENTAL FINANCIAL INFORMATION OF PACKAGING
RESULTS OF OPERATIONS
Packaging's historical and pro forma earnings before interest expense,
income taxes, and minority interest ("EBIT") are shown in the following table:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- ----------------
(MILLIONS)
<S> <C> <C>
Historical EBIT............................................. $283 $144
Pro forma EBIT.............................................. $288 $147
</TABLE>
These historical and pro forma results include certain items that Packaging
believes require additional explanation. These items include costs which Tenneco
incurred at the corporate level but did not fully allocate to its operating
divisions, such as administrative services, corporate overhead, and costs
related to Tenneco's operation as a public company. Because these functions will
become part of Packaging following the spin-off, these costs have been included
in Packaging's historical and pro forma EBIT. These items also included a
restructuring charge recorded in the fourth quarter of 1998. The following
information discusses these items in detail and their financial impact on
Packaging's EBIT.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- ----------------
(MILLIONS)
<S> <C> <C>
- Restructuring charge -- Packaging recorded a
restructuring charge in the fourth quarter of 1998
designed to reduce administrative and operational
costs. Refer to Note 4, "Restructuring and Other
Charges," on page F-14 of The Combined Financial
Statements of the Businesses of Tenneco Packaging for
further information.................................. $32 $29
- Restructuring savings -- The portion of the
restructuring plan designed to reduce operational
costs is expected to result in lower costs of sales.
See "Restructuring and Other Charges" in Packaging's
Management's Discussion and Analysis for a discussion
of expected savings from restructuring............... $13 $ 6
- Corporate overhead reductions -- Packaging's smaller,
less complex corporate structure is expected to
result in corporate overhead costs that are lower by
approximately $12 million than Tenneco incurred
historically. Also, Packaging's EBIT includes costs
associated with Tenneco's administrative services
operations. Although the administrative services
operations provide a number of services to Tenneco's
operating units, some of these corporate level costs
were not previously allocated to Tenneco's operating
segments. Had all the administrative services
operations costs been allocated based on a usage
charge, Packaging estimates that approximately $28
million would have been billed to Automotive for
1998. See page F-11, "General and Administrative
Expenses" in Note 3 to the Combined Financial
Statements of the Businesses of Tenneco Packaging.... $40 $20
</TABLE>
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<PAGE> 77
COMBINED SELECTED FINANCIAL DATA OF PACKAGING
The following combined selected financial data as of December 31, 1998 and
1997, and for the years ended December 31, 1998, 1997, and 1996, were derived
from the audited Combined Financial Statements of The Businesses of Tenneco
Packaging. The following combined selected financial data as of December 31,
1996, 1995, and 1994, and for the years ended December 31, 1995 and 1994, are
unaudited and were derived from Tenneco's accounting records. The following
combined selected financial data as of and for each of the six months ended June
30, 1999 and 1998 were derived from the unaudited Combined Financial Statements
of The Businesses of Tenneco Packaging.
In the opinion of Packaging's management, the combined selected financial
data of Packaging as of December 31, 1996, 1995, and 1994, and for the years
ended December 31, 1995 and 1994, and as of and for the six months ended June
30, 1999 and 1998, include all adjusting entries, consisting only of normal
recurring adjustments, necessary to present fairly the information set forth.
You should not regard the results of operations for the six months ended June
30, 1999 as indicative of the results that may be expected for the full year.
There is other information Packaging believes is relevant to understanding
its results of operations following the spin-off. These items relate to
corporate overhead incurred by Tenneco and its administrative services
operations that Packaging expects will differ following the spin-off. For
further information you should see "Supplemental Financial Information of
Packaging" included elsewhere in this document.
You should read all of this information in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
Packaging and the Combined Financial Statements of The Businesses of Tenneco
Packaging, and related notes, included elsewhere in this document.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
1998(a) 1997(a) 1996(a) 1995 1994
------- ------- ------- ---- ----
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME
DATA(b):
Net sales and operating
revenues --
Specialty............. $ 2,785 $ 2,553 $ 1,987 $ 845 $ 636
Other................. 6 10 -- -- --
------------ ------------ ------------ ------------ ------------
Total............... $ 2,791 $ 2,563 $ 1,987 $ 845 $ 636
============ ============ ============ ============ ============
Income from continuing
operations before
interest expense, income
taxes, and minority
interest --
Specialty............. $ 328 $ 308 $ 249 $ 39 $ 68
Other(c).............. (45) (2) (15) (6) 17
------------ ------------ ------------ ------------ ------------
Total............... 283 306 234 33 85
Interest expense(d)....... 133 124 102 91 48
Income tax expense
(benefit)............... 67 75 67 (3) 19
Minority interest......... 1 1 -- -- --
------------ ------------ ------------ ------------ ------------
Income (loss) from
continuing operations... 82 106 65 (55) 18
Income (loss) from
discontinued operations,
net of income tax(e).... 57 21 71 224 75
Extraordinary loss, net of
income tax(f)........... -- -- (2) -- --
Cumulative effect of
changes in accounting
principles, net of
income tax(g)........... -- (38) -- -- --
------------ ------------ ------------ ------------ ------------
Net income (loss)......... $ 139 $ 89 $ 134 $ 169 $ 93
============ ============ ============ ============ ============
(continued on next page)
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
---------------------------
1999(a) 1998(a)
------- -------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) >
<S> <C> <C>
STATEMENTS OF INCOME
DATA(b):
Net sales and operating
revenues --
Specialty............. $ 1,404 $ 1,361
Other................. -- 10
------------ ------------
Total............... $ 1,404 $ 1,371
============ ============
Income from continuing
operations before
interest expense, income
taxes, and minority
interest --
Specialty............. $ 190 $ 175
Other(c).............. (46) (2)
------------ ------------
Total............... 144 173
Interest expense(d)....... 68 67
Income tax expense
(benefit)............... 24 37
Minority interest......... -- --
------------ ------------
Income (loss) from
continuing operations... 52 69
Income (loss) from
discontinued operations,
net of income tax(e).... (163) 37
Extraordinary loss, net of
income tax(f)........... (7) --
Cumulative effect of
changes in accounting
principles, net of
income tax(g)........... (32) --
------------ ------------
Net income (loss)......... $ (150) $ 106
============ ============
</TABLE>
76
<PAGE> 78
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
1998(a) 1997(a) 1996(a) 1995 1994
------- ------- ------- ---- ----
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Average number of shares of
common stock
outstanding(h) --
Basic..................... 168,505,573 170,264,731 169,609,373 172,764,198 162,307,189
Diluted................... 168,834,531 170,801,636 170,526,112 173,511,654 162,912,425
Earnings (loss) per average
share of common
stock(h) --
Basic:
Continuing operations... $ .49 $ .63 $ .38 $ (.32) $ .11
Discontinued
operations(e)......... .34 .12 .42 1.30 .46
Extraordinary loss(f)... -- -- (.01) -- --
Cumulative effect of
changes in accounting
principles(g)......... -- (.23) -- -- --
------------ ------------ ------------ ------------ ------------
$ .83 $ .52 $ .79 $ .98 $ .57
============ ============ ============ ============ ============
Diluted:
Continuing operations... $ .49 $ .63 $ .38 $ (.32) $ .11
Discontinued
operations(e)......... .34 .12 .42 1.29 .46
Extraordinary loss(f)... -- -- (.01) -- --
Cumulative effect of
changes in accounting
principles(g)......... -- (.23) -- -- --
------------ ------------ ------------ ------------ ------------
$ .83 $ .52 $ .79 $ .97 $ .57
============ ============ ============ ============ ============
BALANCE SHEET DATA(b):
Net assets of discontinued
operations(e)........... $ 366 $ 423 $ 459 $ 393 $ 236
Total assets.............. 4,798 4,618 4,028 3,358 1,630
Short-term debt(d)........ 595 158 123 205 49
Long-term debt(d)......... 1,312 1,492 1,073 880 478
Debt allocated to
discontinued
operations(d)........... 548 473 394 369 285
Minority interest......... 14 15 -- -- --
Combined equity........... 1,776 1,839 1,843 1,531 703
STATEMENT OF CASH FLOWS
DATA(b):
Net cash provided (used)
by operating
activities.............. $ 577 $ 405 $ 263 $ 479 $ 283
Net cash provided (used)
by investing
activities.............. (514) (654) (669) (1,791) (146)
Net cash provided (used)
by financing
activities.............. (67) 239 399 1,327 (142)
Capital expenditures for
continuing operations... (194) (229) (216) (265) (134)
OTHER DATA:
EBITDA(i)................. $ 458 $ 469 $ 365 $ 78 $ 121
Ratio of earnings to fixed
charges(j).............. 1.99 2.31 2.15 NM 1.72
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
---------------------------
1999(a) 1998(a)
------- -------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Average number of shares of
common stock
outstanding(h) --
Basic..................... 166,937,362 169,341,555
Diluted................... 167,319,412 169,936,676
Earnings (loss) per average
share of common
stock(h) --
Basic:
Continuing operations... $ .31 $ .41
Discontinued
operations(e)......... (.98) .22
Extraordinary loss(f)... (.04) --
Cumulative effect of
changes in accounting
principles(g)......... (.19) --
------------ ------------
$ (.90) $ .63
============ ============
Diluted:
Continuing operations... $ .31 $ .41
Discontinued
operations(e)......... (.98) .22
Extraordinary loss(f)... (.04) --
Cumulative effect of
changes in accounting
principles(g)......... (.19) --
------------ ------------
$ (.90) $ .63
============ ============
BALANCE SHEET DATA(b):
Net assets of discontinued
operations(e)........... $ 133 $ 382
Total assets.............. 4,486 4,788
Short-term debt(d)........ 367 335
Long-term debt(d)......... 1,494 1,488
Debt allocated to
discontinued
operations(d)........... -- 479
Minority interest......... 14 15
Combined equity........... 1,340 1,829
STATEMENT OF CASH FLOWS
DATA(b):
Net cash provided (used)
by operating
activities.............. $ (45) $ 288
Net cash provided (used)
by investing
activities.............. (866) (221)
Net cash provided (used)
by financing
activities.............. 920 (66)
Capital expenditures for
continuing operations... (75) (101)
OTHER DATA:
EBITDA(i)................. $ 238 $ 261
Ratio of earnings to fixed
charges(j).............. 2.00 2.45
</TABLE>
- -------------------------
(a) For a discussion of the significant items affecting comparability of the
financial information for the years ended December 31, 1998, 1997, and 1996,
and for the six months ended June 30, 1999 and 1998, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Packaging" included elsewhere in this document.
(b) During the periods presented, Packaging completed numerous acquisitions, the
most significant of which were the acquisitions of Mobil Plastics for $1.3
billion in late 1995, Amoco Foam Products for $310 million in August 1996,
and the protective and flexible packaging business of N.V. Koninklijke KNP
BT for $380 million in April 1997. See Note 6 to the Combined Financial
Statements of The Businesses of Tenneco Packaging. See also, "Description of
Packaging -- Growth Strategy" and "Description of Packaging -- Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(c) Income from continuing operations before interest expense, income taxes and
minority interest for "Other" includes costs which were incurred by
Tenneco's corporate and administrative services operations which were not
allocated to Tenneco's operating segments. Because these functions will be a
part of Packaging upon the spin-off, they are included in Packaging's
historical
(continued on next page)
77
<PAGE> 79
combined financial statements. Packaging expects its costs for these
functions will differ following the spin-off. See "Supplemental Financial
Information of Packaging" included elsewhere in this document for further
information.
(d) Tenneco's historical practice has been to incur indebtedness for its
consolidated group at the parent company level or at a limited number of
subsidiaries, rather than at the operating company level, and to centrally
manage various cash functions. Accordingly, historical amounts include debt
and related interest expense allocated to Packaging from Tenneco based on
the portion of Tenneco's investment in Packaging which Tenneco deemed to be
debt. This allocation is generally based upon the ratio of Packaging's net
assets to Tenneco's consolidated net assets plus debt. An allocation of debt
and its related interest expense has also been made to Packaging's
discontinued operations based on the ratio of the discontinued operations'
net assets to Packaging's combined net assets plus debt. Management believes
that the historical allocation of corporate debt and interest expense is
reasonable. This historical allocation is not, however, indicative of the
total amount of debt that Packaging will have upon completion of the debt
realignment or of the debt and interest that may be incurred by Packaging as
a separate public entity. See the Combined Financial Statements of The
Businesses of Tenneco Packaging included elsewhere in this document.
(e) Discontinued operations for the periods presented consist of Packaging's
paperboard packaging segment, which was discontinued in June 1999 following
the decision to sell Packaging's remaining interest in Packaging's
containerboard joint venture. Loss from discontinued operations for the six
months ended June 30, 1999 included an after-tax loss of $178 million, or
$1.07 per diluted common share, resulting from the contribution of
Packaging's containerboard assets to the joint venture. See Note 7 to the
Combined Financial Statements of the Businesses of Tenneco Packaging
included elsewhere in this document.
(f) Represents Packaging's costs related to prepayment of debt. See Note 7 to
the Combined Financial Statements of The Businesses of Tenneco Packaging
included elsewhere in this document.
(g) In 1999, Packaging implemented the American Institute of Certified Public
Accountants Statement of Position No. 98-5, "Reporting on the Costs of
Start-Up Activities." In 1997, Packaging implemented the Financial
Accounting Standards Board's Emerging Issues Task Force Issue No. 97-13,
"Accounting for Costs Incurred in Connection with a Consulting Contract that
Combines Business Process Reengineering and Information Technology
Transformation." See Note 3 to the Combined Financial Statements of The
Businesses of Tenneco Packaging included elsewhere in this document for
additional information regarding changes in accounting principles.
(h) In the spin-off, Tenneco stockholders will receive one share of Packaging
common stock for each share of Tenneco common stock outstanding.
Accordingly, basic and diluted earnings per share for Packaging were
calculated using Tenneco's historical weighted average shares outstanding
and weighted average shares outstanding adjusted to include estimates of
additional shares that would be issued if potentially dilutive common shares
had been issued, respectively.
(i) EBITDA represents income from continuing operations before interest expense,
income taxes, minority interest and depreciation and amortization. EBITDA is
not a calculation based upon generally accepted accounting principles. The
amounts included in the EBITDA calculation, however, are derived from
amounts included in the Combined Statements of Income of The Businesses of
Tenneco Packaging included elsewhere in this document. EBITDA should not be
considered as an alternative to net income or operating income as an
indicator of the operating performance of Packaging, or as an alternative to
operating cash flows as a measure of liquidity. Packaging has reported
EBITDA because it believes EBITDA is a measure commonly reported and widely
used by investors and other interested parties as an indicator of a
company's ability to incur and service debt. Packaging believes EBITDA
assists investors in comparing a company's performance on a consistent basis
without regard to depreciation and amortization, which can vary
significantly depending upon accounting methods (particularly when
acquisitions are involved) or nonoperating factors. However, the EBITDA
measure presented in this document may not always be comparable to similarly
titled measures reported by other companies due to differences in the
components of the calculation.
(j) For purposes of computing this ratio, earnings generally consist of income
from continuing operations before income taxes and fixed charges excluding
capitalized interest. Fixed charges consist of interest expense, the portion
of rental expense considered representative of the interest factor and
capitalized interest. The historical ratios are based upon the amount of
interest expense on corporate debt allocated to Packaging by Tenneco as
discussed in (d) above. For the year ended December 31, 1995, earnings were
inadequate to cover fixed charges by $59 million.
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<PAGE> 80
INDUSTRY OVERVIEW AND KEY TERMS
Many of the markets Packaging serves are growing faster than the overall
United States gross domestic product. Most of our revenue comes from products
made from different types of plastics, with the balance coming from paper and
aluminum products. According to A.C. Neilsen, the unit volume growth trend as of
June 12, 1999 for the zippered food storage bag market is 6% per year.
Additionally, unit volume in the market for foam disposable foodservice
packaging is projected to grow 6-7% annually for the next five years, according
to a study prepared by a market research group. Several markets within the
protective packaging industry are growing 6-8% per year in sales according to
U.S. Industry and Trade Outlook '99.
Specialty packaging is an industry term which generally refers to packaging
used by commercial customers that is designed and manufactured for a specific
application or product. Examples include:
- rigid, clear plastic containers used in supermarkets to display bakery
goods;
- sponge-like foam plastic packaging used to cushion and protect computers,
TVs and stereos; and
- flexible plastic bags used for sterile intravenous fluid delivery.
The specialty packaging industry may be divided into sub-categories based on the
characteristics of the packaging, the industry in which the packaging is used,
or the primary function of the packaging. Examples include flexible packaging,
foodservice packaging and protective packaging. Individual packaging products
may fall into more than one sub-category of specialty packaging.
Protective packaging is the industry term used to describe specialty
packaging that satisfies the protection and transportation needs of commercial
customers. Protective packaging is designed and manufactured to ensure the
integrity and safety of the customer's product from the point it leaves the
manufacturing floor until it reaches its final destination. Flexible packaging
is an industry term used to describe the sub-category of specialty packaging for
customers whose products or distribution channels require a custom-designed
flexible plastic package. Food/foodservice packaging describes specialty
packaging designed and manufactured for customers in the food industry. This
includes customers who process and prepare food for consumption, known as food
packers and processors. It also includes other customers in the food
distribution channel such as wholesalers and supermarkets.
Specialty packaging generally is constructed from plastic or paper which is
engineered, designed and manufactured to meet the customer's specific need in a
particular product or application. The basic raw materials used to make plastic
specialty packaging are different types of plastics obtained from chemical
companies, often in pelletized form, known as plastic resins. Plastic resins
come in three general forms based on their chemical composition: polyolefins,
polystyrenes and polyvinyl chloride. Polyolefins include polyethylene and
polypropylene.
The plastic resins are subjected to various manufacturing processes that
result in intermediate forms of the plastic. It may be solid or a sponge-like
material called foam. Depending on its thickness, the material may be called
film, sheet or plank.
The plastic films, sheets and planks are then combined, shaped and cut to
produce different specialty packaging:
- polypropylene medical bags -- layered plastic films combined to produce
plastic bags that hold fluid for intravenous delivery;
- printed barrier films -- flexible printed packaging designed to protect a
wide range of products from chemicals to foods;
- modified atmosphere packaging -- packaging that is principally used with
foods to preserve freshness and designed to protect the contents from
penetration by oxygen;
- foam containers -- lightweight containers designed to package individual
servings of food, often in the fast-food, take-out food, or other
foodservice context;
79
<PAGE> 81
- engineered foam plank and foam sheet -- packaging material of different
shapes and thicknesses designed to protect and cushion goods, primarily
while in transit;
- polyethylene stretch film -- strong, puncture-resistant packaging used to
contain and protect goods for transportation, often used to secure
individual goods on pallets; and
- polyolefin foam -- foam packaging that is stronger and more resilient
than conventional plastic foam, may be formed into a soft, rubber-like
material that is flexible, elastic and resilient.
- converted protective packaging -- packaging designed and configured for a
specific product application, such as the plastic foam used to secure
home electronics inside the boxes in which they are shipped and foam pipe
insulation.
Many of Packaging's products are manufactured using paperboard or other
materials created from wood pulp or recycled paper:
- paperboard honeycomb -- paperboard box material designed and engineered
using geometrically shaped paperboard between flat layers of linerboard
to enhance the cushioning characteristics of the container;
- customized packaging systems -- refers to paper or plastic packaging
combined with a unique machine or device to package a specific product or
type of products.
- linerboard -- paperboard used for the flat outer face of containerboard
packaging.
- molded fiber -- a material created from recycled paper that may be formed
into various shapes, such as egg cartons;
- pressed paperboard -- plastic coated paperboard used to make food
containers; and
- dual-ovenable paperboard -- plastic coated paperboard that may be heated
in either a microwave or a conventional oven.
PRODUCTS AND MARKETS
Packaging manufactures, markets and sells plastic and paper-based consumer
products and food/foodservice packaging, as well as protective and flexible
packaging. Approximately 80% of Packaging's revenue comes from products made
from different types of plastics, with the balance from paper and aluminum
products.
CONSUMER PRODUCTS AND FOOD/FOODSERVICE PACKAGING
Packaging manufactures, markets and sells consumer products, such as
plastic storage bags for food and household items, plastic waste bags, foam and
molded fiber disposable tableware and disposable aluminum cookware. Packaging
sells many of these products under such recognized brand names as Hefty(R),
Baggies(R), Hefty One-Zip(R), Kordite(TM) and E-Z Foil(R). These products are
typically used by consumers in their homes, and Packaging markets and sells them
through a variety of retailers, including supermarkets, mass merchandisers and
other stores where consumers purchase household goods.
Packaging's food packaging products protect food during distribution,
assist retailers in merchandising food and help customers prepare and serve
meals in their homes. For food processors, Packaging offers dual-ovenable
paperboard products, molded fiber egg cartons, foam meat trays, aluminum
containers and modified atmosphere packaging, which extends the shelf life of
meat products.
In addition, Packaging provides plastic zipper closures for a variety of
flexible packaging applications. Packaging's food packaging products for
supermarket in-store use include clear rigid display packaging used in produce,
deli and bakery applications, microwaveable containers used for prepared,
ready-to-eat meals, plastic foam trays for meat and produce, and bags for
produce and bakery applications.
For its foodservice customers, Packaging offers products that help
merchandize and serve both on-premises and takeout meals. These products include
tableware products, such as plates, bowls and cups,
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<PAGE> 82
and a broad line of takeout service containers made from clear plastic,
microwaveable plastic, molded fiber, paperboard, foam and aluminum.
PROTECTIVE AND FLEXIBLE PACKAGING
Packaging manufactures, markets and sells protective packaging for use in
the automotive, computer, electronic, furniture, durable goods, building and
construction products industries. Packaging's sheet foams and air encapsulated
bubble products, for example, are used for cushioning and surface protection.
Its paperboard honeycomb and engineered foam plank products protect against
shock, vibration and thermal damage. Packaging also offers other converted
protective packaging products, including padded mailers, a variety of laminated
protective coverings and customized packaging systems.
Packaging's flexible packaging products provide a variety of
cost-effective, efficient and attractive solutions for consumer, medical,
pharmaceutical, chemical, hygiene and industrial applications. These products
include liners for disposable diapers, wrap-around sleeves for glass and plastic
bottles, polypropylene medical bags used for sterile intravenous fluid delivery,
modified atmosphere films, stand-up pouches, food and hygiene packaging, and
disposable surgical kits custom designed for specific procedures.
Packaging also offers polyethylene stretch film, specialty aluminum
materials and film and foam products for use in the construction industry.
GROWTH STRATEGY
Packaging has grown, and plans to continue to grow, by pursuing internal
growth and strategic acquisitions. By pursuing this growth strategy, Packaging
has increased the total revenues of its specialty packaging and consumer
products business from $845 million in 1995 to approximately $2.8 billion in
1998. During this same period, its income from continuing operations from this
business, before interest, income taxes and minority interest, increased from
$39 million to $328 million, representing a compound annualized growth rate of
103%. See "-- Combined Selected Financial Data of Packaging."
As a separate, publicly traded company, Packaging expects to have greater
flexibility to pursue its growth strategy. The increased flexibility will come
from greater focus on a single enterprise and the enhanced access to capital
markets that comes from the ability of investors and lenders to analyze and
understand a single business platform. Packaging expects growth opportunities
will come from additional product development and expansion initiatives as well
as additional strategic acquisitions, joint ventures and strategic alliances.
INTERNAL GROWTH
Since 1995, Packaging has executed a strategy that focuses its business on
markets that have strong underlying growth characteristics and attractive
margins. Packaging offers customers "material neutral" solutions. In other
words, Packaging's goal is not to sell customers a particular product line.
Rather, through its custom design centers and broad product line, Packaging
strives to create the best packaging solutions for its customers, tailored
precisely to their needs. With this approach and Packaging's worldwide
geographical coverage, Packaging has become a primary supplier to national and
international manufacturers and distributors and has developed long-term
relationships with key players in the consolidating packaging and food service
distribution sector. Packaging intends to use these relationships to quickly
identify and focus on growth markets with attractive margins as they develop,
which should expand its customer base and market share.
Packaging seeks to add to its base business by developing new packaging
solutions for markets where it believes its experience and familiarity give it a
competitive advantage. In addition, Packaging grows market share for its
existing products by taking advantage of (a) its broad product line of superior
quality products and its long-term relationships with key manufacturers and
distributors, (b) its product development and design services, (c) its
investment in developing state-of-the-art service capabilities, and (d) its
ongoing effort focused on reducing costs and improving the production of its
operations.
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Product Breadth/Relationships With Key Manufacturers and Distributors
Packaging's ability to provide "one-stop shopping" through its broad
product line is an important selling point with customers. In addition,
Packaging has cultivated long-term relationships with key manufacturers and
distributors who recognize Packaging's strong positions in multiple product
categories. These relationships, coupled with Packaging's complete product line,
are allowing Packaging to grow its market shares for existing products. For
example, in foodservice packaging, Packaging holds the number one market share
position in the United States and Canada with respect to four of its five main
product categories, based on unit volume. Management estimates that products
representing 80% of sales in Packaging's protective packaging business hold the
number one or two market share position in North America, based on sales
revenue.
New Products/Design Services
Packaging further fuels its internal growth by developing and
commercializing proprietary new products and by designing value-added
product-line extensions. In 1998, Packaging's consumer products and
food/foodservice packaging business introduced over 80 new products and
product-line extensions. In Packaging's protective and flexible packaging
business, where custom design services drive revenues, it developed over 500
custom product applications in 1998. Packaging believes its new product
innovation and design services will remain a key factor in driving future
internal growth.
- Consumer Products and Food/Foodservice Packaging. During the last twelve
months, in its consumer products and food/foodservice packaging business,
Packaging added jumbo two-gallon bags and sandwich bags to its existing
Hefty One-Zip(R) quart and half-gallon food storage and freezer bag
offerings. Packaging is also leveraging its patented One-Zip(R) closure
system by expanding into other zipper closure applications, such as
SlideRite(TM) retail packaging for baby wipes, fresh produce, supermarket
deli bags and other recloseable flexible packaging. In the United States,
Packaging has the leading market share with Hefty(R) disposable
tableware, and its E-Z Foil(R) brand disposable aluminum cookware line
leads its competition by a wide margin in both sales and market share.
Packaging's new product innovations include ActiveTech(TM) packaging, a
proprietary modified atmospheric package used by food processors for
case-ready meat. ActiveTech(TM) packaging extends the shelf life of
fresh, unfrozen red meat in a package that maintains the appearance of
freshly packaged meat.
- Protective and Flexible Packaging. In Packaging's protective and flexible
packaging business, new protective packaging products include engineered
foams, and Profiles(R), a foam-based material used in various markets,
such as building products and furniture, and custom designed to provide
many benefits, including insulation, cushioning and surface protection.
Recent flexible packaging innovations include high-end graphic stand-up
pouches for soups and detergents and Propyflex(R) medical bags for
fluids. Propyflex(R), a non-polyvinyl chloride barrier film, satisfies
the requirements for flexibility and transparency even after
sterilization and provides a cost-effective packaging by eliminating the
need for secondary wrap.
State-of-the-Art Service Capabilities
To further take advantage of its broad product line offering and strong
alignment with national distributors, Packaging has developed and implemented
its Customer Linked Manufacturing system. CLM is a state-of-the-art production
planning and order fulfillment system which enables Packaging's customers to do
business easily and efficiently. CLM eliminates costs from the entire supply
chain and provides both its customers and Packaging with a competitive
advantage.
Productivity/Cost Reduction
Packaging's strong focus on improving productivity and reducing costs in
its manufacturing and logistics operations is key to supporting the growth of
its base business. For example, the unit manufacturing costs have continuously
declined, net of inflation, for some of Packaging's products, such as
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its foam products, rigid display packaging and performance films. This has
allowed Packaging to maintain or improve its profit margins.
STRATEGIC ACQUISITIONS
Strategic acquisitions have been, and will continue to be, an important
element of Packaging's overall growth strategy. Management has a proven record
of identifying and acquiring businesses and rapidly integrating them into one of
Packaging's business groups. Packaging pursues acquisitions that offer synergies
through, among other things, rationalizing product lines, reconfiguring and
upgrading manufacturing capabilities and reducing operating, selling,
distribution, purchasing and administrative costs. Packaging also pursues
acquisitions that strengthen its brand presence and expand its product offerings
and markets.
Consumer Products and Food/Foodservice Packaging. Packaging plans to grow
its consumer products and food/foodservice packaging business by acquiring
similar businesses whose products and markets will complement Packaging's.
Packaging will focus on acquiring specialized engineering and manufacturing
capabilities that augment and enhance its existing processes and allow it to
produce top-quality products efficiently. Since the beginning of 1995, its
consumer products and food/foodservice packaging business has grown through the
following acquisitions:
- In 1995, Packaging more than doubled its sales with the acquisition of
Mobil Plastics. This acquisition expanded its product offerings to
include foam containers, meat and poultry trays, disposable plates and
bowls, polyethylene film products, produce bags and stretch film, as
well as the well-known consumer products Baggies(R) food bags and
Hefty(R) waste bags and tableware. This acquisition also added
state-of-the-art manufacturing capabilities and new product
technologies, including the One-Zip(R) closure system.
- In August 1996, Packaging acquired Amoco Foam Products Company, which
enhanced its distribution capabilities and market coverage, especially
among food processors. Amoco Foam's product portfolio included foam
tableware, hinged lid containers, food trays and residential and
commercial insulation products.
- In September 1998, Packaging augmented its dual-ovenable paperboard
manufacturing capacity by acquiring a Champion International facility in
Belvidere, Illinois. As a result, Packaging has the capability to
manufacture this product, which may be heated in a conventional or a
microwave oven, for a broad spectrum of uses in various products.
Protective and Flexible Packaging. Packaging intends to continue its global
growth strategy of acquiring custom engineering and design capabilities that
will provide multi-material packaging solutions to markets with strong
underlying growth characteristics. Management estimates that this strategy has
made it one of the largest producers of protective packaging in the United
States. Since the beginning of 1995, Packaging's protective and flexible
packaging business has grown through the following acquisitions:
- In 1995, continuing its growth strategy of acquiring specialty packaging
applications, Packaging entered the protective packaging sector by
buying Hexacomb, a manufacturer of paperboard honeycomb products.
- In 1997, Packaging acquired the protective and flexible packaging
businesses of KNP BT, which operated in Europe and North America. With
this acquisition, Packaging entered the European protective and flexible
packaging markets and enhanced its global specialty packaging position.
This acquisition also broadened the scope of its protective packaging
business to include sheet foam, engineered foam and air encapsulated
bubble and mailer applications. Packaging also acquired two honeycomb
plants in 1997.
- In April 1998, Packaging acquired Richter Manufacturing, a West Coast
manufacturer and distributor of protective packaging products. This
acquisition expanded the geographical coverage of its North American
protective packaging operation.
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- In December 1998, Packaging acquired the foam packaging assets of
Sentinel Products, a North American producer of specialty polyolefin
foams. This acquisition further diversified its protective packaging
product offering and increased its manufacturing capacity. Packaging
also formed a global joint venture, Sentinel Polyolefin LLC, with
Sentinel to produce and market chemically blown polyolefin foam
applications in a wide variety of non-packaging markets, including the
automotive, sports and leisure, medical and adhesive tape markets.
MARKETING, DISTRIBUTION AND CUSTOMERS
Packaging's sales and marketing staff of 500 people is organized along
three main product groups: consumer products, foodservice and supermarket
products, and protective and flexible packaging products.
The consumer product group sells waste bags, food storage bags, disposable
plates and bowls and disposable aluminum cookware primarily to grocery stores
and mass merchandisers. These products are sold through a direct sales force and
a national network of brokers and manufacturers' representatives.
The foodservice, supermarket and food packer and processor sales
organizations sell a broad array of disposable, rigid and flexible packaging
made from plastic, aluminum, molded fiber and pressed paperboard materials. The
products include disposable plates and bowls, carry-out containers, rigid
display containers, microwavable and dual-ovenable food containers, food and
specialty retail bags and foil wrap. Packaging's foodservice and supermarket
sales are made primarily through a network of independent distributors. Food
packer and processor sales are made primarily direct to large processors, with
some sales through distributors.
The protective and flexible packaging group sells to distributors,
fabricators and directly to end-users worldwide.
No material portion of Packaging's business is dependent upon a single
customer or even a few customers, and no one customer accounted for more than
10% of Packaging's aggregate net sales for the fiscal year ended December 31,
1998. In general, the backlog of orders is not significant or material to an
understanding of Packaging's business.
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ANALYSIS OF REVENUES
The following tables set forth for each of the years 1996 through 1998, and
for the six months ended June 30, 1999, information relating to Packaging's
sales from continuing operations:
<TABLE>
<CAPTION>
NET SALES (MILLIONS)
-------------------------------------------
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------
JUNE 30, 1999 1998 1997 1996
------------- ---- ---- ----
<S> <C> <C> <C> <C>
Disposable plastic, fiber, and aluminum packaging
products.............................................. $1,038 $2,126 $2,105 $1,862
Plastic and fiber protective/flexible packaging
products.............................................. 311 607 399 78
Other................................................... 55 52 49 47
------ ------ ------ ------
Total.............................................. $1,404 $2,785 $2,553 $1,987
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
----------------------------------------------
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------
JUNE 30, 1999 1998 1997 1996
------------- ---- ---- ----
<S> <C> <C> <C> <C>
TOTAL SALES
Disposable plastic, fiber, and aluminum packaging
products.............................................. 74% 76% 83% 94%
Plastic and fiber protective/flexible packaging
products.............................................. 22 22 15 4
Other................................................... 4 2 2 2
--- --- --- ---
Total.............................................. 100% 100% 100% 100%
=== === === ===
SALES BY GEOGRAPHIC AREA(a)
United States........................................... 78% 80% 83% 89%
European Union.......................................... 18 17 15 8
Canada.................................................. 2 1 1 2
Other areas............................................. 2 2 1 1
--- --- --- ---
Total.............................................. 100% 100% 100% 100%
=== === === ===
</TABLE>
- -------------------------
(a) See Note 14 to the Combined Financial Statements of The Businesses of
Tenneco Packaging included elsewhere in this document for information about
foreign and domestic operations.
COMPETITION
Packaging operates in markets that are highly competitive and faces
substantial competition throughout all of its product lines from numerous
global, national and regional companies, ranging from the largest packaging
companies to small, emerging companies. Companies that compete with Packaging
may have greater financial and other resources than it does, while others are
significantly smaller with lower fixed costs and possibly greater operating
flexibility. In addition to price, competition with respect to many of
Packaging's products is based on quality, service supplier response time and
timely and complete order fulfillment. In addition, other packaging producers
supply alternative materials and structures and serve different geographic
regions through various distribution channels.
INTERNATIONAL
Packaging operates facilities and sells products in countries throughout
the world. As a result, Packaging is subject to risks associated with selling
and operating in foreign countries, including devaluations and fluctuations in
currency exchange rates, imposition of limitations on conversion of foreign
currencies into U.S. dollars or remittance of dividends and other payments by
foreign subsidiaries, impositions or increase of withholding and other taxes on
remittances and other payments by foreign subsidiaries, hyperinflation in
foreign countries where Packaging does business, and imposition or increase of
investment and other restrictions by foreign governments.
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PROPERTIES
HEADQUARTERS LOCATIONS
Packaging leases its executive offices at 1900 West Field Court, Lake
Forest, Illinois, 60045, and its telephone number at that address is (847)
482-2000.
MANUFACTURING AND ENGINEERING FACILITIES
In North America, Packaging operates 65 facilities in 18 states, Canada and
Mexico. Plastic and aluminum disposable foodservice and consumer products,
stretch films and building products are manufactured at 25 plants. The
protective packaging operations convert paperboard into honeycomb products at 12
plants. An additional 13 plants apply extrusion, foaming and converting
technologies to produce clear, foamed, flexible or rigid plastic protective
packaging from polystyrene, polyolefins, such as polyethylene and polypropylene,
and kraft papers. Molded fiber packaging is produced at seven locations, and an
eighth location manufactures tooling for the molded fiber plants. Finally,
ovenable paperboard products are manufactured at two facilities. A research and
development center for food packaging and process development is located in a
new facility in Canandaigua, New York. Design centers for protective and
flexible packaging and process development are located in Buffalo Grove,
Illinois, Grand Rapids and Troy, Michigan and Santa Fe Springs, California. In
addition, Packaging participates in two North American joint ventures, Sentinel
Polyolefin LLC and Tenneco Packaging de Mexico.
Packaging owns 24 international manufacturing operations. Eleven protective
packaging plants in Belgium, England, France, Germany, Italy, The Netherlands,
Poland, Spain and Hungary make plastic air encapsulated bubble and foam sheet
products, including mailers. Five flexible products plants in Egypt and Germany
make high quality flexible films, bags, labels and pouches, printed and
converted paper bags and disposable medical packaging. Omni-Pac is a European
subsidiary operation that manufactures molded fiber and cushion packaging with
manufacturing facilities in Elsfleth, Germany and Great Yarmouth, England.
Packaging's Alupak operation in Belp, Switzerland produces smoothwall aluminum
portion packs and specialty food packaging applications. Single-use thermoformed
plastic food containers and films are manufactured at four facilities in
England, Scotland and Wales. Packaging also has a wood products operation in
Romania. In addition, Packaging operates or participates in several
international joint ventures, including a folding carton plant in Dongguan,
China, a recycling venture in Budapest, Hungary and a corrugated converting
facility in Shaoxing, China.
Packaging believes that substantially all of its plants and equipment are,
in general, well maintained and in good operating condition. They are considered
adequate for present needs, and as supplemented by planned construction, are
expected to remain adequate for the near future.
Packaging is of the opinion that Packaging, or its subsidiaries, has
generally satisfactory title to the properties owned and used in its businesses,
subject to liens for current taxes and easements, restrictions and other liens
which do not materially detract from the value of the properties or Packaging's
interest in the properties or the use of those properties in its businesses.
RAW MATERIALS
Plastic resins, such as polystyrene, polyethylene, polypropylene and
polyvinyl chloride, aluminum rollstock, linerboard and recycled fiber constitute
the principal raw materials used in the manufacture of most of Packaging's
products. Generally, these raw materials are readily available from a wide
variety of suppliers. The costs of these materials may be volatile, and are a
function of, among other things, the manufacturing capacity for those materials
and the costs of their components, which may also vary. Costs for Packaging's
plastic resin and recycled fiber tend to fluctuate with economic factors which
generally affect Packaging and its competitors. The availability of raw
materials was adequate in 1998 and the first three months of 1999 and is
expected to remain adequate throughout the remainder of 1999.
ENVIRONMENTAL REGULATION
The packaging industry, in general, and Packaging is subject to existing
and potential federal, state, local and foreign legislation designed to reduce
air emissions. In addition, various consumer and special
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interest groups have lobbied from time to time for the implementation of these
and other similar measures. Although Packaging believes that the legislation and
regulations promulgated to date and the initiatives to date have not had a
material adverse effect on Packaging, Packaging cannot assure you that any such
future legislative or regulatory efforts or future initiatives would not have a
material adverse effect on Packaging.
OTHER
As of July 1, 1999, Packaging employed approximately 15,000 people, 14% of
whom were covered by collective bargaining agreements. Four of these agreements,
covering a total of 247 employees, are scheduled for renegotiation before
December 31, 1999. In Europe, approximately 2,240 employees are governed by
works councils. Packaging regards its employee relations as generally
satisfactory. Packaging owns a number of domestic and foreign patents and
trademarks and other intellectual property relating to its products which are
important to the manufacture, marketing and distribution of its products. In
addition, Packaging's administrative services operations hold numerous software
licenses and own computer equipment.
Packaging's administrative services operations design, implement and
administer administrative service programs and data processing, providing the
following services: (a) financial accounting services; (b) employee benefits
administration for all major salaried and hourly benefit plans; (c) human
resources and payroll services; (d) mainframes and distributed systems
operations; (e) telecommunications and network operations and management; (f)
help desk support; and (g) disaster recovery support. After the spin-off,
Packaging will continue to provide some of these services to Automotive. See
"The Spin-off -- Relationship Between Automotive and Packaging After the
Spin-off." Tenneco and Packaging are currently analyzing their alternatives with
respect to those operations. See "-- Management's Discussion and Analysis of
Financial Condition and Results of Operations."
LEGAL PROCEEDINGS
See "-- Management's Discussion and Analysis of Financial Condition and
Results of Operations" for information about Packaging's potential environmental
liability.
In May 1999, Tenneco Inc., Tenneco Packaging Inc. and a number of
containerboard manufacturers were named as defendants in a civil class action
antitrust lawsuit pending in the United States District Court for the Eastern
District of Pennsylvania. Tenneco Packaging Inc. also was named as a defendant
in a related class action antitrust lawsuit. In re Linerboard Antitrust
Litigation; Winoff v. Stone Container Corp., et al; General Refractories v.
Stone Container Corp., et al. (MDL No. 1261; E. D. Penn.). The lawsuits allege
that the defendants conspired to raise linerboard prices for corrugated
containers and corrugated sheets, respectively, from October 1, 1993 through
November 30, 1995, in violation of Section 1 of the Sherman Act. The lawsuits
seek treble damages in an unspecified amount, plus attorney fees. Tenneco and
Packaging believe that the allegations have no merit, are vigorously defending
the claims, and believe the outcome of this litigation will not have a material
adverse effect on Tenneco's or Packaging's financial position or results of
operations. Under and in accordance with the distribution agreement, as between
Tenneco and Packaging, Packaging is responsible for defending the claims and for
any liability resulting from these actions.
Packaging and its subsidiaries are parties to various other legal
proceedings arising from their operations. Packaging believes that the outcome
of these other proceedings, individually and in the aggregate, will not have a
material adverse effect on its financial position or results of operations.
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CONTAINERBOARD PACKAGING INTEREST
On April 12, 1999, Packaging contributed all of its containerboard
packaging business to a new joint venture, in which it now owns a 43% common
equity interest. For a description of the contribution and Packaging's plans to
sell its remaining joint venture interest in a registered public offering, see
"--Unaudited Pro Forma Combined Financial Statements of Packaging" and "--
Management's Discussion and Analysis of Financial Condition and Results of
Operations." For a description of the joint venture, see "Summary -- The
Companies -- Packaging."
Packaging Corporation of America manufactures corrugated containers,
containerboard, and lumber and related wood products. It has four mills and 67
corrugated products facilities. It also participates in the wood products
business and has access to approximately 950,000 acres of timberland in the
United States through both owned and leased properties. Revenues from the
containerboard business in 1998 were $1.57 billion.
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MANAGEMENT
BOARD OF DIRECTORS
Upon completion of the spin-off, the Packaging Board of Directors will
consist of six members. Each director will serve an annual term that will expire
at the annual meeting of Packaging stockholders in each year and until his or
her successor has been elected and qualified. Information concerning the
individuals who will serve as directors of Packaging as of the date of the
spin-off is provided below.
DANA G. MEAD, CHAIRMAN OF THE BOARD -- Mr. Mead is currently the Chairman
and Chief Executive Officer of Tenneco and has served as an executive officer of
Tenneco since April 1992, when he joined Tenneco as Chief Operating Officer.
Prior to joining Tenneco, 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 Packaging Corporation of America, Textron Inc., Zurich Allied
AG, Pfizer Inc. and Newport News Shipbuilding Inc. Mr. Mead is 63 years old and
has been a director of Tenneco since 1992. Upon completion of the spin-off, he
will resign as Chief Executive Officer of Tenneco, but will continue, on a
non-executive basis, as the Chairman of the Board of Automotive and Packaging
through March 2000.
MARK ANDREWS -- Mr. Andrews has been Chairman of Andrews Associates, Inc.,
a government consulting firm, since February 1987. From 1963 to 1980, he served
in the U.S. House of Representatives, and from 1980 to 1986 he served in the
U.S. Senate. He is also a director of Union Storage Co. Mr. Andrews is 73 and
has been a director of Tenneco since 1987. Mr. Andrews will continue as a
director of Automotive upon the spin-off.
LARRY D. BRADY -- Mr. Brady was President of FMC Corporation, a producer of
chemicals and machinery for industry, agriculture, and government, from 1993 to
June 1999. In August 1999, he became the President and Chief Operating Officer
of UNOVA, Inc., an industrial technologies company. Before 1993, Mr. Brady
served in various executive capacities with FMC Corporation for more than five
years. Mr. Brady is 56 years old and has been a director of Tenneco since
January 1998. Mr. Brady will not be continuing as a director of Automotive after
the spin-off.
ROGER B. PORTER -- Mr. Porter is Director of the Center for Business and
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 53 years old and has been a director of the Tenneco since January
1998. He will continue as a director of Automotive upon the spin-off.
PAUL T. STECKO -- Mr. Stecko became the Chief Executive Officer of
Packaging Corporation of America, Packaging's containerboard joint venture, in
connection with the April 1999 formation of that venture. From November 1998 to
April 1999, Mr. Stecko served as President and Chief Operating Officer of
Tenneco. From January 1997 to November 1998, Mr. Stecko served as Chief
Operating Officer of Tenneco. From December 1993 through January 1997, Mr.
Stecko served as Chief Executive Officer of Packaging. Prior to joining Tenneco,
Mr. Stecko spent 16 years with International Paper Company. He is also a
director of State Farm Mutual Insurance Company and the Chairman of the Board of
Packaging Corporation of America. Mr. Stecko is 54 years old and has been a
director of Tenneco since November 1998. He will continue as a director of
Automotive upon the spin-off.
RICHARD L. WAMBOLD -- Mr. Wambold will be the Chief Executive Officer of
Packaging upon the spin-off and has been serving as its President since June
1999. From June 1997 to May 1999, he was Executive Vice President and General
Manager of Packaging's specialty packaging and consumer products
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units. Prior to joining Packaging in 1994, Mr. Wambold was Executive Vice
President of Case Corporation's construction equipment and worldwide parts
business.
EXECUTIVE OFFICERS
The following table provides information concerning the persons who will
serve as executive officers of Packaging upon completion of the spin-off. Each
of the named persons has been, or before the spin-off will be, elected to the
office indicated opposite his name. The executive officers will serve at the
discretion of Packaging's Board. Officers are elected at the annual meeting of
directors held immediately following the annual meeting of shareowners.
<TABLE>
<CAPTION>
AGE AT
NAME JUNE 30, 1999 POSITION
---- ------------- --------
<S> <C> <C>
Richard L. Wambold............. 47 Chief Executive Officer
Senior Vice President -- Protective and Flexible
Paul J. Griswold............... 47 Packaging
James V. Faulkner, Jr. ........ 55 Vice President and General Counsel
James D. Morris................ 45 Vice President and GM Operations
Vice President -- Supermarket and Foodservice
Peter J. Lazaredes............. 48 Packaging
Andrew A. Campbell............. 53 Vice President and Chief Financial Officer
</TABLE>
RICHARD L. WAMBOLD -- See "-- Board of Directors," above, for information
concerning Mr. Wambold.
PAUL J. GRISWOLD -- Mr. Griswold was named Senior Vice
President -- Protective and Flexible Packaging in May 1997. Since joining
Packaging in 1994, he has held various senior management positions in
Packaging's protective and flexible packaging units. With over 20 years of
packaging-related experience, Mr. Griswold began his career at International
Paper Company, holding positions in sales, marketing and operations, and was
later Vice President, Packaging for Pepsi Cola International.
JAMES V. FAULKNER, JR. -- Mr. Faulkner joined Packaging in 1995 as its Vice
President and General Counsel. Prior to that he was Vice President -- Law for
Tenneco. Mr. Faulkner began his legal career with Lord, Day & Lord and was later
Associate General Counsel of Union Pacific Corporation and Senior Vice President
of USPCI, a wholly owned subsidiary of Union Pacific. He has 25 years experience
in staff and operational legal positions.
JAMES D. MORRIS -- Mr. Morris will be Vice President and GM Operations upon
the spin-off. Since 1995 he has held various senior management positions in
Packaging's specialty packaging unit, including oversight of manufacturing,
engineering and product development. He also has responsibility for the sales,
marketing and business planning of the processor packer operations of the
specialty packaging unit. Mr. Morris joined Packaging in connection with its
1995 acquisition of Mobil Plastics. He spent 20 years with Mobil in assignments
which included manager of polyethylene manufacturing, regional manufacturing
manager and plant manager.
PETER J. LAZAREDES -- Mr. Lazaredes will be Vice President -- Supermarket
and Foodservice Packaging upon the spin-off. Since 1996 he has held various
senior management positions in Packaging's speciality packaging unit, including
responsibility for the marketing and sales of rigid and flexible containers to
the foodservice and institutional markets. Mr. Lazaredes joined Packaging in
1996 from Amoco Foam Products where he was General Manager of the tableware
business unit from 1992. He spent 15 years with Amoco in sales and marketing
positions for packaging, fabrics and fibers divisions.
ANDREW A. CAMPBELL -- Mr. Campbell will be Vice President and Chief
Financial Officer upon the spin-off. Since May 1999 he has served as Acting
Chief Financial Officer and Financial Consultant of Foamex International Inc.
Prior to that, he served as Executive Vice President, Finance and Administration
and Chief Financial Officer of Dominick's Supermarkets Inc. from July 1998 to
November 1998. Prior to that, Mr. Campbell had been Senior Vice President,
Finance and Chief Financial Officer for
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Safety Kleen Corporation from April 1997 to June 1998. Prior to that, Mr.
Campbell was President of Duplex Products, Inc. from 1995 to May 1996 and Vice
President, Finance and Chief Financial Officer of that company from November
1994 to 1995.
STOCK OWNERSHIP OF MANAGEMENT
The following table shows, as of June 30, 1999, the number of shares of
Tenneco common stock beneficially owned by: (1) each person who will be a
director of Packaging upon the spin-off; (2) each person who is named in the
Summary Compensation Table for Packaging, below; and (3) all persons who will be
directors or executive officers of Packaging upon the spin-off, as a group. The
table also shows: (a) Tenneco common stock equivalents held by these directors
and executive officers under benefit plans; and (b) the total number of shares
of Tenneco common stock and common stock equivalents held. Upon the spin-off,
holders of Tenneco common stock will receive one share of Packaging common stock
for each share of Tenneco common stock held.
<TABLE>
<CAPTION>
SHARES OF TENNECO TOTAL TENNECO
TENNECO COMMON STOCK COMMON STOCK SHARES AND
DIRECTORS OWNED(1)(2)(3) EQUIVALENTS(4) EQUIVALENTS
- --------- -------------------- -------------- -------------
<S> <C> <C> <C>
Mark Andrews......................... 14,155 1,600 15,755
Larry D. Brady....................... 2,000 3,381 5,381
Dana G. Mead......................... 765,821 44,737 810,558
Roger B. Porter...................... 2,000 3,420 5,420
Paul T. Stecko....................... 314,362 -- 314,362
Richard L. Wambold................... 90,872 -- 90,872
EXECUTIVE OFFICERS
Paul J. Griswold..................... 34,574 -- 34,574
James V. Faulkner, Jr................ 22,086 -- 22,086
James D. Morris...................... 27,827 -- 27,827
Peter J. Lazaredes................... 17,147 -- 17,147
All executive officers and directors
as a group......................... 1,290,844(5) 53,138 1,343,982(5)
</TABLE>
- ---------------
(1) Each director and executive officer has sole voting and investment power
over the shares beneficially owned, or has the right to acquire shares as
described in note (2) below, as set forth in this column, except for: (a)
restricted shares; and (b) shares that executive officers and directors have
the right to acquire pursuant to stock options. Generally, Tenneco
restricted shares will be vested prior to the spin-off. In connection with
the spin-off the Tenneco stock options held by the executive officers listed
above will be replaced with Packaging stock options which have equivalent
economic terms. Tenneco stock options held by directors will be replaced in
the same manner, except that one-half of the options held by Messrs. Mead,
Andrews and Porter will continue as Tenneco options, adjusted to maintain
equivalent economic terms upon the spin-off, and options held by Mr. Stecko
will terminate unless exercised prior to the spin-off.
(2) Includes restricted shares. At June 30, 1999, Messrs. Andrews, Mead,
Wambold, Griswold, Morris and Lazaredes held 6,547; 66,025; 15,000; 10,000;
5,000; and 5,000 restricted shares, respectively. Also includes shares that
are subject to options which are exercisable within 60 days of June 30, 1999
for Messrs. Andrews, Brady, Mead, Porter, Stecko, Wambold, Griswold,
Faulkner, Morris and Lazaredes to purchase 2,000; 2,000; 616,176; 2,000;
288,814; 49,077; 19,357; 19,312; 14,993; and 8,603 shares, respectively.
(3) Less than one percent of the outstanding shares of Tenneco common stock.
(4) Common stock equivalents are distributed in shares of Tenneco common stock
or, in some circumstances, cash after the individual ceases to serve as a
director or officer. Common stock equivalents held by directors who are not
employees of Tenneco will be vested and distributed prior to the spin-off.
Mr. Mead's stock equivalent units are credited to his account under the
Tenneco Inc. Deferred Compensation Plan and are, therefore, already vested.
(5) Includes 1,022,332 shares that are subject to options that are exercisable
within 60 days of June 30, 1999, by all executive officers and directors as
a group, and includes 107,572 restricted shares for all executive officers
and directors as a group.
COMMITTEES OF THE BOARD OF DIRECTORS
The Packaging Board will establish three standing committees as permitted
by its by-laws, which will have the following described responsibilities and
authority:
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The Audit Committee, comprised solely of outside directors, will have the
responsibility, among other things, to: (1) recommend the selection of
Packaging's independent public accountants; (2) review and approve the scope of
the independent public accountants' audit activity and extent of non-audit
services; (3) review with management and such independent public accountants the
adequacy of Packaging's basic accounting system and the effectiveness of
Packaging's internal audit plan and activities; (4) review with management and
the independent public accountants Packaging's certified financial statements
and exercise general oversight of Packaging's financial reporting process; and
(5) review with Packaging litigation and other legal matters that may affect
Packaging's financial condition and monitor compliance with Packaging's business
ethics and other policies.
The Compensation/Nominating/Governance Committee, comprised solely of
outside directors, will have the responsibility, among other things, to: (1)
establish the salary rate of officers and employees of Packaging and its
subsidiaries; (2) examine periodically the compensation structure of Packaging;
and (3) supervise the welfare and pension plans and compensation plans of
Packaging. It will also have significant corporate governance responsibilities,
among other things, to: (a) review and determine the desirable balance of
experience, qualifications and expertise among members of the Packaging Board;
(b) review possible candidates for membership on the Packaging Board and
recommend a slate of nominees for election as directors at Packaging's annual
stockholders' meeting; (c) review the function and composition of the other
committees of the Packaging Board and recommend membership on these committees;
and (d) review the qualifications and recommend candidates for election as
officers of Packaging.
The Three-year Independent Director Evaluation Committee, comprised solely
of outside directors, will have the responsibility, among other things, to
review Packaging's qualified offer rights plan, which will be adopted prior to
the spin-off, at least every three years and, if it deems it appropriate,
recommend that the full Packaging Board modify or terminate that plan.
EXECUTIVE COMPENSATION
The following table shows the compensation paid by Tenneco and/or its
direct and indirect subsidiaries, including Packaging, for 1998 to: (1) the
person who will become the Chief Executive Officer of Packaging upon the
spin-off; and (2) each of the persons who will be included among the four most
highly compensated executive officers of Packaging upon the spin-off, based on
1998 compensation, other than the Chief Executive Officer. The table shows the
amounts paid to these persons for all services
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<PAGE> 94
provided to Tenneco and its subsidiaries, including Packaging. Mr. Campbell had
no compensation from Tenneco and its subsidiaries prior to 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -----------------------
-------------------------------------- RESTRICTED
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION SALARY(1) BONUS COMPENSATION(2) AWARDS(3) OPTIONS(4) COMPENSATION(5)
--------------------------- --------- -------- --------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Wambold......................... $355,472 $220,000 $152,685 $187,800 45,000 $11,643
Chief Executive Officer
Paul J. Griswold........................... $275,500 $125,000 $ 31,165 $187,800 20,000 $ 9,812
Senior Vice President --
Protective and Flexible Packaging
James V. Faulkner, Jr. .................... $266,568 $ 82,000 $ 25,760 -- 10,000 $17,674
Vice President and
General Counsel
James D. Morris............................ $206,004 $115,000 $ 29,405 $187,800 20,000 $14,139
Vice President and
GM Operations
Peter J. Lazaredes......................... $182,773 $ 73,000 $ 30,730 $177,800 20,000 $12,704
Vice President --
Supermarket and
Foodservice Packaging
</TABLE>
- ---------------
(1) Includes base salary plus amounts paid in lieu of matching contributions to
the Tenneco Thrift Plan.
(2) Includes amounts attributable to: (a) the value of personal benefits
provided by Tenneco to executive officers, such as the personal use of
Tenneco-owned property and relocation expenses; (b) reimbursement for taxes;
and (c) amounts paid as dividend equivalents on performance share equivalent
units ("Dividend Equivalents"). The amount of each personal benefit that
exceeds 25% of the estimated value of the total personal benefits provided
by Tenneco, reimbursement for taxes, and amounts paid as Dividend
Equivalents to the individuals named in the table for 1998 was as follows:
$58,908 in relocation expenses, $47,171 for reimbursement of taxes, $15,600
in Dividend Equivalents and $30,000 perquisite allowance for Mr. Wambold;
$342 for reimbursement of taxes, $10,320 in Dividend Equivalents and $20,000
perquisite allowance for Mr. Griswold; $5,760 in Dividend Equivalents and
$20,000 perquisite allowance for Mr. Faulkner; $6,600 in Dividend
Equivalents and $20,000 perquisite allowance for Mr. Morris; and $17,530 in
relocation expenses, $1,200 in Dividend Equivalents and $12,000 perquisite
allowance for Mr. Lazaredes.
(3) Includes the dollar value of grants of restricted shares based on the price
of Tenneco common stock on the date of grant. At December 31, 1998, Messrs.
Wambold, Griswold, Faulkner, Morris and Lazaredes held 28,000; 18,600;
4,800; 10,500; and 6,000 restricted shares and/or performance share
equivalent units, respectively. 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 $953,764 for Mr. Wambold, $633,572 for Mr.
Griswold, $163,502 for Mr. Faulkner, $357,662 for Mr. Morris and $204,378
for Mr. Lazaredes. Generally, restricted shares and performance share
equivalent units will be vested prior to the spin-off. Dividends/Dividend
Equivalents will be paid on the restricted shares/performance share
equivalent units held by each individual.
(4) In connection with the spin-off, the Tenneco stock options held by the
persons listed above will be replaced with options to purchase Packaging
common stock, the number and exercise price of which will be adjusted so
that the new Packaging options have equivalent economic terms as the old
Tenneco options.
(5) Includes amounts attributable during 1998 to benefit plans of Tenneco as
follows:
(a) The amounts contributed pursuant to Tenneco's Thrift Plan for the
accounts of Messrs. Wambold, Griswold, Faulkner, Morris and Lazaredes
were $10,000; $6,650; $8,000; $10,000; and $10,000, respectively.
(b) The dollar values paid by Tenneco for insurance premiums under the
Tenneco group life insurance plan, including dependent life, for Messrs.
Wambold, Griswold, Faulkner, Morris and Lazaredes were $1,643; $3,162;
$9,674; $4,139 and $2,704, respectively.
Packaging anticipates that, at the time of the spin-off, the annual salary
of Messrs. Wambold, Griswold and Morris will be increased to $600,000, $325,000
and $325,000, respectively, and that bonus targets after the spin-off will be
adjusted and may result in higher bonuses for some or all of the persons named
in the Summary Compensation Table.
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<PAGE> 95
Packaging also anticipates making a grant of stock options immediately
following the spin-off. This grant is intended to represent a three-year award.
Messrs. Wambold, Griswold, Faulkner, Morris and Lazaredes are expected to
receive options to purchase 750,000, 300,000, 200,000, 200,000 and 200,000
shares of Packaging common stock, respectively.
Packaging anticipates that in 2000, Messrs. Wambold, Griswold, Faulkner,
Morris and Lazaredes will be granted 30,000, 15,000, 10,000, 10,000, and 10,000
performance share equivalent units, respectively.
OPTIONS GRANTED IN 1998
The following table shows the number of options to purchase Tenneco common
stock that were granted by Tenneco during 1998 to the persons named in the
Summary Compensation Table above.
<TABLE>
<CAPTION>
SHARES OF PERCENT OF
COMMON TOTAL
STOCK OPTIONS GRANTED
UNDERLYING TO TENNECO
OPTIONS EMPLOYEES EXERCISE EXPIRATION GRANT DATE
NAME GRANTED(#)(1) IN 1998 (%) PRICE($)(2) DATE PRESENT VALUE(3)
- ---- ------------- --------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Mr. Wambold..................... 45,000 2.6% $36.63 2008 $463,050
Mr. Griswold.................... 20,000 1.1% $36.63 2008 $205,800
Mr. Faulkner.................... 10,000 .5% $36.63 2008 $102,900
Mr. Morris...................... 20,000 1.1% $36.63 2008 $205,800
Mr. Lazaredes................... 10,000 .5% $36.63 2008 $102,900
10,000 .5% $37.31 2018 $104,500
</TABLE>
- ---------------
(1) In connection with the spin-off, the Tenneco stock options held by the
persons listed above will be replaced with options to purchase Packaging
common stock, the number and exercise price of which will be adjusted so
that the new Packaging options have equivalent economic terms to the old
Tenneco options.
(2) All options were granted with exercise prices equal to 100% of the fair
market value of a share of Tenneco common stock on the date of grant.
(3) The Black-Scholes valuation was performed using the following assumptions:
25.6% volatility, 5.7% risk free interest rate, 3.2% expected dividend rate
and 10 year option life. Mr. Lazaredes' option grant that expires in 2018 is
valued assuming that such options are exercised by the 10th year.
OPTIONS AT 1998 YEAR-END
The following table shows the number of options to purchase Tenneco common
stock held as of December 31, 1998 by the persons named in the Summary
Compensation Table above. No Tenneco options were exercised in 1998, and there
were no in-the-money options as of December 31, 1998.
<TABLE>
<CAPTION>
TOTAL NUMBER OF
UNEXERCISED OPTIONS HELD
AT DECEMBER 31, 1998(1)
-------------------------------
NAME EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------
<S> <C> <C>
Mr. Wambold................................................. 29,820 107,023
Mr. Griswold................................................ 10,949 58,109
Mr. Faulkner................................................ 14,043 31,501
Mr. Morris.................................................. 6,662 48,330
Mr. Lazaredes............................................... 5,269 19,634
</TABLE>
- ---------------
(1) In connection with the spin-off, the Tenneco stock options held by the
persons listed above will be replaced with options to purchase Packaging
common stock, the number and exercise price of which will be adjusted so
that the new Packaging options have equivalent economic terms to the old
Tenneco options.
LONG-TERM INCENTIVE PLAN
PERFORMANCE SHARE EQUIVALENT UNIT AWARDS IN 1998
The following table shows information concerning performance-based awards
made to the persons named in the Summary Compensation Table, above, during 1998
by Tenneco.
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<PAGE> 96
<TABLE>
<CAPTION>
PERFORMANCE
NUMBER OF OR OTHER ESTIMATED FUTURE PAYOUTS
SHARES, UNITS PERIOD UNTIL UNDER 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>
Mr. Wambold.................. 6,500 4 years 25% 100% 150%
Mr. Griswold................. 5,000 4 years 25% 100% 150%
Mr. Faulkner................. 2,400 4 years 25% 100% 150%
Mr. Morris................... 3,000 4 years 25% 100% 150%
Mr. Lazaredes................ 1,000 4 years 25% 100% 150%
</TABLE>
- ---------------
(1) Estimated future payouts are based on earnings per share ("EPS") from
continuing operations; however, generally, performance share equivalent
units will be deemed to be earned at the target level and vested prior to
the spin-off.
(2) Each performance share equivalent unit represents one share of Tenneco's
common stock that may be earned and the number of performance share
equivalent units listed in this column represents the maximum number of
performance share equivalent units that may be earned under this award.
(3) Performance share equivalent units are earned at the rate of 25% per year
based on achievement of annual EPS goals; however, generally performance
share equivalent units will be deemed to be earned at the target level and
vested prior to the spin-off.
(4) Represents maximum performance share equivalent units earned where the goals
were consistently within the indicated performance range on an individual
year and accumulated four-year basis; however, generally performance share
equivalent units will be deemed to be earned at the target level and vested
prior to the spin-off.
PENSION PLAN TABLE
The following table shows the aggregate estimated annual benefits payable
upon normal retirement pursuant to the Tenneco Retirement Plan and the Tenneco
Inc. Supplemental Executive Retirement Plan to persons in specified remuneration
and years of credited participation classifications. The Tenneco Retirement Plan
will be assumed by Packaging in connection with the spin-off, and Packaging will
adopt a supplemental executive retirement plan that is substantially identical
to Tenneco's current plan.
<TABLE>
<CAPTION>
YEARS OF CREDITED PARTICIPATION
-------------------------------------------------------------------------
ANNUAL REMUNERATION 5 10 15 20 25 30 35
- ------------------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$250,000............. $19,642 $ 39,285 $ 58,928 $ 78,571 $ 98,214 $117,857 $137,500
300,000............. 23,571 47,142 70,714 94,285 117,857 141,428 165,000
350,000............. 27,500 55,000 82,500 110,000 137,500 165,000 192,500
400,000............. 31,428 62,857 94,285 125,714 157,142 188,571 220,000
450,000............. 35,357 70,714 106,071 141,428 176,785 212,142 247,500
500,000............. 39,285 78,571 117,857 157,142 196,428 235,714 275,000
550,000............. 43,214 86,428 129,642 172,857 216,071 259,285 302,500
600,000............. 47,142 94,285 141,428 188,571 235,714 282,857 330,000
650,000............. 51,071 102,142 153,214 204,285 255,357 306,428 357,500
700,000............. 55,000 110,000 165,000 220,000 275,000 330,000 385,000
</TABLE>
- ---------------
(1) The benefits shown above are computed as a straight life annuity and are
based on years of credited participation and the employee's average
compensation, which is salary and bonus. These benefits are not subject to
any deduction for Social Security or other offset amounts. The years of
credited participation for Messrs. Wambold, Griswold, Faulkner, Morris and
Lazaredes are 21, 4, 5, 24 and 18, respectively. See the Summary
Compensation Table above for salary and bonus information for these
individuals.
(2) If Mr. Wambold completes five years of service in the period commencing
January 1, 1997, he will be entitled to benefits commencing at age 55
determined by multiplying his average salary plus bonus, determined over a
three-year period, by 25% plus 2.5% for each year of service in the period
commencing January 1, 1997, up to a maximum of 50%. Mr. Faulkner is entitled
to special early retirement benefits and, if he remains with Packaging
through December 31, 2002, his benefit will be determined by adding three
years of participation and age to his actual participation and age.
COMPENSATION OF DIRECTORS
Fee Structure. Following the spin-off, each director who is not also an
employee of Packaging or its subsidiaries, an "outside director," will be paid a
yearly retainer fee of $35,000 for service on the
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<PAGE> 97
Packaging Board of Directors. In general, 100% of that fee will be paid in the
form of stock-settled common stock equivalents, as described below. A director
may elect, however, to have up to 40%, or $14,000, of the fee paid in cash.
These outside directors will 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 will receive $1,000 for
each meeting of the Board of Directors attended, and each one who serves as a
Chairman of the Audit Committee or the Compensation/ Nominating/Governance
Committee will be paid a fee of $7,000 per chairmanship. Outside directors who
serve as members of these committees will be paid $4,000 per committee
membership. Members of the Three-year Independent Director Evaluation Committee
will receive $1,000 plus expenses for each meeting of that committee attended.
Common Stock Equivalents/Options. As described above, all or a portion of
an outside director's retainer fee will be paid in common stock equivalent
units. These directors' stock equivalents will be payable in shares of
Packaging's common stock after an outside director ceases to serve as a director
of Packaging. Final distribution of these 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 will also receive an annual grant of an option to purchase up
to 3,000 shares of Packaging common stock as additional incentive compensation.
Directors options: (a) will be granted with per share exercise prices equal to
100% of the fair market value of a share of Packaging common stock on the day
the option is granted; (b) will have terms of ten years; and (c) will fully vest
six months from the grant date. Once vested, the directors options will be
exercisable at any time during the option term.
Packaging expects that restricted shares of Tenneco common stock and
directors' stock equivalents held by outside directors will be vested prior to
the completion of the spin-off, and these directors will be paid an amount in
cash to defray taxes incurred on that vesting.
Deferred Compensation Plan. Packaging will have a voluntary deferred
compensation plan for outside directors. Under this plan, an outside director
may elect, prior to the commencement of the next calendar year, to have some or
all of the cash portion, that is, up to 40% or $14,000, of his or her retainer
fee and some or all of his or her meeting fees credited to a deferred
compensation account. The plan will provide these directors with various
investment options. The investment options will include stock equivalent units
of Packaging common stock, which may be paid out in either cash or shares of
Packaging's common stock.
TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
Packaging will maintain a key executive change-in-control severance benefit
plan similar to the existing Tenneco plan and incorporating some provisions of
the Tenneco benefits protection trust. The purpose of the plan is to enable
Packaging to continue to attract, retain and motivate highly qualified employees
by eliminating, to the maximum practicable extent, any concern on the part of
those employees that their job security or benefit entitlements will be
jeopardized by a "change-in-control" of Packaging, as that term will be defined
in the plan. The plan will be designed to achieve this purpose through the
provision of severance benefits for key employees and officers whose positions
are terminated following a change-in-control, as provided in the plan. Under the
plan, Packaging expects that Messrs. Wambold, Griswold, Faulkner, Morris and
Lazaredes would have become entitled to receive payments from Packaging in the
amount of $2,040,000, $1,305,000, $1,146,999, $1,115,001 and $999,000,
respectively, had their positions been terminated on August 31, 1999 following a
change-in-control, based on their current 1999 salaries of $450,000, $300,000,
$285,000, $260,000 and $260,000, respectively. In addition, restricted shares
held in the name of those individuals under the restricted stock plans Packaging
will adopt would have automatically reverted to Packaging, and Packaging would
have been obliged to pay those individuals the fair market value of the shares.
Their performance share equivalent units would also have been fully vested and
paid. The spin-off does not constitute a "change-in-control" of Tenneco or
Packaging for purposes of the Tenneco or Packaging change-in-control severance
benefit plans. The Tenneco benefits protection trust will be terminated prior to
the spin-off.
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<PAGE> 98
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Upon the spin-off, Messrs. Wambold and Griswold will be granted Packaging
restricted stock with a value on the grant date equal to the pre-spin-off value
of 25,000 and 15,000 shares of Tenneco common stock, respectively. One-third of
such restricted stock will vest each year following the spin-off, assuming that
the grantee remains employed through that date.
In connection with the spin-off, Mr. Mead will resign as Chief Executive
Officer of Tenneco, and he is expected to enter into a revised agreement. Under
that agreement, it is expected that: (1) Mr. Mead will be paid an amount
equivalent to three times the total of his annual salary plus bonus; (2) if
certain performance goals are met, he will be entitled to an adjusted target
bonus for 1999 prorated through the date of his separation; (3) his stock
options will be made exercisable, one-half will be replaced by Packaging options
and one-half will continue as Automotive options (the number and exercise price
of such options being determined under the generally applicable rules to be
applied in connection with the spin-off and which maintain the economic
equivalent of the currently outstanding options); (4) for purposes of Tenneco's
Supplemental Executive Retirement Plan, he will be treated as though he had
remained employed until age 65; and (5) he will be granted options to purchase
up to 50,000 shares of Packaging common stock and options to purchase up to
50,000 shares of Automotive common stock at the time of the spin-off. Mr. Mead's
agreement is with an entity which will be a subsidiary of Packaging after the
spin-off and the expense associated therewith is included in the spin-off
expenses and is part of the debt realignment.
During 1999, Mr. Mead was indebted to an affiliate of Tenneco in connection
with a relocation loan of approximately $400,000. In September 1999, that
obligation was canceled.
BENEFIT PLANS FOLLOWING THE SPIN-OFF
Packaging will succeed to sponsorship of the Tenneco Retirement Plan and
the Tenneco Thrift Plan. These plans are qualified under Section 401(a) of the
Code. The Tenneco Retirement Plan is a defined benefit pension plan. The Tenneco
Thrift Plan is comprised of 401(k) plans with employer matching contributions as
specified in the plans. Packaging will also continue its sponsorship of a
defined benefit pension plan covering hourly employees.
Packaging will also succeed to sponsorship of two non-qualified deferred
compensation plans as to its employees or directors: (1) the 1997 Tenneco Inc.
Board of Directors Deferred Compensation Plan; and (2) the Tenneco Inc. Deferred
Compensation Plan. Packaging will succeed to liabilities for benefits under the
Tenneco Inc. Supplemental Executive Retirement Plan as to all participants other
than those who are employees or former employees of Automotive. The 1997 Tenneco
Inc. Board of Directors Deferred Compensation Plan and the Tenneco Inc. Deferred
Compensation Plan will be merged as of the spin-off. All of these plans are
unfunded; however, Packaging will establish one or more rabbi trusts, from which
assets may be available to pay benefits in specified circumstances.
Packaging will adopt an executive incentive compensation plan similar to
Tenneco's plan to provide annual cash bonuses to eligible employees.
Packaging may adopt an employee stock purchase plan similar to the one
maintained by Tenneco, under which approximately 4,000,000 shares of Packaging
common stock would be available for purchase. Tenneco will approve the adoption
of such a plan as Packaging's sole stockholder prior to the spin-off.
Packaging will adopt a plan calling for the grant of stock options,
restricted stock, performance share equivalent units and other stock rights
patterned after the 1996 Tenneco Inc. Stock Ownership Plan. Approximately
24,000,000 shares of Packaging common stock will be available for grant under
this plan. This plan will be approved by Tenneco as Packaging's sole stockholder
prior to the spin-off.
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<PAGE> 99
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following review of Packaging's financial condition and results of
operations should be read in conjunction with the Combined Financial Statements
of The Businesses of Tenneco Packaging, and the related notes, presented on
pages F-1 through F-31. Packaging includes the assets, liabilities and
operations of Tenneco's specialty packaging and paperboard packaging businesses
as well as Tenneco's corporate and administrative service operations.
STRATEGIC ALTERNATIVES ANALYSIS
In July 1998, Tenneco's Board of Directors authorized management to develop
a broad range of strategic alternatives which could result in the separation of
the automotive, paperboard packaging, and specialty packaging businesses. As
part of that strategic alternatives analysis, Tenneco has taken the following
actions:
- In January 1999, Packaging reached an agreement to contribute the
containerboard assets of its paperboard packaging segment to a new joint
venture with an affiliate of Madison Dearborn Partners, Inc. The
contribution of the containerboard assets to the joint venture was
completed in April 1999. Packaging received consideration of cash and
debt assumption totaling approximately $2 billion and a 45 percent common
equity interest in the joint venture valued at approximately $200
million. Packaging now owns a 43 percent common equity interest due to
subsequent management equity issuances.
- In April 1999, Packaging reached an agreement to sell the paperboard
packaging segment's other assets, its folding carton operation, to
Caraustar Industries. This transaction closed in June 1999.
- Also in April 1999, Tenneco announced that its Board of Directors had
approved the separation of its automotive and packaging businesses into
two separate, independent companies.
- In June 1999, Tenneco's Board of Directors approved a plan to sell
Packaging's remaining interest in its containerboard joint venture. In
September 1999, the joint venture, Packaging Corporation of America,
filed a registration statement for Packaging to sell its interest in a
registered public offering. Packaging expects the sale to be completed
before the spin-off discussed below.
The containerboard assets contributed to the new joint venture represented
substantially all of the assets of Packaging's paperboard packaging segment and
included four mills, 67 corrugated products plants, and an ownership or
controlling interest in approximately 950,000 acres of timberland. Before the
transaction, Packaging borrowed approximately $1.8 billion and used
approximately $1.2 billion of those borrowings to acquire assets used by the
containerboard business under operating leases and timber cutting rights and to
purchase containerboard business accounts receivable that had previously been
sold to a third party. The remainder of the borrowings was remitted to Tenneco
and used to repay a portion of short-term debt. Packaging then contributed the
containerboard business assets, subject to the new indebtedness and the
containerboard business liabilities, to the joint venture in exchange for $247
million in cash and the 45 percent interest in the joint venture. As a result of
the sale transaction, Packaging recognized a pre-tax loss of $293 million, $178
million after-tax, or $1.07 per diluted common share. This loss was included in
discontinued operations in the first quarter of 1999.
As a result of the decision to sell Packaging's remaining interest in the
containerboard joint venture, Packaging's paperboard packaging segment is
presented as a discontinued operation in the Combined Financial Statements of
The Businesses of Tenneco Packaging contained elsewhere in this document. Refer
to Note 7 for further information.
The separation of Tenneco's automotive and packaging businesses will be
accomplished by the spin-off of the common stock of Packaging to Tenneco
shareowners. At the time of the spin-off, Packaging will include Tenneco's
specialty packaging business ("Specialty"), Tenneco's administrative services
operations, and the remaining interest in the containerboard joint venture if
the sale has not been completed. Tenneco and Packaging are, however, currently
analyzing the alternatives with respect to the administrative services
operations.
98
<PAGE> 100
Before the spin-off, Tenneco will realign substantially all of its existing
debt through some combination of tender offers, exchange offers, prepayments and
other refinancings. This debt realignment will be financed by internally
generated cash, borrowings by Tenneco under a new credit facility, the issuance
by Tenneco of senior subordinated notes and borrowings by Packaging under new
credit facilities. See "The Spin-off -- Debt Realignment." Tenneco currently
expects that, subject to discussions with debt rating agencies, Packaging's debt
will be rated investment grade and Automotive's debt will be rated non-
investment grade.
Also before the spin-off, Tenneco will restructure its existing businesses,
assets, and liabilities through a series of corporate restructuring
transactions. As Tenneco is currently organized, ownership of its subsidiaries
is based on geographic location and tax considerations rather than on the
businesses in which the subsidiaries are involved. Therefore, Tenneco will need
to restructure its existing businesses so that the assets, liabilities, and
operations of its packaging business and administrative services operations will
be owned by Packaging, and the assets, liabilities, and operations of its
automotive businesses will be owned by Tenneco.
The spin-off is subject to conditions, including formal declaration of the
spin-off by the Tenneco Board of Directors, Tenneco's receipt, and the continued
effectiveness, of a determination that the spin-off will be tax-free for U.S.
federal income tax purposes, and the successful completion of the debt
realignment and corporate restructuring transactions. In August 1999, Tenneco
received a letter ruling from the Internal Revenue Service that the spin-off
will be tax-free for U.S. federal income tax purposes to Tenneco and its
shareowners and as a result the specialty packaging segment is presented as a
discontinued operation in the accompanying financial statements. After
discontinuing the specialty packaging segment, Tenneco's sole continuing
operation is its Automotive segment. Refer to Notes to Combined Financial
Statements of The Businesses of Tenneco Packaging contained elsewhere in this
document for further information.
RESTRUCTURING AND OTHER CHARGES
In the fourth quarter of 1998, Tenneco's Board of Directors approved an
extensive restructuring plan designed to reduce administrative and operational
overhead costs in every part of Tenneco's business. As a result, Packaging
recorded a pre-tax charge to income from continuing operations of $32 million,
$20 million after-tax or $.12 per diluted common share. Of the pre-tax charge,
$10 million relates to operational restructuring plans and $22 million relates
to a staff and cost reduction plan.
The operational restructuring plans provide for Packaging to eliminate
production lines at two plants, exit four joint ventures, and eliminate 104
positions. The staff and cost reduction plan for Packaging involves the
elimination of 184 administrative positions in Packaging's business operations
and in Packaging's corporate operations including Tenneco's corporate operations
that will become a part of Packaging in connection with the spin-off.
The fixed assets for the production lines to be eliminated, as well as the
joint venture investments, were written down to their fair value, less costs to
sell, in the fourth quarter of 1998. Fair value for the production lines was
estimated at scrap value less removal costs. Fair value for the joint ventures
was determined to be zero as Packaging is relinquishing its interests in the
ventures. No significant net cash proceeds are expected to be received from the
ultimate disposal of these assets, which should be complete by the fourth
quarter of 1999. The effect of suspending depreciation for the production lines
is approximately $1 million on an annual basis.
As of December 31, 1998 and June 30, 1999, approximately 158 and 233
employees, respectively, had been terminated. This restructuring is being
executed according to Packaging's initial plan and Packaging expects to complete
all restructuring actions by the fourth quarter of 1999.
In the first quarter of 1999, in connection with Packaging's contribution
of its containerboard assets to a new joint venture, Tenneco adopted a plan to
realign its headquarters functions that will become a part of Packaging in
connection with the spin-off. This plan involves the severance of approximately
40
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<PAGE> 101
employees, and the closing of the Greenwich, Connecticut headquarters facility.
Tenneco reached an agreement to sell its headquarters facility in Greenwich, and
recorded an impairment charge in the first quarter of 1999, based on the selling
price less costs to sell. The carrying value of the facility before the
impairment was $43 million. Annual depreciation will be reduced by $3 million as
a result of the sale. The charge for this plan was recorded in Packaging's
corporate operations in the amount of $29 million pre-tax, $17 million
after-tax, or $.10 per diluted common share. Packaging collected approximately
$30 million in the second quarter of 1999 related to the sale of these assets.
Amounts related to the restructuring plans described above are shown in the
following table:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
-----------------------------------
1998 CHARGED BALANCE AT CHARGED BALANCE AT
RESTRUCTURING CASH TO ASSET DECEMBER 31, RESTRUCTURING CASH TO ASSET JUNE 30,
CHARGE PAYMENTS ACCOUNTS 1998 CHARGE PAYMENTS ACCOUNTS 1999
------------- -------- -------- ------------ ------------- -------- -------- ----------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Severance............... $20 $5 $-- $15 $16 $12 $-- $19
Asset impairments....... 12 -- 12 -- 13 -- 13 --
--- -- --- --- --- -- --- ---
$32 $5 $12 $15 $29 $12 $13 $19
=== == === === === == === ===
</TABLE>
Packaging expects to realize annual savings of $13 million related to the
operational restructuring plans and $40 million related to the fourth quarter
1998 staff and cost reduction plan. In addition, Packaging expects to realize
annual savings of $11 million related to its plan to realign its headquarters
functions. These annual savings will be fully realized upon completion of the
restructuring actions in the fourth quarter of 1999.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
RESULTS OF CONTINUING OPERATIONS
Net Sales and Operating Revenues
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------
1999 1998 % CHANGE
---- ---- --------
(MILLIONS)
<S> <C> <C> <C>
Specialty........................................... $1,404 $1,361 3%
Intergroup sales and other.......................... -- 10 NM
------ ------
$1,404 $1,371 2%
====== ======
</TABLE>
Packaging's revenue in its specialty segment increased by 3 percent over
the first half of 1998. The second half 1998 acquisitions of Sentinel and
Champion International's Belvidere, Illinois dual-ovenable paperboard tray
manufacturing facility generated $21 million of the revenue increase. Lower
prices due to lower raw material costs were offset by overall unit volume growth
of 8 percent. The largest increases were in North American protective packaging,
Hefty OneZip(R) bags, foodservice containers, disposable tableware and
industrial products.
Income Before Interest Expense, Income Taxes and Minority Interest
("Operating Income")
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1999 1998 % CHANGE
---- ---- --------
(MILLIONS)
<S> <C> <C> <C>
Specialty............................................ $ 190 $ 175 9%
Other................................................ (46) (2) NM
----- -----
$ 144 $ 173 (17%)
===== =====
</TABLE>
100
<PAGE> 102
Packaging's operating income in its specialty segment increased by $15
million over the comparable period of 1998. The second half 1998 acquisitions of
Sentinel and Champion International's Belvidere, Illinois dual-ovenable
paperboard tray manufacturing facility produced $4 million of operating income
during the first half of 1999. First half operating income also reflected $5
million of non-recurring Year 2000 and systems implementation costs, and $3
million of overhead costs related to the separation of the paperboard segment.
Adjusting for these two items, Specialty Packaging's operating income improved
by 13 percent. This improvement was driven by lower manufacturing costs and
strong unit volumes, partially offset by lags in passing through rising raw
material costs.
Packaging's "Other" operating loss for both periods reflects unallocated
corporate overhead and costs at Packaging's data center and administrative
services operations. In addition, the first half of 1999 includes a $29 million
charge recorded in the first quarter to realign Tenneco's headquarters functions
as discussed above in the "Restructuring and Other Charges" section.
Operating Income as a Percentage of Revenue
Operating income as a percentage of revenue for the first six months of
1999 and 1998 were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1999 1998 % CHANGE
----- ----- ---------
<S> <C> <C> <C>
Specialty.............................................. 13.5% 12.9% 5%
Total.................................................. 10.3% 12.6% (18%)
</TABLE>
Specialty's operating income as a percentage of revenue increased as the
operating income of the segment grew at three times the rate of revenue growth.
On a consolidated basis, total operating income as a percentage of revenue
declined as the operating income decreased 17 percent while revenue grew 2
percent.
Excluding the first quarter 1999 restructuring charge, operating income as
a percentage of revenue was as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1999 1998 % CHANGE
----- ----- ---------
<S> <C> <C> <C>
Specialty.............................................. 13.5% 12.9% 5%
Total.................................................. 12.3% 12.6% (2%)
</TABLE>
Interest Expense, net of interest capitalized
Interest expense for the first half of 1999 was even with the first half of
1998. Tenneco's historical practice has been to incur indebtedness for its
consolidated group at the parent company level or at a limited number of
subsidiaries. Accordingly, interest expense in each period includes an
allocation of interest on Tenneco corporate debt. This allocation was based, in
general, on the ratio of Packaging's net assets to Tenneco's consolidated net
assets plus debt. See Note 5 to the Combined Financial Statements of The
Businesses of Tenneco Packaging for a further discussion of the allocation of
Tenneco consolidated debt and interest expense to Packaging.
Income Taxes
Packaging's effective tax rate for the first half of 1999 was 31 percent,
compared to 35 percent in last year's period.
DISCONTINUED OPERATIONS AND EXTRAORDINARY CHARGE
Loss from discontinued operations in the first half of 1999 was $163
million, net of an income tax benefit of $102 million, or $.98 per diluted
common share. This included a loss on the contribution of the containerboard
assets of $178 million, net of an income tax benefit of $115 million, or $1.07
per diluted common share.
101
<PAGE> 103
Discontinued operations generated income of $37 million, net of income tax
expense of $25 million, or $.22 per diluted common share, during the first half
of 1998.
The current year's first six months also includes an extraordinary charge
to cover the cost of early retirement of debt in connection with the
contribution of the containerboard assets of $7 million, net of income tax
expense of $3 million, or $.04 per diluted common share.
See Note 7 to the Combined Financial Statements of The Businesses of
Tenneco Packaging for a further discussion of discontinued operations.
OUTLOOK
See "Summary -- Recent Developments" for information concerning Packaging's
expectations for third quarter 1999 results of operations.
CHANGES IN ACCOUNTING PRINCIPLES
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," which establishes new
accounting and reporting standards for the costs of computer software developed
or obtained for internal use. This statement requires prospective application,
for fiscal years beginning after December 15, 1998. Packaging adopted SOP 98-1
on January 1, 1999. The impact of this new standard did not have a significant
effect on Packaging's financial position or results of operations.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which requires costs of start-up activities to be expensed
as incurred. This statement was effective for fiscal years beginning after
December 15, 1998. This statement requires previously capitalized costs related
to start-up activities to be expensed as a cumulative effect of a change in
accounting principle when the statement is adopted. Packaging previously
capitalized costs related to the start-up of new foreign operations and its
administrative service operations. Packaging adopted SOP 98-5 on January 1,
1999, and recorded an after-tax charge for the cumulative effect of this change
in accounting principle upon adoption of $32 million, net of a $9 million tax
benefit, or $.19 per diluted common share. The change in accounting principle
decreased the loss before cumulative effect of change in accounting principle by
$4 million, net of $2 million in income tax expense, or $.02 per diluted common
share, for the six months ended June 30, 1999. If the new accounting method had
been applied retroactively, net income for the six months ended June 30, 1998,
and the years ended December 31, 1998, 1997, and 1996, would have been lower by
$7 million, net of a $5 million income tax benefit, or $.04 per diluted common
share, $14 million, net of an $8 million tax benefit, or $.08 per diluted common
share, $7 million, net of a $3 million tax benefit, or $.04 per diluted common
share, and $7 million, net of a $4 million tax benefit, or $.04 per diluted
share, respectively.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement establishes new accounting and reporting
standards requiring that all derivative instruments, including derivative
instruments embedded in other contracts, be recorded in the balance sheet as
either an asset or liability measured at its fair value. The statement requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting treatment. This statement cannot be applied
retroactively and is effective for all fiscal years beginning after June 15,
2000. Packaging is currently evaluating the new standard but has not yet
determined the impact it will have on its financial position or results of
operations.
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<PAGE> 104
EARNINGS PER SHARE
Packaging's income from continuing operations was $.31 per diluted common
share for the first half of 1999, compared to $.41 per diluted common share for
last year's first half. All references to earnings per share in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations are on a diluted basis unless otherwise noted. The current year's
period also included a loss from discontinued operations of $.98 per diluted
common share, a $.04 per share extraordinary loss on early retirement of debt in
connection with the contribution of the containerboard assets, and $.19 per
diluted common share of charges related to the cumulative effect of changes in
accounting principles noted above. First half 1998 included $.22 per diluted
common share of income from discontinued operations. Net income per diluted
common share was $.63 in the first half of 1998, as compared to a loss of $.90
per diluted common share in this year's period.
LIQUIDITY AND CAPITAL RESOURCES
Capitalization
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, %
1999 1998 CHANGE
-------- ------------ ------
(MILLIONS)
<S> <C> <C> <C>
Short-term debt and current maturities........... $ 367 $ 595
Long-term debt................................... 1,494 1,312
Debt allocated to discontinued operations........ -- 548
------ ------ ---
Total debt.................................. 1,861 2,455 (24%)
Minority interest................................ 14 14 --%
Combined equity.................................. 1,340 1,776 (25%)
------ ------
Total capitalization........................ $3,215 $4,245 (24%)
====== ======
</TABLE>
Packaging's debt to total capitalization ratio was 57.8 percent at both
June 30, 1999, and December 31, 1998. Debt allocated from Tenneco to Packaging
declined due to the contribution by Packaging of its containerboard assets to
the joint venture.
Equity declined primarily as a result of the net loss for the first six
months, which included the loss on the containerboard assets as well as the
charge associated with the plan to realign the Greenwich, Connecticut
headquarters facility. See the Statements of Changes in Combined Equity in the
Combined Financial Statements of The Businesses of Tenneco Packaging contained
elsewhere in this document for a description of factors affecting equity.
In June 1999, Tenneco's Board of Directors approved a plan to sell
Packaging's remaining interest in its containerboard joint venture. Packaging
expects the sale to be completed before the spin-off, with the net proceeds used
to retire Tenneco debt that would otherwise be allocated to Packaging in the
debt realignment. If the sale occurs after the spin-off, the net proceeds will
be used to retire Packaging debt.
Cash Flows
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1999 1998
---- ----
(MILLIONS)
<S> <C> <C>
Cash provided (used) by:
Operating activities...................................... $ (45) $ 288
Investing activities...................................... (866) (221)
Financing activities...................................... 920 (66)
</TABLE>
Cash flow provided by continuing operating activities declined by $163
million for the first six months of 1999 compared to the same period in 1998,
primarily due to higher working capital levels. This was mainly attributable to
higher receivables, lower payables and a seasonal build in inventories during
the 1999 period.
103
<PAGE> 105
Cash flow from Tenneco's discontinued paperboard operations declined by
$170 million in the first six months of 1999 compared to the 1998 period. This
is primarily attributable to the purchase of containerboard business accounts
receivable in contemplation of the contribution of the containerboard business
to the joint venture in April 1999. Additionally, lower linerboard and medium
prices resulted in lower operating cash flow for the containerboard business.
Excluding the effects of the discontinued paperboard operations, cash used
by investing activities was lower during the first six months of 1999 by $127
million compared to the first six months of 1998. Reduced capital spending,
lower systems related expenditures and lower acquisition activity contributed to
the decline.
As described above, Packaging borrowed approximately $1.8 billion in the
second quarter in connection with the formation of the containerboard joint
venture and used approximately $1.2 billion of that amount to purchase leased
assets and timber cutting rights of that business. The remaining proceeds of
these borrowings, plus additional cash proceeds of approximately $306 million
from the containerboard and folding carton transactions, were used to retire
Tenneco's short-term debt in the second quarter. Accordingly, absent the
borrowings described above, cash used by financing activities was $840 million
for the first six months of 1999.
Packaging contributed the containerboard business to the new joint venture
subject to the approximately $1.8 billion in new debt. The debt reduction which
resulted from this contribution is shown on the statements of cash flows as a
non-cash financing activity.
Capital Commitments
Packaging estimates that expenditures aggregating approximately $110
million will be required after December 31, 1998, to complete facilities and
projects authorized at that date, and substantial commitments have been made in
connection with those projects.
Liquidity
Historically, Packaging's excess net cash flows from operating and
investing activities have been used by its parent, Tenneco, to meet consolidated
debt and other obligations. Conversely, when Packaging's cash requirements have
been in excess of cash flows from operations, Tenneco has utilized its
consolidated credit facilities to fund Packaging's obligations. Also, depending
on market and other conditions, Packaging has utilized external sources of
capital to meet specific funding requirements. Packaging's management believes
that, after the spin-off, Packaging's cash flows from operations combined with
available borrowing capacity under the new credit facilities described below,
will generally be sufficient to meet its future capital requirements for the
following year.
As described under "The Spin-off-Debt Realignment," Tenneco intends to
realign its debt before the spin-off. As part of this debt realignment,
Packaging will (1) issue the new securities in the exchange offers and (2) make
new borrowings under new credit facilities entered into in connection with the
spin-off. Funding under these financings will be subject to the satisfaction of
numerous conditions. Cash proceeds will be remitted to Tenneco to fund the debt
realignment.
The terms of the new public debt securities will be substantially identical
to the terms of the corresponding series of Tenneco's original securities for
which they are exchanged, except that (1) Packaging will be the issuer and (2)
the interest rates will be different. The terms of the new securities will not
restrict Packaging's ability to make dividends or capital expenditures or incur
additional unsecured debt. See "Description of the New Securities."
In addition, Packaging has entered into a five-year, $750 million long-term
revolving credit facility and a $250 million 364-day revolving credit facility
in connection with the spin-off. Initial borrowings under these facilities will
be used to fund a portion of the debt realignment. After the spin-off,
additional borrowings may be used for general corporate purposes. These
facilities do not include any general restrictions on Packaging's ability to pay
dividends or make capital expenditures. They do, however,
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<PAGE> 106
include limitations on incurring liens and subsidiary debt, disposing of all or
substantially all of its assets and discontinuing its primary businesses. These
facilities require Packaging to comply with specified financial ratios, as well
as other customary covenants and agreements. Borrowings under these facilities
will bear interest at a floating rate based on LIBOR, adjusted for reserve
requirements, plus a specified margin, or based on a specified prime or
reference rate plus a specified margin, at Packaging's option. Borrowings under
these facilities may also bear interest based on competitive bids. See
"Description of Packaging -- New Financing" for further information.
A lender has committed to provide Packaging up to $1.5 billion of term loan
financing, which Packaging intends to use in the event it does not sell its
containerboard joint venture interest before the spin-off for general corporate
and other purposes. Although the terms of this financing have not been
finalized, Packaging expects that borrowings under this facility would be due 18
months after funding and bear interest at a floating rate based on LIBOR,
adjusted for reserve requirements, plus a specified margin or based on a
specified prime or reference rate plus a specific margin, at Packaging's option.
Packaging expects this financing would include covenants similar to those
described above for the revolving credit facilities. See "Description of
Packaging -- New Financing" for further information.
Before the spin-off Packaging expects to enter into a $175 million
syndicated lease facility with a third party lessor and various lenders, the
proceeds of which will be used to restructure or replace certain existing
operating leases and public warehouse arrangements and to facilitate additional
leasing arrangements for other operating facilities. Packaging expects that the
syndicated lease facility will contain customary terms and conditions, including
a residual value guarantee, default provisions and financial covenants.
ENVIRONMENTAL MATTERS
Packaging and a number of its subsidiaries and affiliates are parties to
environmental proceedings. Expenditures for ongoing compliance with
environmental regulations that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations and which do not contribute to current or future
revenue generation are expensed. Liabilities are recorded when environmental
assessments indicate that remedial efforts are probable and the costs can be
reasonably estimated. Estimates of the liability are based upon currently
available facts, existing technology, and presently enacted laws and regulations
taking into consideration the likely effects of inflation and other societal and
economic factors. All available evidence is considered including prior
experience in remediation of contaminated sites, other companies' clean-up
experience and data released by the United States Environmental Protection
Agency or other organizations. These estimated liabilities are subject to
revision in future periods based on actual costs or new information. These
liabilities are included in the combined balance sheet at their undiscounted
amounts. Recoveries are evaluated separately from the liability and, when
assured, are recorded and reported separately from the associated liability in
the combined financial statements.
As of July 1, 1999, Packaging has been designated as a potentially
responsible party at three Superfund sites and it has estimated its share of the
liability at these sites to be approximately $2 million in the aggregate. In
addition, Packaging also may have liability to remediate several current or
former facilities and it has estimated its share of the remediation costs at
these facilities to be approximately $4 million in the aggregate. For both the
Superfund sites and its current and former facilities, Packaging has established
reserves that it believes are adequate for these costs. Although Packaging
believes its estimates of remediation costs are reasonable and based on the
latest information, the clean-up costs are estimates and are subject to revision
as more information becomes available about the extent of remediation required.
At certain sites, Packaging expects that other parties will contribute to the
remediation costs. In addition, at the Superfund sites, the Comprehensive
Environmental Response, Compensation and Liability Act provides that Packaging's
liability could be joint and several meaning that Packaging could be required to
pay in excess of its share of remediation costs. Packaging's understanding of
the financial strength of other potentially responsible parties at both the
Superfund sites and at its current and former facilities has been considered,
where appropriate, in Packaging's determination of its estimated liability.
Packaging
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<PAGE> 107
believes that any adjustment to the costs associated with its current status as
a potentially responsible party at the Superfund sites or as a liable party at
its current or former facilities will not be material to its consolidated
financial position or results of operations.
Packaging estimates that its capital expenditures for environmental matters
for 1999 and 2000 will not be material.
DERIVATIVE FINANCIAL INSTRUMENTS
Foreign Currency Exchange Rate Risk
Packaging currently manages its exposure to changes in foreign currency
rates by making loans with a Tenneco affiliate in the functional currency of the
operating company concerned. The Tenneco affiliate then integrates all of
Tenneco's foreign currency denominated intercompany loans and enters into
foreign currency forward purchase and sale contracts to mitigate its net
exposure to changes in foreign exchange rates. This reduces Packaging's need to
enter into forward contracts with third parties. Packaging expects that,
following the spin-off, its use of foreign currency forward purchase and sale
contracts will increase.
Additionally, Packaging from time to time enters into foreign currency
forward purchase and sale contracts to mitigate its exposure to changes in
exchange rates on intercompany and third party trade receivables and payables.
Packaging does not currently enter into derivative financial instruments for
speculative purposes.
The administration of these activities is concentrated at a London-based
Tenneco affiliate. This affiliate enters into forward purchase and sell
contracts with Tenneco's operating divisions to hedge the divisions' exposure to
changes in foreign currency exchange rates. The affiliate then enters into
contracts with third parties to hedge Tenneco's consolidated exposure. At
December 31, 1998, Packaging had purchase contracts with this affiliate of
approximately one million dollars, primarily in U.S. dollars, and sell contracts
of approximately one million dollars, primarily in British pounds. At December
31, 1997, Packaging had purchase contracts of approximately two million dollars,
primarily in Belgian francs and German marks, and sell contracts of
approximately two million dollars, primarily in British pounds and French
francs. Packaging's purchase and sell contracts as of June 30, 1999 and December
31, 1998 were not materially different.
Interest Rate Risk
Tenneco's historical practice has been to incur indebtedness for its
consolidated group at the parent company level or at a limited number of
subsidiaries. Tenneco's financial instruments that are sensitive to market risk
for changes in interest rates are its debt securities. Tenneco primarily uses
commercial paper to finance its short-term capital requirements. Since
commercial paper generally matures in three months or less, Tenneco pays a
current market rate of interest on these borrowings. Tenneco finances its
long-term capital requirements with long-term debt with original maturity dates
ranging up to 30 years. All of Tenneco's existing long-term debt obligations
have fixed interest rates. Consequently, Tenneco is not exposed to cash flow or
fair value risk from market interest rate changes on its long-term debt
portfolio.
Packaging's interest expense in each period includes an allocation of
interest on Tenneco corporate debt. The allocated interest expense carries with
it exposure to Tenneco's interest rate risk. The table
106
<PAGE> 108
below provides information about Tenneco's financial instruments that are
sensitive to interest rate risk as of December 31, 1998.
<TABLE>
<CAPTION>
Estimated Maturity Dates Fair Value at
-------------------------------------------------- December 31,
1999 2000 2001 2002 2003 THEREAFTER Total(b) 1998(a)
---- ---- ---- ---- ---- ---------- -------- -------------
(Millions Except Effective Interest Rates)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-term (excluding current
maturities)......................... $821 $-- $ -- $ -- $-- $ -- $ 821 $ 821
Average effective interest rate..... 5.9% --% --% --% --% --%
Long-term debt (including current
maturities)......................... $250 $10 $187 $498 $ 7 $1,583 $2,535 $2,606
Average effective interest rate..... 6.4% 12.0% 6.8% 6.8% 11.2% 7.6%
</TABLE>
- -------------------------
(a) Fair value of short-term debt was considered to be the same as or was not
determined to be materially different from the carrying amount. The fair
value of fixed-rate long term debt was generally based on the market value
of Tenneco debt offered in open market exchanges at December 31, 1998.
(b) At December 31, 1998, short-term and long-term Tenneco debt allocated to
Packaging was $583 million and $1,291 million, respectively. Corporate debt
allocated to Packaging's discontinued operations was $548 million at
December 31, 1998.
Tenneco's financial instruments that are sensitive to interest rate risk as
of June 30, 1999 are not materially different from the table presented above. In
connection with the debt realignment, Packaging will enter into a new credit
facility which will be subject to interest rate risks.
In connection with the spin-off, the above described instruments, which are
sensitive to interest rate risk, are expected to be refinanced.
The statements and other information, including the tables, in this
"Derivative Financial Instruments" section constitute "forward-looking
statements."
YEAR 2000
Many computer software systems, as well as some hardware and equipment
utilizing date-sensitive data, were designed to use a two-digit date field.
Consequently, these systems, hardware and equipment will not be able to properly
recognize dates beyond the year 1999. This is referred to herein as the "Year
2000 issue". Packaging's significant technology transformation projects have
addressed the Year 2000 issue in those areas where replacement systems are being
installed for other business reasons. Where existing systems and equipment are
expected to remain in place beyond 1999, Packaging has a detailed process in
place to identify and assess Year 2000 issues and to remediate, replace or
establish alternative procedures addressing non-Year 2000 compliant systems,
hardware and equipment.
Packaging has substantially completed inventorying its systems and
equipment, including computer systems and business applications, as well as
date-sensitive technology embedded in its equipment and facilities. Packaging
continues to plan for and undertake remediation, replacement or establishment of
alternative procedures for non-compliant Year 2000 systems and equipment; and
test remediated, replaced or alternative procedures for systems and equipment.
Packaging believes that approximately 70 percent of its major business
applications systems and approximately 90 percent of its manufacturing equipment
had achieved Year 2000 compliance as of June 30, 1999. Packaging has confirmed
that none of its products are date-sensitive. Remediation, replacement or
establishment of alternative procedures for systems and equipment have been and
are being undertaken on a business priority basis. This is ongoing and was
completed at some locations in 1998 with the remainder expected to be completed
through the third quarter of 1999. Testing will occur in the same time frame.
Based upon current estimates, Packaging believes that costs to address Year
2000 issues and implement the necessary changes to its existing systems and
equipment, including costs incurred to date,
107
<PAGE> 109
will range from $25 to $30 million. As of June 30, 1999, approximately $17
million of the costs had been incurred. These costs are being expensed as they
are incurred, except that in some instances Packaging may determine that
replacing existing computer systems or equipment may be more effective and
efficient, particularly where additional functionality is available. These
replacements would be capitalized and would reduce the estimated expense
associated with Year 2000 issues.
Packaging has also contacted its major suppliers, financial institutions,
and others with whom it conducts business to determine whether they will be able
to resolve in a timely manner Year 2000 problems possibly affecting Packaging. A
majority of these entities, including critical suppliers, have responded by
advising as to the status of their efforts and by stating that they expect to
become Year 2000 compliant in a timely manner. Based on these responses,
critical suppliers have been assigned a risk rating. This process is ongoing.
Packaging intends to continue corresponding with critical high risk third
parties to obtain information and updates on their Year 2000 efforts, and to
assess new suppliers, financial institutions and others with whom it begins to
conduct business.
If Packaging is unable to complete on a timely and cost-effective basis the
remediation or replacement of critical systems or equipment not yet in
compliance, or develop alternative procedures, or if those with whom Packaging
conducts business are unsuccessful in implementing timely solutions, Year 2000
issues could have a material adverse effect on Packaging's financial condition
or results of operations. Possible worst case scenarios include interruptions in
Packaging's ability to manufacture its products, process and ship orders, and
bill and collect accounts receivable due to internal system failures or the
system failures of its suppliers or customers. Packaging believes it will be
able to timely resolve its own Year 2000 issues.
As part of its planning and readiness activities, Packaging is developing
Year 2000 contingency plans for critical business processes such as banking,
data center operations and just-in-time manufacturing operations. Contingency
plans are being developed on a business unit basis, where needed, to respond to
previously undetected Year 2000 problems and business interruption from
suppliers. Contingency plans will include alternative suppliers, as necessary,
as well as assuring the availability of key personnel at year end to address
unforeseen Year 2000 problems.
Prior to the spin-off, Tenneco's administrative services operation has been
assisting both Packaging and Automotive with their Year 2000 remediation,
replacement and testing activities. Except for mainframe testing, substantially
all of these Year 2000 assistance activities have been completed for Automotive.
Shortly after the spin-off, Packaging is scheduled to assist Automotive with the
completion of the mainframe testing.
EURO CONVERSION
The European Monetary Union resulted in the adoption of a common currency,
the "Euro," among eleven European nations. The Euro is being adopted over a
three-year transition period beginning January 1, 1999. In October 1997, Tenneco
established a cross-functional Euro Committee, comprised of representatives of
Tenneco's operational divisions, including Packaging, as well as its corporate
offices. That Committee had two principal objectives: (1) to determine the
impact of the Euro on Tenneco's business operations; and (2) to recommend and
facilitate implementation of those steps necessary to ensure that Tenneco would
be fully prepared for the Euro's introduction. As of January 1, 1999, Packaging
had implemented those Euro conversion procedures that it had determined to be
necessary and prudent to adopt by that date, and is on track to becoming fully
"Euro ready" on or before the conclusion of the three-year Euro transition
period. Packaging believes that the costs associated with transitioning to the
Euro will not be material to its combined financial position or the results of
its operations.
108
<PAGE> 110
YEARS 1998 AND 1997
RESULTS OF CONTINUING OPERATIONS
Packaging reported income from continuing operations of $82 million for the
year ended December 31, 1998, compared to $106 million for the same period in
1997. The 1998 figure includes a $20 million after-tax charge to reduce overhead
and manufacturing costs throughout every part of Packaging's business. Excluding
the restructuring charge, Packaging's income from continuing operations for the
1998 period was $102 million. The decline resulted from costs related to
Packaging's data center consolidation effort, offset by record results in the
Specialty segment. Higher interest expense and a higher tax rate also
contributed to the earnings decline.
Net Sales and Operating Revenues
<TABLE>
<CAPTION>
%
1998 1997 CHANGE
------ ------ ------
(MILLIONS)
<S> <C> <C> <C>
Specialty........................................... $2,785 $2,553 9%
Intergroup sales and other.......................... 6 10 (40%)
------ ------
$2,791 $2,563 9%
====== ======
</TABLE>
Packaging's revenue increase in its Specialty segment of $232 million
resulted primarily from full-year inclusion of the protective and flexible
packaging businesses acquired from N.V. Koninklijke KNP BT in 1997 and from the
May 1998 acquisition of Richter Manufacturing. The KNP BT businesses contributed
$160 million of incremental revenue in 1998 measured through the first
anniversary of their acquisition in late April 1997. Richter Manufacturing
revenue during 1998 was $39 million. The remaining revenue increase reflects
higher unit volumes in numerous product lines which more than offset lower
pricing.
Operating Income
The following table presents operating income by segment for the years 1998
and 1997:
<TABLE>
<CAPTION>
%
1998 1997 CHANGE
---- ---- ------
(MILLIONS)
<S> <C> <C> <C>
Specialty.............................................. $328 $308 6%
Other.................................................. (45) (2) NM
---- ----
$283 $306 (8%)
==== ====
</TABLE>
As described earlier in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, Packaging recorded a pre-tax
restructuring charge to income from continuing operations of $32 million, $20
million after-tax, in the fourth quarter of 1998. The restructuring charge
affected Packaging's segments as follows: Specialty -- $18 million and
Other -- $14 million.
Excluding these restructuring charges, a comparison of Packaging's 1998 and
1997 operating income is as follows:
<TABLE>
<CAPTION>
%
1998 1997 CHANGE
---- ---- ------
(MILLIONS)
<S> <C> <C> <C>
Specialty............................................... $346 $308 12%
Other................................................... (31) (2) NM
---- ----
$315 $306 3%
==== ====
</TABLE>
Packaging's operating income increase in its Specialty segment reflected
$24 million from acquired businesses measured through the one-year anniversary
of their acquisitions, as well as higher unit volumes, primarily in Hefty
One-Zip(R), food service foam, and consumer tableware products. Lower raw
material
109
<PAGE> 111
costs approximately offset price reductions to customers. In addition, Specialty
incurred approximately $7 million in one-time costs related to an information
systems project in North America.
Packaging's operating loss in its "Other" segment increased in 1998 over
1997 levels primarily as a result of higher costs related to Packaging's data
center consolidation effort, which more than offset lower unabsorbed costs at
Packaging's administrative services operation.
Operating Income as a Percentage of Revenue
Operating income as a percentage of revenue for 1998 and 1997, including
the fourth quarter 1998 restructuring charge, were as follows:
<TABLE>
<CAPTION>
1998 1997 % CHANGE
---- ---- --------
<S> <C> <C> <C>
Specialty.................................................. 11.8% 12.1% (2%)
Total...................................................... 10.1% 11.9% (15%)
</TABLE>
The Specialty segment's operating income as a percentage of revenue
contracted as the growth rate of operating income, including the restructuring
charge, was 6 percent compared with the 9 percent growth rate of revenues. On a
consolidated basis, total operating income as a percentage of revenue contracted
even further, as the operating income, including both the restructuring charge
and the increased costs in the other segment, decreased 8 percent while revenue
grew 9 percent.
Excluding the fourth quarter 1998 restructuring charge, operating income as
a percentage of revenue for the same periods were as follows:
<TABLE>
<CAPTION>
1998 1997 % CHANGE
---- ---- --------
<S> <C> <C> <C>
Specialty.................................................. 12.4% 12.1% 2%
Total...................................................... 11.3% 11.9% (5%)
</TABLE>
Interest Expense, net of interest capitalized
Interest expense for 1998 was $9 million, or 7 percent, higher than for
1997. As described above, interest expense in each period includes an allocation
of interest on Tenneco corporate debt. This allocation was based, in general, on
the ratio of Packaging's net assets to Tenneco consolidated net assets plus
debt. See Note 5 to the Combined Financial Statements of The Business of Tenneco
Packaging contained elsewhere in this document for a further discussion of the
allocation of Tenneco consolidated debt and interest expense to Packaging.
Income Taxes
Packaging's effective tax rate for 1998 was 45 percent, compared to 41
percent for 1997. The effective tax rate was higher than the statutory rate in
both periods primarily as a result of state and local income taxes.
DISCONTINUED OPERATIONS
Discontinued operations generated income of $57 million, net of income tax
expense of $38 million, or $.34 per diluted common share for 1998.
Discontinued operations generated income of $21 million, net of income tax
expense of $14 million, or $.12 per diluted common share during 1997.
Fourth quarter 1998 results from discontinued operations for the paperboard
packaging business includes a pre-tax charge of $14 million related to
Packaging's restructuring plan to reduce administrative and operational overhead
costs. The paperboard packaging restructuring plan involves closing four box
plants and the elimination of 78 positions at those plants.
110
<PAGE> 112
Income from the discontinued paperboard packaging business in 1998 also
included a $15 million pre-tax gain on the sale of its remaining 20 percent
interest in a recycled paperboard joint venture with Caraustar Industries and a
$17 million pre-tax gain on the sale of non-strategic timberland assets. In
1997, income from discontinued operations included a $38 million pre-tax gain on
refinancing of two containerboard mill leases and a $5 million pre-tax gain from
a timberland management transaction.
See Note 7 to the Combined Financial Statements of The Businesses of
Tenneco Packaging contained elsewhere in this document for a further discussion
of discontinued operations.
CHANGES IN ACCOUNTING PRINCIPLES
As required by the FASB's Emerging Issues Task Force Issue 97-13,
"Accounting for Costs Incurred in Connection with a Consulting Contract that
Combines Business Process Reengineering and Information Technology
Transformation," Packaging recorded an after-tax charge of $38 million, net of a
tax benefit of $24 million, or $.23 per diluted common share, in the fourth
quarter of 1997. EITF Issue 97-13 establishes the accounting treatment and an
allocation methodology for consulting and other costs incurred in connection
with information technology transformation efforts. This charge was reported as
a cumulative effect of change in accounting principle.
EARNINGS PER SHARE
Income from continuing operations was $.49 per diluted common share for
1998, compared to $.63 per diluted common share in 1997. Discontinued operations
provided income of $.34 and $.12 per diluted common share, for 1998 and 1997,
respectively. In 1997, Packaging also recorded a charge for the cumulative
effect of a change in accounting principle noted above of $.23 per diluted
common share, resulting in net income of $.52 per diluted common share, compared
to $.83 per diluted common share in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Capitalization
<TABLE>
<CAPTION>
%
1998 1997 CHANGE
---- ---- ------
(MILLIONS)
<S> <C> <C> <C>
Short-term debt and current maturities............... $ 595 $ 158
Long-term debt....................................... 1,312 1,492
Debt allocated to discontinued operations............ 548 473
------ -------
Total debt.................................... 2,455 2,123 16%
Minority interest.................................... 14 15 (7%)
Combined equity...................................... 1,776 1,839 (3%)
------ -------
Total capitalization.......................... $4,245 $ 3,977 7%
====== =======
</TABLE>
Packaging's debt to capitalization ratio was 57.8 percent at December 31,
1998, compared to 53.4 percent at December 31, 1997. The increase in the ratio
is attributable to additional corporate debt allocated to Packaging from Tenneco
during 1998, as well as a decline in equity. See Note 5 to the Combined
Financial Statements of The Businesses of Tenneco Packaging for a further
discussion of the allocation of Tenneco consolidated debt and interest expense
to Packaging. See the Statements of Changes in Combined Equity of The Businesses
of Tenneco Packaging for a description of factors affecting equity.
111
<PAGE> 113
Cash Flows
<TABLE>
<CAPTION>
1998 1997
---- ----
(MILLIONS)
<S> <C> <C>
Cash provided (used) by:
Operating activities...................................... $ 577 $ 405
Investing activities...................................... (514) (654)
Financing activities...................................... (67) 239
</TABLE>
Cash flow from operating activities increased by $172 million from 1997 to
1998. Of this amount, $74 million was produced by continuing operations and $98
million was produced by discontinued operations. The increase from continuing
operations was primarily attributable to working capital, which increased
significantly during 1997 to support the growth in revenues over 1996 levels.
Working capital decreased slightly during 1998 as revenue growth moderated. Cash
flow from discontinued operations improved due to higher earnings in 1998
resulting from improved containerboard pricing.
Investing activities used $140 million less cash during 1998 than in 1997.
A significantly reduced level of acquisitions was partially offset by a higher
level of capital spending for discontinued operations. This increased spending
was primarily to acquire some leased timberlands in contemplation of the
separation of the containerboard assets from Packaging's other businesses.
Acquisitions in 1998 included: Champion International's dual-ovenable paperboard
tray manufacturing facility in Belvidere, Illinois; Richter Manufacturing and
Sentinel Products. In 1997, acquisitions related primarily to the protective and
flexible packaging businesses of KNP.
Financing activities used $67 million in 1998, compared to providing $239
million in 1997, a change of $306 million. Packaging retired $82 million less
debt during 1998. During 1998, Packaging remitted $56 million to Tenneco. During
1997, Tenneco contributed $331 million to Packaging.
YEARS 1997 AND 1996
RESULTS OF CONTINUING OPERATIONS
Net Sales and Operating Revenues
<TABLE>
<CAPTION>
%
1997 1996 CHANGE
---- ---- ------
(MILLIONS)
<S> <C> <C> <C>
Specialty............................................. $2,553 $1,987 28%
Intergroup sales and other............................ 10 -- NM
------ ------
$2,563 $1,987 29%
====== ======
</TABLE>
Packaging experienced increases in revenues from its Specialty segment of
$566 million during 1997 over 1996. This growth was primarily generated by unit
volume sales growth and revenues earned by companies acquired in 1996 and 1997.
The protective and flexible packaging businesses acquired from KNP in late April
1997, along with revenues from the Amoco Foam products business calculated
through the first anniversary of its August 1996 acquisition, contributed $491
million to this revenue growth during 1997. Unit volume sales increases,
primarily in the consumer markets and clear plastic containers, accounted for
significant revenue increases as well. Partially offsetting revenue growth from
acquisitions and volumes was lower product pricing, reflecting lower raw
material prices, which negatively impacted revenues by $53 million.
112
<PAGE> 114
Operating Income
<TABLE>
<CAPTION>
%
1997 1996 CHANGE
---- ---- ------
(MILLIONS)
<S> <C> <C> <C>
Specialty............................................... $308 $249 24%
Other................................................... (2) (15) NM
---- ----
$306 $234 31%
==== ====
</TABLE>
Packaging's higher operating income from its Specialty segment in 1997
resulted primarily from $76 million in operating income generated by the
protective and flexible packaging businesses acquired from KNP in late April
1997 and the Amoco Foam products acquisition calculated through the first
anniversary of its August 1996 acquisition. A portion of the 1997 earnings
increase from the foam products acquisition resulted from cost savings realized
by the integration of the acquired company into the Specialty segment's existing
business.
Packaging's operating loss in its "Other" segment increased in 1997
compared to 1996 before a charge of $17 million related to the acceleration of
employee benefits in connection with Tenneco's December 1996 corporate
reorganization. The increase resulted from a higher level of unallocated
administrative costs related to Packaging's administrative services operation,
which began operation in late 1996.
Operating Income as a Percentage of Revenue
Operating income as a percentage of revenue for 1997 and 1996 were as
follows:
<TABLE>
<CAPTION>
1997 1996 % CHANGE
---- ---- --------
<S> <C> <C> <C>
Specialty............................................... 12.1% 12.5% (3%)
Total................................................... 11.9% 11.8% 1%
</TABLE>
Specialty segment's operating income as a percentage of revenue contracted
from 1996 to 1997 as the growth rate of operating income was 24 percent compared
with the 28 percent growth rate of revenues. On a consolidated basis, total
operating income as a percentage of revenue expanded slightly, as the operating
income grew 31 percent while revenue grew 29 percent.
Interest Expense, net of interest capitalized
Interest expense for 1997 was $22 million or 22 percent higher than for
1996. As described above, interest expense in each period includes an allocation
of interest on Tenneco corporate debt. This allocation was based, in general, on
the ratio of Packaging's net assets to Tenneco consolidated net assets plus
debt. See Note 5 to the Combined Financial Statements of The Businesses of
Tenneco Packaging included elsewhere in this document for a further discussion
of the allocation of Tenneco consolidated debt and interest to Packaging.
Income Taxes
Packaging's effective tax rate for 1997 was 41 percent, compared to 51
percent for 1996. The 1997 and 1996 effective tax rate was higher than the
statutory rate as a result of state and local income taxes.
DISCONTINUED OPERATIONS AND EXTRAORDINARY LOSS
Discontinued operations generated income of $21 million, net of income tax
expense of $14 million, or $.12 per diluted common share, during 1997.
Discontinued operations generated income of $71 million, net of income tax
expense of $47 million, or $.42 per diluted common share, for 1996.
Income from discontinued operations in 1997 included a $38 million pre-tax
gain which resulted from the refinancing of two containerboard mill leases.
Income from the discontinued paperboard packaging
113
<PAGE> 115
business in 1996 included a $50 million pre-tax gain on the sale of certain
recycled paperboard assets to a joint venture with Caraustar Industries and a
pre-tax charge of $6 million to reorganize Packaging's folding carton
operations.
The extraordinary loss reported in 1996 of $2 million, net of an income tax
benefit of $1 million, or $.01 per diluted common share, relates to premium paid
on early retirement of debt in anticipation of the corporate reorganization
effected in the fourth quarter of 1996.
See Note 7 to the Combined Financial Statements of The Businesses of
Tenneco Packaging included elsewhere in this document for a further discussion
of discontinued operations.
EARNINGS PER SHARE
Income from continuing operations was $.63 per diluted common share in
1997, up from $.38 per diluted common share in 1996. Discontinued operations
produced income of $.12 and $.42 per diluted common share, for 1997 and 1996,
respectively. Packaging recorded the cumulative effect of a change in accounting
principle discussed above of $.23 per diluted common share, resulting in net
income of $.52 per diluted common share for 1997. Packaging also recorded an
extraordinary loss of $.01 per diluted common share in 1996, related to early
retirement of debt, resulting in net income per diluted common share of $.79.
Average shares of common stock outstanding increased slightly during 1997. For
further information regarding the calculation of earnings per share, see Note 3
to the Combined Financial Statements of The Businesses of Tenneco Packaging.
LIQUIDITY AND CAPITAL RESOURCES
Capitalization
<TABLE>
<CAPTION>
%
1997 1996 CHANGE
---- ---- ------
(MILLIONS)
<S> <C> <C> <C>
Short-term debt and current maturities................ $ 158 $ 123
Long-term debt........................................ 1,492 1,073
Debt allocated to discontinued operations............. 473 394
------ ------
Total debt.................................. 2,123 1,590 34%
Minority interest..................................... 15 -- NM
Combined equity....................................... 1,839 1,843 --
------ ------
Total capitalization........................ $3,977 $3,433 16%
====== ======
</TABLE>
Packaging's debt to capitalization ratio was 53.4 percent at December 31,
1997, compared to 46.3 percent at December 31, 1996. The increase in the ratio
is attributable to additional corporate debt allocated to Packaging from Tenneco
during 1997. See Note 5 to the Combined Financial Statements of The Businesses
of Tenneco Packaging for a further discussion of the allocation of Tenneco
consolidated debt and interest expense to Packaging.
Cash Flows
<TABLE>
<CAPTION>
1997 1996
---- ----
(MILLIONS)
<S> <C> <C>
Cash provided (used) by:
Operating activities...................................... $ 405 $ 263
Investing activities...................................... (654) (669)
Financing activities...................................... 239 399
</TABLE>
114
<PAGE> 116
Operating activities provided $405 million in 1997 and $263 million in
1996. Discontinued operations provided $110 million of the increase. Continuing
operations benefited from higher income and cash flow benefits from tax refunds
during 1997, resulting primarily from tax benefits derived from the December
1996 reorganization and debt realignment, and a 1996 tax net operating loss,
which was carried back to earlier years. These positive benefits were largely
offset by increased working capital associated with higher revenue levels and
increased cash outflows associated with the fourth quarter 1996 restructuring
initiatives.
Investing activities used $15 million less cash in 1997 than in 1996. Lower
capital expenditures for discontinued operations and lower acquisitions for both
continuing and discontinued operations were largely offset by lower proceeds
from the sale of discontinued operations.
Financing activities generated $160 million less cash in 1997 than in 1996.
Packaging retired $69 million more debt and Tenneco contributed $91 million less
cash to Packaging in 1997 than in 1996.
PRINCIPAL STOCKHOLDERS
All of the capital stock of Packaging is currently owned by Tenneco. In the
spin-off, Tenneco stockholders will receive one share of Packaging common stock
per share of Tenneco common stock. The following table provides information
about these persons that Packaging expects to own more than 5% of Packaging's
common stock upon completion of the spin-off. It is based on Packaging's
knowledge of those persons who owned more than 5% of Tenneco's common stock on
June 30, 1999.
<TABLE>
<CAPTION>
SHARES OF PACKAGING PERCENT OF EXPECTED
NAME AND ADDRESS COMMON STOCK EXPECTED OUTSTANDING PACKAGING
OF BENEFICIAL OWNER(1) TO BE OWNED(1) COMMON STOCK(1)
---------------------- --------------------- ---------------------
<S> <C> <C>
Barrow, Hanley, Mewhinney & Strauss, Inc. .......... 20,761,040(2) 12.18%(2)
One McKinney Plaza
3232 McKinney Avenue
15th Floor
Dallas, Texas 75204-2429
Morgan Stanley Dean Witter & Co. ................... 10,662,171(3) 6.26%(3)
1585 Broadway
New York, New York 10036
</TABLE>
- ---------------
(1) This information is based on information contained in filings made with the
Securities and Exchange Commission regarding the ownership of Tenneco common
stock.
(2) Barrow, Hanley, Mewhinney & Strauss, Inc. has indicated that it has sole
voting power over 4,533,840 shares of Tenneco Common Stock, shared voting
power over 16,227,200 shares of Tenneco Common Stock, and sole dispositive
power over 20,761,040 shares of Tenneco Common Stock. Barrow, Hanley also
advised Tenneco that it is a registered investment advisor and these shares
are held on behalf of various clients.
(3) Morgan Stanley Dean Witter & Co. has indicated that it has sole voting power
over 10,504,928 shares of Tenneco Common Stock.
115
<PAGE> 117
DESCRIPTION OF TENNECO AFTER THE SPIN-OFF/AUTOMOTIVE
Tenneco is a global manufacturing company whose major businesses currently
consist of Automotive and Packaging. See "Incorporation of Information by
Reference" and "Summary." Upon completion of the spin-off, Packaging will be an
independent, publicly traded company and Tenneco's remaining operations will
consist solely of Automotive. See "The Spin-off."
Automotive, with 1998 revenues of over $3.2 billion, is one of the world's
largest producers of emissions control and ride control systems and products.
The company serves both original equipment manufacturers and replacement markets
world wide through leading brands, including Monroe(R) brand ride control and
Walker(R) brand emissions control products. Automotive, on an independent basis,
would have ranked as number 457 based on revenues on the 1998 Fortune 500
listing of U.S. companies.
As an automotive parts supplier, Automotive designs, markets and sells
individual component parts for vehicles as well as groups of components that are
combined as modules or systems within vehicles. These parts, modules and systems
are sold globally to the vast majority of vehicle manufacturers and throughout
all aftermarket distribution channels.
CAPITALIZATION
The following table sets forth the unaudited historical capitalization of
Tenneco as of June 30, 1999, and the unaudited pro forma capitalization of
Tenneco as of June 30, 1999, after giving effect to the debt realignment,
spin-off and related transactions, each as if they occurred on that date. You
should read this table in conjunction with the financial statements of Tenneco
Inc. and Consolidated Subsidiaries and related notes, and Tenneco's Management's
Discussion and Analysis of Financial Condition and Results of Operations, each
included in the Tenneco Current Report on Form 8-K dated August 20, 1999. The
Form 8-K is incorporated by reference in this document. You should also read
this table in conjunction with the "Unaudited Pro Forma Consolidated Financial
Statements of Tenneco," included elsewhere in this document.
<TABLE>
<CAPTION>
TENNECO
----------------------
JUNE 30, 1999
----------------------
HISTORICAL PRO FORMA
---------- ---------
(IN MILLIONS)
<S> <C> <C>
Short-term debt, including current maturities of long-term
debt...................................................... $ 206 $ --
Long-term debt.............................................. 832 1,673(a)
Debt allocated to discontinued operations................... 1,861(b) --
------ ------
Total debt.................................................. 2,899 1,673
------ ------
Minority interest of continuing operations.................. 411 17
Minority interest of discontinued operations................ 14 --
------ ------
Total minority interest..................................... 425 17
------ ------
Shareowners' equity......................................... 2,122 659
------ ------
Total capitalization........................................ $5,446 $2,349
====== ======
</TABLE>
- ---------------
(a) Represents amounts expected to be outstanding under the new Tenneco
borrowings to be incurred in connection with the debt realignment. The pro
forma capitalization assumes that 100% of Tenneco's existing public debt
securities are either repurchased for cash or exchanged for new Packaging
debt securities in the debt realignment. Also assumes that Tenneco will not
record any extraordinary charge related to the retirement of the exchanged
securities because they are not treated as "substantially different" from
the original securities. See "Accounting Treatment of the Exchange Offers."
(b) Tenneco's historical practice has been to incur debt for its consolidated
group at the parent company level or at a limited number of subsidiaries,
rather than at the operating company level, and to centrally manage various
cash functions. Consequently, corporate debt of Tenneco has been allocated
to the net assets of Tenneco's discontinued specialty packaging segment
based on the portion of Tenneco's investment in the specialty packaging
segment which Tenneco deemed to be debt. This allocation is generally based
upon the ratio of specialty packaging's net assets to Tenneco's
consolidated net assets plus debt.
116
<PAGE> 118
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF TENNECO
The following Unaudited Pro Forma Consolidated Balance Sheet of Tenneco as
of June 30, 1999, and the Unaudited Pro Forma Consolidated Statements of Income
for the six months ended June 30, 1999 and the year ended December 31, 1998,
reflect the effects of:
- the debt realignment;
- the spin-off of Packaging and related transactions; and
- the April 1999 contribution of Packaging's containerboard assets to a new
joint venture and the June 1999 sale of Packaging's folding carton assets
(the "paperboard transactions"). These two transactions are reflected
only in the pro forma statement of income data since they were completed
before the date of the pro forma balance sheet.
The Unaudited Pro Forma Consolidated Statements of Income have been
prepared as if these transactions occurred as of January 1, 1998. The Unaudited
Pro Forma Consolidated Balance Sheet has been prepared as if the debt
realignment, spin-off and related transactions occurred on June 30, 1999. The
Unaudited Pro Forma Consolidated Financial Statements for these periods are not
necessarily indicative of the results that would have actually occurred if these
transactions had been consummated as of June 30, 1999 or January 1, 1998, or
results which may be attained in the future.
The spin-off represents the pro rata distribution of Packaging common stock
to the holders of Tenneco common stock. Consequently, no gain or loss will be
recognized as a result of the spin-off.
The pro forma adjustments, as described in the Notes to the Unaudited Pro
Forma Consolidated Financial Statements, are based upon available information
and upon certain assumptions that management believes are reasonable.
You should read the Unaudited Pro Forma Consolidated Financial Statements
in conjunction with the Financial Statements of Tenneco Inc. and Consolidated
Subsidiaries for the year ended December 31, 1998 and the six months ended June
30, 1999 contained in the Tenneco Current Report on Form 8-K dated August 20,
1999, which is incorporated by reference into this document.
117
<PAGE> 119
TENNECO
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------
SPIN-OFF CONSOLIDATED
TENNECO DEBT AND RELATED TENNECO
AS REPORTED REALIGNMENT TRANSACTIONS PRO FORMA
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments.............. $ 40 $ -- $ -- $ 40
Receivables...................................... 606 -- 100(c) 785
79 (b)
Inventories...................................... 401 -- -- 401
Other current assets............................. 129 31(a) -- 160
------ ----- ------- ------
Total current assets........................... 1,176 31 179 1,386
Plant, property, and equipment, net................ 1,049 -- -- 1,049
Goodwill and intangibles, net...................... 510 -- -- 510
Other assets and deferred charges.................. 260 41(a) (54)(h) 247
Net assets of discontinued operations.............. 1,421 -- (1,421)(d) --
------ ----- ------- ------
Total assets................................... $4,416 $ 72 $(1,296) $3,192
====== ===== ======= ======
LIABILITIES AND
SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt (including current maturities on
long-term debt)................................ $ 206 $(206)(a) $ -- $ --
Trade payables................................... 351 -- 20(c) 371
Other current liabilities........................ 287 -- -- 287
------ ----- ------- ------
Total current liabilities...................... 844 (206) 20 658
Long-term debt..................................... 832 841(a) -- 1,673
Deferred income taxes.............................. 39 -- (22)(h) 17(f)
Other liabilities and deferred credits............. 168 -- -- 168
Minority interest.................................. 411 (394)(a) -- 17
Shareowners' equity................................ 2,122 (169)(a) (1,421)(d) 659
80(c)
(32)(h)
79(b)
------ ----- ------- ------
Total liabilities and shareowners' equity...... $4,416 $ 72 $(1,296) $3,192
====== ===== ======= ======
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
118
<PAGE> 120
TENNECO
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------------------
SPIN-OFF CONSOLIDATED
TENNECO PAPERBOARD DEBT AND RELATED TENNECO
AS REPORTED TRANSACTIONS REALIGNMENT TRANSACTIONS PRO FORMA
----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Net sales and operating
revenues....................... $ 1,657 $ -- $ -- $ -- $ $1,657
Other income, net................. 8 -- -- -- 8
------------ ---- ---- ----- ------------
1,665 -- -- -- 1,665
------------ ---- ---- ----- ------------
OPERATING COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)...... 1,212 -- -- -- 1,212
Engineering, research, and
development.................... 27 -- -- -- 27
Selling, general, and
administrative................. 203 -- -- 3(h) 206
Depreciation and amortization..... 71 -- -- -- 71
------------ ---- ---- ----- ------------
1,513 -- -- 3 1,516
INCOME BEFORE INTEREST EXPENSE,
INCOME TAXES, AND MINORITY
INTEREST.......................... 152 -- -- (3) 149
Interest expense.................... 42 (15)(e) 53(g) -- 80(g)
Income tax expense.................. 44 6(i) (21)(i) (1)(i) 28
Minority interest................... 13 -- (13)(j) -- --
------------ ---- ---- ----- ------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS........................ $ 53 $ 9 $(19) $ (2) $ 41
============ ==== ==== ===== ============
EARNINGS PER SHARE
Average shares of common stock --
Basic........................ 166,937,362 166,937,362
Diluted...................... 167,319,412 167,319,412
Income from continuing
operations --
Basic........................ $.32 $.25
Diluted...................... $.32 $.25
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
119
<PAGE> 121
TENNECO
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
(MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------------------
SPIN-OFF CONSOLIDATED
TENNECO PAPERBOARD DEBT AND RELATED TENNECO
AS REPORTED TRANSACTIONS REALIGNMENT TRANSACTIONS PRO FORMA
----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Net sales and operating
revenues................... $ 3,237 $ -- $ -- $ -- $ 3,237
Other income, net............. (25) -- -- -- (25)
------------ ---- ---- ----- ------------
3,212 -- -- -- 3,212
------------ ---- ---- ----- ------------
OPERATING COSTS AND EXPENSES:
Cost of sales (exclusive of
depreciation shown
below)..................... 2,332 -- -- -- 2,332
Engineering, research, and
development................ 31 -- -- -- 31
Selling, general, and
administrative............. 472 -- -- 5(h) 477
Depreciation and
amortization............... 150 -- -- -- 150
------------ ---- ---- ----- ------------
2,985 -- 5 2,990
------------ ---- ---- ----- ------------
INCOME BEFORE INTEREST EXPENSE,
INCOME TAXES, AND MINORITY
INTEREST...................... 227 -- -- (5) 222
Interest expense................ 69 (53)(e) 145(g) -- 161(g)
Income tax expense (benefit).... 13 21(i) (58)(i) (2)(i) (26)
Minority interest............... 29 -- (29)(j) -- --
------------ ---- ---- ----- ------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS.................... $ 116 $ 32 $(58) $ (3) $ 87
============ ==== ==== ===== ============
EARNINGS PER SHARE
Average shares of common
stock --
Basic.................... 168,505,573 168,505,573
Diluted.................. 168,834,531 168,834,531
Income from continuing
operations --
Basic.................... $.69 $.52
Diluted.................. $.68 $.52
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
120
<PAGE> 122
TENNECO
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(a) To reflect adjustments to Tenneco's debt for the debt realignment and the
assumed payment of interest on Tenneco consolidated debt tendered or
exchanged as part of the pre-spin-off debt realignment. The adjustment to
equity reflects the net impact of the debt realignment, the recording of
debt issue costs and deferred income taxes related to the debt realignment.
Tenneco will acquire certain subsidiary preferred stock as part of the debt
realignment. At this time, Tenneco cannot determine the ultimate amount of
its outstanding public debt securities which will be (1) purchased in the
cash tender offers that Tenneco plans to make as part of its debt
realignment, or (2) exchanged for new securities in the exchange offers, and
the amounts could vary significantly. These pro forma adjustments assume
that 100% of the securities subject to the cash tender offers are purchased
and 100% of the original securities are exchanged for new securities. These
pro forma adjustments also assume that the new securities will be recorded
at the net carrying amount of the original securities (in other words, the
new securities are assumed not to be "substantially different;" see
"Accounting Treatment of the Exchange Offers"). The results of the exchange
offers could vary based on a number of factors, including the level of
acceptance of the exchange offers, the ultimate interest rate of the
exchanged securities and whether the exchanges will be considered
extinguishments for accounting purposes. Based on current interest rate
markets, it is expected that the exchange offers will not be extinguishments
for accounting purposes. Tenneco expects to incur an extraordinary charge as
a result of the debt realignment related to the cash tender offers. Tenneco
estimates that this cost will be approximately $20 to $25 million after-tax
based on current market rates of interest. Other costs, including
transaction costs related to the acquisition of certain subsidiary preferred
stock and costs associated with foreign tax restructuring initiatives, will
be incurred by Tenneco in connection with the corporate restructuring
transactions and the spin-off which Tenneco estimates will be approximately
$50 million after-tax. The effect on Tenneco's debt of these costs has been
reflected in this pro forma adjustment. However, these charges have not been
included in the unaudited pro forma consolidated statements of income.
(b) To reflect the purchase of Automotive accounts receivable at fair value
which had previously been sold to a third party.
(c) To reflect affiliated receivables and payables with Packaging that were
eliminated in the Tenneco consolidated balance sheet.
(d) To reflect the spin-off of Packaging common stock to holders of Tenneco
common stock at an exchange ratio of one share of Packaging common stock for
each share of Tenneco common stock.
(e) To reflect the adjustment to interest expense resulting from the use of $854
million of proceeds from (1) the contribution of the containerboard assets
of Tenneco's paperboard packaging segment to a new joint venture with an
affiliate of Madison Dearborn Partners, Inc. and (2) the sale of Tenneco's
folding carton operations. For the purpose of this pro forma adjustment, the
$854 million of Tenneco short-term debt, with an average annual effective
interest rate of 6 1/4%, was assumed to be repaid.
(f) Deferred income taxes at June 30, 1999 include $79 million of net operating
loss carryforwards which will be utilized by Packaging upon the planned sale
of Packaging's remaining interest in its containerboard joint venture.
121
<PAGE> 123
(g) To reflect the adjustment to interest expense from the allocation of Tenneco
debt to Packaging in the debt realignment as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
---------------- ------------
(IN MILLIONS)
<S> <C> <C>
Interest expense on historical debt(1).......... $(42) $(69)
Reduction of interest expense from paperboard
transactions(2)............................... 15 53
Interest expense on the new Tenneco
borrowings(3)................................. 76 153
Commitment fees and amortization of debt
financing costs(4)............................ 4 8
---- ----
Adjustment to interest expense.................. $ 53 $145
==== ====
</TABLE>
- ---------------
(1) Weighted average outstanding historical debt and average annual
effective interest rates were $985 million and 7.3%, respectively,
for the six months ended June 30, 1999 and $1,155 million and 7.0%,
respectively, for the year ended December 31, 1998.
(2) See Note (e) above.
(3) Weighted average outstanding debt and average annual effective
interest rate for the new Tenneco borrowings were assumed to be
$1,673 million and 9 1/8% for the six months ended June 30, 1999 and
the year ended December 31, 1998.
(4) Represents commitment fees on the unused borrowing capacity of the
new financing arrangements to be entered into prior to the spin-off
and the amortization of deferred debt financing costs.
A 1/8% change in the assumed interest rates would change annual pro forma
interest expense by approximately $2 million, before the effect of income
taxes.
(h) To reflect the increase in net periodic pension costs resulting from the
transfer to Packaging of prepaid pension costs attributable to Automotive
employees. Automotive employees will no longer participate in the Tenneco
Retirement Plan following the spin-off and Packaging will become the sponsor
of this plan. These prepaid pension costs will be transferred to Packaging
in connection with the corporate restructuring transactions.
(i) To reflect the income tax expense effects of pro forma adjustments at an
assumed statutory tax rate of 40%.
(j) To eliminate the minority interest related to the acquisition of subsidiary
preferred stock in connection with the debt realignment.
122
<PAGE> 124
SUPPLEMENTAL FINANCIAL INFORMATION OF TENNECO
RESULTS OF OPERATIONS
Tenneco's historical and pro forma EBIT are shown in the following table:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- ----------------
<S> <C> <C>
Historical EBIT............................................. $227 $152
Pro forma EBIT.............................................. $222 $149
</TABLE>
Tenneco has historically incurred costs at the corporate level, including
administrative services, corporate overhead, and costs related to operation as a
public company, which have not been fully allocated to the operating segments.
Because these functions will become part of Packaging following the spin-off,
the costs have been included in Packaging's historical operating results and are
not in Automotive's historical or pro forma EBIT. Automotive must be able to
obtain these functions in order to operate as a public company following the
spin-off. Before the spin-off, Automotive and Packaging will enter into a
transition services agreement under which Packaging will continue to provide
Automotive with specified administrative services for a period of time.
Additionally, Automotive's EBIT includes charges for restructuring and sales of
receivables which Tenneco believes require additional explanation. The following
information discusses these items in detail and their financial impact on
Tenneco.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- ----------------
(MILLIONS)
<S> <C> <C>
- Costs for shared services -- Packaging will own the
administrative services operations after the
spin-off. Tenneco must acquire the services from
Packaging under a transition services agreement which
Tenneco and Packaging will negotiate before the
spin-off. Had the administrative services operations
been allocated based on a usage charge, approximately
$28 million would have been billed to Automotive for
1998. ............................................... $(28) $(14)
- Public company costs -- Tenneco will not have the
benefit of corporate operations such as treasury,
corporate secretary, tax reporting, internal audit,
board of directors and other public company functions
following the spin-off. Tenneco must replace these
functions so that it can operate as a public company
following the spin-off. Tenneco estimates that had it
operated as a stand-alone, separate entity it would
have incurred additional costs for these
functions. .......................................... $(19) $ (8)
- Sale of receivables -- Tenneco's results of
operations include costs related to a receivables
sale program operated by Tenneco prior to the
spin-off. The debt realignment contemplates the
termination of this program. The pro forma financial
statements of Tenneco calculate interest on debt
balances assuming these receivables have not been
sold................................................. $ 19 $ 2
- Restructuring charge -- Tenneco recorded a
restructuring charge in the fourth quarter of 1998
for the costs of a plan designed to reduce
administrative and operational costs. Refer to Notes
to the Financial Statements of Tenneco Inc. and
Consolidated Subsidiaries incorporated into this
document by reference from Tenneco's Current Report
on Form 8-K dated August 20, 1999. .................. $ 54 $ --
</TABLE>
123
<PAGE> 125
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- ----------------
(MILLIONS)
<S> <C> <C>
- Cost savings -- The restructuring plan contemplates
closing certain facilities and terminating employees
to reduce cost of sales. Refer to Management's
Discussion and Analysis of Tenneco incorporated by
reference into this document from Tenneco's Current
Report on Form 8-K dated August 20, 1999 for further
information on the expected savings.................. $ 25 $ 6
</TABLE>
124
<PAGE> 126
TENNECO AND CONSOLIDATED SUBSIDIARIES SELECTED FINANCIAL DATA
The following consolidated selected financial data as of and for each of
the fiscal years in the five years ended December 31, 1998, were derived from
the audited financial statements of Tenneco and its consolidated subsidiaries.
The following consolidated selected financial data as of and for each of the six
months ended June 30, 1999 and 1998 were derived from Tenneco's unaudited
condensed financial statements and its consolidated subsidiaries. In the opinion
of Tenneco's management, the selected financial data of Tenneco as of and for
the six months ended June 30, 1999 and 1998, include all adjusting entries,
consisting only of normal recurring adjustments, necessary to present fairly the
information set forth. You should not regard the results of operations for the
six months ended June 30, 1999 as indicative of the results that may be expected
for the full year.
There is other information Tenneco believes is relevant to understanding
its results of operations following the spin-off. These items relate to
corporate overhead costs incurred by Tenneco and its administrative services
operations that Tenneco expects will differ following the spin-off. For further
information you should see "Supplemental Financial Information of Tenneco"
included elsewhere in this document.
You should read all of this information in conjunction with the Financial
Statements of Tenneco Inc. and Consolidated Subsidiaries for the year ended
December 31, 1998 and for the six months ended June 30, 1999, contained in the
Tenneco Current Report on Form 8-K, dated August 20, 1999. The Form 8-K is
incorporated by reference into this document.
125
<PAGE> 127
<TABLE>
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
------------------------------------------------------------------- -------------------------
1998(a) 1997(a) 1996(a) 1995 1994 1999(a) 1998(a)
------- ------- ------- ---- ---- ------- -------
(DOLLARS IN MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA(b):
Net sales and operating
revenues from continuing
operations.................. $ 3,237 $ 3,226 $ 2,980 $ 2,479 $ 1,989 $ 1,657 $ 1,664
=========== =========== =========== =========== =========== =========== ===========
Income from continuing
operations before interest
expense, income taxes, and
minority interest --
Automotive.................. $ 248 $ 407 $ 249 $ 240 $ 223 $ 156 $ 219
Other....................... (21) (12) (7) 8 7 (4) (12)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total..................... 227 395 242 248 230 152 207
Interest expense (net of
interest capitalized)(c)...... 69 58 60 44 33 42 30
Income tax expense.............. 13 80 79 91 52 44 55
Minority interest............... 29 23 21 23 -- 13 16
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from continuing
operations.................... 116 234 82 90 145 53 106
Income (loss) from discontinued
operations, net of income
tax(d)........................ 139 127 564 645 307 (111) 106
Extraordinary loss, net of
income tax(e)................. -- -- (236) -- (5) (7) --
Cumulative effect of changes in
accounting principles, net of
income tax(f)................. -- (46) -- -- (39) (134) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)............... 255 315 410 735 408 (199) 212
Preferred stock dividends....... -- -- 12 12 60 -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) to common
stock......................... $ 255 $ 315 $ 398 $ 723 $ 348 $ (199) $ 212
=========== =========== =========== =========== =========== =========== ===========
Average number of shares of
common stock outstanding
Basic....................... 168,505,573 170,264,731 169,609,373 172,764,198 162,307,189 166,937,362 169,341,555
Diluted..................... 168,834,531 170,801,636 170,526,112 173,511,654 162,912,425 167,319,412 169,936,676
Earnings (loss) per average
share of common stock --
Basic:
Continuing operations..... $ .69 $ 1.37 $ .49 $ .52 $ .90 $ .32 $ .62
Discontinued
operations(d)........... .83 .75 3.25 3.67 1.52 (.67) .63
Extraordinary loss(e)..... -- -- (1.39) -- (.03) (.04) --
Cumulative effect of
changes in accounting
principles(f)........... -- (.27) -- -- (.24) (.80) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 1.52 $ 1.85 $ 2.35 $ 4.19 $ 2.15 $ (1.19) $ 1.25
=========== =========== =========== =========== =========== =========== ===========
Diluted:
Continuing operations..... $ .68 $ 1.36 $ .49 $ .52 $ .89 $ .32 $ .62
Discontinued
operations(d)........... .83 .75 3.23 3.65 1.52 (.67) .63
Extraordinary loss(e)..... -- -- (1.38) -- (.03) (.04) --
Cumulative effect of
changes in accounting
principles(f)........... -- (.27) -- -- (.24) (.80) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 1.51 $ 1.84 $ 2.34 $ 4.17 $ 2.14 $ (1.19) $ 1.25
=========== =========== =========== =========== =========== =========== ===========
Cash dividends per common
share......................... $ 1.20 $ 1.20 $ 1.80 $ 1.60 $ 1.60 $ .60 $ .60
</TABLE>
(continued on next page)
126
<PAGE> 128
<TABLE>
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
--------------------------------------------------------- ---------------------
1998(a) 1997(a) 1996(a) 1995 1994 1999(a) 1998(a)
------- ------- ------- ---- ---- ------- -------
(Millions Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(b):
Net assets of discontinued
operations(d)........................... $ 1,739 $ 1,771 $ 1,883 $ 1,469 $ 700 $ 1,421 $ 1,793
Total assets.............................. 4,759 4,682 4,653 3,635 2,315 4,416 4,829
Short-term debt(c)........................ 304 75 74 109 31 206 168
Long-term debt(c)......................... 671 713 639 469 303 832 747
Debt allocated to discontinued
operations(c)........................... 2,456 2,123 1,590 1,454 813 1,861 2,302
Minority interest......................... 407 408 304 301 301 411 407
Shareowners' equity....................... 2,504 2,528 2,646 3,148 2,900 2,122 2,559
STATEMENT OF CASH FLOWS DATA(b)
Net cash provided (used) by operating
activities.............................. $ 532 $ 519 $ 253 $ 1,443 $ 450 $ (181) $ 178
Net cash used by investing activities..... (754) (887) (685) (1,162) (113) (976) (314)
Net cash provided (used) by financing
activities.............................. 216 354 147 (356) (151) 1,170 125
Capital expenditures for continuing
operations.............................. (195) (221) (188) (208) (114) (70) (80)
OTHER DATA:
EBITDA(g)................................. $ 377 $ 505 $ 336 $ 331 $ 282 $ 223 $ 279
Ratio of earnings to fixed charges(h)..... 2.16 4.80 2.33 2.62 5.36 2.28 3.82
</TABLE>
- -------------------------
NOTE: The Financial Statements of Tenneco Inc. and Consolidated Subsidiaries
discussed in the following notes are included in and incorporated by reference
from the Tenneco Current Report on Form 8-K dated August 20, 1999. They cover
the three years ended December 31, 1998 and the six months ended June 30, 1999
and 1998.
(a) For a discussion of the significant items affecting comparability of the
financial information for the years ended 1998, 1997, and 1996, and for the
six months ended June 30, 1999 and 1998, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in
Tenneco's Current Report on Form 8-K dated August 20, 1999.
(b) During the periods presented, Tenneco completed numerous acquisitions. The
most significant acquisition was Automotive's acquisition of Clevite for
$328 million in July 1996. See Notes to the Financial Statements of Tenneco
Inc. and Consolidated Subsidiaries for additional information. See also
"Description of Tenneco After the Spin-off/Automotive -- Strategic
Acquisitions and Alliances" included elsewhere in this document.
(c) Debt amounts for 1998, 1997, and 1996, and for June 30, 1998, are net of
allocations of corporate debt to the net assets of Tenneco's discontinued
specialty packaging and paperboard packaging segments. Debt amounts for June
30, 1999, are net of allocations of corporate debt to the net assets of
Tenneco's discontinued specialty packaging segment. Debt amounts for 1995
and 1994 are net of allocations of corporate debt to the net assets of
Tenneco's discontinued specialty packaging, paperboard packaging, energy,
and shipbuilding segments. Interest expense for periods presented is net of
interest expense allocated to income from discontinued operations. These
allocations of debt and related interest expense are based on the ratio of
Tenneco's investment in the specialty packaging, paperboard packaging,
energy, and shipbuilding segments' respective net assets to Tenneco
consolidated net assets plus debt. See Notes to the Financial Statements of
Tenneco Inc. and Consolidated Subsidiaries for additional information.
(d) Discontinued operations reflected in the above periods consist of Tenneco's
(1) specialty packaging segment, which was discontinued in August 1999, (2)
paperboard packaging segment, which was discontinued in June 1999, (3)
energy and shipbuilding segments, which were discontinued in December 1996,
(4) farm and construction equipment segment, which was discontinued in March
1996, and (5) chemicals and brakes operations, which were discontinued
during 1994. See Notes to the Financial Statements of Tenneco Inc. and
Consolidated Subsidiaries for additional information.
(e) Represents Tenneco's costs related to prepayment of debt, including the 1996
loss recognized in the realignment of Tenneco's debt preceding its 1996
corporate reorganization and the 1999 loss recognized in connection with the
contribution of the containerboard assets to a new joint venture. See the
Notes to the Financial Statements of Tenneco Inc. and Consolidated
Subsidiaries.
(f) In 1999, Tenneco implemented the American Institute of Certified Public
Accountants Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities." In addition, effective January 1, 1999, Tenneco changed its
method of accounting for customer acquisition costs from a deferred method
to an expense-as-incurred method. In 1997, Tenneco implemented the Financial
Accounting Standards Board's Emerging Issues Task Force Issue 97-13,
"Accounting for Costs Incurred in Connection with a Consulting Contract that
Combines Business Process Reengineering and Information Technology
Transformation." In 1994, Tenneco adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits." See
the Notes to the Financial Statements of Tenneco Inc. and Consolidated
Subsidiaries for additional information regarding changes in accounting
principles.
(g) EBITDA represents income from continuing operations before interest expense,
income taxes, minority interest and depreciation and amortization. EBITDA is
not a calculation based upon generally accepted accounting principles. The
amounts included in the EBITDA calculation, however, are derived from
amounts included in the historical statements of income data. In addition,
(continued on next page)
127
<PAGE> 129
EBITDA should not be considered as an alternative to net income or operating
income as an indicator of the operating performance of Tenneco, or as an
alternative to operating cash flows as a measure of liquidity. Tenneco has
reported EBITDA because it believes EBITDA is a measure commonly reported and
widely used by investors and other interested parties as an indicator of a
company's ability to incur and service debt. Tenneco believes EBITDA assists
investors in comparing a company's performance on a consistent basis without
regard to depreciation and amortization, which can vary significantly
depending upon accounting methods, particularly when acquisitions are
involved, or nonoperating factors. However, the EBITDA measure presented in
this document may not always be comparable to similarly titled measures
reported by other companies due to differences in the components of the
calculation.
(h) For purposes of computing this ratio, earnings generally consist of income
from continuing operations before income taxes and fixed charges, excluding
capitalized interest. Fixed charges consist of interest expense, the portion
of rental expense considered representative of the interest factor and
capitalized interest. For purposes of computing these ratios, preferred
stock dividends have been included in the calculations on a pre-tax basis.
128
<PAGE> 130
OVERVIEW OF AUTOMOTIVE PARTS INDUSTRY
The automotive parts industry is generally separated into two categories:
(1) "original equipment" or "OE" sales, in which parts are sold in large
quantities directly to original equipment vehicle manufacturers; and (2)
"aftermarket" sales, in which parts are sold as replacement parts in varying
quantities to a wide range of wholesalers, retailers and installers. In the OE
market, parts suppliers are generally divided into tiers -- "Tier 1" suppliers,
who provide their products directly to original equipment manufacturers, and
"Tier 2" or "Tier 3" suppliers, who sell their products principally to other
suppliers for combinations into the other suppliers' own product offerings.
Demand for automotive parts in the OE market is driven by the number of new
vehicle sales, which in turn is largely determined by prevailing economic
conditions. Although OE demand is tied to planned vehicle production, parts
suppliers also have the opportunity to grow through increasing product content
and customer and market penetration. Companies with global presence in advanced
technology, engineering, manufacturing and support capabilities, such as
Automotive, are in the best position to take advantage of these opportunities.
Demand for aftermarket products is fundamentally driven by the quality of
OE parts, the number of vehicles in operation, the average age of the vehicle
fleet and vehicle usage. Innovative aftermarket products that upgrade the
performance or safety of an automobile's original parts, as several of
Automotive's products do, can also drive aftermarket demand.
ANALYSIS OF AUTOMOTIVE'S REVENUES
The following table provides for each of the years 1996 through 1998, and
for the six months ended June 30, 1999, information relating to Automotive's net
sales, by primary product lines and markets:
<TABLE>
<CAPTION>
NET SALES (MILLIONS)
-------------------------------------------
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------
JUNE 30, 1999 1998 1997 1996
------------- ---- ---- ----
<S> <C> <C> <C> <C>
EMISSIONS CONTROL SYSTEMS & PRODUCTS
Aftermarket............................. $ 268 $ 590 $ 686 $ 710
OE Market............................... 696 1,224 1,067 989
------ ------ ------ ------
964 1,814 1,753 1,699
------ ------ ------ ------
RIDE CONTROL SYSTEMS & PRODUCTS
Aftermarket............................. 316 685 782 768
OE Market............................... 377 738 691 513
------ ------ ------ ------
693 1,423 1,473 1,281
------ ------ ------ ------
Total Automotive................... $1,657 $3,237 $3,226 $2,980
====== ====== ====== ======
</TABLE>
CUSTOMERS
Automotive has developed long-standing business relationships with its
customers around the world. It works together with its customers in all stages
of production, including design, development, component sourcing, quality
assurance, manufacturing and delivery. With a balanced mix of OE and aftermarket
products and facilities in major markets worldwide, Automotive is
well-positioned to meet customer needs. Automotive has a strong, established
reputation with its customers for providing high-quality products at competitive
prices, as well as for timely delivery and customer service.
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<PAGE> 131
Automotive serves more than 25 different original equipment manufacturers
on a global basis, and its products or systems are included on six of the 10 top
passenger car models and eight of the 10 top light truck models produced
globally in 1998. Automotive's current OE customers include:
<TABLE>
<S> <C> <C>
NORTH AMERICA EUROPE INDIA
CAMI BMW Maruti Suzuki
DaimlerChrysler DaimlerChrysler TELCO
Ford DAF Bajaj
Freightliner Daihatsu
General Motors Fiat AUSTRALIA
Honda Ford Ford
Mazda Jaguar General Motors/Holden
Mitsubishi Lada Mitsubishi
Navistar Leyland Toyota
Nissan Mitsubishi
NUMMI Nissan JAPAN
Toyota Opel Mazda
Volkswagen Peugeot/Citroen Nissan
Porsche Suzuki
SOUTH AMERICA Renault/Matra Toyota
DaimlerChrysler Rover/Land Rover
Fiat Saab/Scania CHINA
Ford Toyota DaimlerChrysler
General Motors Volkswagen/Audi/SEAT/Skoda Citroen
Honda Volvo Ford
Renault Toyota
Toyota Volkswagen
Volkswagen
THAILAND
General Motors
Isuzu
</TABLE>
Automotive's aftermarket customers are comprised of full-line and specialty
warehouse distributors, retailers, installer chains, car dealers and jobbers --
which are traditional automotive parts stores that have historically sold
primarily to installers. These customers include such wholesalers and retailers
as National Auto Parts Association, Monro Muffler and Brake, and Advance Auto
Parts in North America and Temot, Autodistribution International and Kwik-Fit in
Europe. Automotive has a balanced mix of aftermarket customers, with its top 10
aftermarket customers accounting for less than 11% of Automotive's total net
sales.
The loss of a principal customer or a material decline in the requirements
for Automotive's products from a principal customer, resulting, for example,
from a prolonged strike against the customer, could have a material adverse
effect on the operating results or financial condition of Automotive. For each
of the last three years, less than five customers individually accounted for 5%
or more of Automotive's revenues. For example, Ford accounted for about 11.5%,
13.2% and 12.8% of Automotive's net sales in 1996, 1997 and 1998, and
DaimlerChrysler accounted for about 9.6%, 8.9% and 10.9% of Automotive's net
sales in 1996, 1997 and 1998, respectively. No other customer accounted for more
than 10% of Automotive's revenues for those years.
COMPETITION
Automotive operates in highly competitive markets. Customer loyalty is a
key element of competition in these markets and is developed through
long-standing relationships, customer service, value-added products and timely
delivery. Product pricing and services provided are other important competitive
factors.
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In both the OE market and aftermarket, Automotive competes with the vehicle
manufacturers, some of which are also customers of Automotive, and numerous
independent suppliers. In the OE market, Automotive believes that it is among
the top three suppliers in the world for both emissions control and ride control
products and systems. In the aftermarket, Automotive believes that it is the
market share leader in the supply of both emissions control and ride control
products in the world.
EMISSIONS CONTROL SYSTEMS
Vehicle emissions control products and systems play a critical role in
safely conveying noxious exhaust gases away from the passenger compartment,
reducing the level of pollutants and engine exhaust noise to an acceptable
level. Precise engineering of the exhaust system -- from the manifold that
connects an engine's exhaust ports to an exhaust pipe, to the catalytic
converter that eliminates pollutants from the exhaust, to the muffler -- leads
to a pleasant, tuned engine sound, reduced pollutants and optimized engine
performance.
Automotive designs, manufactures and distributes a variety of automotive
emissions control systems, which include components such as:
- mufflers;
- resonators -- help the muffler eliminate noise;
- catalytic converters -- devices used to convert harmful gaseous
emissions, such as carbon monoxide, from a vehicle's exhaust system into
harmless components such as water vapor and carbon dioxide;
- fabricated exhaust manifolds -- made of sheet metal or tubes and collect
gases from individual cylinders of a vehicle's engine and direct them
into a single exhaust pipe;
- pipes -- connect various parts of an exhaust system;
- hydroformed tubing -- forms into various geometric shapes, such as
Y-pipes or T-pipes, and provide flexibility in design; and
- electronic noise cancellation products.
Automotive entered this product line in 1967 with the acquisition of Walker
Manufacturing Company, which was founded in 1888. When the term "Walker" is used
in this document, it refers to the affiliates of Automotive that produce
emissions control products and systems.
Walker supplies emissions control products used in six of the 10 top
passenger car models and five of the 10 top light truck models produced globally
for 1998. With the acquisition of Heinrich Gillet GmbH & Co. in 1994, Walker
also became one of Europe's leading OE emissions control systems suppliers.
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<PAGE> 133
The following table provides for each of the years 1996 through 1998, and
for the six months ended June 30, 1999, information relating to Automotive's
sales of emissions control systems:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
------------------------------------------
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------
JUNE 30, 1999 1998 1997 1996
------------- ---- ---- ----
<S> <C> <C> <C> <C>
UNITED STATES MARKET
Aftermarket............................ 30% 37% 43% 46%
OE Market.............................. 70% 63% 57% 54%
---- ---- ---- ----
100% 100% 100% 100%
==== ==== ==== ====
FOREIGN SALES
Aftermarket............................ 27% 30% 36% 38%
OE Market.............................. 73% 70% 64% 62%
---- ---- ---- ----
100% 100% 100% 100%
==== ==== ==== ====
TOTAL SALES BY GEOGRAPHIC AREA
United States.......................... 39% 41% 44% 44%
European Union......................... 45% 44% 41% 43%
Canada................................. 8% 7% 7% 6%
Other areas............................ 8% 8% 8% 7%
---- ---- ---- ----
100% 100% 100% 100%
==== ==== ==== ====
</TABLE>
RIDE CONTROL SYSTEMS
Superior ride control is governed by a vehicle's suspension system,
including its shock absorbers and struts. Shock absorbers and struts help
maintain vertical loads placed on a vehicle's tires to help keep the tires in
contact with the road. A vehicle's ability to steer, brake and accelerate
depends on the contact between the vehicle's tires and the road. Worn shocks and
struts can allow excess weight transfer from side to side, which is called
"roll," from front to rear, which is called "pitch," and up and down, which is
called "bounce." Variations in tire-to-road contact can affect a vehicle's
handling and braking performance and the safe operation of a vehicle. Shock
absorbers are designed to control vertical loads placed on tires by providing
resistance to vehicle roll, pitch and bounce. Thus, by maintaining the
tire-to-road contact, ride control products are designed to function as safety
components of a vehicle, in addition to providing a comfortable ride.
Automotive designs, manufactures and distributes a variety of ride control
products and systems. Its ride control offerings include:
- shock absorbers;
- struts;
- electronically adjustable suspension systems that change performance
based on inputs like steering and braking;
- vibration control components, including rubber-like bushings and
mountings that reduce vibration between metal parts of a vehicle;
- springs; and
- modular assemblies which are combinations of parts that are provided to
customers as a unit.
Automotive manufactures and markets replacement shock absorbers for
virtually all North American, European and Asian makes of automobiles. In
addition, Automotive manufactures and markets shock absorbers and struts for use
on passenger cars and trucks, as well as for other uses such as exercise and
recreational equipment. Monroe supplies ride control products used in three of
the 10 top passenger car models and seven of the 10 top light truck models
produced globally for 1998. Automotive entered the ride control product line in
1977 with the acquisition of Monroe Auto Equipment, which was founded in 1916
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<PAGE> 134
and introduced the world's first automotive shock absorber in 1926. When the
term "Monroe" is used in this document it refers to the affiliates of Automotive
that produce ride control products and systems.
The following table provides for each of the years 1996 through 1998, and
for the six months ended June 30, 1999, information relating to Automotive's
sales of ride control equipment:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
------------------------------------------
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------
JUNE 30, 1999 1998 1997 1996
------------- ---- ---- ----
<S> <C> <C> <C> <C>
UNITED STATES MARKET
Aftermarket............................ 40% 43% 50% 62%
OE Market.............................. 60% 57% 50% 38%
---- ---- ---- ----
100% 100% 100% 100%
==== ==== ==== ====
FOREIGN SALES
Aftermarket............................ 51% 53% 56% 59%
OE Market.............................. 49% 47% 44% 41%
---- ---- ---- ----
100% 100% 100% 100%
==== ==== ==== ====
TOTAL SALES BY GEOGRAPHIC AREA
United States.......................... 50% 47% 48% 48%
European Union......................... 29% 32% 27% 34%
Canada................................. 5% 3% 3% 3%
Other areas............................ 16% 18% 22% 15%
---- ---- ---- ----
100% 100% 100% 100%
==== ==== ==== ====
</TABLE>
SALES AND MARKETING
Automotive sells directly to original equipment manufacturers. To maintain
its customer focus, Automotive's OE sales force is organized into
customer-dedicated teams. These sales teams service the original equipment
manufacturers at a regional facility level, with global coordination and support
from Automotive's headquarters.
For the aftermarket, Automotive uses a dedicated sales force and consumer
brand marketing professionals to sell and market its products. This group
provides extensive marketing support to aftermarket customers, including trade
and consumer marketing, promotions and general advertising. Automotive maintains
an aftermarket customer order fill rate of 95%, which reflects the percentage of
the average customer order Automotive is able to fill from inventory. Automotive
sells its aftermarket products through five primary channels of distribution:
(1) the traditional three-step distribution system: full-line warehouse
distributors, jobbers and installers; (2) the specialty two-step distribution
system: specialty warehouse distributors that carry only specified automotive
product groups and installers; (3) direct sales to retailers; (4) direct sales
to installer chains; and (5) direct sales to car dealers.
MANUFACTURING AND ENGINEERING
Automotive uses state-of-the-art manufacturing to achieve superior product
quality at the lowest operating costs possible. Automotive's manufacturing
strategy centers on a lean production system that reduces overall
costs -- especially indirect costs -- while maintaining quality standards and
reducing manufacturing cycle time. Automotive deploys new technology where it
makes sense to differentiate its processes from its competitors' or to achieve
balance in one piece flow-through production lines.
EMISSIONS CONTROL
Walker operates 11 manufacturing facilities in the U.S. and six engineering
and technical facilities worldwide. Walker also operates 32 manufacturing
facilities outside of the U.S. and has a controlling
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<PAGE> 135
interest in six joint ventures that own manufacturing facilities in China,
Germany, India, and Sweden. See "-- Properties."
Walker attempts to locate original equipment manufacturing facilities close
to its OE customers to provide products on demand, or "just-in-time." Eleven of
Walker's plants are just-in-time facilities.
During the 1990's, Walker expanded its converter and emission system
design, development, test and manufacturing capabilities. Walker's engineering
capabilities now include advanced predictive design tools, advanced prototyping
processes and state-of-the-art testing equipment. This expanded technological
capability makes Walker a "full system" integrator, supplying complete emissions
control systems from the manifold to the tailpipe, to provide full emission and
noise control. It also allows Walker to provide just-in-time delivery and, when
feasible, sequence delivery of emissions control systems to meet customer
production requirements.
RIDE CONTROL
Monroe operates seven manufacturing facilities in the U.S. and ten
engineering and technical facilities worldwide. Monroe also operates 16
manufacturing facilities outside of the U.S. and has a controlling interest in
three joint ventures that own manufacturing facilities in China and India.
Monroe is attempting to locate original equipment manufacturing facilities close
to customers to provide products on demand, or just-in-time. See
"-- Properties."
In designing its shock absorbers and struts, Monroe uses advanced
engineering and test capabilities to provide product reliability, endurance and
performance. Monroe's engineering capabilities feature advanced computer-aided
design equipment and testing facilities. Monroe's dedication to innovative
solutions has led to such technological advances as:
- adaptive damping systems -- adapts to the vehicle's motion to better
control undesirable vehicle motions;
- electronically adjustable suspensions -- changes suspension performance
based on a variety of inputs such as steering, braking, vehicle height,
and velocity; and
- air leveling systems -- manually or automatically adjust the height of
the vehicle.
Conventional shock absorbers and struts generally compromise either ride comfort
or vehicle control. Monroe's innovative grooved-tube, gas-charged shock
absorbers and struts provide both ride comfort and vehicle control, resulting in
improved handling, less roll, reduced vibration and a wider range of vehicle
control. This technology can be found in Monroe's premium quality Sensa-Trac(R)
shock absorbers. In late 1997, Monroe further enhanced this technology by adding
the Safe-Tech(TM) fluon banded piston, which improves shock absorber performance
and durability.
INDUSTRY TRENDS
Currently, several significant existing and emerging trends are
dramatically reshaping the automotive industry. As the dynamics of the
automotive industry change, so do the roles, responsibilities and relationships
of its participants. Key trends that Automotive believes are affecting
automotive parts suppliers include:
CUSTOMER AND SUPPLIER CONSOLIDATION
The customer base for automotive parts is consolidating in both the OE
market and aftermarket. Because of recent business combinations among vehicle
manufacturers -- such as the DaimlerChrysler merger and Ford's acquisition of
Volvo -- and in the aftermarket -- such as AutoZone's acquisition of Chief Auto
Parts and CSK Auto's acquisition of Big Wheel/Rossi -- suppliers are competing
for the business of fewer customers. The cost focus of these major customers is
causing suppliers to reduce prices.
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<PAGE> 136
Consolidation is also occurring among automotive parts suppliers,
particularly those who supply vehicle makers. The approximate number of Tier 1
suppliers is projected to decrease from 1,500 to 600 between 1998 and 2005. The
primary reasons for this consolidation include: (1) an increasing desire by
original equipment manufacturers to work with fewer, larger suppliers that can
provide fully-integrated systems; and (2) the inability of smaller suppliers to
compete on price with the larger companies who benefit from purchasing and
distribution economies of scale. A supplier's viability in this consolidating
market depends, in part, on its continuing ability to maintain and increase
operating efficiencies by reducing costs and improving productivity. Also
important is a supplier's ability to provide value-added services such as
materials management, specialized engineering capabilities and integration of
individual components into modules and systems. With its strong market positions
in emissions control and ride control products and its demonstrated ability to
integrate and deliver modules and systems, Automotive is well-positioned to
respond to increasing customer consolidation.
INCREASED OE OUTSOURCING AND DEMAND FOR FULL-SYSTEM INTEGRATION BY
SUPPLIERS
Original equipment manufacturers are moving towards outsourcing automotive
parts and systems to simplify the vehicle assembly process, lower costs and
reduce vehicle development time. Outsourcing allows original equipment
manufacturers to take advantage of the lower cost structure of the automotive
parts suppliers and to benefit from multiple suppliers engaging in simultaneous
development efforts. Development of advanced electronics has enabled formerly
independent vehicle components to become "interactive," leading to a shift in
demand from individual parts to fully-integrated systems. As a result,
automotive parts suppliers offer original equipment manufacturers component
products individually, as well as in a variety of integrated forms such as
modules and systems:
- "Modules" are groups of component parts arranged in close physical
proximity to each other within a vehicle. Modules are often assembled by
the supplier and shipped to the original equipment manufacturer for
installation in a vehicle as a unit. Seats, instrument panels, axles and
door panels are examples.
- "Systems" are groups of component parts located throughout a vehicle
which operate together to provide a specific vehicle function. Anti-lock
braking systems, safety restraint systems, emissions control and power
train systems are examples.
This shift in demand towards fully-integrated systems has created the role of
the Tier 1 systems integrator. These systems integrators will increasingly have
the responsibility to execute a number of activities, such as design, product
development, engineering, testing of component systems and purchasing from Tier
2 suppliers. Automotive is an established Tier 1 supplier with ten years of
product integration experience. Automotive has modules or systems for 25 vehicle
platforms in production worldwide and modules or systems for three additional
platforms under development. For example, Automotive supplies ride control
modules for the Chrysler JA Cirrus/Stratus/Breeze and the emissions control
system for the Porsche Boxster.
GLOBALIZATION OF THE AUTOMOTIVE INDUSTRY
Original equipment manufacturers are increasingly requiring suppliers to
provide parts on a global basis. As the customer base of original equipment
manufacturers changes, and emerging markets become more important to achieving
growth, suppliers must be prepared to provide products any place in the world.
This requires a worldwide approach to supply chain management, engineering,
sales and distribution:
- Growing Importance of Emerging Markets. Because the North American and
Western European automotive markets are relatively mature, original
equipment manufacturers are increasingly focusing on emerging markets for
growth opportunities, particularly China, Eastern Europe, India and Latin
America. This increased OE focus has, in turn, increased the growth
opportunities in the aftermarkets in these regions.
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<PAGE> 137
- Governmental Tariffs and Local Parts Requirements. Many governments
around the world require that vehicles sold within their country contain
specified percentages of locally produced parts. Additionally, some
governments place high tariffs on imported parts.
- Location of Production Closer to End Markets. Original equipment
manufacturers and parts suppliers have relocated production globally on
an "on-site" basis that is closer to end markets. This international
expansion allows suppliers to pursue sales in developing markets and take
advantage of relatively lower labor costs.
With facilities around the world, including the key regions of North America,
South America, Europe and Asia, Automotive can supply its customers on a global
basis.
GLOBAL RATIONALIZATION OF OE VEHICLE PLATFORMS
Original equipment manufacturers are increasingly designing "global"
platforms. A "global" platform is a basic mechanical structure of a vehicle that
can accommodate different features and is in production and/or development in
two or more regions. Thus, original equipment manufacturers can design one
platform for a number of similar vehicle models. This allows manufacturers to
realize significant economies of scale through limiting variations across items
such as steering columns, brake systems, transmissions, axles, exhaust systems,
support structures and power window and door lock mechanisms. Automotive
believes that this shift towards standardization will have a large impact on
automotive parts suppliers, who should experience a reduction in production
costs as original equipment manufacturers reduce variations in components.
Automotive also expects parts suppliers to experience higher production volumes
per unit and greater economies of scale, as well as reduced total investment
costs for molds, dies and prototype development. Automotive currently works with
original equipment manufacturers on 33 "global" platforms.
INCREASING ELECTRONIC COMPONENTS AND TECHNOLOGICAL INNOVATION
As consumers continue to demand competitively priced vehicles with
increased performance and functionality, the number of electronic components
utilized in vehicles is increasing. By replacing mechanical functions with
electronics and by integrating mechanical and electronic functions within a
vehicle, original equipment manufacturers are achieving improved emissions
control, improved safety and more sophisticated features at lower costs.
In addition, automotive parts customers are increasingly demanding
technological innovation from suppliers to address more stringent emissions and
other regulatory standards and to improve vehicle performance. To continue
developing innovative products, systems and modules, Automotive maintains 16
research and development facilities and has entered into several strategic
alliances focused on advanced technology designs. For example, Automotive has
developed several adaptive damping systems which reduce undesirable vehicle
motion. Also, Automotive has developed the self-lubricating elastomer, which has
the additional ability to reduce friction between moving components in a
suspension-system thereby reducing noise and vibration.
INCREASING ENVIRONMENTAL STANDARDS
Automotive parts suppliers and original equipment manufacturers are
designing products and developing materials to comply with increasingly
stringent environmental requirements. Government regulations adopted over the
past decade require substantial reductions in automobile tailpipe emissions,
longer warranties on parts of an automobile's pollution-control equipment and
additional equipment to control fuel-vapor emissions. Some of these regulations
also mandate more frequent emissions and safety inspections for the existing
fleet of vehicles. Manufacturers have responded by focusing their efforts
towards technological development to minimize pollution. As a leading supplier
of emissions control systems with strong technical capabilities, Automotive is
well-positioned to benefit from more rigorous environmental standards.
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EXTENDED PRODUCT LIFE OF AUTOMOTIVE PARTS
The average useful life of automotive parts -- both OE and
replacement -- has been steadily increasing in recent years due to innovations
in products and technologies. The longer product lives allow vehicle owners to
replace parts of their vehicles less often. As a result, a portion of sales in
the aftermarket has been displaced. Accordingly, a supplier's future viability
in the aftermarket will depend, in part, on its ability to reduce costs and
leverage its advanced technology and recognized brand names to maintain or
achieve additional sales. As a Tier 1 OE supplier, Automotive is well-positioned
to leverage its products and technology into the aftermarket. Furthermore, an
opportunity exists for replacement of automobile parts to increase as the
average age of vehicles on the road increases. For example, from 1990 to 1997
the average age of cars in the U.S. increased from 7.8 to 8.7 years.
GROWING RETAIL AFTERMARKET DISTRIBUTION
During the last decade, the number of retail automotive parts chains, such
as AutoZone and Advance Auto Parts, has been growing while the number of
traditional automotive parts stores that sell to installers ("jobbers") has been
declining. Since 1990, the number of retail automotive parts stores has
increased from approximately 10,000 to approximately 14,000, while the number of
jobbers has decreased from approximately 25,000 to approximately 21,000. In
addition, since retailers are attempting to grow their commercial sales to
automotive parts installers, they are increasingly adding premium brands to
their product portfolios. This enables them to offer the option of a premium
brand, which is often preferred by their commercial customers, or a standard
product, which is often preferred by their retail customers. Automotive is
well-positioned to respond to this changing aftermarket situation because of its
focus on cost reduction and high-quality, premium brands.
BUSINESS STRATEGY
Automotive's objective is to enhance profitability by leveraging its global
position in the manufacture of emissions control and ride control products and
systems. Automotive intends to apply its competitive strengths and balanced mix
of products, markets, customers and distribution channels to capitalize on many
of the significant existing and emerging trends in the automotive industry. The
key components of Automotive's business strategy are described below.
"OWN" THE PRODUCT LIFE CYCLE
Using its global engineering capabilities and its advanced technology
position, Automotive is pursuing opportunities to design unique, value-added
products for vehicle manufacturers that yield higher margins in the OE market.
Automotive expects to take advantage of its OE technology investments by moving
these differentiated products into the aftermarket, where they should continue
to generate future revenue streams through the entire life of the vehicle.
Innovative products such as Sensa-Trac(R) shocks and Quiet-Flow(TM) mufflers are
examples of where Automotive's market balance between OE and aftermarket sales
allows Automotive to leverage its cost structure over the entire product life
cycle.
DEVELOP AND COMMERCIALIZE INNOVATIVE, VALUE-ADDED PRODUCTS
Automotive intends to continue to focus on the development of highly
engineered systems and complex assemblies and modules which provide value-added
solutions to customers and generally carry higher profit margins than
individualized components. Furthermore, Automotive intends to expand its product
lines by continuing to identify and fill new fast-growing niche markets, by
developing new products for existing markets, by acquiring companies with
product portfolios that complement the products currently supplied by Automotive
and by establishing strategic alliances with other suppliers.
One example of Automotive's focus on innovation is its acquisition in early
1999 of Kinetic Ltd., an Australian advanced suspension engineering company with
advanced roll-control technology. This technology also provides enhanced on-road
handling while improving off road performance. In addition, in an effort to
further enhance its electronic competencies Automotive entered into an agreement
with
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Siemens Automotive S.A. in late 1998 to cooperate in the development and
commercialization of advanced electronically controlled ride control and
suspension technologies. Also in late 1998, Automotive reached an agreement with
Ohlins Racing A.B. to jointly develop advanced, electronically controlled
suspension damping systems which decrease spring movement.
LEVERAGE AFTERMARKET BRAND NAMES
Automotive manufactures and markets leading brand-name products. Monroe(R)
ride control products and Walker(R) emissions control products, which have been
offered to consumers for over 50 years, are two of the most recognized
brand-name products in the automotive parts industry. Automotive continues to
emphasize product value differentiation with these brands and its other primary
brands, including:
- the Monroe Sensa-Trac(R) line of shock absorbers, that has been enhanced
by the Safe-Tech(TM) system technology which incorporates a fluon banded
piston to improve performance and durability;
- Walker's Quiet-Flow(TM) muffler, which features an open-flow design that
increases exhaust flow, improves sound quality and significantly reduces
exhaust backpressure when compared to other replacement mufflers;
- Rancho(R) ride control products for the high-performance light truck
market;
- DynoMax(R) high-performance emissions control systems;
- Walker Perfection(TM) catalytic converters;
- Clevite(TM) elastomeric vibration control components, which are primarily
rubber products used to reduce vibration through "cushioning" a
connection or contact point; and
- in European markets, Walker(R) and Aluminox(TM) mufflers.
Automotive is also capitalizing on its brand strength by incorporating
newly acquired product lines within existing product families. Automotive's
brand equity is a key asset in a time of customer consolidation and merging
channels of distribution.
DIVERSIFY END-MARKETS
One of Automotive's goals is to apply its existing design, marketing and
manufacturing capabilities to produce products for a variety of adjacent
markets. Automotive believes that these capabilities could be used for heavy
duty vehicle and industrial applications, various recreational vehicles,
scooters and bicycles. Automotive expects that expanding into markets other than
automotive parts will allow it to capitalize on its advancing technical and
manufacturing infrastructure to achieve growth in higher margin businesses.
EXPAND FULL-SYSTEM CAPABILITIES
The automotive parts industry is encountering a consolidation of parts
suppliers, as original equipment manufacturers require suppliers to provide
design assistance and innovation and full-system capabilities rather than just
specific parts. In response to this trend, Automotive has developed integrated,
electronically linked global engineering and manufacturing facilities to
maintain its presence on top selling vehicles. Automotive has over 10 years of
experience as an integrator of systems and modules. Automotive is currently
supplying modules or systems for 25 vehicle platforms worldwide and has modules
or systems for three additional platforms under development. Automotive also
plans to continue to dedicate more resources towards strengthening technical
capability and design expertise and to pursue appropriate strategic
acquisitions, joint ventures, strategic alliances and cooperative development
agreements to increase its ability to deliver full-system capabilities.
MAINTAIN OPERATING COST LEADERSHIP
Automotive intends to continue to reduce costs by:
- standardizing its products and processes throughout its operations;
- further developing its global supply chain management capabilities;
- improving its information technology;
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- increasing efficiency through employee training;
- investing in more efficient machinery; and
- enhancing the global coordination of costing and quoting procedures.
In the fourth quarter of 1998, Automotive began a restructuring designed to
reduce administrative and operational overhead costs. The largest part of the
$53 million pre-tax restructuring charge which was recorded in income from
continuing operations related to the restructuring of its North American
aftermarket operations. The operational restructuring, designed to better match
Automotive's capacity to market demand, involves closing two plant locations and
five distribution centers, with the elimination of 302 positions at those
locations. Automotive expects to complete this by mid-2000. The administrative
restructuring involves the reduction of approximately 450 administrative staff
positions. Automotive is also considering a supplemental restructuring plan. See
"Summary -- Recent Developments -- Automotive." Automotive expects to complete
this by the end of 1999.
Automotive has also adopted Business Operating System as a disciplined
system to promote and manage continuous improvement. BOS focuses on the assembly
and analysis of data for quick and effective problem resolution to create more
efficient and profitable operations.
Automotive has also adopted a management process of measuring the economic
value of its operations to help ensure returns exceed capital costs. Automotive
is planning to link the successful application of this management discipline to
its incentive compensation program.
EXECUTE FOCUSED ACQUISITIONS AND ALLIANCES
In the past, Automotive has been successful in identifying and capitalizing
on strategic acquisitions and alliances to achieve growth. Through these
acquisitions and alliances, Automotive has: (1) expanded its product portfolio;
(2) realized incremental business with existing customers; (3) gained access to
new customers; and (4) achieved leadership positions within new geographic
markets.
Where appropriate, Automotive intends to continue to pursue strategic
acquisitions that complement its existing technology and systems development
efforts. This focused strategy will assist Automotive to identify and acquire
smaller-scale companies with proven proprietary technology and recognized
research capabilities necessary to help develop further leadership in systems
integration. Any potential acquisition will be expected to meet strict financial
criteria to ensure it increases economic value. Automotive also plans to
continue to pursue its joint venture and alliance opportunities to achieve its
objectives and enhance its profitability.
PROPERTIES
Automotive leases its principal executive offices, which are located at 500
North Field Drive, Lake Forest, Illinois, 60045.
Walker operates 11 manufacturing facilities in the U.S. and six engineering
and technical facilities worldwide. Walker also operates 32 manufacturing
facilities outside of the U.S. and has a controlling interest in six joint
ventures that own manufacturing facilities in China, Germany, India and Sweden.
Monroe operates seven manufacturing facilities in the U.S. and ten
engineering and technical facilities worldwide. Monroe also operates 16
manufacturing facilities outside of the U.S. and has a controlling interest in
three joint ventures that own manufacturing facilities in China, South Africa
and India.
Automotive's manufacturing locations outside of the U.S. are located in
Canada, Mexico, Belgium, Spain, the United Kingdom, the Czech Republic, Turkey,
South Africa, France, Denmark, Sweden, Germany, Poland, Portugal, Argentina,
Brazil, Australia, and New Zealand. Sales offices are located in Australia,
Canada, Italy, Japan, Poland, Russia, and Sweden.
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Of Automotive's properties described above, approximately one-half are
owned and one-half are leased. Twelve of the properties are held through joint
ventures. Automotive also has distribution facilities at its manufacturing sites
and at a few offsite locations, substantially all of which are leased.
Automotive's commitment to sound management practices and policies is also
demonstrated by its successful participation in the International Standards
Organization/Quality Systems certification process (ISO/QS). ISO/QS
certifications are yearly audits that certify that a company's facilities meet
stringent quality and business systems requirements. Without either ISO or QS
certification, Automotive would not be able to supply original equipment
manufacturers locally or globally. Over 90% of Automotive's manufacturing
facilities have achieved ISO 9000 certification, excluding facilities held in
joint ventures. Of those 60 manufacturing facilities where Automotive has
determined that QS certification is required to service its customers or would
provide Automotive with an advantage in securing additional business, 85% have
achieved QS 9000 certification, and Automotive is pursuing certification of the
remaining 15%.
Automotive believes that substantially all of its plants and equipment are,
in general, well maintained and in good operating condition. They are considered
adequate for present needs and, as supplemented by planned construction, are
expected to remain adequate for the near future.
Automotive also believes that it and its subsidiaries have generally
satisfactory title to the properties owned and used in their respective
businesses.
LEGAL AND ENVIRONMENTAL PROCEEDINGS
As of June 1, 1999, Automotive has been designated as a potentially
responsible party at four "Superfund" sites and it has estimated its share of
the liability at these sites to be approximately $2 million in the aggregate. In
addition, Automotive may have liability to remediate contaminant releases at 18
of its current or former facilities and it has estimated its share of the
remediation costs at these facilities to be $19 million in the aggregate. For
both the Superfund sites and its current and former facilities, Automotive has
established reserves that it believes are adequate for these costs. Although
Automotive believes its estimates of remediation costs are reasonable and are
based on the latest available information, the clean-up costs are estimates and
are subject to revision as more information becomes available about the extent
of remediation required. At some sites, Automotive expects that other parties
will contribute to the remediation costs. In addition, at the Superfund sites,
the Comprehensive Environmental Response, Compensation and Liability Act
provides that Automotive's liability could be joint and several, meaning that
Automotive could be required to pay in excess of its share of remediation costs.
Automotive's understanding of the financial strength of other potentially
responsible parties at both the Superfund sites and at its former facilities has
been considered, where appropriate, in Automotive's determination of its
estimated liability. Automotive believes that any adjustment to the costs
associated with its current status as a potentially responsible party at the
Superfund sites or as a liable party at its current or former facilities will
not be material to its consolidated financial position or results of operations.
Automotive estimates that its capital expenditures for environmental
matters for 1999 and 2000 will not be material.
For a description of an antitrust lawsuit related to Packaging in which
Tenneco has been named a defendant, see "Description of Packaging -- Legal
Proceedings." Under and in accordance with the Distribution Agreement, as
between Tenneco and Packaging, Packaging is responsible for defending the claims
and for any liability resulting from this action.
Automotive is party to various other legal proceedings arising from its
operations. Tenneco believes that the outcome of these other proceedings,
individually and in the aggregate, will not have a material adverse effect on
Automotive's financial position or results of operations.
STRATEGIC ACQUISITIONS AND ALLIANCES
Strategic acquisitions, joint ventures and alliances have been an important
part of Automotive's growth. Through this strategy, Automotive has expanded to
meet customers' global requirements. This
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strategy has also allowed Automotive to acquire or align with companies that
possess proven technology and research capabilities, furthering Automotive's
leadership in systems integration.
EMISSIONS CONTROL
- In 1996, Automotive established a joint venture in Dalian, China to
supply emissions control systems to the Northern Chinese automotive
market, expanded its North American heavy duty truck aftermarket business
through the acquisition of Stemco Inc. and acquired Minuzzi, the second
largest manufacturer of exhaust products in Argentina.
- In 1997, Automotive acquired Autocan, a Mexican catalytic converter and
exhaust pipe assembly manufacturer. It also acquired the manufacturing
operations of MICHEL, a privately owned, Polish-based manufacturer of
replacement market emissions control systems for passenger cars in
Eastern Europe.
- In 1998, Automotive established a joint venture in Shanghai, China to
supply emissions control systems to the Central and Southern Chinese
automotive markets. Automotive also established a joint venture in Pune,
India to supply emissions control systems to OE customers and the
aftermarket.
- In 1999, Automotive began manufacturing emissions control systems at a
new facility in Curitiba, Brazil to supply original equipment customers
in this growing regional market.
RIDE CONTROL
- In 1995, Automotive acquired a 51% interest in a joint venture that has
three ride control manufacturing facilities in India and acquired a 51%
interest in a joint venture that has one ride control manufacturing
facility in China.
- In July 1996, Automotive acquired The Pullman Company and its Clevite
products division. Clevite is a leading original equipment manufacturer
of elastomeric vibration control components, including bushings, engine
mounts and control arms, for the auto, light truck and heavy truck
markets. These products connect major metal parts and help isolate noise,
vibration and shock. With this acquisition, Automotive expanded its
capability to deliver ride control systems to original equipment
manufacturers. The Clevite acquisition also complemented Automotive's
interest in global growth opportunities, since both Clevite and Monroe
have manufacturing operations in Mexico and Brazil.
- In September 1996, Automotive acquired full ownership of Monroe Amortisor
Imalat ve Ticaret, a Turkish shock absorber manufacturer, in which it
previously held a 16.7% ownership interest.
- In December 1996, Automotive acquired 94% of the voting stock of Fric-Rot
S.A.I.C., the leading producer and marketer of ride control products in
Argentina. In 1997, Automotive increased its interest in Fric-Rot to more
than 99% through the purchase of additional shares.
- In 1996, Automotive also expanded its presence in Australia's ride
control product market with the acquisition of National Springs.
- In 1997, Automotive entered into a joint venture which resulted in its
acquisition of majority ownership of Armstrong, a leading South African
manufacturer of ride control products.
- Earlier this year, Automotive completed its acquisition of Kinetic, an
Australian advanced suspension engineering company with advanced
roll-control technology. Also this year, Automotive licensed elastomer
technology and equipment from Draftex, a French company. Automotive
intends to apply this technology to manufacturing engine mounts and ride
control products for sale in Mexico, Central America and South America.
OTHER
As of June 1, 1999, Automotive had approximately 23,500 employees, 34% of
which were covered by collective bargaining agreements and 16% of which are
governed by European works councils. Twenty-three of
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Automotive's existing labor agreements, covering a total of 3,000 employees, are
scheduled for renegotiation in 1999 and 2000. Automotive regards its employee
relations as generally satisfactory.
The principal raw material utilized by Automotive is steel. Automotive
believes that an adequate supply of steel can presently be obtained from a
number of different domestic and foreign suppliers.
Automotive holds a number of domestic and foreign patents and trademarks
relating to its products and businesses. It manufactures and distributes its
products primarily under the Walker(R) and Monroe(R) brand names, which are well
recognized in the marketplace and are registered trademarks of Automotive. The
patents, trademarks and other intellectual property owned by or licensed to
Automotive are important in the manufacturing, marketing and distribution of its
products.
MANAGEMENT AFTER THE SPIN-OFF
BOARD OF DIRECTORS
In connection with the spin-off, the current Board of Directors of Tenneco
Inc. will be restructured. This restructured Board of Directors will govern the
management and operations of Automotive upon completion of the spin-off.
The Automotive Board of Directors is currently divided into three classes
serving staggered three-year terms. At each annual meeting of stockholders,
successors to the directors whose terms expire at that meeting are elected.
However, Tenneco intends to submit a proposal for stockholder consideration to
eliminate its staggered board structure and provide instead for the annual
election of directors. Tenneco plans to submit this proposal at a special
stockholders' meeting to be held on October 25, 1999. If this proposal is
approved, the staggered board structure will be phased-out over the next three
annual stockholders' meetings, with directors being elected annually after the
expiration of the current staggered board terms set forth below.
Information concerning the individuals who will serve as directors of
Automotive upon completion of the spin-off and their terms is provided below.
Any current directors of Tenneco Inc. who will not be continuing as Automotive
directors will resign effective upon the spin-off.
Terms Expiring at the 2000 Annual Meeting of Stockholders -- Class I
MARK ANDREWS -- See "Description of Packaging -- Management -- Board of
Directors" for information about Mr. Andrews.
DAVID B. PRICE, JR. -- Mr. Price has been an Executive Vice President of
the BFGoodrich Company and President and Chief Operating Officer of BFGoodrich
Performance Materials, a producer of chemical additives and specialty plastics
for use in consumer and industrial products, since July 1997. Prior to joining
BFGoodrich, Mr. Price held various executive positions over a 20-year span at
Monsanto Company, most recently serving as President of the Performance
Materials Division of Monsanto Company from 1995 to July 1997. From 1993 to
1995, he was Vice President and General Manager of commercial operations for the
Industrial Products Group and was also named to the management board of
Monsanto's Chemical Group. Mr. Price is 53 years old and will be named a
director in connection with the spin-off.
Terms Expiring at the 2001 Annual Meeting of Stockholders -- Class II
DANA G. MEAD, CHAIRMAN OF THE BOARD -- See "Description of
Packaging -- Management -- Board of Directors" for information about Mr. Mead.
M. KATHRYN EICKHOFF -- Ms. Eickhoff has been President of Eickhoff
Economics, Inc., a consulting firm, since 1987. From 1985 to 1987, she was
Associate Director for Economic Policy for the U.S. Office of Management and
Budget, and prior to 1985, was Executive Vice President and Treasurer of
Townsend-Greenspan & Co., Inc., an economic consulting firm. She is also a
director of AT&T Corp., Pharmacia & Upjohn, Inc., and Fleet Bank, NA. Ms.
Eickhoff is 60 years old, and has been a director of Tenneco since
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1987. She previously served as a member of the Tenneco Board of Directors from
1982 until her resignation to join the Office of Management and Budget in 1985.
ROGER B. PORTER -- See "Description of Packaging -- Management -- Board of
Directors" for information about Mr. Porter.
Terms Expiring at the 2002 Annual Meeting of Stockholders -- Class III
MARK P. FRISSORA -- Mr. Frissora will be the Chief Executive Officer of
Automotive upon the spin-off and has been serving as its President since April
1999. From 1996 to April 1999, he held various positions within Automotive's
operations including Senior Vice President and General Manager of North American
Original Equipment. Mr. Frissora joined Automotive in 1996 from Aeroquip-Vickers
Corporation, where he served from 1991 as Vice President of North American
marketing, sales and distribution. Mr. Frissora is 43 years old and will be
named a director in connection with the spin-off.
SIR DAVID PLASTOW -- Sir David Plastow was Chairman of the Medical Research
Council, which promotes and supports research and post-graduate training in the
biomedical and other sciences, from 1990 until his retirement in 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 FT Everard &
Sons Limited. Sir David Plastow is 67 years old and has been a director of
Tenneco since May 1996. He previously served as a member of the Board of
Directors of Tenneco from 1985 until 1992.
PAUL T. STECKO -- See "Description of Packaging -- Management -- Board of
Directors" for information about Mr. Stecko.
EXECUTIVE OFFICERS
The following provides information concerning the persons who will serve as
the executive officers of Automotive upon completion of the spin-off. Each of
the named persons has been, or before the spin-off will be, elected to the
office indicated opposite his name and will serve at the discretion of the
Automotive Board of Directors.
<TABLE>
<CAPTION>
AGE AT
NAME JUNE 30, 1999 TITLE
---- ------------- -----
<S> <C> <C>
Mark P. Frissora............... 43 Chief Executive Officer
Richard P. Schneider........... 52 Senior Vice President -- Global Administration
Mark A. McCollum............... 40 Senior Vice President and Chief Financial Officer
Timothy R. Donovan............. 43 Senior Vice President and General Counsel
Timothy E. Jackson............. 45 Senior Vice President and General Manager -- North
American Original Equipment and Worldwide Program
Management
David G. Gabriel............... 40 Senior Vice President and General Manager -- North
American Aftermarket
</TABLE>
MARK P. FRISSORA -- See "-- Board of Directors," above, for information
about Mr. Frissora.
RICHARD P. SCHNEIDER -- As Senior Vice President -- Global Administration,
Mr. Schneider is responsible for the development and implementation of human
resources programs and policies and corporate communications activities for
Automotive's worldwide operations. He joined Automotive in 1994 from
International Paper Company where, during his 20-year tenure, he held key
positions in labor relations, management development, personnel administration
and equal employment opportunity.
MARK A. MCCOLLUM -- Mr. McCollum joined Automotive in April 1998 from
Tenneco, where as Vice President, Corporate Development he was responsible for
executing Tenneco's strategic transactions. From January 1995 to April 1998, he
served in various capacities with Tenneco, including Vice President,
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Financial Analysis and Planning and Corporate Controller. Before joining
Tenneco, Mr. McCollum spent 14 years with the international public accounting
firm of Arthur Andersen LLP, serving as an audit and business advisory partner
of the company's worldwide partnership from 1991 to December 1994.
TIMOTHY R. DONOVAN -- Mr. Donovan was named Senior Vice President and
General Counsel of Automotive in August 1999. Mr. Donovan was a partner in the
law firm of Jenner & Block from 1989 until his resignation in September 1999,
and most recently served as the Chairman of the firm's Corporate and Securities
Department and as a member of its Executive Committee.
TIMOTHY E. JACKSON -- Mr. Jackson was named Senior Vice President and
General Manager -- North American Original Equipment and Worldwide Program
Management in June 1999. Mr. Jackson joined the company from ITT Industries
where he was President of the company's Fluid Handling Systems Division. With
over 20 years of management experience, 14 within the automotive industry, he
was also Chief Executive Officer for HiSAN, a joint venture between ITT
Industries and Sanoh Industrial Company. Mr. Jackson has also served in senior
management positions at BFGoodrich Aerospace and General Motors Corporation.
DAVID G. GABRIEL -- Mr. Gabriel was named Senior Vice President and General
Manager -- North American Aftermarket in August 1999. From March to August 1999,
Mr. Gabriel was the Vice President of Operations for Automotive's North American
aftermarket business. From March 1997 to March 1999, he served as Vice President
of Manufacturing for Automotive's North American aftermarket business. From
February 1995 to March 1997, he served as Executive Director of Supplier
Development for Tenneco Business Services. Before joining Tenneco in February
1995, Mr. Gabriel spent 15 years in various operating positions of increasing
responsibility with the Pepsi Cola Company and Johnson and Johnson. From 1993 to
February 1995, Mr. Gabriel was Director of Supplier Development at the Pepsi
Cola Company.
STOCK OWNERSHIP OF MANAGEMENT
The following table shows, as of June 30, 1999, the number of shares of
Tenneco common stock beneficially owned by: (1) each person who will be a
director of Automotive upon the spin-off; (2) each person who is named in the
Summary Compensation Table for Automotive, below; and (3) all persons who will
be directors or executive officers of Automotive upon the spin-off, as a group.
The table also shows: (a) Tenneco common stock equivalents held by these
directors and executive officers under benefit plans; and (b) the total number
of shares of Tenneco common stock and common stock equivalents held.
<TABLE>
<CAPTION>
SHARES OF COMMON COMMON STOCK TOTAL SHARES
STOCK OWNED(1)(2)(3) EQUIVALENTS(4) AND EQUIVALENTS
-------------------- -------------- ---------------
<S> <C> <C> <C>
DIRECTORS
Mark Andrews........................................... 14,155 1,600 15,755
M. Kathryn Eickhoff.................................... 9,728 1,600 11,328
Mark P. Frissora....................................... 33,968 -- 33,968
Dana G. Mead........................................... 765,821 44,737 810,558
Sir David Plastow...................................... 4,700 2,610 7,310
Roger B. Porter........................................ 2,000 3,420 5,420
David B. Price, Jr. ................................... -- -- --
Paul T. Stecko......................................... 314,362 -- 314,362
EXECUTIVE OFFICERS
Richard P. Schneider................................... 24,751 -- 24,751
Mark A. McCollum....................................... 30,959 -- 30,959
Timothy R. Donovan..................................... -- -- --
Timothy E. Jackson..................................... -- -- --
David G. Gabriel....................................... 15,742 -- 15,742
All executive officers and directors as a group........ 1,216,186(5) 53,967 1,270,153(5)
</TABLE>
- ---------------
(1) Each director and executive officer has sole voting and investment power
over the shares beneficially owned (or has the right to acquire shares as
described in note (2) below) as set forth in this column, except for: (a)
restricted shares; and (b) shares that executive officers and directors have
the right to acquire pursuant to stock options. Generally, Tenneco
restricted shares will be vested prior to the spin-off. In connection with
the spin-off, Tenneco stock options held by the executive officers listed
above will
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be adjusted so that the options immediately after the spin-off will have
equivalent economic terms to the options immediately before the spin-off.
Tenneco stock options held by directors will be adjusted in the same manner,
except that one-half of the Tenneco options held by Messrs. Mead, Andrews
and Porter will be replaced with Packaging options having equivalent
economic terms, and options held by Mr. Stecko will terminate unless
exercised prior to the spin-off.
(2) Includes restricted shares. At June 30, 1999, Ms. Eickhoff and Messrs.
Andrews, Frissora, Mead, Plastow, Schneider and Gabriel held 3,963; 6,547;
12,000; 66,025; 300; 3,000; and 5,000 restricted shares, respectively. Also
includes shares that are subject to options, which are exercisable within 60
days of June 30, 1999 for Ms. Eickhoff and Messrs. Andrews, Frissora, Mead,
Plastow, Porter, Stecko, Schneider, McCollum and Gabriel to purchase 2,000;
2,000; 20,887; 616,176; 2,000; 2,000; 288,814; 15,844; 30,959; and 9,848
shares, respectively.
(3) Less than one percent of the outstanding shares of Tenneco common stock.
(4) Common stock equivalents are distributed in shares of Tenneco common stock
or, in some circumstances, cash after the individual ceases to serve as a
director or officer. Common stock equivalents held by directors who are not
employees of Tenneco will be vested and distributed prior to the spin-off.
Mr. Mead's stock equivalent units are credited to his account under the
Tenneco Inc. Deferred Compensation Plan and are, therefore, already vested.
(5) Includes 990,528 shares that are subject to options that are exercisable
within 60 days of June 30, 1999, by all executive officers and directors as
a group, and includes 96,835 restricted shares for all executive officers
and directors as a group.
COMMITTEES OF THE BOARD OF DIRECTORS AFTER THE SPIN-OFF
The Automotive Board of Directors will have three standing committees when
the spin-off is completed. These committees will have the following described
responsibilities and authority:
The Audit Committee, comprised solely of outside directors, will have the
responsibility, among other things, to: (1) recommend the selection of
Automotive's independent public accountants; (2) review and approve the scope of
the independent public accountants' audit activity and extent of non-audit
services; (3) review with management and such independent public accountants the
adequacy of Automotive's basic accounting system and the effectiveness of
Automotive's internal audit plan and activities; (4) review with management and
the independent public accountants Automotive's certified financial statements
and exercise general oversight of Automotive's financial reporting process; and
(5) review with Automotive litigation and other legal matters that may affect
Automotive's financial condition and monitor compliance with Automotive's
business ethics and other policies.
The Compensation/Nominating/Governance Committee, comprised solely of
outside directors, will have the responsibility, among other things, to: (1)
establish the salary rate of officers and employees of Automotive and its
subsidiaries; (2) examine periodically the compensation structure of Automotive;
and (3) supervise the welfare and pension plans and compensation plans of
Automotive. It will also have significant corporate governance responsibilities,
among other things, to: (a) review and determine the desirable balance of
experience, qualifications and expertise among members of the Automotive Board;
(b) review possible candidates for membership on the Automotive Board and
recommend a slate of nominees for election as directors at Automotive's annual
stockholders' meeting; (c) review the function and composition of the other
committees of the Automotive Board and recommend membership on these committees;
and (d) review the qualifications and recommend candidates for election as
officers of Automotive.
The Three-year Independent Director Evaluation Committee, comprised solely
of outside directors, will have the responsibility, among other things, to
review Automotive's qualified offer rights plan at least every three years and,
if it deems it appropriate, recommend that the full Automotive Board modify or
terminate that plan.
EXECUTIVE COMPENSATION
The following table shows the compensation paid for 1998 by Tenneco to: (1)
the person who will become the Chief Executive Officer of Automotive upon the
spin-off; and (2) each of the persons who will be included among the next three
most highly compensated executive officers of Automotive upon the spin-off,
based on 1998 compensation, other than the Chief Executive Officer. The table
shows amounts paid to these persons for all services provided to Tenneco and its
subsidiaries. Messrs. Donovan and Jackson had no compensation from Tenneco and
its subsidiaries prior to 1999.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -----------------------
-------------------------------------- RESTRICTED
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION SALARY(1) BONUS COMPENSATION(2) AWARDS(3) OPTIONS(4) COMPENSATION(5)
--------------------------- --------- -------- --------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Mark P. Frissora.................... $252,300 $130,000 $ 31,234 $450,720 35,000 $ 9,393
Chief Executive Officer
Richard P. Schneider................ $216,310 $ 80,000 $ 39,169 -- 15,000 $12,683
Senior Vice President -- Global
Administration
Mark A. McCollum.................... $211,800 $ 75,000 $110,678 -- 15,000 $ 584
Senior Vice President and Chief
Financial Officer
David G. Gabriel.................... $182,353 $ 60,000 $ 15,720 $187,800 10,000 $ 7,288
Senior Vice President and General
Manager -- North American
Aftermarket
</TABLE>
- ---------------
(1) Includes base salary plus amounts paid in lieu of matching contributions to
the Tenneco Thrift Plan.
(2) Includes amounts attributable to: (a) the value of personal benefits
provided by Tenneco to executive officers, such as the personal use of
Tenneco-owned property, and relocation expenses; (b) reimbursement for
taxes; and (c) amounts paid as dividend equivalents on performance share
equivalent units ("Dividend Equivalents"). The amount of each personal
benefit that exceeds 25% of the estimated value of the total personal
benefits provided by Tenneco, reimbursement for taxes, and amounts paid as
Dividend Equivalents to the individuals named in the table for 1998 was as
follows: $1,013 for reimbursement of taxes; $8,760 in Dividend Equivalents
and $20,000 perquisite allowance for Mr. Frissora; $3,950 for reimbursement
of taxes, $10,200 in Dividend Equivalents and $20,000 perquisite allowance
for Mr. Schneider; $58,946 in relocation expenses, $20,745 for reimbursement
of taxes, $8,400 in Dividend Equivalents and $20,000 perquisite allowance
for Mr. McCollum; and $3,720 in Dividend Equivalents and $12,000 perquisite
allowance for Mr. Gabriel.
(3) Includes the dollar value of grants of restricted shares based on the price
of Tenneco common stock on the date of grant. At December 31, 1998, Messrs.
Frissora, Schneider, McCollum and Gabriel held 19,300; 11,500; 7,000; and
8,100 restricted shares and/or performance share equivalent units,
respectively. 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 $657,416 for Mr. Frissora, $391,725 for
Mr. Schneider, $238,441 for Mr. McCollum, and $275,910 for Mr. Gabriel.
Generally, restricted shares and performance share equivalent units will be
vested prior to the spin-off. Dividends/Dividend Equivalents will be paid on
the restricted shares/ performance share equivalent units held by each
individual.
(4) In connection with the spin-off, options will be adjusted so that the
options immediately after the spin-off will have equivalent economic terms
to the options immediately before the spin-off.
(5) Includes amounts attributable during 1998 to benefit plans of Tenneco as
follows:
(a) The amounts contributed pursuant to Tenneco's Thrift Plan for the
accounts of Messrs. Frissora, Schneider and Gabriel were $6,400, $5,013
and $5,000, respectively.
(b) The dollar values paid by Tenneco for insurance premiums under the
Tenneco group life insurance plan (including dependent life) for Messrs.
Frissora, Schneider, McCollum, and Gabriel were $2,993, $7,670, $584,
and $2,288, respectively.
Automotive anticipates that, at the time of the spin-off, Mr. Frissora's
annual salary will be increased to $580,000 and that his bonus target after the
spin-off will be increased. Bonus targets for Messrs. Schneider, McCollum and
Gabriel have been increased on a prorated basis for 1999. See also
"-- Termination of Employment and Change-in-Control Arrangements."
Automotive also anticipates making a grant of stock options immediately
following the spin-off. This grant is intended to represent a three-year award.
Messrs. Frissora, Schneider, McCollum, Donovan, Jackson and Gabriel are expected
to receive options to purchase 375,000, 90,000, 120,000, 90,000, 90,000 and
75,000 shares of Automotive common stock, respectively, after giving effect to a
proposed one-for-five reverse stock split.
Automotive anticipates that in 2000, Messrs. Frissora, Schneider, McCollum,
Donovan, Jackson and Gabriel will be granted 25,000, 5,500, 7,000, 5,500, 5,500
and 5,000 performance share equivalent units, respectively, after giving effect
to a proposed one-for-five reverse stock split.
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OPTIONS GRANTED IN 1998
The following table shows the number of options to purchase Tenneco common
stock granted during 1998 to the persons named in the Summary Compensation Table
above.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OF TOTAL
COMMON STOCK OPTIONS GRANTED
UNDERLYING TO TENNECO EMPLOYEES EXERCISE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED(#)(1) IN 1998(%) PRICE($)(2) DATE PRESENT VALUE(3)
---- --------------------- -------------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Mr. Frissora......... 35,000 2.0% $36.63 7/21/08 $360,150
Mr. Schneider........ 15,000 .9% $36.63 7/21/08 $154,350
Mr. McCollum......... 15,000 .9% $36.63 7/21/08 $154,350
Mr. Gabriel.......... 10,000 .5% $36.63 7/21/08 $102,900
</TABLE>
- ---------------
(1) In connection with the spin-off, the Tenneco stock options held by the
persons listed above will be adjusted so that the options immediately after
the spin-off will have equivalent economic terms to the options immediately
before the spin-off.
(2) All options were granted with exercise prices equal to 100% of the fair
market value of a share of Tenneco common stock on the date of grant.
(3) The Black-Scholes valuation was performed using the following assumptions:
25.6% volatility, 5.7% risk free interest rate, 3.2% expected dividend rate
and 10 year option life.
OPTIONS AT 1998 YEAR-END
The following table shows the number of options to purchase Tenneco common
stock held at December 31, 1998 by the persons named in the Summary Compensation
Table above. No Tenneco options were exercised in 1998, and there were no
in-the-money Tenneco options as of December 31, 1998.
<TABLE>
<CAPTION>
TOTAL NUMBER OF
UNEXERCISED OPTIONS
HELD AT
DECEMBER 31, 1998(1)
----------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
Mr. Frissora................................................ 8,291 65,495
Mr. Schneider............................................... 9,180 57,862
Mr. McCollum................................................ 22,476 49,583
Mr. Gabriel................................................. 5,894 23,346
</TABLE>
- ---------------
(1) In connection with the spin-off, the Tenneco stock options held by the
persons listed above will be adjusted so that the options immediately after
the spin-off will have equivalent economic terms to the options immediately
before the spin-off.
LONG-TERM INCENTIVE PLANS
PERFORMANCE SHARE EQUIVALENT UNIT AWARDS IN 1998
The following table shows information concerning performance-based awards
made during 1998 to the persons named in the Summary Compensation Table above.
<TABLE>
<CAPTION>
NUMBER OF SHARES, PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
UNITS OR OTHER PERIOD NON-STOCK PRICE-BASED PLANS(1)
OTHER UNTIL MATURATION ---------------------------------------
NAME RIGHTS(1)(2) OR PAYOUT(3) THRESHOLD(4) TARGET(4) MAXIMUM(4)
---- ----------------- ---------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Mr. Frissora.................. 5,000 4 years 25% 100% 150%
Mr. Schneider................. 4,500 4 years 25% 100% 150%
Mr. McCollum.................. 3,500 4 years 25% 100% 150%
Mr. Gabriel................... 2,000 4 years 25% 100% 150%
</TABLE>
- ---------------
(1) Estimated future payouts are based on earnings per share ("EPS") from
continuing operations; however, generally performance share equivalent units
will be deemed to be earned at the target level and vested prior to the
spin-off.
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(2) Each performance share equivalent unit represents one share of Tenneco's
common stock that may be earned under this award and the number of
performance share equivalent units listed in this column represents the
maximum number of performance share equivalent units that may be earned
under this award.
(3) Performance share equivalent units are earned at the rate of 25% per year
based on achievement of annual EPS goals; however, generally performance
share equivalent units will be deemed to be earned at the target level and
vested prior to the spin-off.
(4) Represents maximum performance share equivalent units earned where the goals
were consistently within the indicated performance range on an individual
year and accumulated four-year basis; however, generally performance share
equivalent units will be deemed to be earned at the target level and vested
prior to the spin-off.
PENSION PLAN TABLE
The following table shows the aggregate estimated annual benefits payable
upon normal retirement pursuant to the Tenneco Retirement Plan and the Tenneco
Inc. Supplemental Executive Retirement Plan to persons in specified remuneration
and years of credited participation classifications. In connection with the
spin-off, Packaging will become the sponsor of the Tenneco Retirement Plan.
Automotive expects to adopt a salaried defined benefit pension plan patterned
after the Tenneco Retirement Plan. The Automotive plan will count service prior
to the spin-off for all purposes, including benefit accrual, but there will be
an offset for benefits accrued under the Tenneco Retirement Plan. Therefore, as
to Automotive employees, the benefits described in the table will be provided by
a combination of payments from the Tenneco Retirement Plan and the Automotive
plan. Automotive also expects to adopt plans similar to the Tenneco Inc.
supplemental pension plan. Automotive also expects to adopt a key executive
pension plan covering executive officers which will call for benefits commencing
at age 55 of 4% of compensation (salary and bonus) per year of service up to a
maximum of 50%, reduced by payments under all other Automotive qualified and
non-qualified defined benefit pension plans.
<TABLE>
<CAPTION>
YEARS OF CREDITED PARTICIPATION
ANNUAL -------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35
- ------------ - -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
$250,000 $19,642 $39,285.. $ 58,928 $ 78,571 $ 98,214 $117,857 $137,500
$300,000 $23,571 $47,142.. $ 70,714 $ 94,285 $117,857 $141,428 $165,000
$350,000 $27,500 $55,000.. $ 82,500 $110,000 $137,500 $165,000 $192,500
$400,000 $31,428 $62,857.. $ 94,285 $125,714 $157,142 $188,571 $220,000
$450,000 $35,357 $70,714.. $106,071 $141,428 $176,785 $212,142 $247,500
$500,000 $39,285 $78,571.. $117,857 $157,142 $196,428 $235,714 $275,000
$550,000 $43,214 $86,428.. $129,642 $172,857 $216,071 $259,285 $302,500
$600,000 $47,142 $94,285.. $141,428 $188,571 $235,714 $282,857 $330,000
$650,000 $51,071 $102,142.. $153,214 $204,285 $255,357 $306,428 $357,500
$700,000 $55,000 $110,000.. $165,000 $220,000 $275,000 $330,000 $385,000
</TABLE>
- ---------------
1. The benefits shown above are computed as a straight life annuity and are
based on years of credited participation and the employee's average
compensation, which is comprised of salary and bonus. These benefits are not
subject to any deduction for Social Security or other offset amounts. The
years of credited participation for Messrs. Frissora, Schneider, McCollum and
Gabriel are 2, 4, 4 and 4, respectively. See the Summary Compensation Table
above for salary and bonus information for these individuals.
2. If Mr. Frissora completes 10 years of service in the period commencing
January 1, 1999, he will be entitled to benefits commencing at age 55 of at
least 40% of his average salary plus bonus determined over a three-year
period.
COMPENSATION OF DIRECTORS
Fee Structure. Following the spin-off, each director who is not also an
employee of Automotive or its subsidiaries, an "outside director," will be paid
a yearly retainer fee of $35,000 for service on the Automotive Board of
Directors. In general, 100% of that fee will be paid in the form of
stock-settled common stock equivalents, (the "directors' stock equivalents") as
described below. A director may elect, however, to have up to 40%, or $14,000,
of the fee paid in cash. These outside directors will 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 will receive $1,000 for each meeting of the Board of Directors
attended, and each one who serves as a Chairman of the Audit Committee or the
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Compensation/Nominating/Governance Committee will be paid a fee of $7,000 per
chairmanship. Outside directors who serve as members of these committees will be
paid $4,000 per committee membership. Members of the Three-year Independent
Director Evaluation Committee will receive $1,000 plus expenses for each meeting
of that committee attended.
Common Stock Equivalents/Options. As described above, all or a portion of
an outside director's retainer fee will be paid in common stock equivalent
units. These directors' stock equivalents will be payable in shares of
Automotive common stock after an outside director ceases to serve as a director
of Automotive. Final distribution of these shares may be made either in a lump
sum or in installments over a period of years. The directors' stock equivalents
will be issued at 100% of the fair market value on the date of the grant. Each
outside director will also receive an annual grant of an option to purchase up
to 5,000 shares of Automotive common stock and 1,000 performance share
equivalent units as additional incentive compensation. Directors options: (a)
will be granted with per share exercise prices equal to 100% of the fair market
value of a share of Automotive common stock on the day the option is granted;
(b) will have terms of ten years; and (c) will fully vest six months from the
grant date. Once vested, the directors options will be exercisable at any time
during the option term.
Automotive expects that restricted shares of Tenneco common stock and
directors' stock equivalents held by outside directors will be vested prior to
the completion of the spin-off, and the directors will be paid an amount in cash
to defray taxes incurred on that vesting.
Deferred Compensation Plan. Automotive will have a voluntary deferred
compensation plan for outside directors. Under the plan, an outside director may
elect, prior to commencement of the next calendar year, to have some or all of
the cash portion, that is, up to 40% or $14,000, of his or her retainer fee and
some or all of his or her meeting fees credited to a deferred compensation
account. The plan will provide these directors with various investment options.
The investment options will include stock equivalent units of Automotive common
stock, which may be paid out in either cash or shares of Automotive common
stock.
Restricted Stock. In satisfaction of residual obligations of Automotive
under the discontinued retirement plan for directors, Ms. Eickhoff and Mr.
Andrews will receive a yearly grant of $15,400 in value of restricted shares of
Automotive common stock. The restricted shares may not be sold, transferred,
assigned, pledged or otherwise encumbered and are subject to forfeiture if Ms.
Eickhoff or Mr. Andrews ceases to serve on the Board prior to the expiration of
the restricted period. This restricted period ends upon his or her normal
retirement from the Board, unless he or she is disabled, dies, or the
Compensation/Nominating/Governance Committee of the Board, at its discretion,
determines otherwise. During the restricted period, Ms. Eickhoff and Mr. Andrews
will be entitled to vote the shares and receive dividends.
TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
Automotive will maintain a key executive change-in-control severance
benefit plan similar to the existing Tenneco plan and incorporating some
provisions of the benefits protection trust. The purpose of the plan is to
enable Automotive to continue to attract, retain and motivate highly qualified
employees by eliminating, to the maximum practicable extent, any concern on the
part of such employees that their job security or benefit entitlements will be
jeopardized by a "change-in-control" of Automotive, as that term will be defined
in the plan. The plan will be designed to achieve this purpose through the
provision of severance benefits for key employees and officers whose positions
are terminated following a change-in-control as provided in the plan. Under the
plan, Automotive expects that Messrs. Frissora, Schneider, McCollum and Gabriel
would have become entitled to receive payments from Automotive in the amount of
$1,575,000; $1,295,001; $1,428,999 and $924,999, respectively, had their
positions been terminated on August 31, 1999 following a change-in-control,
based on their current 1999 salaries of $400,000, $315,000, $315,000 and
$235,000, respectively. In addition, restricted shares held in the name of those
individuals under restricted stock plans would have automatically reverted to
Automotive, and Automotive would have been obliged to pay those individuals the
fair market value of those restricted shares. Their performance share equivalent
units would also have been fully vested and paid. The spin-off does not
constitute a "change-in-control" of Tenneco for purposes of Tenneco's current or
new change-in-control severance
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benefits plans or of Automotive for purposes of the change-in-control severance
benefits plans. The Tenneco benefits protection trust and the existing rabbi
trust will be terminated prior to the spin-off.
Other than in connection with a change-in-control, Automotive has agreed
that if Mr. Frissora's employment is terminated other than for death, disability
or non-performance of duties, he will be paid two times the total of his current
salary and his bonus for the immediately preceding year, all outstanding
stock-based awards would be vested, subject to Board approval, and his stock
options will remain exercisable for at least 90 days. Automotive has agreed to
provide Mr. Schneider severance benefits similar to those with respect to Mr.
Frissora, except he would be paid one and one-half times the total of his
current salary plus his bonus for the immediately preceding year.
Mr. Donovan receives an annual salary of $290,000. His target bonus is
$150,000 and he will be included in the group of executives who qualify for the
benefits described above with respect to a change-in-control.
Mr. Jackson receives an annual salary of $250,000. His target bonus is
$150,000 and he will be included in the group of executives who qualify for the
benefits described above with respect to a change-in-control.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 1998, Tenneco paid the firm Eickhoff Economics, Inc., of
which Ms. Eickhoff is the sole owner, approximately $25,000 for financial
consulting services. These services have not been and will not be provided in
1999.
Upon the spin-off, Messrs. Frissora, Schneider, McCollum and Jackson will
be granted Automotive restricted stock with a value on the grant date equal to
the pre-spin-off value of 35,000 shares of Tenneco common stock as to Mr.
Frissora and 15,000 shares of Tenneco common stock as to each of the others.
One-third of such restricted stock will vest each year following the spin-off
assuming that the grantee remains employed through that date.
During fiscal year 1999, Mr. Frissora was indebted to Tenneco. Such
indebtedness was incurred in connection with his relocation and all amounts
outstanding are secured by a subordinated mortgage note without interest.
Principal will only be payable in full upon termination of his employment prior
to 2003 except for a termination without cause or following a change-in-control.
The approximate aggregate amount outstanding is $400,000.
During 1999, Mr. McCollum was indebted to an affiliate of Tenneco in
connection with a relocation loan of approximately $400,000. In July, 1999, that
obligation was canceled.
During fiscal 1998, Tenneco and its subsidiaries paid the law firm of
Jenner & Block, of which Mr. Donovan was a partner, approximately $13.5 million
for legal services, a substantial portion of which related to work for
Packaging.
For additional information concerning certain relationships between Tenneco
and members of Tenneco's existing management, see the Tenneco Inc. Proxy
Statement for the Annual Meeting of Shareowners held on May 11, 1999 which is
incorporated in this document by reference. See also "Description of
Packaging -- Management -- Certain Relationships and Related Transactions."
AUTOMOTIVE BENEFIT PLANS FOLLOWING THE SPIN-OFF
Automotive will continue its sponsorship of the defined benefit pension
plans covering hourly employees. Automotive expects to adopt a salaried defined
benefit pension plan patterned after the Tenneco Retirement Plan, which will
count service prior to the spin-off for all purposes including benefit accrual,
but there will be an offset for benefits accrued under the Tenneco Retirement
Plan. Automotive will adopt thrift plans covering salaried and hourly employees
to which the employees' account balances in the existing Tenneco Thrift Plan
will be transferred. The Automotive thrift plans will be 401(k) plans, and there
will be employer contributions.
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Automotive will adopt two non-qualified deferred compensation plans
patterned after the existing Tenneco deferred compensation plans and
supplemental defined benefit pension plan. These plans will be unfunded.
Automotive will continue the executive incentive compensation plan to
provide annual cash bonuses to eligible employees.
Participation in the existing Tenneco employee stock purchase plan has been
suspended. Automotive expects to permit resumed participation in that plan after
the spin-off.
Automotive will continue the 1996 Tenneco Inc. Stock Ownership Plan.
Tenneco options which will continue to be held by Automotive personnel will be
adjusted in connection with the spin-off to maintain economic equivalent terms.
Shares underlying options previously held by non-Automotive personnel will
become available for regrant at the time of the spin-off.
NEW FINANCING
In connection with the spin-off, Automotive (1) has entered into a new
senior secured credit facility and (2) intends to issue new senior subordinated
debt. Automotive plans to use the proceeds of the senior subordinated debt issue
and borrowings of approximately $1,173 million under the new senior credit
facility to fund a portion of the debt realignment. See "The Spin-off -- Debt
Realignment."
A definitive agreement for the issuance and sale of the senior subordinated
notes is being negotiated and has not been completed. Accordingly, the terms of
such arrangement described below are preliminary and may change as a result of
the negotiation of a definitive agreement. In addition, funding under both of
the financings described below will be subject to the satisfaction of numerous
conditions.
NEW CREDIT FACILITY
Automotive has entered into a senior secured credit facility with a
syndicate, or group, of banks and other financial institutions. The total
available borrowing capacity under the senior secured credit facility is $1,550
million, including a $500 million revolving credit facility, with commitment
terms ranging from six to eight and one-half years.
Repayment. The terms of the senior secured credit facility require the
revolving credit facility to be repaid on or before the date that is the sixth
anniversary of the funding date. Prior to that date, funds may be borrowed,
repaid and reborrowed without premium or penalty. The revolving credit facility
will terminate in 2005.
The term loans under the senior secured credit facility have varying
maturities from six to eight and one-half years, a portion of which will be
payable in quarterly installments beginning September 30, 2001 and the remainder
of which will be payable at maturity.
Guarantee; Security. Upon the spin-off, the senior credit facility will be
guaranteed by each of Automotive's direct and indirect wholly-owned domestic
subsidiaries. At that time, the senior credit facility will also be secured by a
perfected security interest in (1) substantially all of the tangible and
intangible assets of Automotive and its domestic subsidiaries, (2) the capital
stock of Automotive's domestic subsidiaries, and (3) up to 66% of the capital
stock of Automotive's first-tier foreign subsidiaries, excluding joint venture
interests. Automotive expects that the collateral will be permanently released
if Automotive achieves specified long-term debt ratings and a portion of the
term loans have been paid in full.
Covenants. The senior credit facility will require Automotive to maintain
compliance with the following financial tests:
- minimum interest coverage ratio, which is the ratio of consolidated
earnings before interest expense, income taxes, minority interest,
depreciation and amortization ("EBITDA") to consolidated cash interest
expense;
- minimum fixed charge coverage ratio, which is the ratio of consolidated
EBITDA less consolidated capital expenditures to consolidated cash
interest expense; and
- maximum leverage ratio, which is the ratio of consolidated indebtedness
to consolidated EBITDA.
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In addition, the senior credit facility contains restrictions on
Automotive's operations that are customary for similar facilities and
transactions, including limitations on: (a) incurring additional liens; (b)
liquidations and dissolutions; (c) incurring additional indebtedness or
guarantees; (d) sales or other dispositions of assets; (e) capital expenditures;
(f) dividends; (g) mergers and consolidations; (h) loans and advances; (i)
prepayments and modifications of subordinated and other debt instruments; and
(j) sales and leasebacks.
Interest. The borrowings under the senior credit facility will bear
interest at floating rates, generally based, at Tenneco's option, on a base rate
defined in the senior secured credit facility or the Eurodollar rate, in each
case plus an applicable margin that will depend on Automotive's leverage ratio.
Mandatory Prepayments. The senior secured credit facility requires
Automotive to prepay the term loan facilities and reduce commitments under the
revolving credit facility with:
- 100% of the net proceeds of any issuance or incurrence of indebtedness
after the funding date by Automotive or its subsidiaries, subject to
exceptions for permitted debt;
- 50% of the net proceeds of any issuance of equity by Automotive or its
subsidiaries, subject to some exceptions;
- 100% of the net proceeds of any sale or other disposition by Automotive
or its subsidiaries of any assets, unless such proceeds are reinvested in
assets useful in Automotive's business, with some exceptions;
- 75% of excess cash flow, as defined in the senior secured credit
facility; and
- 100% of the net proceeds of casualty insurance, condemnation awards or
other recoveries, to the extent the proceeds are not reinvested in other
assets useful in Automotive's business, subject to some exceptions.
The mandatory prepayment percentages will be reduced if Automotive achieves
certain performance measures established in the facility.
NEW SUBORDINATED DEBT
In connection with the spin-off, Automotive intends to offer $500 million
of senior subordinated notes in a private placement for resale pursuant to Rule
144A under the Securities Act of 1933. The senior subordinated notes will be
general unsecured obligations of Automotive, junior to all senior indebtedness
of Automotive. While the interest rate, interest payment dates, maturity and
other material terms of the senior subordinated notes have not been finalized,
Automotive expects that the senior subordinated notes will have terms customary
for senior subordinated note offerings of issuers similar to Automotive.
Automotive also expects that the senior subordinated notes will:
- mature in 10 years;
- be guaranteed by all of Automotive's material domestic wholly-owned
subsidiaries;
- have registration rights;
- be redeemable at the option of the holders upon a change of control; and
- include customary limitations on Automotive for this type of financing,
including limitations on indebtedness, liens, dividends, stock
repurchases, investments, assets sales, mergers, subsidiary stock
issuances and affiliate transactions.
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U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of U.S. federal income tax
consequences of the exchange offers and consent solicitation to holders of
original securities. This discussion is the opinion of Jenner & Block, tax
counsel to Tenneco and Packaging in connection with the exchange offers, based
on United States federal income tax laws as now in effect. This discussion does
not discuss all aspects of U.S. federal income taxation that may be relevant to
you in light of the your particular circumstances. For example, special rules
may apply to you if you are one of the following types of holders:
- an insurance company,
- a tax-exempt organization,
- an employee stock ownership plan,
- a bank, broker, dealer or financial institution,
- a holder that holds original securities as part of a position in a
"straddle" or as part of a "hedging" or "conversion" transaction for U.S.
federal income tax purposes,
- a holder that has a "functional currency" other than the United States
dollar, or
- a taxpayer that is not a citizen or resident of the United States, or
that is a foreign corporation, foreign partnership or foreign estate or
trust as to the United States.
In addition, the discussion does not consider the effect of any foreign,
state, local, or other tax laws, or any United States tax consequences, such as
estate or gift tax, other than income tax consequences, that may be applicable
to you. Further, this summary assumes that you hold the original securities as
"capital assets" within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code"). "Capital assets" are generally property held
for investment. This summary is based on the Code and applicable Treasury
Regulations promulgated and proposed under the Code, rulings, administrative
pronouncements and decisions as of the date of this document, all of which are
subject to change or differing interpretations at any time with possible
retroactive effect.
YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR TO DETERMINE THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO YOU OF THE EXCHANGE OFFERS AND
CONSENT SOLICITATION.
TAX CONSIDERATIONS IF YOU EXCHANGE
New Securities. In general, if you tender your original securities in the
exchange offers, you should not recognize any gain or loss as a result of your
receipt of new securities, except on the receipt of accrued and unpaid interest
on the original securities and except with respect to cash received in lieu of a
fractional interest in new securities. Your basis of the new securities
immediately after the exchange offers will be the same as the basis of your
original securities exchanged for those new securities, which will not include
any basis allocated to a fractional interest in new securities for which cash is
received. The holding period of the new securities received by you in the
exchange offers will include the period during which you held the original
securities exchanged for those new securities, assuming the original securities
were held as capital assets. No ruling has been requested from the Internal
Revenue Service regarding the consequences of the exchange offers and,
accordingly, Tenneco and Packaging cannot assure you that the IRS will not take
a view contrary to those expressed above.
The above conclusions are based on the assumption, among others, that the
original securities and new securities are "securities" for federal income tax
purposes. Whether a debt instrument constitutes a security for U.S. federal
income tax purposes depends on the terms, conditions and other facts and
circumstances relating to the instrument. Prominent factors that the courts have
relied upon in making this determination include: (a) the term to maturity of
the debt; (b) the collateral securing the debt; (c) the degree of subordination
of the debt; (d) the ratio of debt to equity of the issuer; (e) the riskiness of
the business of the issuer; and (f) the negotiability of the instrument.
Generally, notes with terms to maturity of ten years or more, such as some of
the original securities and some of the new securities, are treated as
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securities for federal income tax purposes. Securities with terms to maturity of
five years or less are generally not treated as securities for federal income
tax purposes. Nevertheless, the IRS has taken the position that while the term
to maturity is an important factor, the determination of whether a debt
instrument is a security should be based upon an evaluation of the overall
nature of the debt, including the degree of participation and continuing
interest in the business of the debtor obligated for the debt. [Terms to
maturity of new securities to be provided by amendment.]
Based on all of the factors discussed above, in the opinion of Jenner &
Block, both the original securities and the new securities should be treated as
securities for U.S. federal income tax purposes. However, due to the inherently
factual nature of the determination of whether a debt instrument is a security
for tax purposes, the IRS or a court could determine that the original
securities or the new securities do not constitute securities.
The above conclusions are also based on the assumption that the spin-off
will qualify as a tax-free distribution under Section 355 of the Code. Tenneco
has received a letter ruling from the IRS to that effect. The letter ruling is
based on various factual representations and assumptions. If any of these
factual representations or assumptions are incomplete or untrue in a material
respect, or the facts on which the letter ruling is based are materially
different from the facts at the time of the spin-off, the spin-off could become
taxable to Tenneco, its stockholders and its other securityholders.
If the spin-off does not qualify as a tax-free distribution under Section
355 of the Code, other than as a result of a 50% ownership shift in Automotive
or Packaging, or if either the original securities or new securities are
determined not to be securities for U.S. federal income tax purposes, you would
recognize capital gain or loss if you participate in the exchange offers equal
to the difference between the issue price of the new securities and your tax
basis of the original securities exchanged. Any gain may be subject to ordinary
income treatment if you acquired the original securities at a market discount.
The "issue price" of the new securities will be equal to (a) the fair market
value of the original securities or the new securities, if either the original
securities or the new securities are traded on an established market, or (b) the
stated principal amount of the new securities, if neither the original
securities nor the new securities are traded on an established market.
If either the original securities or the new securities are traded on an
established market, the new securities may have original issue discount equal to
the difference between their issue price and their stated principal amount. You
would include any original issue discount in income as it accrued on the basis
of a constant yield to the maturity date, and thus would be required to include
amounts in income prior to the date such income is actually paid in cash.
If you tender your original securities prior to the expiration of the
consent solicitation, it is possible that a portion of the new securities will
be treated as a consent payment. If a portion of the new securities is treated
as a consent payment, it would result in ordinary income to you.
Cash received by you in lieu of a fractional interest in new securities
should be treated as received in exchange for a fractional interest received in
exchange for your original securities, and you should generally recognize
capital gain or loss for federal income tax purposes measured by the difference
between the amount of cash received and the tax basis of the original securities
allocable to such fractional interest. Such gain or loss should be a long-term
capital gain or loss if the holding period of the original securities exchanged
is greater than one year at the time of the exchange.
An exception to the capital gain treatment described above applies to a
holder who holds securities with "market discount." Market discount is the
amount by which the holder's basis in his, her or its securities immediately
after the acquisition is exceeded by the stated redemption price at maturity of
the securities. Generally, a holder who purchased his, her or its securities at
market discount will be required to treat as ordinary income the lesser of the
gain realized on the receipt of cash in lieu of a fractional interest in new
securities or the market discount that accrued while the original securities
were held by the holder, unless the holder made an election to include accrued
market discount in income currently.
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Accrued Interest. Any portion of the payment received by you which is
attributable to accrued interest on the original securities will be taxable as
ordinary income in accordance with your method of accounting for U.S. federal
income tax purposes.
Amortizable Bond Premium. If you tender your original securities after the
consent solicitation expires, the tax basis of your new securities may exceed
the amount payable at maturity of the new securities. In general, such excess
will be treated as "amortizable bond premium" that you may elect, under Section
171 of the Code, to amortize as an offset to interest income under the constant
yield method over the period from the date of the acquisition of the new
securities to the maturity date of the new securities, subject to special rules
for early call provisions.
If a holder of the new securities makes an election to amortize bond
premium, the tax basis of the new securities must be reduced by the annual
amount of the aggregate amortization deductions allowable for the bond premium.
An election to amortize bond premium applies to all obligations with amortizable
bond premium held by the electing holder at the beginning of the first taxable
year to which the election applies or later acquired by the holder, and is
irrevocable without the consent of the IRS.
TAX CONSIDERATIONS IF YOU DO NOT EXCHANGE
If you do not exchange your original securities in the exchange offers you
should not recognize gain or loss for U.S. federal income tax purposes unless
the supplemental indenture with respect to the original indenture, providing for
the proposed amendments, becomes effective and is deemed to constitute a
significant modification of the original securities under Section 1001 of the
Code. The changes in the terms of the original securities to be effected by the
supplemental indenture should not constitute a significant modification under
the applicable Treasury Regulations, and should not result in a deemed exchange
of securities for U.S. federal income tax purposes. Accordingly, if you hold
original securities and elect to retain them, you should not recognize gain or
loss as a result of the changes to the terms of the original securities effected
by the supplemental indenture. Alternatively, even if the supplemental indenture
were to result in a deemed exchange of securities for U.S. federal income tax
purposes, if you do not tender your original securities in the exchange offers,
you should not recognize gain or loss on the deemed exchange since the deemed
exchange should qualify as a tax-free recapitalization, assuming the original
securities constitute securities for federal income tax purposes.
BACKUP WITHHOLDING
Under the U.S. federal income tax backup withholding provisions of the Code
and applicable Treasury Regulations, you will be subject to backup withholding
at the rate of 31% with respect to interest received by you unless you: (a) are
a corporation or come within another exempt category and, when required,
demonstrate this fact; or (b) provide a correct taxpayer identification number
to the exchange agent, certify as to no loss of exemption from backup
withholding, and otherwise comply with the applicable requirements of the backup
withholding rules. Any amount withheld under these rules will be credited
against your U.S. federal income tax liability. To prevent backup withholding
with respect to the payment of interest, you must complete and sign a substitute
Form W-9, which is included as part of the consent and letter of transmittal,
and return it to the exchange agent. If the exchange agent is not provided with
the correct taxpayer identification number, you may also be subject to a penalty
imposed by the IRS. If withholding results in an overpayment of taxes, a refund
may be obtained by you from the IRS.
LEGAL MATTERS
Legal matters regarding the authorization and issuance of the new
securities will be passed upon for Tenneco and Packaging by Jenner & Block,
Chicago, Illinois. Matters regarding the federal income tax treatment of the
exchange offers and consent solicitation are also being passed upon for Tenneco
and Packaging by Jenner & Block. Theodore R. Tetzlaff, General Counsel of
Tenneco and a partner of Jenner & Block, beneficially owns 188,406 shares of
Tenneco common stock. This amount includes options to purchase 89,871 shares of
Tenneco common stock, which options are either presently exercisable or
155
<PAGE> 157
exercisable within 60 days. Timothy R. Donovan, a partner of Jenner & Block
through September 1999, was named Senior Vice President and General Counsel of
Automotive in August 1999. Legal matters relating to exchange offers and consent
solicitation will be passed upon for the dealer managers by Cahill Gordon &
Reindel, a partnership including a professional corporation, New York, New York.
Cahill Gordon & Reindel has in the past represented and continues to represent
Tenneco in various matters.
EXPERTS
The following financial statements and schedules included or incorporated
by reference in this document or elsewhere in this registration statement to the
extent and for the periods indicated in their reports, have been audited by
Arthur Andersen LLP, independent public accountants, and are included in this
document in reliance upon the authority of said firm as experts in accounting
and auditing in giving said reports: (a) Tenneco Inc. and Consolidated
Subsidiaries included in Tenneco's Current Report on Form 8-K dated August 20,
1999, incorporated by reference in this document; and (b) The Businesses of
Tenneco Packaging, included in this document.
156
<PAGE> 158
INDEX TO COMBINED FINANCIAL STATEMENTS AND SCHEDULE OF
THE BUSINESSES OF TENNECO PACKAGING
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of independent public accountants.................... F-2
Combined statements of income for each of the three years in
the period ended December 31, 1998, and the six months
ended June 30, 1999 (unaudited) and 1998 (unaudited)...... F-3
Combined balance sheets -- December 31, 1998 and 1997, and
June 30, 1999 (unaudited)................................. F-4
Combined statements of cash flows for each of the three
years in the period ended December 31, 1998, and the six
months ended June 30, 1999 (unaudited) and 1998
(unaudited)............................................... F-5
Statements of changes in combined equity for each of the
three years in the period ended December 31, 1998, and six
months ended June 30, 1999 (unaudited).................... F-6
Statements of comprehensive income for each of the three
years in the period ended December 31, 1998, and the six
months ended June 30, 1999 (unaudited) and 1998
(unaudited)............................................... F-7
Notes to combined financial statements...................... F-8
Financial statement schedule -- Valuation and Qualifying
Accounts.................................................. S-1
</TABLE>
F-1
<PAGE> 159
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Tenneco Inc.:
We have audited the accompanying combined balance sheets of the Businesses
of Tenneco Packaging (see Note 1) as of December 31, 1998 and 1997, and the
related combined statements of income, cash flows, changes in combined equity
and comprehensive income for each of the three years in the period ended
December 31, 1998. These combined financial statements and the schedule referred
to below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these combined financial statements and schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Businesses of Tenneco Packaging as of December 31, 1998 and 1997, and the
results of their combined operations and cash flows for each of the three years
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
As discussed in Note 3 to the combined financial statements, in the fourth
quarter of 1997, the Businesses of Tenneco Packaging changed their method of
accounting for certain costs incurred in connection with information technology
transformation projects.
Our audits were made for the purpose of forming an opinion on the basic
combined financial statements taken as a whole. The supplemental schedule listed
in the index to the combined financial statements and schedule is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic combined financial statements. The supplemental schedule
has been subjected to the auditing procedures applied in the audits of the basic
combined financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to the
basic combined financial statements of the Businesses of Tenneco Packaging taken
as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
July 2, 1999
F-2
<PAGE> 160
THE BUSINESSES OF TENNECO PACKAGING
COMBINED STATEMENTS OF INCOME
(MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------- --------------------------
1998 1997 1996 1999 1998
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Net sales and operating revenues --
Specialty................................. $2,785 $2,553 $1,987 $1,404 $1,361
Other..................................... 6 10 -- -- 10
------ ------ ------ ------ ------
2,791 2,563 1,987 1,404 1,371
Gain (loss) on sale of businesses and assets,
net....................................... (9) -- 15 (21) (1)
Other income, net............................ 6 6 34 3 9
------ ------ ------ ------ ------
2,788 2,569 2,036 1,386 1,379
------ ------ ------ ------ ------
COSTS AND EXPENSES
Cost of sales (exclusive of depreciation
shown below).............................. 1,870 1,796 1,417 924 931
Engineering, research, and development....... 33 34 22 18 13
Selling, general, and administrative......... 427 270 232 206 174
Depreciation and amortization................ 175 163 131 94 88
------ ------ ------ ------ ------
2,505 2,263 1,802 1,242 1,206
------ ------ ------ ------ ------
INCOME BEFORE INTEREST EXPENSE, INCOME TAXES,
AND MINORITY INTEREST........................ 283 306 234 144 173
Interest expense (net of interest
capitalized)............................ 133 124 102 68 67
Income tax expense........................ 67 75 67 24 37
Minority interest......................... 1 1 -- -- --
------ ------ ------ ------ ------
INCOME FROM CONTINUING OPERATIONS.............. 82 106 65 52 69
Income (loss) from discontinued operations, net
of income tax................................ 57 21 71 (163) 37
------ ------ ------ ------ ------
Income (loss) before extraordinary loss........ 139 127 136 (111) 106
Extraordinary loss, net of income tax.......... -- -- (2) (7) --
------ ------ ------ ------ ------
Income (loss) before cumulative effect of
change in accounting principle............... 139 127 134 (118) 106
Cumulative effect of change in accounting
principle, net of income tax................. -- (38) -- (32) --
------ ------ ------ ------ ------
NET INCOME (LOSS).............................. $ 139 $ 89 $ 134 $ (150) $ 106
====== ====== ====== ====== ======
EARNINGS (LOSS) PER SHARE
Basic earnings per share of common stock --
Continuing operations........................ $ .49 $ .63 $ .38 $ .31 $ .41
Discontinued operations...................... .34 .12 .42 (.98) .22
Extraordinary loss........................... -- -- (.01) (.04) --
Cumulative effect of change in accounting
principle................................. -- (.23) -- (.19) --
------ ------ ------ ------ ------
$ .83 $ .52 $ .79 $ (.90) $ .63
====== ====== ====== ====== ======
Diluted earnings per share of common stock --
Continuing operations........................ $ .49 $ .63 $ .38 $ .31 $ .41
Discontinued operations...................... .34 .12 .42 (.98) .22
Extraordinary loss........................... -- -- (.01) (.04) --
Cumulative effect of change in accounting
principle................................. -- (.23) -- (.19) --
------ ------ ------ ------ ------
$ .83 $ .52 $ .79 $ (.90) $ .63
====== ====== ====== ====== ======
</TABLE>
The accompanying notes to combined financial statements are an integral part
of these combined statements of income.
F-3
<PAGE> 161
THE BUSINESSES OF TENNECO PACKAGING
COMBINED BALANCE SHEETS
(MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1998 1997 1999
---- ---- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments....................... $ 7 $ 11 $ 18
Receivables --
Customer notes and accounts, net....................... 336 301 320
Affiliated companies................................... 44 74 20
Income taxes........................................... 15 36 7
Other.................................................. 52 10 28
Inventories............................................... 412 404 447
Deferred income taxes..................................... 6 41 46
Prepayments and other..................................... 45 47 26
------ ------ ------
917 924 912
------ ------ ------
Other assets:
Long-term notes receivable, net........................... 22 21 16
Goodwill and intangibles, net............................. 1,052 1,009 1,028
Pension assets............................................ 742 654 795
Other..................................................... 143 129 107
------ ------ ------
1,959 1,813 1,946
------ ------ ------
Plant, property, and equipment, at cost..................... 2,057 1,856 2,025
Less -- Reserves for depreciation and amortization........ 501 398 530
------ ------ ------
1,556 1,458 1,495
------ ------ ------
Net assets of discontinued operations....................... 366 423 133
------ ------ ------
$4,798 $4,618 $4,486
====== ====== ======
LIABILITIES AND COMBINED EQUITY
Current liabilities:
Short-term debt (including current maturities on long-term
debt).................................................. $ 595 $ 158 $ 367
Payables --
Trade.................................................. 255 252 257
Affiliated companies................................... 6 6 100
Taxes accrued............................................. 13 12 14
Accrued liabilities....................................... 188 192 215
Other..................................................... 85 124 107
------ ------ ------
1,142 744 1,060
------ ------ ------
Long-term debt.............................................. 1,312 1,492 1,494
------ ------ ------
Deferred income taxes....................................... 291 270 380
------ ------ ------
Postretirement benefits..................................... 163 114 149
------ ------ ------
Deferred credits and other liabilities...................... 100 144 49
------ ------ ------
Commitments and contingencies
Minority interest........................................... 14 15 14
------ ------ ------
Combined equity............................................. 1,776 1,839 1,340
------ ------ ------
$4,798 $4,618 $4,486
====== ====== ======
</TABLE>
The accompanying notes to combined financial statements are an integral part
of these combined balance sheets.
F-4
<PAGE> 162
THE BUSINESSES OF TENNECO PACKAGING
COMBINED STATEMENTS OF CASH FLOWS
(MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
--------------------- ---------------
1998 1997 1996 1999 1998
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations........................... $ 82 $ 106 $ 65 $ 52 $ 69
Adjustments to reconcile income from continuing operations
to cash provided (used) by continuing operations --
Depreciation and amortization........................... 175 163 131 94 88
Deferred income taxes................................... 77 118 4 89 27
(Gain) loss on sale of businesses and assets, net....... 9 -- (15) 21 1
Allocated interest, net of tax.......................... 85 78 63 44 44
Changes in components of working capital --
(Increase) decrease in receivables................... 28 (1) (59) (103) 37
(Increase) decrease in inventories................... 8 (12) (5) (45) (5)
(Increase) decrease in prepayments and other current
assets............................................. (1) (30) 8 1 (5)
Increase (decrease) in payables...................... (13) (44) 13 (44) (21)
Increase (decrease) in taxes accrued................. (23) (36) 40 1 (6)
Increase (decrease) in interest accrued.............. -- (1) (1) (1) --
Increase (decrease) in other current liabilities..... 35 (5) (8) (2) 9
Other................................................... (90) (38) 30 (90) (58)
----- ----- ----- ------- -----
Cash provided (used) by continuing operations............... 372 298 266 17 180
Cash provided (used) by discontinued operations............. 205 107 (3) (62) 108
----- ----- ----- ------- -----
Net cash provided (used) by operating activities............ 577 405 263 (45) 288
----- ----- ----- ------- -----
INVESTING ACTIVITIES
Net proceeds related to the sale of discontinued
operations................................................ -- 10 123 306 --
Net proceeds from sale of businesses and assets............. 22 14 23 28 12
Expenditures for plant, property, and equipment............. (194) (229) (216) (75) (101)
Acquisitions of businesses and assets....................... (101) (285) (323) (2) (58)
Expenditures for plant, property, and equipment and business
acquisitions -- discontinued operations................... (203) (108) (169) (1,129) (51)
Investments and other....................................... (38) (56) (107) 6 (23)
----- ----- ----- ------- -----
Net cash provided (used) by investing activities............ (514) (654) (669) (866) (221)
----- ----- ----- ------- -----
FINANCING ACTIVITIES
Issuance of long-term debt.................................. 3 4 -- 1,760 2
Retirement of long-term debt................................ (18) (18) (7) (29) (14)
Net increase (decrease) in short-term debt excluding current
maturities on long-term debt.............................. 4 (78) (16) (1) 5
Cash contributions from (distributions to) Tenneco.......... (56) 331 422 (810) (59)
----- ----- ----- ------- -----
Net cash provided (used) by financing activities............ (67) 239 399 920 (66)
----- ----- ----- ------- -----
Effect of foreign exchange rate changes on cash and
temporary cash investments................................ -- (1) (1) 2 --
----- ----- ----- ------- -----
Increase (decrease) in cash and temporary cash
investments............................................... (4) (11) (8) 11 1
Cash and temporary cash investments, beginning of period.... 11 22 30 7 11
----- ----- ----- ------- -----
Cash and temporary cash investments, end of
period.................................................... $ 7 $ 11 $ 22 $ 18 $ 12
===== ===== ===== ======= =====
Cash paid during the period for interest.................... $ 6 $ 9 $ 8 $ 2 $ 4
Cash paid during the period for income taxes (net of
refunds).................................................. $ 21 $ (68) $ 60 $ 17 $ 10
NON-CASH INVESTING AND FINANCING ACTIVITIES
Common equity interest received related to the sale of
containerboard operations................................. $ -- $ -- $ -- $ 194 $ --
Principal amount of long-term debt assumed by buyers of
containerboard operations................................. $ -- $ -- $ -- $(1,760) $ --
</TABLE>
- -------------------------
Note: Cash and temporary cash investments include highly liquid investments with
a maturity of three months or less at the date of purchase.
The accompanying notes to combined financial statements are an integral part
of these combined statements of cash flows.
F-5
<PAGE> 163
THE BUSINESSES OF TENNECO PACKAGING
STATEMENTS OF CHANGES IN COMBINED EQUITY
(MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------- SIX MONTHS ENDED
1998 1997 1996 JUNE 30, 1999
---- ---- ---- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Balance, January 1................................. $1,839 $1,843 $1,531 $1,776
Net income (loss)................................ 139 89 134 (150)
Accumulated other comprehensive income (loss).... 22 (24) (7) (29)
Allocated interest, net of tax................... 111 102 86 49
Change in allocated corporate debt............... (333) (549) (137) 573
Cash contributions from (distributions to)
Tenneco....................................... (56) 331 422 (810)
Noncash contributions from (distributions to)
Tenneco....................................... 54 47 (186) (69)
------ ------ ------ ------
Balance, end of period............................. $1,776 $1,839 $1,843 $1,340
====== ====== ====== ======
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these
statements of changes in combined equity.
F-6
<PAGE> 164
THE BUSINESSES OF TENNECO PACKAGING
COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------- ----------------------------- -----------------------------
ACCUMULATED ACCUMULATED ACCUMULATED
OTHER OTHER OTHER
COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE
INCOME INCOME INCOME INCOME INCOME INCOME
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET INCOME (LOSS)................. $139 $ 89 $134
---- ---- ----
ACCUMULATED OTHER COMPREHENSIVE
INCOME:
CUMULATIVE TRANSLATION
ADJUSTMENT
Balance, January 1.............. $(21) $ 3 $10
Translation of foreign
currency statements......... 24 24 (25) (25) (6) (6)
Hedges of net investment in
foreign subsidiaries........ -- -- 2 2 (2) (2)
Income tax benefit
(expense)................... -- -- (1) (1) 1 1
---- ---- ---
Balance, end of period.......... 3 (21) 3
---- ---- ---
ADDITIONAL MINIMUM PENSION
LIABILITY ADJUSTMENT
Balance, January 1.............. -- -- --
Additional minimum pension
liability adjustment........ (4) (4) -- -- -- --
Income tax benefit
(expense)................... 2 2 -- -- -- --
---- ---- ---
Balance, end of period.......... (2) -- --
---- ---- ---
Balance, end of period............ $ 1 $(21) $ 3
==== ---- ==== ---- === ----
Other comprehensive income
(loss).......................... 22 (24) (7)
---- ---- ----
COMPREHENSIVE INCOME (LOSS)....... $161 $ 65 $127
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
ACCUMULATED ACCUMULATED
OTHER OTHER
COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE
INCOME INCOME INCOME INCOME
------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET INCOME (LOSS)........................................... $(150) $106
----- ----
ACCUMULATED OTHER COMPREHENSIVE INCOME:
CUMULATIVE TRANSLATION ADJUSTMENT
Balance, January 1........................................ $ 3 $(21)
Translation of foreign currency statements.............. (29) (29) (5) (5)
Hedges of net investment in foreign subsidiaries........ -- -- -- --
Income tax benefit (expense)............................ -- -- -- --
---- ----
Balance, end of period.................................... (26) (26)
---- ----
ADDITIONAL MINIMUM PENSION LIABILITY ADJUSTMENT
Balance, January 1........................................ (2) --
Additional minimum pension liability adjustment......... -- -- -- --
Income tax benefit (expense)............................ -- -- -- --
---- ----
Balance, end of period.................................... (2) --
---- ----
Balance, end of period...................................... $(28) $(26)
==== ----- ==== ----
Other comprehensive income (loss)........................... (29) (5)
----- ----
COMPREHENSIVE INCOME (LOSS)................................. $(179) $101
===== ====
</TABLE>
The accompanying notes to combined financial statements are an integral part
of these combined statements of comprehensive income (loss).
F-7
<PAGE> 165
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying combined financial statements represent the financial
position, results of operations, and cash flows for all of the Businesses of
Tenneco Packaging ("Packaging") owned directly or indirectly by Tenneco Inc.
("Tenneco") and its subsidiaries (see "Control" below). Packaging includes the
assets, liabilities, and operations of Tenneco's specialty packaging and
paperboard packaging businesses as well as Tenneco's corporate and
administrative service operations.
Unless the context otherwise requires, the term "Tenneco" refers to: (i)
for periods prior to the spin-off, as defined below, Tenneco's automotive and
packaging businesses, and administrative service operations and (ii) for periods
after the spin-off, Tenneco's automotive business.
2. STRATEGIC ALTERNATIVES ANALYSIS
In July 1998, Tenneco's Board of Directors authorized management to develop
a broad range of strategic alternatives which could result in the separation of
the automotive, paperboard packaging, and specialty packaging businesses. As
part of that strategic alternatives analysis, Tenneco has taken the following
actions:
- In January 1999, Tenneco reached an agreement to contribute the
containerboard assets of its paperboard packaging segment to a new joint
venture with an affiliate of Madison Dearborn Partners, Inc. The
contribution to the joint venture was completed in April 1999. Tenneco
received consideration of cash and debt assumption totaling
approximately $2 billion and a 45 percent common equity interest in the
joint venture (now 43 percent due to subsequent management equity
issuances) valued at approximately $200 million.
- In April 1999, Tenneco reached an agreement to sell the paperboard
packaging segment's other assets, its folding carton operation, to
Caraustar Industries. This transaction closed in June 1999.
- Also in April 1999, Tenneco announced that its Board of Directors had
approved the separation of its automotive and packaging businesses into
two separate, independent companies.
- In June 1999, Tenneco's Board of Directors approved a plan to sell
Packaging's remaining interest in its containerboard joint venture.
Packaging expects the sale to be completed before the spin-off discussed
below.
As a result of the decision to sell Packaging's remaining interest in the
containerboard joint venture, Packaging's paperboard packaging segment is
presented as a discontinued operation in the accompanying combined financial
statements. Reference is made to Note 7 for information related to discontinued
operations.
The separation of Tenneco's automotive and packaging businesses will be
accomplished by the spin-off of the common stock of Packaging to Tenneco
shareowners (the "Spin-off"). At the time of the Spin-off, Packaging will
include Tenneco's specialty packaging business, Tenneco's administrative
services operations, and the remaining interest in the containerboard joint
venture if the sale has not been completed. Tenneco and Packaging are, however,
currently analyzing the alternatives with regard to the administrative services
operations.
Before the Spin-off, Tenneco will realign substantially all of its existing
debt through some combination of tender offers, exchange offers, prepayments and
other refinancings. The debt realignment will be financed by internally
generated cash, borrowings by Tenneco under a new credit facility, the issuance
by Tenneco of subordinated debt, and borrowings by Packaging under new credit
facilities.
The Spin-off is subject to conditions, including formal declaration of the
Spin-off by the Tenneco Board of Directors, Tenneco's receipt, and the continued
effectiveness of a determination that the Spin-off
F-8
<PAGE> 166
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
will be tax-free for U.S. federal income tax purposes and the successful
completion of the debt realignment and corporate restructuring transactions. In
August 1999, Tenneco received a letter ruling from the Internal Revenue Service
that the Spin-off will be tax-free for U.S. federal income tax purposes to
Tenneco and its shareowners (unaudited).
Packaging will modify or enter into certain contractual agreements with
Tenneco related to becoming a separate publicly held company. These agreements
include a distribution agreement, a tax sharing agreement, a human resources
agreement, an insurance agreement, and a transition services agreement.
These agreements will provide, among other things, that (i) Packaging will
become the sponsor of the Tenneco Retirement Plan, the Tenneco Supplemental
Executive Retirement Plan, and the Tenneco Thrift Plan; and (ii) Packaging will
provide certain administrative services, including payroll, accounts payable,
benefits administration, accounting, and travel-related services to Tenneco for
a specified period of time.
3. SUMMARY OF ACCOUNTING POLICIES
Control
All of the outstanding common stock of Packaging is owned directly or
indirectly by Tenneco. Thus, Packaging is under the control of Tenneco.
Unaudited Interim Information
The unaudited interim combined financial statements as of June 30, 1999,
and for the six month periods ended June 30, 1999 and 1998, included herein,
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of Packaging's management, the unaudited
interim combined financial statements contain all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation. The
interim financial results are not necessarily indicative of operating results
for an entire year.
Income Taxes
Packaging utilizes the liability method of accounting for income taxes
whereby it recognizes deferred tax assets and liabilities for the future tax
consequences of temporary differences between the tax basis of assets and
liabilities and their reported amounts in the combined financial statements.
Deferred tax assets are reduced by a valuation allowance when, based upon
management's estimates, it is more likely than not that a portion of the
deferred tax assets will not be realized in a future period. The estimates
utilized in the recognition of deferred tax assets are subject to revision in
future periods based on new facts or circumstances.
Packaging and Tenneco, together with certain of their respective
subsidiaries which are owned 80% or more, have entered into an agreement to file
a consolidated U.S. federal income tax return. This agreement provides, among
other things, that (1) each company in a taxable income position will be
currently charged with an amount equivalent to its U.S. federal income tax
computed on a separate return basis and (2) each company in a tax loss position
will be reimbursed currently. The income tax amounts reflected in the combined
financial statements of Packaging under the provisions of the tax sharing
arrangement are not materially different from the income taxes which would have
been provided had Packaging filed a separate tax return. Under the tax sharing
agreement, Tenneco pays all U.S. federal taxes directly and bills or refunds, as
applicable, its subsidiaries for the applicable portion of the total tax
payments. Cash taxes paid in the combined statements of cash flows include
payments to Tenneco for U.S. federal income taxes.
F-9
<PAGE> 167
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Packaging does not provide for U.S. federal income taxes on unremitted
earnings of foreign subsidiaries as it is the present intention of management to
reinvest the unremitted earnings in its foreign operations. Unremitted earnings
of foreign subsidiaries are approximately $95 million at December 31, 1998. It
is not practicable to determine the amount of U.S. federal income taxes that
would be payable upon remittance of the assets that represent those earnings.
In connection with the Spin-off, the current tax sharing agreement will be
cancelled, and Packaging will enter into a new tax sharing agreement with
Tenneco. The tax sharing agreement will provide, among other things, for the
allocation of taxes among the parties of tax liabilities arising prior to, as a
result of, and subsequent to the Spin-off. Generally, Packaging will be liable
for taxes imposed on it and its affiliates engaged in the packaging business. In
the case of U.S. federal income taxes imposed on the combined activities of the
consolidated group, Packaging will generally be liable to Tenneco for U.S.
federal income taxes attributable to its activities.
Changes in Accounting Principles
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("FAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes new
accounting and reporting standards requiring that all derivative instruments
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's gains
and losses to offset related results on the hedged item in the income statement
and requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting treatment. This
statement cannot be applied retroactively and is effective for all fiscal years
beginning after June 15, 2000. Packaging is currently evaluating the new
standard but has not yet determined the impact it will have on its financial
position or results of operations.
In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of
Start-Up Activities," which requires costs of start-up activities to be expensed
as incurred. This statement is effective for fiscal years beginning after
December 15, 1998. The statement requires previously capitalized costs related
to start-up activities to be expensed as a cumulative effect of a change in
accounting principle when the statement is adopted. Packaging previously
capitalized certain costs in connection with the start-up of certain new foreign
operations and its shared administrative service operations. Packaging adopted
SOP 98-5 on January 1, 1999, and recorded an after-tax charge for the cumulative
effect of this change in accounting principle upon adoption of $32 million (net
of a $9 million tax benefit), or $.19 per diluted common share. The change in
accounting principle decreased the loss before cumulative effect of change in
accounting principle by $4 million (net of $2 million in income tax expense), or
$.02 per diluted common share for the six months ended June 30, 1999. If the new
accounting method had been applied retroactively, net income for the six months
ended June 30, 1998, and the years ended December 31, 1998, 1997, and 1996,
would have been lower by $7 million (net of a $5 million tax benefit), or $.04
per diluted common share, $14 million (net of a $8 million tax benefit), or $.08
per diluted common share, $7 million (net of a $3 million tax benefit), or $.04
per diluted common share, and $7 million (net of a $4 million tax benefit), or
$.04 per diluted common share.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which establishes new
accounting and reporting standards for the costs of computer software developed
or obtained for internal use. This statement requires prospective application
for fiscal years beginning after December 15, 1998. Packaging adopted SOP 98-1
on January 1,
F-10
<PAGE> 168
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
1999. The impact of this new standard did not have a significant effect on
Packaging's financial position or results of operations.
As required by the FASB's Emerging Issues Task Force ("EITF") Issue 97-13,
"Accounting for Costs Incurred in Connection with a Consulting Contract that
Combines Business Process Reengineering and Information Technology
Transformation," Packaging recorded an after-tax charge of $38 million (net of a
tax benefit of $24 million), or $.23 per diluted common share in the fourth
quarter of 1997. EITF Issue 97-13 establishes the accounting treatment and an
allocation methodology for certain consulting and other costs incurred in
connection with information technology transformation efforts. This charge was
reported as a cumulative effect of change in accounting principle.
General and Administrative Expenses
Included in the "Selling, general and administrative" caption in the
Combined Statements of Income for 1998, 1997, and 1996, is $70 million, $49
million, and $51 million, respectively, which represents Packaging's share of
Tenneco's corporate general and administrative costs for legal, financial,
communication, and other administrative services. The allocation of Tenneco's
corporate general and administrative expenses is based on estimated levels of
effort devoted to Tenneco's various operations and the relative size of these
operations based on revenues, gross property, and payroll. Packaging's
management believes the method for allocating corporate general and
administrative expenses is reasonable. Also included in the "Selling, general
and administrative" caption is $55 million, $22 million, and $7 million, for
1998, 1997, and 1996, respectively, related to administrative service operations
which has not been allocated among Tenneco's various operations. Packaging
estimates that, had it operated as a separate, stand-alone entity and had the
administrative service operations costs been allocated based on a usage charge,
its annual costs for these services would have been lower by approximately $40
million (unaudited) for the year ended December 31, 1998, $27 million
(unaudited) for the year ended December 31, 1997, and $18 million (unaudited)
for the year ended December 31, 1996.
Sales of Receivables
Packaging sells trade receivables to a third party in the ordinary course
of business. At December 31, 1998 and 1997, $140 million and $130 million,
respectively, and $119 million at June 30, 1999, of its outstanding trade
receivables had been sold. Sales of trade receivables are reflected as a
reduction of customer notes and accounts receivable in the accompanying combined
balance sheets and the proceeds received are included in cash flows from
operating activities in the accompanying combined statements of cash flows.
Inventories
At December 31, 1998 and 1997, inventory by major classification was as
follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(MILLIONS)
<S> <C> <C>
Finished goods.............................................. $246 $265
Work in process............................................. 51 22
Raw materials............................................... 63 85
Materials and supplies...................................... 52 32
---- ----
$412 $404
==== ====
</TABLE>
Inventories are stated at the lower of cost or market. A portion of total
inventories (61% and 43% at December 31, 1998 and 1997, respectively) is valued
using the "last-in, first-out" method. All other
F-11
<PAGE> 169
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
inventories are valued on the "first-in, first-out" ("FIFO") or "average"
methods. If the FIFO or average method of inventory accounting had been used by
Packaging for all inventories, inventories would have been approximately $30
million lower and $2 million higher at December 31, 1998 and 1997, respectively.
Goodwill and Intangibles, Net
At December 31, 1998 and 1997, goodwill and intangibles, net of
amortization, by major category were as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(MILLIONS)
<S> <C> <C>
Goodwill.................................................... $ 695 $ 662
Trademarks.................................................. 177 182
Patents..................................................... 149 157
Other....................................................... 31 8
------ ------
$1,052 $1,009
====== ======
</TABLE>
Goodwill is being amortized on a straight-line basis over 40 years. Such
amortization amounted to $17 million, $21 million, and $12 million for 1998,
1997, and 1996, respectively, and is included in the combined statements of
income caption, "Depreciation and amortization."
Packaging has capitalized certain intangible assets, primarily trademarks
and patents, based on their estimated fair value at date of acquisition.
Amortization is provided on these intangible assets on a straight-line basis
over periods ranging from 5 to 40 years. Such amortization amounted to $18
million, $17 million, and $17 million in 1998, 1997, and 1996, respectively, and
is included in the combined statements of income caption, "Depreciation and
amortization."
Plant, Property, and Equipment, at Cost
At December 31, 1998 and 1997, plant, property, and equipment, at cost, by
major category was as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(MILLIONS)
<S> <C> <C>
Land, buildings, and improvements........................... $ 446 $ 389
Machinery and equipment..................................... 1,481 1,339
Other, including construction in progress................... 130 128
------ ------
$2,057 $1,856
====== ======
</TABLE>
Depreciation of Packaging's properties is provided on a straight-line basis
over the estimated useful lives of the assets. Useful lives range from 10 to 40
years for buildings and improvements and from 3 to 25 years for machinery and
equipment.
Other Long-Term Assets
Packaging previously capitalized certain costs in connection with the
start-up of certain new foreign operations and its shared administrative service
operations. The start-up costs are amortized over the periods benefited,
generally three to five years. Start-up costs capitalized, net of amortization,
at December 31, 1998 and 1997, were $41 million and $20 million, respectively.
Packaging adopted a new accounting standard in the first quarter of 1999, which
requires these costs to be expensed. Refer to "Changes in Accounting Principles"
discussed previously in this footnote.
F-12
<PAGE> 170
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Packaging capitalizes certain costs related to the purchase and development
of software which is used in its business operations. The costs attributable to
these software systems are amortized over their estimated useful lives, ranging
from 3 to 12 years, based on various factors such as the effects of
obsolescence, technology, and other economic factors. Capitalized software
development costs, net of amortization, were $140 million and $104 million at
December 31, 1998 and 1997, respectively. As described previously in this
footnote, Packaging adopted a new accounting standard related to accounting for
the costs of computer software developed for internal use. The impact of this
new standard did not have a significant effect on Packaging's financial position
or results of operations.
Environmental Liabilities
Expenditures for ongoing compliance with environmental regulations that
relate to current operations are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations and
that do not contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments indicate that remedial
efforts are probable and the costs can be reasonably estimated. Estimates of the
liability are based upon currently available facts, existing technology, and
presently enacted laws and regulations taking into consideration the likely
effects of inflation and other societal and economic factors. All available
evidence is considered including prior experience in remediation of contaminated
sites, other companies' clean-up experience, and data released by the United
States Environmental Protection Agency or other organizations. These estimated
liabilities are subject to revision in future periods based on actual costs or
new information. These liabilities are included in the balance sheet at their
undiscounted amounts. Recoveries are evaluated separately from the liability
and, when assured, are recorded and reported separately from the associated
liability in the combined financial statements. For further information on this
subject, refer to Note 15, "Commitments and Contingencies."
Earnings Per Share
In connection with the Spin-off, Tenneco shareowners will receive one share
of Packaging common stock for each share of Tenneco common stock outstanding.
Accordingly, basic and diluted earnings per share for Packaging have been
calculated using Tenneco's historical weighted average shares outstanding and
weighted average shares outstanding adjusted to include estimates of additional
shares that would be issued if potentially dilutive common shares had been
issued, respectively. Potentially dilutive securities include stock options,
restricted stock and performance shares.
Tenneco's basic and diluted average common shares outstanding are as
follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------- -------------------------
1998 1997 1996 1999 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Basic......................... 168,505,573 170,264,731 169,609,373 166,937,362 169,341,555
Diluted....................... 168,834,531 170,801,636 170,526,112 167,319,412 169,936,676
</TABLE>
Research and Development
Research and development costs are expensed as incurred. Research and
development expenses were $25 million, $29 million, and $19 million for 1998,
1997, and 1996, respectively, and are included in the combined statements of
income caption "Engineering, research, and development."
F-13
<PAGE> 171
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Foreign Currency Translation
Financial statements of international operations are translated into U.S.
dollars using the exchange rate at each balance sheet date for assets and
liabilities and the weighted average exchange rate for each applicable period
for revenues, expenses, and gains and losses. Translation adjustments are
reflected in the combined balance sheet caption "Combined equity."
Risk Management Activities
Packaging from time to time uses derivative financial instruments,
principally foreign currency forward purchase and sale contracts with terms of
less than one year, to hedge its exposure to changes in foreign currency
exchange rates. Net gains or losses on these foreign currency exchange contracts
that are designated as hedges are recognized in the combined statements of
income to offset the foreign currency gain or loss on the underlying
transaction. Packaging has from time to time also entered into forward contracts
to hedge its net investment in foreign subsidiaries. The after-tax net gains or
losses on these contracts are recognized on the accrual basis in the combined
balance sheet caption "Combined equity." In the statement of cash flows, cash
receipts or payments related to these exchange contracts are classified
consistent with the cash flows from the transaction being hedged.
Packaging does not currently enter into derivative financial instruments
for speculative purposes.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions in determining the reported amounts of Packaging's assets,
liabilities, revenues, and expenses. Reference is made to the "Income Taxes" and
"Environmental Liabilities" sections of this footnote and Notes 13 and 15 for
additional information on significant estimates included in Packaging's combined
financial statements.
4. RESTRUCTURING AND OTHER CHARGES
In the fourth quarter of 1998, Tenneco's Board of Directors approved an
extensive restructuring plan designed to reduce administrative and operational
overhead costs in every part of Tenneco's business. As a result, Packaging
recorded a pre-tax charge to income from continuing operations of $32 million,
$20 million after-tax or $.12 per diluted common share. Of the pre-tax charge,
$10 million relates to operational restructuring actions and $22 million relates
to a staff and cost reduction plan, which covers employees in both the operating
unit and corporate operations.
The operational restructuring plans for Packaging involve the elimination
of production lines at two plants resulting in the elimination of 104 positions.
Additionally, Packaging intends to exit four joint ventures. The staff and cost
reduction plan involves the elimination of 184 administrative positions in
Packaging's business unit and in Packaging's corporate operations.
The fixed assets for the production lines to be eliminated, as well as the
joint venture investments, were written down to their fair value, less costs to
sell, in the fourth quarter of 1998. Fair value for the production lines was
estimated at scrap value less removal costs. Fair value for the joint ventures
were determined to be zero as Packaging is relinquishing their interest. No
significant net cash proceeds are expected to be received from the ultimate
disposal of these assets which should be complete by the fourth quarter of 1999.
The effect of suspending depreciation for the production lines is approximately
$1 million on an annual basis.
F-14
<PAGE> 172
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1998, and June 30, 1999, approximately 158 and 233
employees, respectively, have been terminated. This restructuring is being
executed according to Packaging's initial plan and Packaging expects to complete
all restructuring actions by the fourth quarter of 1999.
In the first quarter of 1999, in connection with Packaging's contribution
of its containerboard assets to a new joint venture, Tenneco adopted a plan to
realign its headquarters functions. This plan involves the severance of
approximately 40 employees, and the closing of the Greenwich, Connecticut
headquarters facility. Tenneco reached an agreement to sell its headquarters
facility in Greenwich and recorded an impairment charge based on the selling
price, less costs to sell. The carrying value of the facility before the
impairment was $43 million. Annual depreciation expense was reduced by
approximately $3 million as a result of the sale. The charge for this plan was
recorded in Packaging's corporate operations in the amount of $29 million
pre-tax, $17 million after-tax, or $.10 per diluted common share. Packaging
collected approximately $30 million in the second quarter of 1999 related to the
sale of these assets.
Amounts related to the restructuring plans described above are shown in the
following table:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
-----------------------------------
1998 CHARGED BALANCE AT CHARGED BALANCE AT
RESTRUCTURING CASH TO ASSET DECEMBER 31, RESTRUCTURING CASH TO ASSET JUNE 30,
CHARGE PAYMENTS ACCOUNTS 1998 CHARGE PAYMENTS ACCOUNTS 1999
------------- -------- -------- ------------ ------------- -------- -------- ----------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Severance............... $20 $ 5 $-- $15 $16 $12 $-- $19
Asset impairments....... 12 -- 12 -- 13 -- 13 --
--- --- --- --- --- --- --- ---
$32 $ 5 $12 $15 $29 $12 $13 $19
=== === === === === === === ===
</TABLE>
5. TRANSACTIONS WITH TENNECO
Combined Equity
The "Combined equity" caption in the accompanying combined financial
statements represents Tenneco's cumulative net investment in the combined
businesses of Packaging. Changes in the "Combined equity" caption represent the
net income (loss) of Packaging, net cash and noncash contributions from
(distributions to) Tenneco, accumulated other comprehensive income, changes in
allocated corporate debt, and allocated corporate interest, net of tax.
Reference is made to the statements of changes in combined equity for an
analysis of the activity in the "Combined equity" caption for the three years
ended December 31, 1998, and six months ended June 30, 1999.
Corporate Debt and Interest Allocation
Tenneco's historical practice has been to incur indebtedness for its
consolidated group at the parent company level or at a limited number of
subsidiaries, rather than at the operating company level, and to centrally
manage various cash functions. Consequently, corporate debt of Tenneco and its
related interest expense have been allocated to Packaging based on the portion
of Tenneco's investment in Packaging which is deemed to be debt, generally based
upon the ratio of Packaging's net assets to Tenneco consolidated net assets plus
debt. Interest expense was allocated at a rate equivalent to the weighted-
average cost of all corporate debt, which was 7.0%, 7.4%, and 8.3% for 1998,
1997, and 1996, respectively. Total pre-tax interest expense allocated to
Packaging in 1998, 1997, and 1996 was $130 million, $120 million, and $99
million, respectively. Packaging has also been allocated tax benefits
approximating 35% of the allocated pre-tax interest expense. Although interest
expense, and the related tax effects, have been allocated to Packaging for
financial reporting on a historical basis, Packaging has not been billed for
these amounts. The changes in allocated corporate debt and the after-tax
allocated interest have been included as a component of Packaging's combined
equity. Although management believes that the
F-15
<PAGE> 173
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
historical allocation of corporate debt and interest is reasonable, it is not
necessarily indicative of Packaging's debt upon completion of the realignment of
Tenneco's debt nor debt and interest that will be incurred by Packaging as a
separate public entity.
A portion of the corporate debt of Tenneco and its related interest expense
allocated to Packaging has also been allocated to discontinued operations based
on the ratio of the discontinued operations' net assets to Packaging's combined
net assets plus debt.
Notes and Advances Receivable from Tenneco
"Cash contributions from (distributions to) Tenneco" in the Statements of
Changes in Combined Equity consist of net cash changes in notes and advances
receivable with Tenneco which have been included in combined equity.
Historically, Tenneco has utilized notes and advances to centrally manage cash
funding requirements for its consolidated group.
Noncash contributions from (distributions to) Tenneco result primarily from
transfers of assets and liabilities to or from Tenneco, such as transfers of
acquired net assets and tax assets and liabilities.
At December 31, 1998 and 1997, Packaging had a note receivable from Tenneco
totaling $476 million and $496 million, respectively, which is payable on demand
and is included as a component of Packaging's combined equity.
Accounts Receivable and Accounts Payable -- Affiliated Companies
Receivables -- Affiliated companies relates to general and administrative
costs incurred by Packaging and allocated to affiliates. Payables -- Affiliated
companies relates to billings for costs incurred by affiliates and allocated to
Packaging. Reference is made to Note 3 for a discussion of the types of such
costs allocated to Packaging.
Employee Benefits
Certain employees of Packaging participate in the Tenneco employee stock
option and employee stock purchase plans. The Tenneco employee stock option plan
provides for the grant of Tenneco common stock options and other stock awards at
a price not less than market value at the date of grant. The Tenneco employee
stock purchase plan allows employees to purchase Tenneco common stock at a 15%
discount subject to certain thresholds. Packaging expects to establish similar
plans for its employees after the Spin-off. In connection with the Spin-off,
outstanding options to Tenneco common stock held by Packaging employees will be
replaced by options of Packaging so as to preserve the aggregate value of the
options held prior to the Spin-off. Employees of Packaging also participate in
certain Tenneco postretirement and pension plans. Reference is made to Notes 11
and 13 for a further discussion of these plans.
6. ACQUISITIONS
During 1998, Packaging made three acquisitions for approximately $101
million.
In March 1997, Packaging entered into an agreement to acquire the
protective and flexible packaging division of N.V. Koninklijke KNP BT ("KNP"), a
Dutch distribution, paper, and packaging firm, for approximately $380 million
including debt assumed and preferred stock of a subsidiary issued to the seller.
The KNP acquisition was completed in late April 1997.
In June 1996, Packaging entered into an agreement to acquire Amoco Foam
Products for $310 million. Amoco Foam Products manufactures expanded polystyrene
tableware, hinged-lid food containers, packaging trays, and industrial products
for residential and commercial construction applications. Packaging closed the
acquisition of Amoco Foam Products in August 1996.
F-16
<PAGE> 174
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
All of the acquisitions discussed above have been accounted for as
purchases; accordingly, the purchase price has been allocated to the assets
purchased and the liabilities assumed based on their fair values. The excess of
the purchase price over the fair value of the net assets acquired is included in
the combined balance sheet caption "Goodwill and intangibles, net."
7. DISCONTINUED OPERATIONS AND EXTRAORDINARY LOSS
Discontinued Operations
In January 1999, Tenneco reached an agreement to contribute the
containerboard assets of its paperboard packaging segment to a new joint venture
with an affiliate of Madison Dearborn Partners, Inc. The contribution to the
joint venture was completed in April 1999. Tenneco received consideration of
cash and debt assumption totaling approximately $2 billion plus a 45 percent
common equity interest in the joint venture (now 43 percent due to subsequent
management equity issuances) valued at approximately $200 million. The
containerboard assets contributed to the joint venture represented substantially
all of the assets of Packaging's paperboard packaging segment and included four
mills, 67 corrugated products plants, and an ownership or leasehold interest in
approximately 950,000 acres of timberland. Prior to the transaction, Packaging
borrowed approximately $1.8 billion and used approximately $1.2 billion of those
borrowings to acquire assets used by the containerboard business under operating
leases and timber cutting rights and to purchase containerboard business
accounts receivable that had previously been sold to a third party. The
remainder of the borrowings was remitted to Tenneco and used to repay a portion
of Tenneco's short-term debt. Packaging then contributed the containerboard
business assets (subject to the new indebtedness and the containerboard business
liabilities) to the joint venture in exchange for $247 million in cash and the
45 percent interest in the joint venture. As a result of the transaction,
Packaging recognized a pre-tax loss of $293 million, $178 million after-tax or
$1.07 per diluted common share, in the first quarter of 1999, based on the
amount by which the carrying amount of the containerboard assets exceeded the
fair value of those assets, less cost to sell. The estimate of fair value of the
containerboard assets was based on the fair value of the consideration received
by Tenneco from the joint venture.
In June 1999, Tenneco's Board of Directors approved a plan to sell
Packaging's remaining interest in its containerboard joint venture. Packaging
expects the sale to be completed before the Spin-off. As a result of the
decision to sell the remaining interest in the containerboard joint venture,
Packaging's paperboard packaging segment is presented as a discontinued
operation in the accompanying combined financial statements.
In April 1999, Tenneco reached an agreement to sell the paperboard
packaging segment's other assets, its folding carton operations, to Caraustar
Industries. Packaging received cash proceeds of $73 million from this
transaction which closed in June 1999. As a result of the sale transaction,
Packaging recognized a pre-tax gain of $14 million, $9 million after-tax or $.05
per diluted share and is included in discontinued operations in the second
quarter of 1999.
F-17
<PAGE> 175
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Net assets as of December 31, 1998, 1997, and 1996, and results of
operations for the years then ended for the paperboard packaging segment were as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1997 1996
------ ------ ------
(MILLIONS)
<S> <C> <C> <C>
Net assets at the end of the period (Note).................. $ 366 $ 423 $ 459
====== ====== ======
Net sales and operating revenues............................ $1,570 $1,431 $1,605
====== ====== ======
Income before income taxes and interest allocation.......... $ 131 $ 63 $ 152
Income tax (expense) benefit................................ (48) (19) (60)
------ ------ ------
Income before interest allocation........................... 83 44 92
Allocated interest expense, net of income tax (Note)........ (26) (23) (21)
------ ------ ------
Income from discontinued operations......................... $ 57 $ 21 $ 71
====== ====== ======
</TABLE>
- -------------------------
Note: Net assets of discontinued operations includes allocated corporate debt of
$548 million, $473 million and $394 million as of December 31, 1998, 1997 and
1996, respectively. Reference is made to Note 5, "Transactions with
Tenneco -- Corporate Debt and Interest Allocation," for a discussion of the
allocation of corporate debt and interest expense to discontinued operations.
Extraordinary Loss
In the first quarter of 1999, Packaging recorded an extraordinary loss for
extinguishment of debt of $7 million (net of a $3 million income tax benefit) or
$.04 per diluted common share. The loss related to early retirement of debt in
connection with the sale of the containerboard assets.
8. LONG-TERM DEBT, SHORT-TERM DEBT, AND FINANCING ARRANGEMENTS
Long-Term Debt
A summary of long-term debt outstanding and allocated long-term corporate
debt obligations at December 31, 1998 and 1997, is set forth in the following
table:
<TABLE>
<CAPTION>
1998 1997
---- ----
(MILLIONS)
<S> <C> <C>
Notes due 1999 through 2016, average effective interest rate
9.5% in 1998 and 10% in 1997.............................. $ 22 $ 20
Less -- current maturities.................................. 1 1
------ ------
21 19
Allocated corporate debt obligations, average effective
interest rate 7.0% in 1998 and 7.4% in 1997............... 1,291 1,473
------ ------
Total long-term debt........................................ $1,312 $1,492
====== ======
</TABLE>
The aggregate maturities and sinking fund requirements applicable to the
issues outstanding at December 31, 1998, are $1 million, $3 million, $4 million,
$5 million, and $2 million for 1999, 2000, 2001, 2002, and 2003, respectively.
Reference is made to Note 5 for a discussion of allocated corporate debt
obligations.
F-18
<PAGE> 176
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Short-Term Debt
Packaging uses lines of credit and overnight borrowings to finance certain
of its short-term capital requirements. Information regarding short-term debt as
of and for the years ended December 31, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
CREDIT CREDIT
AGREEMENTS* AGREEMENTS*
----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Outstanding borrowings at end of year....................... $11 $ 1
Weighted average interest rate on outstanding borrowings at
end of year............................................... 18.7% 7.1%
Approximate maximum month-end outstanding borrowings during
year...................................................... $37 $26
Approximate average month-end outstanding borrowings during
year...................................................... $18 $9
Weighted average interest rate on approximate average
month-end outstanding borrowings during year.............. 18.4% 17.5%
</TABLE>
- -------------------------
* Includes borrowings under both committed credit facilities and uncommitted
lines of credit and similar arrangements.
Packaging was allocated short-term corporate debt obligations of $583
million at December 31, 1998, and $156 million at December 31,1997. Reference is
made to Note 5 for a discussion of allocated corporate debt obligations.
9. FINANCIAL INSTRUMENTS
Asset and Liability Instruments
The fair value of cash and temporary cash investments, short and long-term
receivables, and accounts payable, and short-term debt (before allocation of
corporate debt to Packaging from Tenneco) was considered to be the same as or
was not determined to be materially different from the carrying amount.
The long-term debt reflected in the Combined Balance Sheets primarily
represents corporate debt allocated to Packaging from Tenneco. As such, an
estimate of fair value has not been provided. The fair value of other long-term
debt is not materially different from the carrying amount.
Instruments With Off-Balance-Sheet Risk
Foreign Currency Contracts -- Note 3, "Summary of Accounting
Policies -- Risk Management Activities" describes Tenneco's use of and
accounting for foreign currency exchange contracts. Packaging currently manages
its exposure to changes in foreign currency rates by making loans with a Tenneco
affiliate in the functional currency of the operating company concerned. The
Tenneco affiliate then integrates all of Tenneco's foreign currency denominated
loans and enters into foreign currency forward purchase and sale contracts to
mitigate its net exposure to changes in foreign exchange rates. For most
operating companies third party trade receivables and payables are maintained in
the functional currency. From time to time Packaging may enter into foreign
currency forward purchase and sale contracts with terms of less than one year to
mitigate its exposure to changes in exchange rates on foreign currency third
party trade receivables and payables. At December 31, 1998, Packaging had
purchase contracts of approximately $1 million, primarily in U.S. dollars, and
sell contracts of approximately $1 million, primarily in British pounds. At
December 31, 1997, Packaging had purchase contracts of approximately $2 million,
primarily in Belgian francs and German marks, and sell contracts of
approximately $2 million, primarily in British pounds and French francs. At June
30, 1999, Packaging's purchase and sell contracts were not significant.
F-19
<PAGE> 177
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
10. INCOME TAXES
The domestic and foreign components of income from continuing operations
before income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1997 1996
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
U.S. income before income taxes............................. $108 $139 $108
Foreign income before income taxes.......................... 42 43 24
---- ---- ----
Income before income taxes.................................. $150 $182 $132
==== ==== ====
</TABLE>
Following is a comparative analysis of the components of income tax expense
applicable to continuing operations:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------------
1998 1997 1996
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
Current --
U.S....................................................... $(11) $(57) $45
State and local........................................... (2) 9 15
Foreign................................................... 3 5 3
---- ---- ---
(10) (43) 63
---- ---- ---
Deferred --
U.S....................................................... 59 101 3
Foreign, state and other.................................. 18 17 1
---- ---- ---
77 118 4
---- ---- ---
Income tax expense.......................................... $ 67 $ 75 $67
==== ==== ===
</TABLE>
Current income tax expense for the years ended December 31, 1998, 1997, and
1996, include tax benefits of $45 million, $41 million, and $34 million,
respectively, related to the allocation of corporate interest expense to
Packaging from Tenneco. See Note 5.
Following is a reconciliation of income taxes computed at the statutory
U.S. federal income tax rate (35% for all years presented) to the income tax
expense reflected in the combined statements of income:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------------
1998 1997 1996
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
Tax expense computed at the statutory U.S. federal income
tax rate.................................................. $ 53 $ 64 $46
Increases (reductions) in income tax expense resulting from:
Foreign income taxed at different rates and foreign losses
with no tax benefit.................................... 1 (8) (1)
State and local taxes on income, net of U.S. federal
income tax benefit..................................... 3 18 10
Amortization of nondeductible goodwill.................... 5 4 4
Other..................................................... 5 (3) 8
---- ---- ---
Income tax expense.......................................... $ 67 $ 75 $67
==== ==== ===
</TABLE>
F-20
<PAGE> 178
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The components of Packaging's net deferred tax liability were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1998 1997
---- ----
(MILLIONS)
<S> <C> <C>
Deferred tax assets --
Tax loss carryforwards:
U.S. .................................................. $ 95 $ 46
State and local........................................ 7 --
Foreign................................................ 13 4
Postretirement benefits other than pensions............... 13 23
Other..................................................... 26 24
Valuation allowance....................................... (8) (4)
---- ----
Net deferred tax asset............................... 146 93
---- ----
Deferred tax liabilities --
Tax over book depreciation................................ 95 61
Pensions.................................................. 213 206
Other..................................................... 123 55
---- ----
Total deferred tax liability......................... 431 322
---- ----
Net deferred tax liability................................ $285 $229
==== ====
</TABLE>
As reflected by the valuation allowance in the table above, Packaging had
potential tax benefits of $8 million and $4 million at December 31, 1998 and
1997, respectively, which were not recognized in the combined statements of
income when generated. These unrecognized tax benefits resulted primarily from
foreign tax loss carryforwards which are available to reduce future foreign tax
liabilities.
Of the $270 million of U.S. tax loss carryforwards which exist at December
31, 1998, $215 million expire in 2012 and $55 million expire in 2018. The $110
million of state tax loss carryforwards which exist at December 31, 1998, will
expire in varying amounts over the period from 2000 to 2012. Of the $43 million
of foreign tax loss carryforwards which exist at December 31, 1998, $18 million
do not expire and the remainder expires in varying amounts over the period from
1999 to 2005.
Packaging and Tenneco, together with certain of their respective
subsidiaries which are owned 80% or more, have entered into an agreement to file
a consolidated U.S. federal income tax return. This agreement provides, among
other things, that (1) each company in a taxable income position will be
currently charged with an amount equivalent to its U.S. federal income tax
computed on a separate return basis and (2) each company in a tax loss position
will be reimbursed currently. The income tax amounts reflected in the combined
financial statements of Packaging under the provisions of the tax sharing
arrangement are not materially different from the income taxes which would have
been provided had Packaging filed a separate tax return. Under the tax sharing
agreement, Tenneco pays all federal taxes directly and bills or refunds, as
applicable, its subsidiaries for the applicable portion of the total tax
payments. Cash taxes paid in the combined statements of cash flows include
payments to Tenneco for income taxes.
Liability for foreign income taxes is generally allocated to the legal
entity on which such taxes are imposed. In the case of state income taxes,
Packaging is liable for its tax in states where returns are filed for separate
entities. In states where returns are filed in a combined basis, liability is
allocated in a manner similar to federal income tax.
F-21
<PAGE> 179
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
11. EMPLOYEE STOCK PLANS
In June 1992, Tenneco initiated an Employee Stock Purchase Plan ("ESPP").
The ESPP was terminated in 1996. Tenneco adopted a new employee stock purchase
plan effective April 1, 1997 with provisions similar to the 1992 ESPP. Under the
new ESPP, Tenneco sold 311,586 shares, 216,665 shares, and 185,179 shares to
Packaging employees in 1998, 1997, and 1996, respectively. The plan allows U.S.
and Canadian employees of Packaging to purchase Tenneco Inc. common stock
through payroll deductions at a 15% discount. Each year, an employee in the plan
may purchase shares with a discounted value not to exceed $21,250. The weighted
average fair value of the employee purchase right, which was estimated using the
Black-Scholes option pricing model and the assumptions described below except
that the average life of each purchase right was assumed to be 90 days, was
$6.31, $11.14, and $10.77 in 1998, 1997, and 1996, respectively. After the
Spin-off, Packaging employees will no longer participate in the Tenneco ESPP.
In December 1996, Tenneco adopted the 1996 Stock Ownership Plan which
permits the granting of a variety of awards, including common stock, restricted
stock, performance units, stock appreciation rights, and stock options, to
officers and employees of Tenneco. Tenneco can issue up to 17 million shares of
common stock under this plan, which will terminate December 31, 2001. Certain
key Packaging employees have been granted restricted stock and restricted units
under the 1996 Stock Ownership Plan. These awards generally require, among other
things, that the employee remain an employee of Tenneco during the restriction
period. Certain key Packaging employees have also been granted performance
shares which will vest based upon the attainment of specified performance goals
within four years from the date of grant. In connection with the Spin-off,
outstanding restricted stock, restricted units and performance shares will
generally become fully vested. After the Spin-off, Packaging employees will no
longer participate in Tenneco's 1996 Stock Ownership Plan.
The fair value of each stock option issued by Tenneco to Packaging
employees during 1998, 1997, and 1996 is estimated on the date of grant using
the Black-Scholes option pricing model using the following weighted average
assumptions for grants in 1998, 1997, and 1996, respectively: (a) risk-free
interest rate of 5.7%, 6.5%, and 6.0%; (b) expected lives of 10 years, 6 years,
and 5 years; (c) expected volatility of 25.6%, 24.1%, and 24.9%; and (d)
dividend yield of 3.2%, 2.8%, and 3.3%. The weighted average fair value of
options granted during the year is $10.83, $12.03, and $11.42 for 1998, 1997,
and 1996, respectively.
Packaging applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," to its stock-based compensation plans. Packaging
recognized after-tax stock-based compensation expense of $3 million, $4 million,
and $15 million in 1998, 1997, and 1996, respectively. Had compensation costs
for Packaging's stock-based compensation plans been determined in accordance
with FAS No. 123, "Accounting for Stock-Based Compensation," based on the fair
value at the grant dates for awards under those plans, Packaging's pro forma net
income for the years ended December 31, 1998, 1997, and 1996, would have been
lower by $14 million or $.08 per both basic and diluted common share, $13
million or $.08 per both basic and diluted common share, and $5 million or $.03
per both basic and diluted common share, respectively.
12. MINORITY INTEREST
At December 31, 1998 and 1997, Packaging reported minority interest in the
combined balance sheet of $14 million and $15 million, respectively. This
primarily relates to preferred stock of a subsidiary issued in connection with
the KNP acquisition.
13. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Packaging has pension plans that cover substantially all of its employees.
Benefits are based on years of service and, for most salaried employees, on
final average compensation. Packaging's funding policies
F-22
<PAGE> 180
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
are to contribute to the plans amounts necessary to satisfy the funding
requirement of federal laws and regulations. Plan assets consist principally of
listed equity and fixed income securities. After the Spin-off, Packaging will
become the sponsor of the Tenneco Retirement Plan (the "TRP"). Benefits accrued
under the TRP by employees of Tenneco's automotive business will be frozen as of
the last day of the calendar month in which the Spin-off occurs, and all related
pension obligations and assets will be retained by Packaging. In addition, all
TRP pension obligations and assets associated with participating employees from
former subsidiaries and affiliates of Tenneco will be retained by Packaging and
have been reflected in the historical combined financial statements. These
pension obligations and assets that Packaging will retain under all of these
arrangements are included in the table below.
Packaging has postretirement health care and life insurance plans that
cover all of its salaried and certain of its hourly domestic employees. For
salaried employees, the plans cover employees retiring from Packaging on or
after attaining age 55 who have had a least 10 years service with Packaging
after attaining age 45. For hourly employees, the postretirement benefit plans
generally cover employees who retire according to one of Packaging's hourly
employee retirement plans. All of these benefits may be subject to deductibles,
copayment provisions, and other limitations, and Packaging has reserved the
right to change these benefits. Packaging's postretirement benefit plans are not
funded.
F-23
<PAGE> 181
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the change in benefit obligation, the change in plan assets,
the development of net amount recognized, and the amounts recognized in the
combined statement of financial position for the pension plans and
postretirement benefit plans follows:
<TABLE>
<CAPTION>
PENSION POSTRETIREMENT
--------------- ---------------
1998 1997 1998 1997
---- ---- ---- ----
(MILLIONS)
<S> <C> <C> <C> <C>
Change in benefit obligations:
Benefit obligation at September 30 of the previous year... $2,654 $2,361 $ 70 $ 64
Currency rate conversion.................................. 1 -- -- --
Service cost.............................................. 28 23 1 1
Interest cost............................................. 199 178 5 5
Plan amendments........................................... 44 8 -- --
Actuarial loss (gain)..................................... 293 254 1 5
Acquisitions.............................................. -- 13 -- --
Benefits paid............................................. (194) (183) (8) (6)
Participants' contributions............................... -- -- 1 1
------ ------ ---- ----
Benefit obligation at September 30........................ $3,025 $2,654 $ 70 $ 70
====== ====== ==== ====
Change in plan assets:
Fair value at September 30 of the previous year........... $3,516 $2,966 $ -- $ --
Currency rate conversion.................................. -- 4 -- --
Actual return on plan assets.............................. 102 714 -- --
Employer contributions.................................... 5 3 7 5
Participants' contributions............................... 1 -- 1 1
Acquisitions.............................................. -- 12 -- --
Benefits paid............................................. (194) (183) (8) (6)
------ ------ ---- ----
Fair value at September 30................................ $3,430 $3,516 $ -- $ --
====== ====== ==== ====
Development of net amount recognized:
Funded status at September 30............................. $ 405 $ 862 $(70) $(70)
Contributions during the fourth quarter................... 1 1 2 1
Unrecognized cost:
Actuarial loss (gain).................................. 200 (273) 11 11
Prior service cost..................................... 71 57 (4) (5)
Transition liability (asset)........................... (43) (62) -- --
------ ------ ---- ----
Net amount recognized at December 31...................... $ 634 $ 585 $(61) $(63)
====== ====== ==== ====
Amounts recognized in the combined balance sheet:
Prepaid benefit cost...................................... $ 664 $ 594 $ -- $ --
Accrued benefit cost...................................... (56) (9) (61) (63)
Intangible asset.......................................... 22 -- -- --
Accumulated other comprehensive income.................... 4 -- -- --
------ ------ ---- ----
Net amount recognized..................................... $ 634 $ 585 $(61) $(63)
====== ====== ==== ====
</TABLE>
- -------------------------
Note: Assets of one plan may not be utilized to pay benefits of other plans.
Additionally, the prepaid (accrued) benefit cost has been recorded based
upon certain actuarial estimates as described below. Those estimates are
subject to revision in future periods given new facts or circumstances.
F-24
<PAGE> 182
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic pension costs (income) from continuing operations for the
years 1998, 1997, and 1996, consist of the following components:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
Service cost -- benefits earned during the year............. $ 28 $ 23 $ 20
Interest on prior year's projected benefit obligation....... 199 178 126
Expected return on plan assets.............................. (285) (265) (178)
Net amortization:
Actuarial loss (gain)..................................... 1 -- 3
Prior service cost........................................ 11 11 11
Transition liability (asset).............................. (19) (19) (13)
----- ----- -----
Net pension costs (income).................................. $ (65) $ (72) $ (31)
===== ===== =====
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for all pension plans with accumulated benefit obligations
in excess of plan assets were $89 million, $83 million, and $27 million,
respectively, as of September 30, 1998, and $12 million, $11 million, and $1
million, respectively, as of September 30, 1997.
The weighted average discount rates (which are based on long-term market
rates) used in determining the 1998, 1997, and 1996 actuarial present value of
the benefit obligations were 7.0%, 7.75%, and 7.75%, respectively. The rate of
increase in future compensation was 4.8%, 4.9%, and 4.8%, for 1998, 1997, and
1996, respectively. The weighted average expected long-term rate of return on
plan assets for 1998, 1997, and 1996 was 10.0% for each year.
Net periodic postretirement benefit cost from continuing operations for the
years 1998, 1997, and 1996 consist of the following components:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
Service cost -- benefits earned during the year............. $ 2 $ 1 $1
Interest on accumulated postretirement benefit obligation... 5 5 5
Net amortization:
Prior service cost........................................ (2) (2) (2)
Actuarial loss (gain)..................................... 1 1 --
--- --- --
Net periodic postretirement benefit cost.................... $ 6 $ 5 $4
=== === ==
</TABLE>
The initial weighted average assumed health care cost trend rate used in
determining the 1998, 1997, and 1996 accumulated postretirement benefit
obligation was 5%, 5%, and 6%, respectively, declining to 5% in 1997 and
remaining at that level thereafter.
Increasing the assumed health care cost trend rate by one percentage point
in each year would increase the 1998, 1997, and 1996 accumulated postretirement
benefit obligations by approximately $2 million for each year. There would be no
change in the aggregate of the service cost and interest cost components of the
net periodic postretirement benefit cost for any of these years.
Decreasing the assumed health care cost trend rate by one percentage point
in each year would decrease the 1998 accumulated postretirement benefit
obligation by approximately $2 million and would not change the aggregate of
service cost and interest cost components of the net periodic postretirement
benefit cost.
F-25
<PAGE> 183
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The discount rates (which are based on long-term market rates) used in
determining the 1998, 1997, and 1996 accumulated postretirement benefit
obligations were 7.00%, 7.75%, and 7.75%, respectively.
14. SEGMENT AND GEOGRAPHIC AREA INFORMATION
Packaging is a global manufacturer with a single operating segment:
Specialty Packaging -- Manufacture and sale of specialty packaging and
consumer products for foodservice, consumer, protective, flexible and
institutional/industrial markets.
The accounting policies of the segment are the same as those described in
Note 3, "Summary of Accounting Policies." Packaging evaluates operating
performance based primarily on income before interest expense, income taxes, and
minority interest. Individual operating segments have not been aggregated within
this reportable segment.
Products are transferred between geographic areas on a basis intended to
reflect as nearly as possible the "market value" of the products.
The following table sets forth information relating to Packaging's external
customer revenues for each product or each group of similar products:
<TABLE>
<CAPTION>
NET SALES AND
OPERATING REVENUES
YEAR ENDED DECEMBER 31,
--------------------------
1998 1997 1996
---- ---- ----
(MILLIONS)
<S> <C> <C> <C>
SPECIALTY
Disposable plastic, fiber, and aluminum packaging
products............................................... $2,126 $2,105 $1,862
Plastic and fiber protective and flexible packaging
products............................................... 607 399 78
Other..................................................... 52 49 47
------ ------ ------
Total Specialty Packaging............................ 2,785 2,553 1,987
------ ------ ------
OTHER....................................................... 6 10 --
------ ------ ------
COMBINED.................................................... $2,791 $2,563 $1,987
====== ====== ======
</TABLE>
F-26
<PAGE> 184
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following tables summarize certain segment and geographic information
of Packaging:
<TABLE>
<CAPTION>
SEGMENT RECLASS
------------------ &
SPECIALTY OTHER ELIMS COMBINED
--------- ------ ------- --------
(MILLIONS)
<S> <C> <C> <C> <C>
AT JUNE 30, 1999, AND FOR THE SIX MONTHS THEN ENDED
Revenues from external customers........................ $1,404 $ -- $ -- $1,404
Depreciation and amortization........................... 84 10 -- 94
Income before interest, income taxes, and minority
interest.............................................. 190 (46)(b) -- 144
Extraordinary loss...................................... -- (7) -- (7)
Cumulative effect of change in accounting principle..... (17) (15) -- (32)
Total assets............................................ 3,296 1,309(a) (119) 4,486
Net assets of discontinued operations................... -- 133 -- 133
AT DECEMBER 31, 1998, AND FOR THE YEAR THEN ENDED
Revenues from external customers........................ $2,785 $ 6 $ -- $2,791
Depreciation and amortization........................... 152 23 -- 175
Income before interest, income taxes, and minority
interest.............................................. 328 (45)(c) -- 283
Total assets............................................ 3,260 1,580(a) (42) 4,798
Net assets of discontinued operations................... -- 366 -- 366
Investment in affiliated companies...................... 17 -- -- 17
Capital expenditures.................................... 190 4 -- 194
Noncash items other than depreciation and
amortization.......................................... 22 (84) -- (62)
AT JUNE 30, 1998, AND FOR THE SIX MONTHS THEN ENDED
Revenues from external customers........................ $1,361 $ 10 $ -- $1,371
Depreciation and amortization........................... 77 11 -- 88
Income before interest, income taxes, and minority
interest.............................................. 175 (2) -- 173
Total assets............................................ 3,373 1,468(a) (53) 4,788
Net assets of discontinued operations................... -- 382 -- 382
AT DECEMBER 31, 1997, AND FOR THE YEAR THEN ENDED
Revenues from external customers........................ $2,553 $ 10 $ -- $2,563
Depreciation and amortization........................... 143 20 -- 163
Income before interest, income taxes, and minority
interest.............................................. 308 (2) -- 306
Cumulative effect of change in accounting principle..... (11) (27) -- (38)
Total assets............................................ 3,244 1,412(a) (38) 4,618
Net assets of discontinued operations................... -- 423 -- 423
Investment in affiliated companies...................... 9 -- -- 9
Capital expenditures.................................... 227 2 -- 229
Noncash items other than depreciation and
amortization.......................................... 10 (86) -- (76)
AT DECEMBER 31, 1996, AND FOR THE YEAR THEN ENDED
Revenues from external customers........................ $1,987 $ -- $ -- $1,987
Depreciation and amortization........................... 123 8 -- 131
Income before interest, income taxes, and minority
interest.............................................. 249 (15) -- 234
Extraordinary loss...................................... -- (2) -- (2)
Total assets............................................ 2,655 1,421(a) (48) 4,028
Net assets of discontinued operations................... -- 459 -- 459
Investment in affiliated companies...................... 9 1 -- 10
Capital expenditures.................................... 172 44 -- 216
Noncash items other than depreciation and
amortization.......................................... (2) (44) -- (46)
</TABLE>
F-27
<PAGE> 185
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
- -------------------------
Notes: (a) The Other segment's total assets includes pension assets retained by
Packaging related to certain employees of Tenneco's and Packaging's
discontinued operations, Packaging's administrative service
operations assets and net assets of the discontinued paperboard
packaging segment.
(b) The Other segment's income before interest expense, income taxes and
minority interest for the six months ended June 30, 1999 includes a
$29 million charge relating to the severance of corporate employees
and the closing of the Greenwich, Connecticut headquarters facility
(see Note 4).
(c) The Other segment's income before interest expense, income taxes and
minority interest for the year ended December 31, 1998 includes
restructuring charges of $10 million relating to severance of
corporate employees (see Note 4) and approximately $50 million of
operating costs relating to Packaging's information technology
service center that began operation in 1998.
<TABLE>
<CAPTION>
GEOGRAPHIC AREA
--------------------
UNITED RECLASS &
STATES FOREIGN(A) ELIMS COMBINED
------ ---------- --------- --------
(MILLIONS)
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1998, AND FOR THE YEAR THEN ENDED
Revenues from external customers(b).................... $2,212 $579 $ -- $2,791
Long-lived assets(c)................................... 2,168 295 -- 2,463
Total assets........................................... 4,131 691 (24) 4,798
AT DECEMBER 31, 1997, AND FOR THE YEAR THEN ENDED
Revenues from external customers(b).................... $2,116 $447 $ -- $2,563
Long-lived assets(c)................................... 2,026 236 -- 2,262
Total assets........................................... 4,036 596 (14) 4,618
AT DECEMBER 31, 1996, AND FOR THE YEAR THEN ENDED
Revenues from external customers(b).................... $1,759 $228 $ -- $1,987
Long-lived assets(c)................................... 1,957 94 -- 2,051
Total assets........................................... 3,755 281 (8) 4,028
</TABLE>
- -------------------------
Notes: (a) Revenues from external customers and long-lived assets for individual
foreign countries are not material.
(b) Revenues are attributed to countries based on location of the seller.
(c) Long-lived assets include all long-term assets except net assets from
discontinued operations, goodwill, intangibles, and deferred tax
assets.
15. COMMITMENTS AND CONTINGENCIES
Capital Commitments
Packaging estimates that expenditures aggregating approximately $110
million will be required after December 31, 1998, to complete facilities and
projects authorized at such date, and substantial commitments have been made in
connection therewith.
F-28
<PAGE> 186
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Lease Commitments
Packaging holds certain of its facilities, equipment, and other assets
under long-term leases. The minimum lease payments under non-cancelable
operating leases with lease terms in excess of one year are $44 million, $31
million, $22 million, $15 million, and $56 million for the years 1999, 2000,
2001, 2002, and 2003, respectively, and $53 million for subsequent years.
Commitments under capital leases were not significant to the accompanying
combined financial statements. Total rental expense for continuing operations
for the years 1998, 1997, and 1996, was $35 million, $37 million, and $24
million, respectively, including minimum rentals under non-cancelable operating
leases of $45 million, $42 million, and $18 million for the corresponding
periods.
Litigation
Packaging and its combined subsidiaries are parties to various legal
proceedings arising from their operations. Packaging believes that the outcome
of these proceedings, individually and in the aggregate, will have no material
effect on the financial position or results of operations of Packaging and its
combined subsidiaries.
Environmental Matters
Packaging and its combined subsidiaries are subject to a variety of
environmental and pollution control laws and regulations in all jurisdictions in
which they operate. Packaging has provided reserves for compliance with these
laws and regulations where it is probable that a liability exists and where
Packaging can make a reasonable estimate of the liability. The estimated
liabilities recorded are subject to change as more information becomes available
regarding the magnitude of possible clean-up costs and the timing, varying
costs, and effectiveness of alternative clean-up technologies. However,
Packaging believes that any additional costs which arise as more information
becomes available will not have a material effect on the combined financial
condition or results of operations of Packaging.
F-29
<PAGE> 187
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
16. QUARTERLY FINANCIAL DATA (UNAUDITED) (IN MILLIONS EXCEPT PER SHARE)
<TABLE>
<CAPTION>
INCOME (LOSS)
INCOME BEFORE BEFORE
INTEREST CUMULATIVE
NET SALES EXPENSE, INCOME (LOSS) INCOME (LOSS) INCOME (LOSS) EFFECT OF
AND INCOME TAXES, FROM FROM BEFORE CHANGE IN
OPERATING AND MINORITY CONTINUING DISCONTINUED EXTRAORDINARY EXTRAORDINARY ACCOUNTING
QUARTER REVENUES INTEREST OPERATIONS OPERATIONS LOSS LOSS PRINCIPLE
- ------- --------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999
1st................. $ 666 $ 45 $ 6 $(172) $(166) $ (7) $(173)
2nd................. 738 99 46 9 55 -- 55
------ ---- ---- ----- ----- ---- -----
$1,404 $144 $ 52 $(163) $(111) $ (7) $(118)
====== ==== ==== ===== ===== ==== =====
1998
1st................. $ 633 $ 69 $ 18 $ 14 $ 32 $ -- $ 32
2nd................. 738 104 51 23 74 -- 74
3rd................. 696 74 15 25 40 -- 40
4th................. 724 36 (2) (5) (7) -- (7)
------ ---- ---- ----- ----- ---- -----
$2,791 $283 $ 82 $ 57 $ 139 $ -- $ 139
====== ==== ==== ===== ===== ==== =====
1997
1st................. $ 510 $ 48 $ 9 $ 13 $ 22 $ -- $ 22
2nd................. 675 87 31 (11) 20 -- 20
3rd................. 682 89 32 11 43 -- 43
4th................. 696 82 34 8 42 -- 42
------ ---- ---- ----- ----- ---- -----
$2,563 $306 $106 $ 21 $ 127 $ -- $ 127
====== ==== ==== ===== ===== ==== =====
<CAPTION>
CUMULATIVE
EFFECT OF
CHANGE IN NET
ACCOUNTING INCOME
QUARTER PRINCIPLE (LOSS)
- ------- ---------- ------
<S> <C> <C>
1999
1st................. $(32) $(205)
2nd................. -- 55
---- -----
$(32) $(150)
==== =====
1998
1st................. $ -- $ 32
2nd................. -- 74
3rd................. -- 40
4th................. -- (7)
---- -----
$ -- $ 139
==== =====
1997
1st................. $ -- $ 22
2nd................. -- 20
3rd................. -- 43
4th................. (38) 4
---- -----
$(38) $ 89
==== =====
</TABLE>
<TABLE>
<CAPTION>
BASIC EARNINGS (LOSS) PER SHARE OF COMMON STOCK
---------------------------------------------------------------------------------------------------------
BEFORE CUMULATIVE
CUMULATIVE EFFECT OF
FROM FROM BEFORE EFFECT OF CHANGE CHANGE IN
CONTINUING DISCONTINUED EXTRAORDINARY EXTRAORDINARY IN ACCOUNTING ACCOUNTING NET INCOME
QUARTER OPERATIONS OPERATIONS LOSS LOSS PRINCIPLE PRINCIPLE (LOSS)
- ------- ---------- ------------ ---------------- ------------- ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999
1st................ $ .03 $(1.03) $(1.00) $(.04) $(1.04) $(.19) $(1.23)
2nd................ .28 .05 .33 -- .33 -- .33
----- ------ ------ ----- ------ ----- ------
$ .31 $ (.98) $ (.67) $(.04) $ (.71) $(.19) $ (.90)
===== ====== ====== ===== ====== ===== ======
1998
1st................ $ .11 $ .08 $ .19 $ -- $ .19 $ -- $ .19
2nd................ .30 .14 .44 -- .44 -- .44
3rd................ .09 .15 .24 -- .24 -- .24
4th................ (.01) (.04) (.05) -- (.05) -- (.05)
----- ------ ------ ----- ------ ----- ------
$ .49 $ .34 $ .83 $ -- $ .83 $ -- $ .83
===== ====== ====== ===== ====== ===== ======
1997
1st................ $ .06 $ .07 $ .13 $ -- $ .13 $ -- $ .13
2nd................ .19 (.07) .12 -- .12 -- .12
3rd................ .18 .07 .25 -- .25 -- .25
4th................ .20 .05 .25 -- .25 (.23) .02
----- ------ ------ ----- ------ ----- ------
$ .63 $ .12 $ .75 $ -- $ .75 $(.23) $ .52
===== ====== ====== ===== ====== ===== ======
</TABLE>
F-30
<PAGE> 188
THE BUSINESSES OF TENNECO PACKAGING
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DILUTED EARNINGS (LOSS) PER SHARE OF COMMON STOCK
---------------------------------------------------------------------------------------------------------
BEFORE CUMULATIVE
CUMULATIVE EFFECT OF
FROM FROM BEFORE EFFECT OF CHANGE CHANGE IN
CONTINUING DISCONTINUED EXTRAORDINARY EXTRAORDINARY IN ACCOUNTING ACCOUNTING NET INCOME
QUARTER OPERATIONS OPERATIONS LOSS LOSS PRINCIPLE PRINCIPLE (LOSS)
------- ---------- ------------ ---------------- ------------- ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999
1st................ $ .03 $(1.03) $(1.00) $(.04) $(1.04) $(.19) $(1.23)
2nd................ .28 .05 .33 -- .33 -- .33
----- ------ ------ ----- ------ ----- ------
$ .31 $ (.98) $ (.67) $(.04) $ (.71) $(.19) $ (.90)
===== ====== ====== ===== ====== ===== ======
1998
1st................ $ .11 $ .08 $ .19 $ -- $ .19 $ -- $ .19
2nd................ .30 .14 .44 -- .44 -- .44
3rd................ .09 .15 .24 -- .24 -- .24
4th................ (.01) (.04) (.05) -- (.05) -- (.05)
----- ------ ------ ----- ------ ----- ------
$ .49 $ .34 $ .83 $ -- $ .83 $ -- $ .83
===== ====== ====== ===== ====== ===== ======
1997
1st................ $ .06 $ .07 $ .13 $ -- $ .13 $ -- $ .13
2nd................ .19 (.07) .12 -- .12 -- .12
3rd................ .18 .07 .25 -- .25 -- .25
4th................ .20 .05 .25 -- .25 (.23) .02
----- ------ ------ ----- ------ ----- ------
$ .63 $ .12 $ .75 $ -- $ .75 $(.23) $ .52
===== ====== ====== ===== ====== ===== ======
</TABLE>
- -------------------------
Notes: Reference is made to Notes 3, 4, 6, and 7 and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for items
affecting quarterly results. The sum of the quarters may not equal the
total of the respective year's earnings per share on either a basic or
diluted basis due to changes in the weighted average shares outstanding
throughout the year.
(The preceding notes are an integral part of the foregoing combined financial
statements.)
F-31
<PAGE> 189
SCHEDULE II
THE BUSINESSES OF TENNECO PACKAGING
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(MILLIONS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------------------------- ---------- ----------------------- ---------- ---------
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR
----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts Deducted from
Assets to Which it Applies:
Year Ended December 31, 1998............ $11 $ 5 $-- $ 5 $11
=== === == === ===
Year Ended December 31, 1997............ $18 $ 2 $2 $11 $11
=== === == === ===
Year Ended December 31, 1996............ $ 9 $11 $-- $ 2 $18
=== === == === ===
</TABLE>
S-1
<PAGE> 190
ANNEX A
PROPOSED AMENDMENTS AND WAIVER
The following is the text of the proposed amendments and waiver. The
following is qualified in its entirety by reference to the supplemental
indenture and the original indenture, copies of which can be obtained without
charge from the information agent. Capitalized terms used below without
definition have the meanings assigned to them in the original indenture.
1. IF TENNECO RECEIVES THE REQUIRED CONSENTS, THE FOLLOWING PROVISIONS
REGARDING THE WAIVER WILL TAKE EFFECT UPON EXECUTION OF THE SUPPLEMENTAL
INDENTURE ON OR PROMPTLY FOLLOWING THE WITHDRAWAL TIME.
"SECTION 1. Definitions: As used herein, the following terms shall have the
meanings set forth below:
"Cash Tender Offers" means Tenneco's offers to purchase for cash certain
series of Securities issued under the Original Indenture pursuant to the Offer
to Purchase and Consent Solicitation of Tenneco dated , 1999, as amended
from time to time.
"Consent Solicitation" means Tenneco's solicitation of consents to
amendments to the Original Indenture and the execution of this Eleventh
Supplemental Indenture pursuant to the Exchange Offers and Cash Tender Offers.
"Debt Realignment" means the realignment, prior to the Spin-off, of
Tenneco's debt through some combination of tender offers, exchange offers,
prepayments and other refinancings.
"Exchange Offers" means Tenneco's offers to exchange notes and debentures
issued by Tenneco Packaging Inc. for certain Securities issued under the
Original Indenture pursuant to the Prospectus and Consent Solicitation of
Packaging and Tenneco dated , 1999, as amended from time to time.
"Exchange Securities" means the series of Securities subject to the
Exchange Offers.
"Original Indenture" means the Indenture, dated November 1, 1996, between
Tenneco Inc. (formerly New Tenneco Inc.) and The Chase Manhattan Bank, as
trustee, as amended.
"Packaging" means Tenneco Packaging Inc., a Delaware corporation.
"Spin-off" means the distribution of all Packaging common stock to the
holders of Tenneco common stock at a ratio of one share of Packaging common
stock for each share of Tenneco common stock.
"Tender Securities" means the series of Securities subject to the Cash
Tender Offers.
"Tenneco" means Tenneco Inc., a Delaware corporation.
"Trustee" means The Chase Manhattan Bank, as trustee under the Original
Indenture.
SECTION 2. Waiver. Subject to Section 3.2 of this Eleventh Supplemental
Indenture, the application of the covenants contained in Sections 3.6, 9.1, 9.2
and 9.3 of the Original Indenture is hereby waived to the extent required to
effect the Spin-off, including, without limitation, to effect the Debt
Realignment (the "Waiver").
SECTION 3. Operation of Amendments and Waiver.
Section 3.1. Upon the execution and delivery of this Eleventh Supplemental
Indenture by Tenneco and the Trustee, the Original Indenture shall be amended
and supplemented in accordance herewith, and this Eleventh Supplemental
Indenture shall form a part of the Original Indenture for all purposes, and
every holder of Securities heretofore or hereafter authenticated and delivered
under the Original Indenture shall be bound hereby, as hereby amended and
supplemented; provided, however, that the provisions of the Eleventh
Supplemental Indenture, except as described in Section 3.2 with respect to the
Waiver, shall not become operative until Tenneco has notified the Trustee that
it has accepted for exchange or payment the Exchange Securities and/or Tender
Securities, as the case may be, tendered pursuant to the Exchange
A-1
<PAGE> 191
Offers and/or Tender Offers which represent at least a majority of all
Securities outstanding under the Original Indenture (and at such time the
provisions of this Eleventh Supplemental Indenture shall automatically become
operative without the requirement of any further action by or notice to Tenneco,
the Trustee or any holder of Exchange Securities or Tender Securities).
SECTION 3.2 The Waiver shall become operative immediately upon the
execution and delivery of this Eleventh Supplemental Indenture by Tenneco and
the Trustee. However, if Exchange Securities and/or Tender Securities which
represent at least a majority of all Securities outstanding under the Original
Indenture are not accepted for exchange or purchase, as the case may be, because
the related Exchange Offers, Cash Tender Offers or Consent Solicitation are
terminated or withdrawn, the Waiver will cease to be operative."
2. IF THE PROPOSED AMENDMENTS ARE ADOPTED, THE FOLLOWING ITALICIZED TEXT
WILL BE DELETED IN ITS ENTIRETY FROM THE ORIGINAL INDENTURE, AND THE UNDERLINED
TEXT WILL BE ADDED FOLLOWING THE APPROPRIATE SECTIONS THEREOF.
SECTION 3.6. NEGATIVE PLEDGE; LIMITATION ON SALE AND LEASEBACK
TRANSACTIONS.
[ADD: Intentionally Deleted by Amendment]
[DELETE: (a) The Issuer will not issue, assume, incur or guarantee, and
will not permit any Restricted Subsidiary to issue, assume, incur or guarantee,
any Debt secured by any mortgage, pledge, lien or other encumbrance (any such
mortgage, pledge, lien and other encumbrance being hereinafter called a
"Mortgage") upon any principal Manufacturing Property of the Issuer or any
Restricted Subsidiary, or upon shares of capital stock or Debt of any Restricted
Subsidiary (whether such Principal Manufacturing Property or shares of stock are
now owned or hereafter acquired or such Debt is now existing or hereafter
incurred or assumed), without in any such case effectively providing,
concurrently with the issuance or assumption of such Debt, that the Securities
(together with, if the Issuer shall so determine, any other Debt of the Issuer
or such Restricted Subsidiary ranking equally with the Securities and then
existing or thereafter created) shall be secured equally and ratably with such
Debt; provided, however, that the foregoing restrictions shall not apply to:
(i) the creation of Mortgages on any Principal Manufacturing Property
(including any improvements on an existing property, as to which the
Mortgage may include such underlying real property as the Issuer may deem
necessary for the improvement and unnecessary for the operation of any
theretofore existing Principal Manufacturing Property on the same or
adjoining real property) hereafter acquired by the Issuer or a Restricted
Subsidiary prior to, at the time of, or within 180 days after the latest of
the acquisition, completion of construction or commencement of commercial
operation of such property, to secure or provide for the payment of
financing of all or any part of the purchase price thereof or construction
of fixed improvements thereon, or, in addition to assumptions in
transactions contemplated by subparagraph (ii) below, the assumption of any
Mortgage upon any Principal Manufacturing Property hereafter acquired
existing at the time of such acquisitions, or the acquisition of any
Principal Manufacturing Property subject to any Mortgage without the
assumption thereof; provided that the aggregate principal amount of Debt
secured by any such Mortgage so issued, assumed or existing shall not
exceed 100% of the cost of such Principal Manufacturing Property to the
corporation acquiring the same or of the fair value thereof (as determined
by resolution adopted by the Board of Directors) at the time of such
acquisition, whichever is less, and, provided further, that in the case of
any such acquisition, construction or improvement the Mortgage shall not
apply to any property theretofore owned by the Issuer or a Restricted
Subsidiary, other than, in the case of any such construction or
improvement, any theretofore unimproved real property on which the property
so constructed, or the improvement, is located (which unimproved real
property may at the option of the Issuer be segregated by legal description
from other real property of the Issuer appurtenant to such Principal
Manufacturing Property and subjected to the Mortgage related to such
construction or improvement);
A-2
<PAGE> 192
(ii) any Mortgages on any Principal Manufacturing Property of a
corporation which is merged into or consolidated with the Issuer or a
Restricted Subsidiary or substantially all of the assets of which are
required by the Issuer or a Restricted Subsidiary (whether or not the
obligations secured by any such Mortgage are assumed by the Issuer or a
Restricted Subsidiary); provided that such Mortgages were not created in
contemplation of such merger, consolidation or acquisition;
(iii) Mortgages on any Principal Manufacturing Property of the Issuer
or a Restricted Subsidiary in favor of the United States of America or any
State thereof, or any department, agency or instrumentality or political
subdivision of the United States of America or any State thereof, or in
favor of any other country, or any political subdivision thereof, to secure
partial, progress, advance or other payments pursuant to any contract or
statute or to secure any Debt incurred or guaranteed for the purpose of
financing all or any part of the cost of acquiring, construction or
improving the property subject to such Mortgages (including Mortgages
incurred in connection with financings of the type contemplated by Section
103 of the Internal Revenue Code, maritime financings under Title XI of the
United States Code or similar financings);
(iv) Mortgages on particular property (or any proceeds of the sale
thereof) to secure all or any part of the cost of exploration, drilling,
mining, development, operation or maintenance thereof (including, without
limitation, construction of facilities for field processing) intended to
obtain or increase the production and sale or other disposition of oil,
gas, coal, natural gas, carbon dioxide, sulphur, helium, metals, minerals,
steam, timber or other natural resources, or any Debt created, issued,
assumed or guaranteed to provide funds for any or all such purposes;
(v) Mortgages securing Debt of a Restricted Subsidiary owing to the
Issuer and/or another Restricted Subsidiary;
(vi) Mortgages on any Principal Manufacturing Property of the Issuer
or a Restricted Subsidiary which Mortgages were in existence on the date of
this Indenture; provided, however, that each such Mortgage shall be limited
to all or a part of the property which secured such Mortgage at such date
(plus improvements and construction on such Property);
(vii) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part, of any Mortgage referred to
in the foregoing clauses (i) through (vi); provided, however, that the
principal amount of Debt so secured thereby shall not exceed the principal
amount of Debt so secured at the time of such extension, renewal or
replacement, and that such extension, renewal or replacement shall be
limited to all or a part of the property which secured the Mortgage so
extended, renewed or replaced (plus improvements and construction on such
property); and
(viii) Permitted Mortgages.]
[DELETE: (b) Notwithstanding the provisions of subsection (a) of this
Section, the Issuer or anyone or more Restricted Subsidiaries may issue or
assume Debt secured by a Mortgage on a Principal Manufacturing Property in
addition to those permitted by subsection (a) of this Section and renew, extend
or replace such Mortgages; provided that at the time of such creation,
assumption, renewal, extension or replacement, and after giving effect thereto,
Exempted Debt does not exceed 15% of Consolidated Net Tangible Assets.]
[DELETE: (c) The Issuer will not, nor will it permit any Restricted
Subsidiary to, enter into any arrangement with any Person providing for the
leasing by the Issuer or any Restricted Subsidiary of any Principal
Manufacturing Property, whether such principal Manufacturing Property is now
owned or hereafter acquired (except for temporary leases for a term, including
renewals at the option of the lessee, of not more than three years and except
for leases between the Issuer and a Restricted Subsidiary or between Restricted
Subsidiaries), which property has been or is to be sold or transferred by the
Issuer or such Restricted Subsidiary to such Person with the intention of taking
back a lease on such property (a "sale and leaseback transaction") unless the
net proceeds of such sale or transfer shall be at least equal to the fair value
of such property as determined by resolution adopted by the Board of Directors
and either:
A-3
<PAGE> 193
(i) the Issuer or such Restricted Subsidiary would be entitled,
pursuant to the provisions of subsection (a) of this Section, to issue or
assume Debt secured by a Mortgage on such property at least equal in amount
to the Attributable Debt in respect of such sale and leaseback transaction
without equally and ratably securing the Securities; or
(ii) since the date hereof and within a period commencing twelve
months prior to the consummation of such sale and leaseback transaction and
ending twelve months after the consummation of such sale and leaseback
transaction the Issuer or such Restricted Subsidiary, as the case may be,
has expended or will expend, or a combination of both, for facilities
comprising all or a part of a Principal Manufacturing Property an amount
equal to (A) the net proceeds of such sale and leaseback transaction and
the Issuer elects to designate such amount as a credit against such sale
and leaseback transaction or (B) a part of the net proceeds of such sale
and leaseback transaction and the Issuer elects to designate such amount as
a credit against such sale and leaseback transaction and applies an amount
equal to the remainder of the net proceeds as provided in clause (iii)
hereof; or
(iii) such sale and leaseback transactions do not come within the
exceptions provided in clause (i) hereof and the Issuer does not make the
election permitted by clause (ii) hereof or makes such election only as to
part of such net proceeds, in either which event the Issuer will, within
180 days after such sale and leaseback transaction, apply an amount equal
to the Attributable Debt in respect of such sale and leaseback transaction
(less an amount equal to the amount, if any, elected under clause (ii)
hereof to the retirement (other than any mandatory retirement or by way of
payment at maturity) of Debt with a maturity of greater than one year of
the Issuer or any Restricted Subsidiary (other than Debt of the Issuer to
any Restricted Subsidiary or of any Restricted Subsidiary to the Issuer or
another Restricted Subsidiary).
(d) Notwithstanding the provisions of paragraph (c) of this Section, the
Issuer and any Restricted Subsidiary may enter into sale and leaseback
transactions in addition to those permitted by paragraph (c) of this Section and
without any obligation to make expenditures for facilities comprising a part or
all of a Principal manufacturing Property or to retire any Debt, provided that
at the time of entering into such sale and leaseback transaction and after
giving effect thereto, Exempted Debt does not exceed 15% of Consolidated Net
Tangible Assets.]
SECTION 9.1. COVENANT NOT TO MERGE, CONSOLIDATE, SELL OR CONVEY PROPERTY
EXCEPT UNDER CERTAIN CONDITIONS.
[ADD: Intentionally Deleted by Amendment]
[DELETE: The Issuer covenants that it will not merge or consolidate with
any other Person or sell, lease or convey all or substantially all of its assets
to any other Person, unless (i) either the Issuer shall be the continuing
corporation, or the successor corporation or the Person which acquires by sale,
lease or conveyance substantially all the assets of the Issuer (if other than
the Issuer) shall be a corporation organized under the laws of the United States
of America or any State thereof or the District of Columbia and shall expressly
assume the due and punctual payment of the principal of and interest on all the
Securities and Coupons, if any, according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed or observed by the Issuer, by supplemental
indenture satisfactory to the Trustee, executed and delivered to the Trustee by
such corporation, and (ii) the Issuer, such Person or such successor
corporation, as the case may be, shall not, immediately after such merger or
consolidation, or such sale, lease or conveyance, be in default in the
performance of any such covenant or condition.]
SECTION 9.2. SUCCESSOR CORPORATION SUBSTITUTED.
[ADD: Intentionally Deleted by Amendment]
[DELETE: In case of any such consolidation, merger, sale, lease or
conveyance, and following such an assumption by the successor corporation, such
successor corporation shall succeed to and be substituted for the Issuer, with
the same effect as if it had been named herein. Such successor corporation may
cause to
A-4
<PAGE> 194
be signed, and may issue either in its own name or in the name of the Issuer
prior to such succession any or all of the Securities issuable hereunder which
together with any Coupons appertaining thereto theretofore shall not have been
signed by the Issuer and delivered to the Trustee; and, upon the order of such
successor corporation, instead of the Issuer, and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities together with any Coupons
appertaining thereto which previously shall have been signed and delivered by
the officers of the Issuer to the Trustee for authentication, and any Securities
which such successor corporation thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All of the Securities so issued
together with any Coupons appertaining thereto shall in all respects have the
same legal rank and benefit under this Indenture as the Securities theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Securities had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, lease or conveyance such
changes in phrasing and form (but not in substance) may be made in the
Securities and Coupons thereafter to be issued as may be appropriate.
In the event of any such sale or conveyance (other than a conveyance by way
of lease) the Issuer or any successor corporation which shall theretofore have
become such in the manner described in this Article shall be discharged from all
obligations and covenants under this Indenture and the Securities and may be
liquidated and dissolved.]
SECTION 9.3. OPINION OF COUNSEL DELIVERED TO TRUSTEE.
[ADD: Intentionally Deleted by Amendment]
[DELETE: The Trustee, subject to the provisions of Section 6.1 and 6.2, may
receive an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale, lease or conveyance, and any such assumption, and
any such liquidation or dissolution, complies with the applicable provisions of
this Indenture.]
A-5
<PAGE> 195
THE DEALER MANAGERS FOR THE EXCHANGE OFFERS ARE
<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER CREDIT SUISSE FIRST BOSTON
1585 Broadway, Second Floor Eleven Madison Avenue, Fourth Floor
New York, NY 10036 New York, NY 10010
Attn: Liability Management Group Attn: Liability Management Group
(800) 624-1808 (800) 820-1653
</TABLE>
Any questions concerning the terms of the exchange offers may be directed to
the dealer managers.
THE INFORMATION AGENT FOR THE EXCHANGE OFFERS IS
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 State Street, 10th Floor
New York, New York 10004
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800)223-2064
Any questions concerning tender procedures or requests for additional copies of
this
document may be directed to the information agent.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFERS IS
THE CHASE MANHATTAN BANK
<TABLE>
<S> <C> <C>
By Hand: By Registered Mail: By Overnight Delivery:
Corporate Trust Securities Window The Chase Manhattan Bank The Chase Manhattan Bank
55 Water Street Money Market Operations Money Market Operations
Room 234 55 Water Street 55 Water Street
North Building Room 234 Room 234
New York, NY 10041 North Building North Building
Attn: Carlos Esteves New York, NY 10041 New York, NY 10041
Attn: Carlos Esteves Attn: Carlos Esteves
</TABLE>
By Facsimile:
(212) 638-7380 or (212) 638-7381
Confirm by Telephone:
(212) 638-0828
UNTIL , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 196
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Packaging will be restating its certificate of incorporation prior before
the spin-off to provide that a director of Packaging will not be liable to
Packaging or its stockholders for monetary damages for breach of fiduciary duty
as a director, except to the extent that an exemption from liability or
limitation of liability is not permitted under the Delaware General Corporation
Law ("DGCL"). Based on the DGCL as presently in effect, a director of Packaging
will not be personally liable to Packaging or its stockholders for monetary
damages for breach of fiduciary duty as a director, except: (1) for any breach
of the director's duty of loyalty to Packaging or its stockholders; (2) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (3) under Section 174 of the DGCL; which concerns
unlawful payments of dividends, stock purchases or redemptions; or (4) for any
transactions from which the director derived an improper personal benefit.
While these provisions give directors protection from awards for monetary
damages for breaches of their duty of care, they do not eliminate the duty.
Accordingly, Packaging's certificate of incorporation will have no effect on the
availability of equitable remedies such as injunction or rescission based on a
director's breach of his or her duty of care. The provisions of Packaging's
certificate of incorporation described above apply to an officer of Packaging
only if he or she is a director of Packaging and is acting in his or her
capacity as director. They do not apply to officers of Packaging who are not
directors.
The by-laws of Packaging currently provide that Packaging shall indemnify,
to the fullest extent permitted by the DGCL, as may be amended from time to
time, each person who is or was a director or officer, or who serves or may have
served at Packaging's request as a director or officer of another corporation,
and who is or was a party or is threatened to be made a party to any pending or
completed claim, action, suit or proceeding. Packaging will provide
indemnification against any expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement, actually and reasonably incurred by the
person in his or her capacity or status as a director or officer. At the
discretion of Packaging's board of directors, Packaging may indemnify each
person who is or was an employee or agent of Packaging, or who served or may
have served at Packaging's request as an employee or agent of another
corporation, to the same extent as directors and officers.
Before the spin-off, Packaging will amend and restate its by-laws. After
the amendment and restatement, Packaging's by-laws will include the following
provisions:
"Section 14. (1) The corporation shall indemnify and hold harmless,
to the fullest extent permitted by applicable law as it presently exists or
may hereafter be amended, any person (an "Indemnitee") who was or is made
or is threatened to be made a party or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or
investigative, including appeals (a "proceeding"), by reason of the fact
that he, or a person for whom he is the legal representative, is or was a
director or officer of the corporation or, while a director or officer of
the corporation, is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, enterprise or nonprofit entity,
including service with respect to employee benefit plans, against all
liability and loss suffered and expenses (including attorneys' fees)
reasonably incurred by such Indemnitee. Notwithstanding the preceding
sentence, except as otherwise provided in paragraph (3) of this Section 14,
the corporation shall be required to indemnify an Indemnitee in connection
with a proceeding (or part thereof) commenced by such Indemnitee only if
the commencement of such proceeding (or part thereof) by the Indemnitee was
authorized by the Board.
(2) The corporation shall pay the expenses (including attorneys' fees)
incurred by an Indemnitee in defending any proceeding in advance of its
final disposition, provided, however, that, to the extent required by law,
such payment of expenses in advance of the final disposition of the
II-1
<PAGE> 197
proceeding shall be made only upon receipt of an undertaking by the
Indemnitee to repay all amounts advanced if it should be ultimately
determined that the Indemnitee is not entitled to be indemnified under this
Section 14 or otherwise.
(3) If a claim for indemnification or payment of expenses under this
Section 14 is not paid in full within thirty days after a written claim
therefor by the Indemnitee has been received by the corporation, the
Indemnitee may file suit to recover the unpaid amount of such claim and, if
successful in whole or in part, shall be entitled to be paid the expense of
prosecuting such claim. In any such action the corporation shall have the
burden of proving that the Indemnitee is not entitled to the requested
indemnification or payment of expenses under applicable law.
(4) The rights conferred on any Indemnitee by this Section 14 shall
not be exclusive of any other rights which such Indemnitee may have or
hereafter acquire under any statute, provision of the Restated Certificate
of Incorporation, these By-Laws, agreement, vote of stockholders or
disinterested directors or otherwise.
(5) The corporation's obligation, if any, to indemnify or to advance
expenses to any Indemnitee who was or is serving at its request as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, enterprise or nonprofit entity shall be reduced by
any amount such Indemnitee may collect as indemnification or advancement of
expenses from such other corporation, partnership, joint venture, trust,
enterprise or nonprofit enterprise.
(6) Any repeal or modification of the foregoing provisions of this
Section 14 shall not adversely affect any right or protection hereunder of
any Indemnitee in respect of any act or omission occurring prior to the
time of such repeal or modification.
(7) This Section 14 shall not limit the right of the corporation, to
the extent and in the manner permitted by law, to indemnify and to advance
expenses to persons other than Indemnitees when and as authorized by
appropriate corporate action."
Packaging has purchased insurance which purports to insure Packaging
against some of the costs of indemnification which may be incurred under the
by-law section discussed above. The insurance also purports to insure the
officers and directors of Packaging and its subsidiaries against some
liabilities incurred by them in the discharge of their duties as officers and
directors, except for liabilities resulting from their own malfeasance.
In addition, in the distribution agreement Tenneco will agree to indemnify
the directors and officers of Packaging against some liabilities for any
violations or alleged violations of securities or other laws arising out of some
of the documents related to the spin-off. See "Item 22, Undertakings" for a
description of the Commission's position regarding such indemnification
provisions.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1 None.
2 Form of Distribution Agreement by and between Tenneco Inc.
and Tenneco Packaging Inc.
3.1 Certificate of Incorporation of Tenneco Packaging Inc., as
amended, as currently in effect (incorporated herein by
reference to Exhibit 3.1 to Tenneco Packaging Inc.'s
Registration Statement on Form 10, File No. 1-15157).
3.2 Form of Restated Certificate of Incorporation of Tenneco
Packaging Inc., to be adopted prior to the spin-off
(incorporated herein by reference to Exhibit 3.2 to Tenneco
Packaging Inc.'s Registration Statement on Form 10, File No.
1-15157).
</TABLE>
II-2
<PAGE> 198
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
3.3 Amended By-laws of Tenneco Packaging Inc., as currently in
effect (incorporated herein by reference to Exhibit 3.3 to
Tenneco Packaging Inc.'s Registration Statement on Form 10,
File No. 1-15157).
3.4 Form of Amended and Restated By-laws of Tenneco Packaging
Inc., to be adopted prior to the spin-off (incorporated
herein by reference to Exhibit 3.4 to Tenneco Packaging
Inc.'s Registration Statement on Form 10, File No. 1-15157).
4.1 Indenture, dated September 29, 1999, by and between Tenneco
Packaging Inc. and The Chase Manhattan Bank, as Trustee.
4.2 Form of Registration Rights Agreement between Tenneco
Packaging Inc. and the trustees under the Tenneco Packaging
Inc. Rabbi Trust, to be adopted in connection with the
spin-off (incorporated herein by reference to Exhibit 4.4 to
Tenneco Packaging Inc.'s Registration Statement on Form 10,
File No. 1-15157).
4.3 Long Term Credit Agreement, dated as of September 29, 1999,
among Tenneco Packaging Inc., Bank of America, N.A., as
Administrative Agent, Credit Suisse First Boston, as
Syndication Agent, Bank One, NA and Banque Nationale de
Paris, as Co-Documentation Agents, and the other financial
institutions party thereto.
4.4 Short Term Credit Agreement, dated as of September 29, 1999,
among Tenneco Packaging Inc., Bank of America, N.A., as
Administrative Agent, Credit Suisse First Boston, as
Syndication Agent, Bank One, NA and Banque Nationale de
Paris, as Co-Documentation Agents, and the other financial
institutions party thereto.
5 Form of opinion of Jenner & Block.
8 Form of opinion of Jenner & Block regarding tax matters.
9 None.
10.1 Form of Human Resources Agreement by and between Tenneco
Inc. and Tenneco Packaging Inc. (incorporated herein by
reference to Exhibit 10.1 to Tenneco Packaging Inc.'s
Registration Statement on Form 10, File No. 1-15147).
10.2 Form of Tax Sharing Agreement by and between Tenneco Inc.
and Tenneco Packaging Inc. (incorporated herein by reference
to Exhibit 10.2 to Tenneco Packaging Inc.'s Registration
Statement on Form 10, File No. 1-15157).
10.3 Indenture (the "original indenture"), dated November 1,
1996, between Tenneco Inc. (formerly known as New Tenneco
Inc.) and The Chase Manhattan Bank, as trustee (incorporated
herein by reference to New Tenneco Inc.'s Registration
Statement on Form S-4, Registration No. 333-14003).
10.4 Form of Eleventh Supplemental Indenture to the original
indenture, to be entered into between Tenneco Inc. and The
Chase Manhattan Bank, as Trustee, providing for the proposed
amendments.**
10.5 Form of Trademark Transition License Agreement by and
between Tenneco Inc. and Tenneco Packaging Inc.
(incorporated herein by reference to Exhibit 10.3 to Tenneco
Packaging Inc.'s Registration Statement on Form 10, File No.
1-15157).
10.6 Form of Tenneco Packaging Inc. Executive Incentive
Compensation Plan, to be adopted in connection with the
spin-off (incorporated herein by reference to Exhibit 10.4
to Tenneco Packaging Inc.'s Registration Statement on Form
10, File No. 1-15157).
10.7 Form of Tenneco Packaging Inc. Supplemental Executive
Retirement Plan, to be adopted in connection with the
spin-off (incorporated herein by reference to Exhibit 10.5
to Tenneco Packaging Inc.'s Registration Statement on Form
10, File No. 1-15157).
</TABLE>
II-3
<PAGE> 199
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.8 Form of Tenneco Packaging Inc. Change in Control Severance
Benefit Plan for Key Executives, to be adopted in connection
with the spin-off (incorporated herein by reference to
Exhibit 10.6 to Tenneco Packaging Inc.'s Registration
Statement on Form 10, File No. 1-15157).
10.9 Form of Tenneco Rabbi Trust Agreement, to be adopted in
connection with the spin-off (incorporated herein by
reference to Exhibit 10.11 to Tenneco Packaging Inc.'s
Registration Statement on Form 10, File No. 1-15157).
10.10 Form of Tenneco Packaging Inc. Stock Ownership Plan, to be
adopted in connection with the spin-off (incorporated herein
by reference to Exhibit 10.8 to Tenneco Packaging Inc.'s
Registration Statement on Form 10, File No. 1-15157).
10.11 Professional Services Agreement, dated August 22, 1996, by
and between Tenneco Business Services Inc. and Newport News
Shipbuilding Inc. (incorporated herein by reference to
Exhibit 10.28 to Tenneco Inc.'s Form 10, File No. 1-12387).
10.12 Form of Tenneco Packaging Inc. Rabbi Trust, to be adopted in
connection with the spin-off (incorporated herein by
reference to Exhibit 10.10 to Tenneco Packaging Inc.'s
Registration Statement on Form 10, File No. 1-15157).
10.13 Form of Tenneco Packaging Inc. Deferred Compensation Plan,
to be adopted in connection with the spin-off (incorporated
herein by reference to Exhibit 10.7 to Tenneco Packaging
Inc.'s Registration Statement on Form 10, File No. 1-15157).
10.14(a) Contribution Agreement, dated as of January 25, 1999, by and
among Tenneco Packaging Inc., PCA Holdings LLC and Packaging
Corporation of America (the "Contribution Agreement")
(incorporated herein by reference to Exhibit 10.30 to
Tenneco Inc.'s Current Report on Form 8-K dated April 12,
1999, File No. 1-12387).
10.14(b) Letter Agreement, dated as of April 12, 1999, by and among
Tenneco Packaging Inc., PCA Holdings LLC and Packaging
Corporation of America, amending the Contribution Agreement
(incorporated herein by reference to Exhibit 10.31 to
Tenneco Inc.'s Current Report on Form 8-K dated April 12,
1999, File No. 1-12387).
10.15 Stockholders Agreement, as amended, dated as of April 12,
1999, by and among Tenneco Packaging Inc., PCA Holdings LLC
and Packaging Corporation of America (incorporated herein by
reference to Exhibit 10.32 to Tenneco Inc.'s Current Report
on Form 8-K dated April 12, 1999, File No. 1-12387).
10.16 Registration Rights Agreement, as amended, dated as of April
12, 1999, by and among Tenneco Packaging Inc., PCA Holdings
LLC and Packaging Corporation of America (incorporated
herein by reference to Exhibit 10.33 to Tenneco Inc.'s
Current Report on Form 8-K dated April 12, 1999, File No.
1-12387).
10.17 Form of Release Agreement by and between Dana G. Mead and
Tenneco Management Company, to be executed in connection
with the spin-off (incorporated herein by reference to
Exhibit 10.15 to Tenneco Packaging Inc.'s Registration
Statement on Form 10, File No. 1-15157).
10.18 Employment Agreement, dated as of March 11, 1997, by and
between Richard L. Wambold and Tenneco Inc. (incorporated
herein by reference to Exhibit 10.16 to Tenneco Packaging
Inc.'s Registration Statement on Form 10, File No. 1-15157).
10.19 Restricted Stock Contract, dated as of June 1, 1999, by and
between Paul J. Griswold and Tenneco Inc. (incorporated
herein by reference to Exhibit 10.17 to Tenneco Packaging
Inc.'s Registration Statement on Form 10, File No. 1-15157).
10.20 Restricted Stock Contract, dated as of June 1, 1999, by and
between Richard L. Wambold and Tenneco Inc. (incorporated
herein by reference to Exhibit 10.18 to Tenneco Packaging
Inc.'s Registration Statement on Form 10, File No. 1-15157).
11 None.
12.1 Statement of Ratio of Earnings to Fixed Charges (Tenneco
Packaging Inc.).**
12.2 Statement of Ratio of Earnings to Fixed Charges (Tenneco
Inc.) (incorporated herein by reference to Exhibit 12.2 to
Tenneco Inc.'s Current Report on Form 8-K dated August 20,
1999, File No. 1-12387).
13 None.
</TABLE>
II-4
<PAGE> 200
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
15 None.
16 None.
21 List of Subsidiaries of Tenneco Packaging Inc. (incorporated
herein by reference to Exhibit 21 to Tenneco Packaging
Inc.'s Registration Statement on Form 10, File No. 1-15157).
23.1 Consent of Jenner & Block (included in Exhibit 5 and Exhibit
8).
23.2 Consent of Arthur Andersen LLP.
24 Power of Attorney of Richard L. Wambold.**
25 Statement of Eligibility of Trustee.**
26 None.
27.1 Financial Data Schedule, December 31, 1998.**
27.2 Financial Data Schedule, June 30, 1999.**
99.1 Form of Letter of Consent/Transmittal.
99.2 Form of Letter to DTC Participants, including Brokers,
Dealers and Other Nominees.
99.3 Form of Letter to Beneficial Holders.
99.4 Form of Letter to Holders of Physical Securities.
99.5 Consents to be named as directors of Tenneco Packaging Inc.
for: Mark Andrews, Larry D. Brady, Roger B. Porter and Paul
T. Stecko.**
</TABLE>
- -------------------------
* To be filed by amendment.
** Previously filed.
(b) Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts
(c) Not Applicable.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
registration statement:
a. To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
b. To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
c. To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed
to be new registration statement relating to the securities
II-5
<PAGE> 201
offered therein, and the offering of such securities at that time will be
deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
4. That, for the purpose of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
will be deemed to be the initial bona fide offering thereof.
5. To respond to requests for information that is incorporated by
reference into this prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
6. To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-6
<PAGE> 202
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Lake Forest, State of Illinois, as of the 4th day of October, 1999.
TENNECO PACKAGING INC.
By: /s/ DANA G. MEAD
--------------------------------------
Dana G. Mead
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed by the following persons in
the capacities indicated on October 4, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ DANA G. MEAD Chairman of the Board and Chief Executive Officer
- --------------------------------------------------- and Director
Dana G. Mead (principal executive officer)
/s/ ROBERT T. BLAKELY Chief Financial Officer and Director
- --------------------------------------------------- (principal financial and accounting officer)
Robert T. Blakely
* Director
- ---------------------------------------------------
Richard L. Wambold
*By: /s/ THEODORE R. TETZLAFF
---------------------------------------------
Theodore R. Tetzlaff
Attorney-in-fact
</TABLE>
II-7
<PAGE> 1
EXHIBIT 2
DISTRIBUTION AGREEMENT
BETWEEN
TENNECO INC.
(TO BE RENAMED TENNECO AUTOMOTIVE INC.)
AND
TENNECO PACKAGING INC.
, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
ARTICLE I
DEFINITIONS................................................................. -1-
SECTION GENERAL.....................................................
1.01. -1-
SECTION REFERENCES..................................................
1.02. -12-
ARTICLE II
PRE-DISTRIBUTION TRANSACTIONS; CERTAIN COVENANTS............................ -12-
SECTION CORPORATE RESTRUCTURING TRANSACTIONS........................
2.01. -12-
SECTION PRE-DISTRIBUTION STOCK DIVIDEND TO TENNECO..................
2.02. -12-
SECTION CERTIFICATE OF INCORPORATION AND BYLAWS OF PACKAGING........
2.03. -12-
SECTION ELECTION OF DIRECTORS OF PACKAGING..........................
2.04. -12-
SECTION TRANSFER AND ASSIGNMENT OF CERTAIN LICENSES AND PERMITS.....
2.05. -12-
SECTION TRANSFER AND ASSIGNMENT OF CERTAIN AGREEMENTS...............
2.06. -13-
SECTION OTHER TRANSACTIONS..........................................
2.07. -14-
SECTION ELECTION OF OFFICERS........................................
2.08. -14-
SECTION PACKAGING REGISTRATION STATEMENT............................
2.09. -14-
SECTION STATE SECURITIES LAWS.......................................
2.10. -14-
SECTION LISTING APPLICATION.........................................
2.11. -15-
SECTION CERTAIN FINANCIAL AND OTHER ARRANGEMENTS....................
2.12. -15-
SECTION DIRECTOR, OFFICER AND EMPLOYEE RESIGNATIONS.................
2.13. -15-
SECTION TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION; TRANSFERS
2.14. DEEMED EFFECTIVE AS OF THE DISTRIBUTION DATE.............. -15-
SECTION ANCILLARY AGREEMENTS........................................
2.15. -16-
SECTION DEBT REALIGNMENT............................................
2.16. -16-
ARTICLE III
THE DISTRIBUTION............................................................ -16-
SECTION TENNECO ACTION PRIOR TO THE DISTRIBUTION....................
3.01. -16-
SECTION THE DISTRIBUTION............................................
3.02. -17-
ARTICLE IV
CONDITIONS TO THE DISTRIBUTION.............................................. -17-
SECTION CONDITIONS PRECEDENT TO THE DISTRIBUTION....................
4.01. -17-
SECTION NO CONSTRAINT...............................................
4.02. -18-
SECTION DEFERRAL OF DISTRIBUTION DATE...............................
4.03. -18-
SECTION PUBLIC NOTICE OF DEFERRED DISTRIBUTION DATE.................
4.04. -18-
ARTICLE V
COVENANTS................................................................... -19-
SECTION FURTHER ASSURANCES..........................................
5.01. -19-
SECTION TENNECO NAME................................................
5.02. -19-
SECTION SUPPLIES AND DOCUMENTS......................................
5.03. -19-
SECTION ASSUMPTION AND SATISFACTION OF LIABILITIES..................
5.04. -19-
SECTION NO REPRESENTATIONS OR WARRANTIES; CONSENTS..................
5.05. -20-
SECTION REMOVAL OF CERTAIN GUARANTEES...............................
5.06. -21-
SECTION PUBLIC ANNOUNCEMENTS........................................
5.07. -21-
SECTION INTERCOMPANY AGREEMENTS.....................................
5.08. -21-
SECTION TAX MATTERS.................................................
5.09. -21-
SECTION 1996 AGREEMENTS.............................................
5.10. -22-
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C>
ARTICLE VI
ACCESS TO INFORMATION....................................................... -22-
SECTION PROVISION, TRANSFER AND DELIVERY OF APPLICABLE CORPORATE
6.01. RECORDS................................................... -22-
SECTION ACCESS TO INFORMATION.......................................
6.02. -23-
SECTION REIMBURSEMENTS, OTHER MATTERS...............................
6.03. -23-
SECTION CONFIDENTIALITY.............................................
6.04. -23-
SECTION WITNESS SERVICES............................................
6.05. -24-
SECTION RETENTION OF RECORDS........................................
6.06. -24-
SECTION PRIVILEGED MATTERS..........................................
6.07. -24-
ARTICLE VII
INDEMNIFICATION............................................................. -25-
SECTION INDEMNIFICATION BY TENNECO..................................
7.01. -25-
SECTION INDEMNIFICATION BY PACKAGING................................
7.02. -25-
SECTION NO INDEMNIFICATION IN RESPECT OF INDEMNITEE'S INVESTMENT....
7.03. -26-
SECTION LIMITATIONS ON INDEMNIFICATION OBLIGATIONS..................
7.04. -26-
SECTION PROCEDURES FOR INDEMNIFICATION..............................
7.05. -27-
SECTION INDEMNIFICATION PAYMENTS....................................
7.06. -29-
SECTION OTHER ADJUSTMENTS...........................................
7.07. -29-
SECTION OBLIGATIONS ABSOLUTE........................................
7.08. -30-
SECTION SURVIVAL OF INDEMNITIES.....................................
7.09. -30-
SECTION REMEDIES CUMULATIVE.........................................
7.10. -30-
SECTION COOPERATION OF THE PARTIES WITH RESPECT TO ACTIONS AND THIRD
7.11. PARTY CLAIMS.............................................. -30-
SECTION CONTRIBUTION................................................
7.12. -31-
SECTION PROCEDURES WITH RESPECT TO TRANSACTION
7.13. LIABILITIES............................................... -31-
ARTICLE VIII
INDEMNIFICATION OF OFFICERS AND DIRECTORS................................... -32-
SECTION INDEMNIFICATION OF OFFICERS AND DIRECTORS...................
8.01. -32-
ARTICLE IX
MISCELLANEOUS............................................................... -32-
SECTION COMPLETE AGREEMENT, CONSTRUCTION............................
9.01. -32-
SECTION ANCILLARY AGREEMENTS........................................
9.02. -32-
SECTION COUNTERPARTS................................................
9.03. -32-
SECTION SURVIVAL OF AGREEMENTS......................................
9.04. -33-
SECTION RESPONSIBILITY FOR EXPENSES.................................
9.05. -33-
SECTION NOTICES.....................................................
9.06. -33-
SECTION WAIVERS.....................................................
9.07. -33-
SECTION AMENDMENTS..................................................
9.08. -33-
SECTION ASSIGNMENT..................................................
9.09. -33-
SECTION SUCCESSORS AND ASSIGNS......................................
9.10. -34-
SECTION TERMINATION.................................................
9.11. -34-
SECTION THIRD PARTY BENEFICIARIES...................................
9.12. -34-
SECTION ATTORNEY FEES...............................................
9.13. -34-
SECTION TITLE AND HEADINGS..........................................
9.14. -34-
SECTION EXHIBITS AND SCHEDULES......................................
9.15. -34-
SECTION SPECIFIC PERFORMANCE........................................
9.16. -34-
SECTION GOVERNING LAW...............................................
9.17. -34-
SECTION SEVERABILITY................................................
9.18. -34-
SECTION SUBSIDIARIES................................................
9.19. -35-
</TABLE>
ii
<PAGE> 4
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
------- DESCRIPTION
<C> <S>
A -- AUTOMOTIVE BUSINESS PRO FORMA BALANCE SHEET
B -- AUTOMOTIVE SUBSIDIARIES
C -- CORPORATE RESTRUCTURING TRANSACTIONS
D -- DEBT REALIGNMENT PLAN
E -- FORM OF HUMAN RESOURCES AGREEMENT
F -- PACKAGING BUSINESS PRO FORMA BALANCE SHEET
G -- PACKAGING SUBSIDIARIES
H -- FORM OF TAX SHARING AGREEMENT
I -- SHARED AGREEMENTS
J -- EXCEPTIONS TO RESIGNATIONS OF COMMON DIRECTORS, OFFICERS
AND EMPLOYEES
K -- FORM OF TRANSITION TRADEMARK LICENSE
</TABLE>
<PAGE> 5
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT is made and entered into as of ,
1999 by and between Tenneco Inc., a Delaware corporation to be renamed Tenneco
Automotive Inc. ("TENNECO"), and Tenneco Packaging Inc., a Delaware corporation
("PACKAGING").
RECITALS
WHEREAS, the Board of Directors of Tenneco has deemed it appropriate and
advisable to:
(a) separate and divide the existing businesses of Tenneco so that (i)
Packaging and its subsidiaries shall own, directly or indirectly, the
Packaging Business (as defined below), and (ii) Tenneco and its remaining
subsidiaries shall own, directly or indirectly, the Automotive Business (as
defined below);
(b) distribute, following consummation of such separation and division
as a dividend to the holders of shares of common stock, par value $.01 per
share, of Tenneco (the "TENNECO COMMON STOCK") all of the outstanding
shares of common stock, $.01 par value, of Packaging (the "PACKAGING COMMON
STOCK"); and
(c) change the name of Tenneco Inc. to Tenneco Automotive Inc. upon
consummation of the transaction; and
WHEREAS, each of Tenneco and Packaging has determined that it is necessary
and desirable to set forth the principal corporate transactions required to
effect such separation, division and distribution and to set forth other
agreements that will govern certain other matters prior to and following such
separation, division and distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. GENERAL. Unless otherwise defined herein or unless the
context otherwise requires, the following terms will have the meanings set forth
or referenced below (such meanings to be equally applicable to both the singular
and plural forms of the terms defined).
"ACTION" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority or any arbitration
tribunal.
"AFFILIATE" means, when used with respect to a specified Person,
another Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control
with the Person specified. For the purpose of this definition, "control"
means (i) the ownership or control of more than 50% of the equity interest
in any Person, or (ii) the ability to direct or cause the direction of the
management or affairs of a Person, whether through the direct or indirect
ownership of voting interests, by contract or otherwise.
"AGENT" means First Chicago Trust Company of New York, or such other
trust company or bank designated by Tenneco and Packaging, who shall act as
agent for the holders of Tenneco Common Stock in connection with the
Distribution.
"AGREEMENT" means this Distribution Agreement by and between Tenneco
and Packaging, including any amendments hereto and each Schedule and
Exhibit attached hereto.
TENNECO DISTRIBUTION AGREEMENT
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"ANCILLARY AGREEMENTS" means all of the written agreements,
instruments, understandings, assignments or other arrangements (other than
this Agreement) entered into by either of the parties hereto or any other
member of its respective Group in connection with the Corporate
Restructuring Transactions, the Distribution and the other transactions
contemplated hereby or thereby, including, without limitation, the
following:
(i) the Conveyancing and Assumption Instruments;
(ii) the Human Resources Agreement;
(iii) the Tax Sharing Agreement;
(iv) the Insurance Agreement;
(v) the Transition Services Agreement; and
(vi) the Transition Trademark License.
"AUTOMOTIVE ASSETS" means, collectively, all of the rights and assets
owned by Tenneco or any of its Subsidiaries as of the close of business on
the Distribution Date, including:
(i) the capital stock of the Automotive Subsidiaries;
(ii) all of the assets included on the Automotive Business Pro
Forma Balance Sheet which are owned by Tenneco or any of its
Subsidiaries as of the close of business on the Distribution Date;
(iii) all of the assets and rights expressly allocated to Tenneco
or any of the Automotive Subsidiaries under this Agreement or any of the
Ancillary Agreements;
(iv) any other asset acquired by Tenneco or any of its Subsidiaries
from the date of the Automotive Business Pro Forma Balance Sheet to the
close of business on the Distribution Date that is owned by Tenneco or
one of its Subsidiaries as of the close of business on the Distribution
Date and that is of a type or nature that would have resulted in such
asset being included as an asset on the Automotive Business Pro Forma
Balance Sheet had it been acquired on or prior to the date of the
Automotive Business Pro Forma Balance Sheet, determined on a basis
consistent with the determination of assets included on the Automotive
Business Pro Forma Balance Sheet; and
(v) Tenneco Trademarks and Trade Names;
provided, however, that notwithstanding the foregoing, the Automotive
Assets shall not include the Packaging Assets or the capital stock of
Packaging.
"AUTOMOTIVE BUSINESS" means the businesses (other than the Packaging
Business or Prior Packaging Business) that, after giving effect to the
Corporate Restructuring Transactions, are or were conducted by:
(i) Tenneco, the Automotive Subsidiaries or any of the other
members of the Automotive Group;
(ii) any other division, Subsidiary or investment of Tenneco, or
any Automotive Subsidiary or any of the other members of the Automotive
Group managed or operated or in existence as of the date of this
Agreement or any prior time, unless such other division, Subsidiary or
investment is expressly included in the Packaging Group immediately
after giving effect to the Corporate Restructuring Transactions; or
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(iii) any business entity acquired or established by or for Tenneco
or any of the Automotive Subsidiaries between the date of the Automotive
Pro Forma Balance Sheet and the close of business on the Distribution
Date that is engaged in, or intends to engage in, any business that is
of a type or nature that would have resulted in such business being
included either as a Subsidiary or an asset of Tenneco on the Automotive
Business Pro Forma Balance Sheet had it been acquired or established on
or prior to the date of the Automotive Business Pro Forma Balance Sheet,
determined on a basis consistent with the determination of the
Subsidiaries and assets included on the Automotive Business Pro Forma
Balance Sheet.
"AUTOMOTIVE BUSINESS PRO FORMA BALANCE SHEET" means the column
entitled "Consolidated Tenneco Pro Forma" on the Tenneco Unaudited Pro
Forma Consolidated Balance Sheet (prepared in accordance with GAAP) as of
June 30, 1999 attached hereto as Exhibit A, other than any amounts
reflected in that column for the line items titled "Short-term debt
(including current maturities on long-term debt)" and "Long-term debt." The
parties agree that the liabilities of each party and its respective
Subsidiaries for indebtedness for borrowed money shall be determined
pursuant to the Debt Realignment.
"AUTOMOTIVE GROUP" means Tenneco, the Automotive Subsidiaries and,
after giving effect to the Corporate Restructuring Transactions and the
Distribution, the corporations, partnerships, joint ventures, investments
and other entities that represent equity investments of Tenneco or any of
the Automotive Subsidiaries.
"AUTOMOTIVE INDEMNITEE" means:
(i) Tenneco, the Automotive Subsidiaries and each Affiliate thereof
after giving effect to the Corporate Restructuring Transactions and the
Distribution; and
(ii) each of the respective past, present and future directors,
officers, employees and agents of any of the entities described in the
immediately preceding clause (i) and each of the heirs, executors,
successors and assigns of such directors, officers, employees and
agents.
"AUTOMOTIVE LIABILITIES" means, collectively, all of the following
Liabilities other than Transaction Liabilities:
(i) all of the Liabilities included on the Automotive Business Pro
Forma Balance Sheet which remain outstanding as of the close of business
on the Distribution Date;
(ii) all of the Liabilities which are incurred or which otherwise
accrue or are accrued at any time on, prior to, or after the date of the
Automotive Business Pro Forma Balance Sheet and which arise or arose out
of, or in connection with, the Automotive Assets, Automotive Business or
Prior Automotive Business, determined on a basis consistent with the
determination of the Liabilities of Tenneco which are included on the
Automotive Business Pro Forma Balance Sheet;
(iii) all of the Liabilities of Tenneco, each Automotive Subsidiary
and each member of the Automotive Group under, or to be retained or
assumed by Tenneco, any Automotive Subsidiary or any other member of the
Automotive Group pursuant to, the Corporate Restructuring Transactions,
the Debt Realignment, this Agreement (including, without limitation, the
liabilities arising from the matters allocated to it in the Litigation
Letter) or any of the Ancillary Agreements;
(iv) all of the Liabilities of the parties hereto or their
respective Subsidiaries (whenever arising whether prior to, on or
following the Distribution Date) arising out of or in connection with or
otherwise relating to the management or conduct before or after the
Distribution Date of the Automotive Business or any Prior Automotive
Business;
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(v) all Automotive Securities Liabilities and Tenneco Securities
Liabilities; and
(vi) all other Liabilities of Tenneco, of each Automotive
Subsidiary and of each of member of the Automotive Group which do not
constitute Packaging Liabilities.
"AUTOMOTIVE RECORDS" has the meaning ascribed to such term in Section
6.01(c) hereof.
"AUTOMOTIVE SECURITIES LIABILITIES" means any and all Securities
Liabilities, other than Transaction Securities Liabilities, of Tenneco or
any entity that was or is a Subsidiary of Tenneco on or before the
Distribution Date arising out of, or in connection with, or relating to any
information, data (financial or otherwise, and including pro forma
financial data) or disclosures (or any omissions of information, data or
disclosures) provided, made or omitted (or alleged to have been provided,
made or omitted) on or prior to the Distribution Date to the extent
relating to or concerning the business, operations, financial or other
results, prospects, plans, potential risks, financing or management of the
Prior Automotive Business, Automotive Business, Automotive Assets or
Automotive Group before or after the Distribution irrespective of (A) who
authored, prepared or provided such information, data or disclosures (or,
as the case may be, the section or discussion in which certain information,
data or disclosure is alleged to have been omitted), or (B) the form in
which, or medium through which (e.g., in writing, orally, electronically,
etc.), such information, data, disclosure, section or discussion was
provided.
"AUTOMOTIVE SUBSIDIARIES" means the Subsidiaries of Tenneco set forth
on Exhibit B hereto and all other Subsidiaries of Tenneco other than
Packaging and the Packaging Subsidiaries.
"BOOKS AND RECORDS" means all books, records, manuals, agreements and
other materials (in any form or medium), including without limitation, all
mortgages, licenses, indentures, contracts, financial data, customer lists,
marketing materials and studies, advertising materials, price lists,
correspondence, distribution lists, supplier lists, production data, sales
and promotional materials and records, purchasing materials and records,
personnel records, manufacturing and quality control records and
procedures, blue prints, research and development files, records, data and
laboratory books, accounts records, sales order files, litigation files,
computer files, computer disks and tapes, microfiche, tape recordings and
photographs.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor law.
"COMMISSION" means the United States Securities and Exchange
Commission.
"CONSENTS" has the meaning ascribed to such term in Section 5.05(d)
hereof.
"CONVEYANCING AND ASSUMPTION INSTRUMENTS" means collectively, the
various written agreements, instruments and other documents to be entered
into to effect the Corporate Restructuring Transactions or to otherwise
effect the transfer of assets and the assumption of Liabilities in the
manner contemplated by this Agreement, the Ancillary Agreements and the
Corporate Restructuring Transactions.
"CORPORATE RESTRUCTURING TRANSACTIONS" means, collectively, (i) each
of the distributions, transfers, conveyances, contributions, assignments
and other transactions described and set forth on Exhibit C hereto, and
(ii) such other distributions, transfers, conveyances, contributions,
assignments and other transactions that may be required to be accomplished,
effected or consummated by any of Tenneco, Packaging or any of their
respective divisions, investments, Subsidiaries or Affiliates in order to
separate and divide, in a series of transactions that, to the extent
intended to qualify for tax-free transactions under the Code, shall qualify
for tax-free treatment under
TENNECO DISTRIBUTION AGREEMENT
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the Code, the existing businesses of Tenneco so that, except as otherwise
expressly set forth on Exhibit C hereto:
(i) the Packaging Assets shall be owned, directly and indirectly,
by Packaging; and
(ii) the businesses and assets of Tenneco that remain after the
separations and divisions described in clause (i) above, including,
without limitation, the Automotive Assets are, after giving effect to
the Distribution, owned, directly and indirectly, by Tenneco.
"DEBT REALIGNMENT" means the repayment, realignment, refinancing,
exchange and/or modification of the consolidated indebtedness of Tenneco,
as described in Exhibit D attached hereto.
"DGCL" means the General Corporation Law of the State of Delaware.
"DISTRIBUTION" means the distribution on the Distribution Date as a
dividend to holders of record of shares of Tenneco Common Stock as of the
Distribution Record Date of all of the outstanding Packaging Common Stock
owned by Tenneco on the basis provided in Section 3.02 hereof.
"DISTRIBUTION DATE" means such date as may hereafter be determined by
Tenneco's Board of Directors as the date on which the Distribution shall be
effected.
"DISTRIBUTION RECORD DATE" means the close of business on the date
determined by the Board of Directors of Tenneco for the purpose of
determining the holders of record of Tenneco Common Stock entitled to
participate in the Distribution.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other Governmental restrictions (including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. 9601, et seq.), whether now or hereafter in existence, relating to
the environment, natural resources or human health and safety or endangered
or threatened species of fish, wildlife and plants or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes
into the environment including, without limitation, ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, petroleum or petroleum products,
chemicals, or industrial, toxic or hazardous substances or wastes or the
cleanup or other remediation thereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GAAP" means United States generally accepted accounting principles
and practices, as in effect on the date of this Agreement, as promulgated
by the Financial Accounting Standards Board and its predecessors.
"GOVERNMENTAL AUTHORITY" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state
or local, domestic or foreign.
"GROUP" means (i) with respect to Tenneco, the Automotive Group, and
(ii) with respect to Packaging, the Packaging Group.
"HUMAN RESOURCES AGREEMENT" means the Human Resources Agreement by and
between Tenneco and Packaging, which agreement shall be entered into on or
prior to the Distribution Date in substantially the form attached hereto as
Exhibit E.
TENNECO DISTRIBUTION AGREEMENT
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"INDEMNIFIABLE LOSSES" means, with respect to any Person, any and all
losses, liabilities, penalties, claims, damages, demands, costs and
expenses (including, without limitation, reasonable attorneys' fees,
investigation expenses and any and all other out-of-pocket expenses, but
excluding any punitive or consequential damages) or other Liabilities
whatsoever that are assessed, imposed, awarded against, incurred or accrued
by such Person (a) in investigating, preparing for, defending against or
otherwise arising out of or in connection with any Actions, any potential
or threatened Actions or any Third Party Claims for which such Person would
be entitled to indemnification under Article VII hereof, (b) as a result of
the failure to remove as a guarantor or obligor any Person that is
contemplated being removed as a guarantor or obligor pursuant to Section
5.06 hereof, or (c) in respect of any other event, occurrence or matter for
which such Person would be entitled to indemnification under Article VII
hereof, in each case whether accrued or incurred on, before or after the
date of this Agreement.
"INDEMNIFYING PARTY" has the meaning ascribed to such term in Section
7.04(a) hereof.
"INDEMNITEE" has the meaning ascribed to such term in Section 7.04(a)
hereof.
"INSURANCE AGREEMENT" means the Insurance Agreement by and between
Tenneco and Packaging, which agreement shall be entered into on or prior to
the Distribution Date and which shall provide for the separation and
administration of existing insurance programs and the purchase of "run-off"
policies for fiduciaries and directors and officers.
"INSURANCE PROCEEDS" means, with respect to any insured party, those
monies, net of any applicable premium adjustment retrospectively-rated
premium, deductible, retention or cost of reserve paid or held by or for
the benefit of such insured, which are either:
(i) received by an insured from an insurance carrier; or
(ii) paid by an insurance carrier on behalf of an insured.
"LAW" means any constitutional provision, statute, law, ordinance,
rule, regulation, permit, decree, injunction, order, ruling, determination,
finding or writ of any Governmental Authority.
"LIABILITIES" means any and all debts, liabilities, obligations,
responsibilities, response actions, losses, damages (whether compensatory,
punitive or statutory), fines, penalties and sanctions, absolute or
contingent, matured or unmatured, liquidated or unliquidated, foreseen or
unforeseen, joint, several or individual, asserted or unasserted, accrued
or unaccrued, known or unknown, whenever arising, including, without
limitation, those arising under or in connection with any Law (including
any Environmental Law), Action, threatened Action, order or consent decree
of any Governmental Authority or any award of any arbitration tribunal, and
those arising under any contract, guarantee, commitment or undertaking,
whether sought to be imposed by a Governmental Authority, private party or
party to this Agreement, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute, or
otherwise, and including any costs, expenses, interest, attorneys' fees,
disbursements and expense of counsel, expert and consulting fees and costs
related thereto or to the investigation or defense thereof.
"LITIGATION LETTER" means the letter agreement between Tenneco and
Packaging relating to the notice and defense of existing Third Party
Claims.
"NYSE" means the New York Stock Exchange.
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"PACKAGING ASSETS" means, collectively, all of the following rights
and assets that are owned by Tenneco or any of its Subsidiaries as of the
close of business on the Distribution Date:
(i) the capital stock of the Packaging Subsidiaries;
(ii) all of the assets included on the Packaging Business Pro Forma
Balance Sheet that are owned by Tenneco or any of its Subsidiaries as of
the close of business on the Distribution Date;
(iii) all of the assets and rights expressly allocated to Packaging
or any Packaging Subsidiary under this Agreement, the Contribution
Agreement or any of the Ancillary Agreements; and
(iv) any other asset acquired by Tenneco or any of its Subsidiaries
from the date of the Packaging Business Pro Forma Balance Sheet or to
the close of business on the Distribution Date that is owned by Tenneco
or any of its Subsidiaries as of the close of business on the
Distribution Date and that is of a type or nature that would have
resulted in such asset being included as an asset on the Packaging
Business Pro Forma Balance Sheet had it been acquired on or prior to the
date thereof, determined on a basis consistent with the determination of
the assets included on the Packaging Business Pro Forma Balance Sheet.
"PACKAGING BUSINESS" means the businesses that, after giving effect to
the Corporate Restructuring Transactions, are or were conducted by:
(i) Packaging, the Packaging Subsidiaries or any of the other
members of the Packaging Group; or
(ii) any business entity acquired or established by or for Tenneco,
Packaging or any of the Packaging Subsidiaries between the date of this
Agreement and the close of business on the Distribution Date that is
engaged in, or intends to engage in, any business that is of a type or
nature that would have resulted in such business being included either
as a Subsidiary or an asset on the Packaging Business Pro Forma Balance
Sheet, had it been acquired or established on or prior to the date
thereof, determined on a basis consistent with the determination of the
Subsidiaries and assets included on the Packaging Business Pro Forma
Balance Sheet.
"PACKAGING BUSINESS PRO FORMA BALANCE SHEET" means the column entitled
"Packaging Pro Forma Combined" on the Packaging Unaudited Pro Forma
Combined Balance Sheet (prepared in accordance with GAAP) as of June 30,
1999 attached hereto as Exhibit F other than any amounts reflected in that
column for the line items titled "Short-term debt" and "Long-term debt".
The parties agree that the liabilities of each party and its respective
Subsidiaries for indebtedness for borrowed money shall be determined
pursuant to the Debt Realignment.
"PACKAGING COMMON STOCK" has the meaning ascribed to such term in the
Recitals to this Agreement.
"PACKAGING" has the meaning ascribed to such term in the Recitals to
this Agreement.
"PACKAGING GROUP" means Packaging, the Packaging Subsidiaries and,
after giving effect to the Corporate Restructuring Transactions and the
Distribution, the corporations, partnerships, joint ventures, investments
and other entities that represent equity investments of any of Packaging or
any of the Packaging Subsidiaries.
"PACKAGING INDEMNITEES" means:
(i) Packaging, the Packaging Subsidiaries and each Affiliate
thereof after giving effect to the Corporate Restructuring Transactions
and the Distribution; and
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(ii) each of the respective past, present and future directors,
officers, employees and agents of any of the entities described in the
immediately preceding clause (i) and each of the heirs, executors,
successors and assigns of any of such directors, officers, employees and
agents.
"PACKAGING INFORMATION STATEMENT" means the information statement or
registration statement relating to Packaging and the transactions
contemplated hereby to be distributed to holders of Tenneco Common Stock
pursuant to the terms of this Agreement.
"PACKAGING LIABILITIES" means, collectively, all of the following
Liabilities other than Transaction Liabilities:
(i) all of the Liabilities included on the Packaging Business Pro
Forma Balance Sheet which remain outstanding as of the close of business
on the Distribution Date;
(ii) all of the Liabilities which are incurred or which otherwise
accrue or are accrued at any time on, prior to or after the date of the
Packaging Business Pro Forma Balance Sheet, and which arise or arose out
of, or in connection with the Packaging Assets, Packaging Business or
Prior Packaging Business, determined on a basis consistent with the
determination of Liabilities of Packaging on the Packaging Business Pro
Forma Balance Sheet;
(iii) all of the Liabilities of Packaging, each Packaging
Subsidiary or any other member of the Packaging Group under, or to be
retained or assumed by Packaging, any Packaging Subsidiary or any of the
other members of the Packaging Group pursuant to the Corporate
Restructuring Transactions, the Debt Realignment, this Agreement
(including, without limitation, the liabilities arising from the matters
allocated to it in the Litigation Letter) or any of the Ancillary
Agreements;
(iv) all of the Liabilities of the parties hereto or their
respective Subsidiaries (whenever arising whether prior to, at or
following the Distribution Date) arising out of or in connection with or
otherwise relating to the management or conduct before or after the
Distribution Date of the Packaging Business or Prior Packaging Business;
(v) the Packaging Securities Liabilities; and
(vi) all other Liabilities of Packaging, of each Packaging
subsidiary and of each member of the Packaging Group that are not
expressly included in clauses (i) through (v) of the definition of
Automotive Liabilities.
"PACKAGING RECORDS" has the meaning ascribed to such term in Section
6.01(a) hereof.
"PACKAGING REGISTRATION STATEMENT" means the Registration Statement on
Form 10 to be filed with the Commission pursuant to the requirements of
Section 12 of the Exchange Act and the rules and regulations thereunder in
order to register the Packaging Common Stock under Section 12(b) of the
Exchange Act.
"PACKAGING SECURITIES LIABILITIES" means any and all Securities
Liabilities, other than Transaction Securities Liabilities, of Tenneco or
any entity that was or is a Subsidiary of Tenneco on or prior to the
Distribution Date arising out of, or in connection with, or relating to any
information, data (financial or otherwise, and including pro forma
financial data) or disclosures (or any omissions of information, data or
disclosures) provided, made or omitted (or alleged to have been provided,
made or omitted) on or prior to the Distribution Date to the extent
relating to or concerning the business, operations, financial or other
results, prospects, plans, potential risks, financing or management of the
Prior Packaging Business, Packaging Business, Packaging Assets or Packaging
Group before or after the Distribution irrespective of (A) who authored,
prepared or provided such information, data or disclosures (or, as the case
may be, the section or discussion in which certain
TENNECO DISTRIBUTION AGREEMENT
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information, data or disclosure is alleged to have been omitted), or (B)
the form in which, or medium through which (e.g., in writing, orally,
electronically, etc.), such information, data, disclosure, section or
discussion was provided.
"PACKAGING SUBSIDIARIES" means the Subsidiaries listed on Exhibit G
hereto.
"PERSON" means any natural person, corporation, business trust, join
venture, association, company, partnership, limited liability company or
other entity, or any government, or any agency or political subdivision
thereof.
"PRIOR AUTOMOTIVE BUSINESS" means, collectively, the businesses that
were conducted by any division, Subsidiary, other business entity or
investment of Tenneco (or one of its former Subsidiaries or former
Affiliates) that (i) at any time prior to the Distribution Date, were
included in the "automotive parts" segment for purposes of segment
reporting in any Annual Report on Form 10-K of Tenneco or the entity that,
from December 8, 1987 to December 12, 1996, was known as "Tenneco Inc.",
and (ii) were sold, transferred or otherwise discontinued or disposed of
prior to the Distribution Date.
"PRIOR PACKAGING BUSINESS" means, collectively, the businesses that
were conducted by any division, Subsidiary, other business entity or
investment of Tenneco (or one of its former Subsidiaries or former
Affiliates) that (i) at any time prior to the Distribution Date were
included in the "packaging," "specialty packaging," or "paperboard
packaging" segments for purposes of segment reporting in any Annual Report
on Form 10-K of Tenneco or the entity that, from December 8, 1987 to
December 12, 1996, was known as "Tenneco Inc.", and (ii) were sold,
transferred or otherwise discontinued or disposed of prior to the
Distribution Date.
"PRIOR RULINGS" means, collectively, the private letter ruling issued
by the Internal Revenue Service on October 30, 1996 with control number
PLR-240198-96, and the three private letter rulings supplementing that
ruling, issued by the Internal Revenue Service on December 4, 1996 (control
number PLR-252639-96), December 5, 1996 (control number PLR-253203-96) and
May 27, 1997 (control number PLR-104206-97).
"PRIVILEGE" has the meaning ascribed to such term in Section 6.07(a)
hereof.
"PRIVILEGED INFORMATION" has the meaning ascribed to such term in
Section 6.07(a) hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES LIABILITIES" means any and all losses, liabilities,
penalties, claims, damages, demands, costs or expenses or other Liabilities
whatsoever that are assessed, imposed, awarded against, incurred or accrued
by a Person arising out of or relating in whole or in part to any Action,
any potential or threatened Action or any Third Party Claim (or potential
or threatened Third Party Claim) by any Governmental Authority or any other
Person that is based on any violations or alleged violations of the
Securities Act, Exchange Act, any of the rules or regulations of the
Commission promulgated under the Securities Act or Exchange Act, or any
other securities or other similar Law.
"SUBSIDIARY" means, with respect to any Person:
(i) any corporation of which at least a majority in interest of the
outstanding voting stock (having by the terms thereof voting power under
ordinary circumstances to elect a majority of the directors of such
corporation, irrespective of whether or not at the time stock of any
other class or classes of such corporation shall have or might have
voting power by reason of the happening of a contingency) is at the
time, directly or indirectly, owned or controlled by such Person or by
such Person and one or more of its Subsidiaries; or
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(ii) any non-corporate entity in which such Person or such Person
and one or more Subsidiaries of such Person either (a) directly or
indirectly, at the date of determination thereof, has at least majority
ownership interest, or (b) at the date of determination is a general
partner or an entity performing similar functions (e.g., manager of a
limited liability company or a trustee of a trust).
"TAX" or "TAXES" means any income, gross income, gross receipts,
profits, capital stock, franchise, withholding, payroll, social security,
workers compensation, unemployment, disability, property, ad valorem,
stamp, excise, occupation, services, sales, use, license, lease, transfer,
import, export, value added, alternative minimum, estimated or other
similar tax (including any fee, assessment or other charge in the nature of
or in lieu of any tax) imposed by any governmental entity or political
subdivision thereof, and any interest, penalties, additions to tax or
additional amounts in respect of the foregoing.
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement by and among
Tenneco and Packaging, which agreement shall be entered into on or prior to
the Distribution Date in substantially the form attached hereto as Exhibit
I.
"TENNECO" means Tenneco Inc., a Delaware corporation.
"TENNECO COMMON STOCK" has the meaning ascribed to such term in the
Recitals to this Agreement.
"TENNECO CORPORATE RECORDS" has the meaning ascribed to such term in
Section 6.01(a) hereof.
"TENNECO HOLDERS" means the holders of record of Tenneco Common Stock
as of the Distribution Record Date.
"TENNECO SECURITIES LIABILITIES" means any and all Securities
Liabilities of Tenneco or any of its Subsidiaries including, without
limitation, Tenneco Automotive Inc., other than Packaging Securities
Liabilities or Transaction Securities Liabilities.
"TENNECO TRADEMARKS AND TRADE NAMES" means trademarks, service marks,
and trade names containing "TENNECO", "TEN", or "TENN" or variations
thereof, along with their respective applications and registrations
wherever used or registered.
"TERMINATION DATE" means the date on which this Agreement is
terminated pursuant to and in accordance with the provisions of Section
8.11 of this Agreement.
"THIRD PARTY CLAIM" has the meaning as defined in Section 7.05(a)
hereof.
"TRADEMARK TRANSITION LICENSE" has the meaning ascribed to such term
in Section 5.02 hereof.
"TRANSACTION LIABILITIES" means any and all Transaction Securities
Liabilities and any and all Liabilities imposed on Tenneco, Packaging, or
any member of their respective Group, jointly or severally, arising as a
result of the actions taken in connection with or pursuant to this
Agreement, any Ancillary Agreement, the Debt Realignment or any of the
Corporate Restructuring Transactions that are based on:
(i) any violation or alleged violation of the DGCL or any other
corporate or other similar Law, to the extent such violation occurred or
is alleged to have occurred on or prior to the Distribution Date; or
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(ii) any violation or alleged violation by any officer or director
of any member of the Packaging Group or the Automotive Group of such
officer's or director's fiduciary duty as an officer or director.
"TRANSACTION SECURITIES LIABILITIES" means any and all Securities
Liabilities imposed on Tenneco, Packaging, or any member of their
respective Group, jointly or severally, arising as a result of the actions
taken in connection with or pursuant to this Agreement, any Ancillary
Agreement, the Debt Realignment or any of the Corporate Restructuring
Transactions that are not Automotive Securities Liabilities or Packaging
Securities Liabilities.
"TRANSITION SERVICES AGREEMENT" means the Transition Services
Agreement by and between Tenneco and Packaging, which agreement shall be
entered into on or prior to the Distribution Date pursuant to which
Packaging shall provide certain administrative services to Tenneco after
the Distribution Date.
"1996 AGREEMENTS" means the following agreements, and any amendments
thereto:
(i) Distribution Agreement, dated November 1, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.),
Tenneco Inc. (formerly New Tenneco Inc.) and Newport News
Shipbuilding Inc., as amended (the "1996 DISTRIBUTION
AGREEMENT");
(ii) Debt and Cash Allocation Agreement, dated December 11, 1996,
by and among El Paso Tennessee Pipeline Co. (formerly
Tenneco Inc.), Tenneco Inc. (formerly New Tenneco Inc.) and
Newport News Shipbuilding Inc. (the "1996 DEBT AND CASH
ALLOCATION AGREEMENT");
(iii) Benefits Agreement, dated December 11, 1996, by and among El
Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), Tenneco
Inc. (formerly New Tenneco Inc.) and Newport News
Shipbuilding Inc.;
(iv) Insurance Agreement, dated December 11, 1996, by and among El
Paso Tennessee Pipeline Co. (formerly Tenneco Inc.), Tenneco
Inc. (formerly New Tenneco Inc.) and Newport News
Shipbuilding Inc.;
(v) Tax Sharing Agreement, dated December 11, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.),
Newport News Shipbuilding Inc., Tenneco Inc. (formerly New
Tenneco Inc.) and El Paso Natural Gas Company;
(vi) First Amendment to Tax Sharing Agreement, dated as of
December 11, 1996, among El Paso Tennessee Pipeline Co.
(formerly Tenneco Inc.), Tenneco Inc. (formerly New Tenneco
Inc.) and Newport News Shipbuilding Inc.;
(vii) Transition Services Agreement, dated June 19, 1996, by and
among Tenneco Business Services Inc., El Paso Tennessee
Pipeline Co. (formerly Tenneco Inc.) and El Paso Natural Gas
Company;
(viii) Trademark Transition License Agreement, dated December 11,
1996, by and between Newport News Shipbuilding Inc. and
Tenneco Inc. (formerly New Tenneco Inc.) (the "Newport News
License"); and
(ix) Trademark Transition License Agreement, dated December 11,
1996, by and between Tenneco Inc. (formerly New Tenneco Inc.)
and El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.)
(the "El Paso License").
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SECTION 1.02. REFERENCES. References to an "Exhibit" or to a "Schedule"
are, unless otherwise specified, to one of the Exhibits or Schedules attached to
this Agreement, and references to a "Section" are, unless otherwise specified to
one of the Sections of this Agreement. References to "including" shall be deemed
to mean "including, without limitation."
ARTICLE II
PRE-DISTRIBUTION TRANSACTIONS;
CERTAIN COVENANTS
SECTION 2.01. CORPORATE RESTRUCTURING TRANSACTIONS. On or prior to the
Distribution Date (but in all events prior to the Distribution) and subject to
Section 2.06 below, each of Tenneco and Packaging shall, and shall cause each of
their respective divisions, investments, Subsidiaries and Affiliates to, as
applicable, take such action or actions as is necessary to cause, effect and
consummate the Corporate Restructuring Transactions. Each of Tenneco and
Packaging hereby agrees that any one or more of the Corporate Restructuring
Transactions may be modified, supplemented or eliminated on or prior to the
Distribution Date; provided such modification, supplement or elimination is
determined to be necessary or appropriate (i) to divide the existing businesses
of Tenneco so that Tenneco's packaging businesses and administrative services
operations shall be owned, directly and indirectly, by Packaging, or so that
Tenneco's automotive businesses shall be owned, directly and indirectly by
Tenneco after giving effect to the Distribution, in each case so long as the
ruling referred to in the following clause (ii) will not be adversely affected
by such modification, supplement, or elimination, or (ii) to obtain a ruling
from the Internal Revenue Service as described in Section 4.01(d).
SECTION 2.02. PRE-DISTRIBUTION STOCK DIVIDEND TO TENNECO. On or prior to
the Distribution Date (but in all events prior to the Distribution), Packaging
shall issue to Tenneco, as a stock dividend, the number of shares of Packaging
Common Stock as is required to effect the Distribution, as certified by the
Agent. In connection therewith, Tenneco shall deliver to Packaging for
cancellation the share certificate (or certificates) then held by it
representing all Packaging Common Stock, and Packaging shall issue a new
certificate (or certificates) to Tenneco representing the total number of shares
of Packaging Common Stock to be owned by Tenneco after giving effect to such
stock dividend.
SECTION 2.03. CERTIFICATE OF INCORPORATION AND BYLAWS OF PACKAGING. On or
prior to the Distribution Date (but in all events prior to the Distribution),
Tenneco and Packaging shall each take all necessary actions so that, as of the
Distribution Date, the certificate of incorporation and bylaws of Packaging are
amended and/or restated in such manner as is determined appropriate by Tenneco.
SECTION 2.04. ELECTION OF DIRECTORS OF PACKAGING. On or prior to the
Distribution Date, Tenneco, as the sole stockholder of Packaging, shall take all
necessary action so that as of the Distribution Date the directors of Packaging
will be as set forth in the Packaging Information Statement.
SECTION 2.05. TRANSFER AND ASSIGNMENT OF CERTAIN LICENSES AND PERMITS.
(a) LICENSES AND PERMITS RELATING TO THE PACKAGING BUSINESS. On or
prior to the Distribution Date, or as soon as reasonably practicable
thereafter, Tenneco shall (and, if applicable, shall cause any other Person
over which it has legal or effective direct or indirect control to) duly
and validly transfer or cause to be duly and validly transferred to the
appropriate member of the Packaging Group (as directed by Packaging) all
transferrable licenses, permits and authorizations issued by any
Governmental Authority that relate exclusively to the Packaging Business
but which are held in the name of Tenneco, any member of the Automotive
Group, or any of their respective employees, officers, directors,
stockholders or agents.
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(b) LICENSES AND PERMITS RELATING TO THE AUTOMOTIVE BUSINESS. On or
prior to the Distribution Date, or as soon as reasonably practicable
thereafter, Packaging shall (and if applicable, shall cause any other
Person over which it has legal or effective direct or indirect control to)
duly and validly transfer or cause to be duly and validly transferred to
the appropriate member of the Automotive Group (as directed by Tenneco) all
transferrable licenses, permits and authorizations issued by any
Governmental Authority that relate exclusively to the Automotive Business
but which are held in the name of any member of the Packaging Group or any
of their respective employees, officers, directors, stockholders or agents.
SECTION 2.06. TRANSFER AND ASSIGNMENT OF CERTAIN AGREEMENTS.
(a) TRANSFER AND ASSIGNMENT OF AUTOMOTIVE BUSINESS AGREEMENTS. On or
prior to the Distribution Date, or as soon as reasonably practicable
thereafter, and subject to the limitations set forth in this Section 2.06,
Packaging shall (and, if applicable, shall cause any of the other members
of its Group over which it has legal or effective direct or indirect
control to) assign, transfer and convey to Tenneco (or such other member of
the Automotive Group as Tenneco shall direct) all of its (or such other
member of its Group's) right, title and interest in and to any and all
agreements that relate exclusively to the Automotive Business or any member
of the Automotive Group.
(b) TRANSFER AND ASSIGNMENT OF PACKAGING BUSINESS AGREEMENTS. On or
prior to the Distribution Date, or as soon as reasonably practicable
thereafter, and subject to the limitations set forth in this Section 2.06,
Tenneco shall (and, if applicable, shall cause any other Person over which
it has legal or effective direct or indirect control to) assign, transfer
and convey to Packaging (or such other member of the Packaging Group as
Packaging shall direct) all of its (or such other Person's) right, title
and interest in and to any and all agreements that relate exclusively to
the Packaging Business or any member of the Packaging Group.
(c) SHARED AGREEMENTS.
(i) Exhibit I attached hereto contains a list of certain third
party agreements with Tenneco Business Services, Inc. under or through
which both the Automotive Group and Packaging Group has obtained or does
obtain goods or services. Of these third party agreements, those listed
in Section 1 of Exhibit I have been modified to provide that Tenneco and
Packaging may each order, receive and pay for the goods and services to
which such agreements apply for its respective Group as if each company
had a separate contract. The third-party agreements listed in Section 2
of Exhibit I will be administered by Packaging or one of its
Subsidiaries after the Distribution and the allocated costs for such
goods or services will be billed to and paid by Tenneco on a recurring
basis.
(ii) Except with respect to the 1996 Agreements and the agreements
listed on Exhibit I hereto, and subject to the provisions of Section
5.08 below, any agreement to which any party hereto (or any other member
of such party's Group) is a party that inures to the benefit of or
relates to the Automotive Business and the Packaging Business, but that
is not a Packaging Asset or otherwise the subject of this Agreement or
any Ancillary Agreement, shall be assigned in part, at the expense and
risk of the Assignee (as defined herein), on or prior to the
Distribution Date or as soon as reasonably practicable thereafter, so
that each party (or such other member of such party's Group) shall be
entitled to the rights and benefits inuring to its business under such
agreement.
(d) OBLIGATIONS OF ASSIGNEES. The assignee of any agreement assigned,
in whole or in part, hereunder (an "ASSIGNEE") shall, as a condition to
such assignment, assume and agree to pay, perform and fully discharge all
obligations of the assignor under such agreement (whether such obligations
arose or were incurred prior to, on or subsequent to the Distribution Date
and irrespective
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of whether such obligations have been asserted as of the Distribution Date)
or, in the case of a partial assignment under Section 2.06(c)(ii) above,
such Assignee's related portion of such obligations as determined in
accordance with the terms of the relevant agreement, where determinable on
the face thereof, or otherwise as determined in accordance with the
practice of the parties prior to the Distribution. Furthermore, the
Assignee shall use its reasonable efforts to cause the assignor of such
agreement to be released from the Assignee's obligations under the assigned
agreements.
(e) NO ASSIGNMENT OF CERTAIN AGREEMENTS. Notwithstanding anything in
this Agreement to the contrary, this Agreement shall not constitute an
agreement to assign any agreement, in whole or in part, or any rights
thereunder if the agreement to assign or attempt to assign, without the
consent of a third party, would constitute a breach thereof or in any way
adversely affect the rights of the Assignee thereto until such consent is
obtained. If an attempted assignment thereof would be ineffective or would
adversely affect the rights of any party hereto (or a member of its Group)
so that the Assignee would not, in fact, receive all such rights, the
parties hereof will make efforts consistent with Section 5.05(d) hereof to
effect any arrangement designed reasonably to provide for the Assignee the
benefits of, and to permit the Assignee to assume liabilities under, any
such agreement subject to the remaining sentences of this Section 2.06(e).
There are certain software license agreements held in the name of a member
of the Packaging Group that presently inure to the benefit of the
Automotive Business and the Packaging Business. Notwithstanding any other
provision of this Agreement and subject to the terms of the Transition
Service Agreement, each such license agreement shall continue to be held by
that member of the Packaging Group without any obligation of any party to
cause the assignment or inurement to the benefit of such license agreement,
or to effect any arrangement to provide such benefit, to the Automotive
Business, except where the license agreement expressly permits the benefits
and obligations to be divided among the Businesses or as may be negotiated
with the licensor by that member of the Packaging Group and such other
parties.
SECTION 2.07. OTHER TRANSACTIONS. On or prior to the Distribution Date (but
in all events prior to the Distribution), each of Tenneco and Packaging shall
have consummated those other transactions in connection with the Corporate
Restructuring Transactions and the Distribution that are contemplated by the
Packaging Information Statement and the ruling request submitted by Tenneco to
the Internal Revenue Service dated April 29, 1999 (as subsequently
supplemented), and not specifically referred to in Sections 2.01 through 2.06
above, as long as such other transactions will not adversely affect the ruling
from the Internal Revenue Service.
SECTION 2.08. ELECTION OF OFFICERS. On or prior to the Distribution Date,
each of Tenneco and Packaging shall, as applicable, take all actions necessary
and desirable so that as of the Distribution Date the officers of Packaging will
be as set forth in the Packaging Information Statement.
SECTION 2.09. PACKAGING REGISTRATION STATEMENT. Tenneco and Packaging shall
prepare or cause to be prepared, and Packaging shall file or cause to be filed
with the Commission, the Packaging Registration Statement. The Packaging
Registration Statement shall include or incorporate by reference the Packaging
Information Statement setting forth appropriate disclosure concerning Tenneco,
Packaging, the Distribution and such other matters as may be required to be
disclosed therein by the provisions of the Exchange Act and the rules and
regulations promulgated thereunder. Tenneco and Packaging shall take all such
actions as may be reasonably necessary or appropriate in order to cause the
Packaging Registration Statement to become effective by order of the Commission
pursuant to the Exchange Act.
SECTION 2.10. STATE SECURITIES LAWS. Prior to the Distribution Date,
Tenneco and Packaging shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in order to effect the Distribution.
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SECTION 2.11. LISTING APPLICATION. Prior to the Distribution Date, Tenneco
and Packaging shall prepare and file with the NYSE a listing application and
related documents and shall take all such other actions with respect thereto as
shall be necessary or desirable in order to cause the NYSE to list on or prior
to the Distribution Date, subject to official notice of issuance, the Packaging
Common Stock.
SECTION 2.12. CERTAIN FINANCIAL AND OTHER ARRANGEMENTS.
(a) SETTLEMENT OF INTERCOMPANY ACCOUNTS BETWEEN PACKAGING GROUP AND
AUTOMOTIVE GROUP. All intercompany receivables, payables and loans (other
than receivables, payables and loans otherwise specifically provided for in
any of the Ancillary Agreements or hereunder), including, without
limitation, in respect of any cash balances, any cash balances representing
deposited checks or drafts for which only a provisional credit has been
allowed or any cash held in any centralized cash management system, between
any member of the Packaging Group, on the one hand, and any member of the
Automotive Group, on the other hand, shall, as of the close of business on
the Distribution Date, be settled, capitalized or converted into ordinary
trade accounts, in each case as may be agreed in writing prior to the
Distribution Date by duly authorized representatives of Tenneco and
Packaging.
(b) OPERATIONS IN ORDINARY COURSE. Except as otherwise provided in
this Agreement or any Ancillary Agreement during the period from the date
of this Agreement through the Distribution Date, each of Tenneco and
Packaging shall, and shall cause any entity that is a Subsidiary of such
party at any time during such period to, conduct its business in a manner
substantially consistent with current and past operating practices and in
the ordinary course.
SECTION 2.13. DIRECTOR, OFFICER AND EMPLOYEE RESIGNATIONS. Subject to the
provisions of Section 2.04 and Section 2.08 above:
(a) RESIGNATIONS BY DIRECTORS AND EMPLOYEES OF THE AUTOMOTIVE
GROUP. Tenneco shall cause all of its directors and all employees of the
Automotive Group to resign, effective as of (or immediately prior to) the
close of business on the Distribution Date, from all boards of directors or
similar governing bodies (including committees and trusts responsible for
benefit plans and compensation structures) of each member of the Packaging
Group on which they serve, and from all positions as officers or employees
of any member of the Packaging Group, except as otherwise set forth on
Exhibit J hereto or in the Packaging Information Statement or as otherwise
mutually agreed to in writing on or prior to the Distribution Date by
Tenneco and Packaging.
(b) RESIGNATIONS BY DIRECTORS AND EMPLOYEES OF THE PACKAGING
GROUP. Packaging shall cause all of its directors and all employees of the
Packaging Group to resign, effective as of the close of business on the
Distribution Date, from all boards of directors or similar governing bodies
(including committees and trusts responsible for benefit plans and
compensation structures) of each member of the Automotive Group on which
they serve, and from all positions as officers or employees of any member
of the Automotive Group, except as otherwise set forth on Exhibit J hereto
or in the Packaging Information Statement or as otherwise mutually agreed
to in writing on or prior to the Distribution Date by Packaging and
Tenneco.
SECTION 2.14. TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION; TRANSFERS
DEEMED EFFECTIVE AS OF THE DISTRIBUTION DATE. To the extent that any transfers
or transactions contemplated by this Article II shall not have been consummated
on or prior to the Distribution Date, the parties hereto shall cooperate and
make efforts consistent with Section 5.05(d) hereof (and shall cause each of
their respective Affiliates and each member of their respective Groups over
which they have legal or effective direct or indirect control to cooperate and
make such efforts) to effect such transfers or transactions as promptly
following the Distribution Date as shall be practicable. Nothing herein shall be
deemed to require the transfer of any assets or the assumption of any
Liabilities which by
TENNECO DISTRIBUTION AGREEMENT
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their terms or operation of Law cannot be transferred or assumed, provided,
however, that the parties hereto shall cooperate (and shall cause each of their
respective Affiliates and each member of their respective Groups over which they
have legal or effective direct or indirect control to cooperate) to seek to
obtain any necessary consents or approvals for the transfer of all assets and
Liabilities contemplated to be transferred or assumed pursuant to this Article
II and Section 5.04, in a manner consistent with Section 5.05(d) hereof. In the
event that any such transfer of assets or assumption of Liabilities has not been
consummated, from and after the Distribution Date the party retaining such asset
or Liability (or, as applicable, such other member or members of such party's
Group) shall hold such asset in trust for the use and benefit of the party
entitled thereto (at the expense of the party entitled thereto) or retain such
Liability for the account of the party by whom such Liability is to be assumed
pursuant hereto, as the case may be, and take such other action pursuant to
Section 5.05(d) hereof as may be reasonably requested by the party to whom such
asset is to be transferred, or by whom such Liability is to be assumed, as the
case may be, in order to place such party, insofar as is reasonably possible, in
the same position as would have existed had such asset or Liability been
transferred or assumed as contemplated hereby. As and when any such asset or
Liability becomes transferable or assumable, such transfer shall be effected
forthwith. As of the Distribution Date, each party hereto (or, if applicable,
such other members of such party's Group) shall be deemed to have acquired (or,
as applicable, retained) complete and sole beneficial ownership over all of the
assets, together with all rights, powers and privileges incident thereto, and
shall be deemed to have assumed in accordance with the terms of this Agreement
all of the Liabilities, and all duties, obligations and responsibilities
incident thereto, which such party (or any other member of such party's Group)
is entitled to acquire or required to assume pursuant to the terms of this
Agreement.
SECTION 2.15. ANCILLARY AGREEMENTS. Prior to the Distribution Date, each
of Tenneco and Packaging shall enter into, or where applicable shall cause such
other members of their respective Group to enter into, (a) the Ancillary
Agreements and (b) any other agreements in respect of the Corporate
Restructuring Transactions and the Distribution as are reasonably necessary or
appropriate in connection with the transactions contemplated hereby and thereby.
SECTION 2.16. DEBT REALIGNMENT. Tenneco and Packaging shall each use
commercially reasonable efforts so that, immediately prior to the Distribution,
the Debt Realignment plan set forth on Exhibit D attached hereto has been
effected in accordance with the goal set forth in clause 1 of Exhibit D.
Notwithstanding the foregoing, neither Tenneco nor Packaging, nor any member of
its respective Group, shall have any recourse, claim, or cause of action to or
against any other member of either Group if the ultimate result of the Debt
Realignment, the manner of the Debt Realignment or any element or component
thereof varies from that set forth in Exhibit D.
ARTICLE III
THE DISTRIBUTION
SECTION 3.01. TENNECO ACTION PRIOR TO THE DISTRIBUTION. Subject to the
terms and conditions set forth herein, Tenneco shall take, or cause to be taken,
the following acts or actions in connection with, and to otherwise effect in
accordance with the terms of this Agreement, the Distribution.
(a) DECLARATION OF DISTRIBUTION AND ESTABLISHMENT OF DISTRIBUTION
DATE. The Board of Directors of Tenneco shall, in its sole discretion and
subject to and in accordance with this Agreement, the applicable rules of
the NYSE and provisions of the DGCL, declare the Distribution and establish
the Distribution Record Date, the Distribution Date, the date on which
Packaging Common Stock shall be mailed to the Tenneco Holders and all
appropriate procedures in connection with the Distribution to the extent
not provided for herein; provided, however, that no such action shall
create any obligation on the part of Tenneco to effect the Distribution or
in any way limit Tenneco's power of termination as set forth in Section
8.11 hereof or alter the consequences of any such termination from those
specified in such Section.
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(b) NOTICE TO NYSE. Tenneco shall, to the extent possible, give the
NYSE not less than ten days advance notice of the Distribution Record Date
in compliance with Rule 10b-17 under the Exchange Act.
(c) MAILING OF PACKAGING INFORMATION STATEMENT. Tenneco shall, as soon
as practicable after the Packaging Registration Statement shall have been
declared effective under the Exchange Act, cause the Packaging Information
Statement to be mailed to the holders of Tenneco Common Stock.
SECTION 3.02. THE DISTRIBUTION.
(a) DUTIES AND OBLIGATIONS OF TENNECO. Subject to the conditions
contained herein, on the Distribution Date but effective immediately
following the close of business on the Distribution Date Tenneco shall:
(i) deliver to the Agent the share certificates representing the
Packaging Common Stock issued to Tenneco by Packaging, pursuant to
Section 2.02 hereof, endorsed by Tenneco in blank, for the benefit of
the Tenneco Holders; and
(ii) instruct the Agent to distribute, as soon as practicable
following consummation of the Distribution, to the Tenneco Holders one
share of Packaging Common Stock for every one share of Tenneco Common
Stock held by such Tenneco Holders as of the Distribution Record Date.
(b) DUTIES AND RESPONSIBILITIES OF PACKAGING. Packaging shall provide,
or cause to be provided, to the Agent sufficient certificates representing
Packaging Common Stock, in such denominations as the Agent may request in
order to effect the Distribution. All shares of Packaging Common Stock
issued in connection with the Distribution will be validly issued, fully
paid and nonassessable and free of any preemptive (or similar) rights.
ARTICLE IV
CONDITIONS TO THE DISTRIBUTION
SECTION 4.01. CONDITIONS PRECEDENT TO THE DISTRIBUTION. The obligation of
Tenneco to cause the Distribution to be consummated shall be subject, at the
option of Tenneco, to the fulfillment or waiver, on or prior to the Termination
Date, of each of the following conditions.
(a) ANCILLARY AGREEMENTS. Each of the parties to each Ancillary
Agreement shall have executed and delivered such Ancillary Agreement and
all Ancillary Agreements shall be in full force and effect.
(b) REGISTRATION STATEMENT. The Packaging Registration Statement shall
have been declared effective by order of the Commission and no stop order
shall have been entered, and no proceeding for that purpose shall have been
initiated or threatened by the Commission with respect thereto.
(c) NYSE LISTING. The Packaging Common Stock shall have been approved
for listing on the NYSE, subject to official notice of issuance.
(d) TAX RULING. Tenneco shall have received rulings from the Internal
Revenue Service reasonably acceptable to Tenneco and Packaging, which
rulings shall be in full force and effect as of the Distribution Date, to
the effect that:
(i) the Distribution as contemplated hereunder will be tax-free for
federal income tax purposes to Tenneco under Section 355(c)(1) of the
Code and to the stockholders of Tenneco under Section 355(a) of the
Code;
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(ii) the merger, pursuant to a plan of complete liquidation, of
Tenneco Packaging Specialty and Consumer Products Inc. with and into
Packaging will be tax-free for federal income tax purposes to Packaging
and Tenneco Packaging Specialty and Consumer Products Inc. under
Sections 332 and 337 of the Code, respectively;
(iii) the transfers of property by Tenneco to Packaging and the
entity now known as Tenneco Automotive Inc. will be tax-free for federal
income tax purposes under Sections 361(a) and 351(a), respectively; and
(iv) the foregoing transactions will have no adverse effect on the
Prior Rulings.
(e) PRE-DISTRIBUTION TRANSACTIONS. Each of the transactions and other
matters contemplated by Article II and Section 3.01 hereof (including,
without limitation, each of the distributions, transfers, conveyances,
contributions, assignments or other transactions included in, or otherwise
necessary to consummate, the Corporate Restructuring Transactions) and the
Debt Realignment shall have been fully effected, consummated and
accomplished.
(f) COVENANTS. The covenants contained in Article V of this Agreement
that are required to be performed on or before the Distribution Date shall
have been fully performed.
(g) NO PROHIBITIONS. Consummation of the transactions contemplated
hereby shall not be prohibited by Law and no Governmental Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is in
effect and which materially restricts, prevents or prohibits consummation
of the Distribution, or any transaction contemplated by this Agreement, it
being understood that the parties hereto hereby agree to use their
reasonable best efforts to cause any such decree, judgment, injunction or
other order to be vacated or lifted as promptly as possible.
(h) CONSENTS. Tenneco and Packaging and the other members of their
respective Groups shall have obtained all Consents the failure of which to
obtain would, in the determination of the Board of Directors of Tenneco,
have a material adverse effect on the Automotive Group or the Packaging
Group, each taken as a whole, and such Consents shall be in full force and
effect.
SECTION 4.02. NO CONSTRAINT. Notwithstanding the provisions of Section 4.01
above, the fulfillment or waiver of any or all of the conditions precedent to
the Distribution set forth therein shall not:
(i) create any obligation on the part of Tenneco or any other party
hereto to effect the Distribution;
(ii) in any way limit Tenneco's right and power under Section 8.11
to terminate this Agreement and the process leading to the Distribution
and to abandon the Distribution; or
(iii) alter the consequences of any such termination under Section
8.11 from those specified in such Section.
SECTION 4.03. DEFERRAL OF DISTRIBUTION DATE. If the Distribution Date shall
have been established by the Board of Directors of Tenneco but all the
conditions precedent to the Distribution set forth in this Agreement have not
theretofore been fulfilled or waived, or Tenneco does not reasonably anticipate
that they will be fulfilled or waived, on or prior to the date established as
the Distribution Date, Tenneco may, by resolution of its Board of Directors (or
a committee thereof, so authorized), defer the Distribution Date to a later date
or terminate this Agreement under Section 8.11.
SECTION 4.04. PUBLIC NOTICE OF DEFERRED DISTRIBUTION DATE. If the Board of
Directors (or a committee thereof, so authorized) of Tenneco shall defer the
Distribution Date in accordance with Section 4.03 above and public announcement
of the prior Distribution Date has
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theretofore been made, Tenneco shall promptly thereafter issue, in accordance
with the advice of legal counsel, a public announcement with respect to such
deferment and shall, with the advice of legal counsel, take such other actions
as may be deemed necessary or desirable with respect to the dissemination of
such information.
ARTICLE V
COVENANTS
SECTION 5.01. FURTHER ASSURANCES. Each of Tenneco and Packaging shall use
all reasonable efforts to:
(a) take or cause to be taken all actions, and to do or cause to be
done all things reasonably necessary, proper or advisable under applicable
Law and agreements or otherwise to consummate and make effective the
transactions contemplated hereby, including without limitation using
commercially reasonable efforts to obtain any, consents and approvals from,
enter into any amendatory agreements with and make any applications,
registrations or filings with, any third Person or any Governmental
Authority necessary or desirable in order to consummate the transactions
contemplated hereby or to carry out the purposes of this Agreement; and
(b) execute and deliver such further instruments and documents and
take such other actions as the other party may reasonably request in order
to consummate the transactions contemplated hereby and effectuate the
purposes of this Agreement.
SECTION 5.02. TENNECO NAME. As part of the Corporate Restructuring
Transactions the Tenneco Trademarks and Trade Names will be assigned to a member
of the Automotive Group designated by Tenneco. Tenneco shall grant to Packaging
and to each of the members of the Packaging Group a transition license,
substantially in the form of Exhibit K hereto (the "TRADEMARK TRANSITION
LICENSE"), to use certain Tenneco Trademarks and Trade Names.
SECTION 5.03. SUPPLIES AND DOCUMENTS. Tenneco shall, pursuant to the terms
of the Trademark Transition License, grant a license (on a nonexclusive basis)
to Packaging and to each of the members of the Packaging Group to use existing
supplies and documents which have imprinted thereon any of the Tenneco
Trademarks and Trade Names to the extent that such supplies and documents were
existing in the inventory of such member of the Packaging Group as of the
Distribution Date.
SECTION 5.04. ASSUMPTION AND SATISFACTION OF LIABILITIES. Except as
otherwise specifically set forth in any Ancillary Agreement, from and after the
Distribution Date:
(a) Tenneco shall, and shall cause each of the other members of the
Automotive Group over which it has legal or effective direct or indirect
control to, assume, pay, perform and discharge all Automotive Liabilities
in accordance with their terms, when determinable, and otherwise as
determined in accordance with the practice of the parties prior to the
Distribution;
(b) Packaging shall, and shall cause each of the other members of the
Packaging Group over which it has legal or effective direct or indirect
control to, assume, pay, perform and discharge all Packaging Liabilities in
accordance with their terms, when determinable, and otherwise as determined
in accordance with the practice of the parties prior to the Distribution;
and
(c) Tenneco and Packaging each severally and not jointly covenant and
agree to assume, pay, and discharge one half of the amount of any and all
Transaction Liabilities.
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SECTION 5.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS.
(a) GENERAL. Each of the parties hereto understands and agrees that no
party hereto is, in this Agreement or in any other agreement or document
contemplated by this Agreement (including the Ancillary Agreements) or
otherwise, making to any other party hereto any representation or warranty
whatsoever, including without limitation, any representation or warranty:
(i) as to the value or freedom from encumbrance of, or any other
matter concerning, any assets of such party; or
(ii) as to the legal sufficiency to convey title to any asset as of
the execution, delivery and filing of this Agreement or any Ancillary
Agreement, including, without limitation, any Conveyancing and
Assumption Instrument.
(b) DISCLAIMER OF MERCHANTABILITY OR FITNESS OF ASSETS. Each party
hereto further understands and agrees that there are no warranties, express
or implied, as to the merchantability or fitness of any of the assets
either transferred to or retained by the Automotive Group or the Packaging
Group, as the case may be, pursuant to the Corporate Restructuring
Transactions and the other terms and provisions of this Agreement, any
Conveyancing and Assumption Agreement or any Ancillary Agreement, and all
such assets which are so transferred will be transferred on an "AS IS,
WHERE IS" basis, and the party to which any such assets are transferred
hereunder, or which retains assets hereunder, shall bear the economic and
legal risk that any conveyances of such assets shall prove to be
insufficient or that the title of such party or any other member of its
respective Group to any such assets shall be other than good and marketable
and free from encumbrances.
(c) NO REPRESENTATIONS OR WARRANTIES REGARDING CONSENTS. Each of the
parties hereto understands and agrees that no party hereto is, in this
Agreement or any Ancillary Agreement or in any other agreement or document
contemplated by this Agreement or any Ancillary Agreement or otherwise,
representing or warranting in any way to any other party hereto that the
obtaining of any consents or approvals, the execution and delivery of any
amendatory agreements and the making of any filings or applications
contemplated by this Agreement will satisfy the provisions of any or all
applicable agreements or the requirements of any or all applicable Law.
Each of the parties hereto further agrees and understands that the party to
which any assets to be or are transferred as contemplated by the Corporate
Restructuring Transactions or the other provisions of this Agreement shall
bear the economic and legal risk that any necessary consents or approvals
are not obtained, that any necessary amendatory agreements are not executed
and delivered or that any requirements of Laws are not complied with.
(d) COVENANT TO USE REASONABLE EFFORTS TO OBTAIN
CONSENTS. Notwithstanding the provisions of Section 5.05(c) above, each of
the parties hereto shall (and shall cause each of their respective
Affiliates and each member of its respective Group over which it has direct
or indirect legal or effective control to) use commercially reasonable
efforts to obtain all consents and approvals (the "CONSENTS"), to enter
into all amendatory agreements and to make all filings and applications
which may be reasonably required for the consummation of the Corporate
Restructuring Transactions, the Distribution and all other transactions
contemplated by this Agreement and shall take all such further reasonable
actions as shall be reasonably necessary to preserve for each of the
Automotive Group and the Packaging Group, to the greatest extent feasible,
the economic and operational benefits of the allocation of assets and
Liabilities contemplated by this Agreement. In case at any time after the
Distribution Date any further action is necessary or desirable to carry out
the purposes of this Agreement, the proper officers and directors of each
party to this Agreement, or their successors in interest, shall take all
such necessary or desirable action.
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SECTION 5.06. REMOVAL OF CERTAIN GUARANTEES.
(a) REMOVAL OF TENNECO AS GUARANTOR OF PACKAGING LIABILITIES. Except
as otherwise contemplated in the Corporate Restructuring Transactions or
otherwise specified in any Ancillary Agreement, each of Tenneco and
Packaging shall use its commercially reasonable efforts to have, on or
prior to the Distribution Date, or as soon as practicable thereafter,
Tenneco and any other member of the Automotive Group removed as a guarantor
of, or obligor under or for, any Packaging Liability.
(b) REMOVAL OF PACKAGING AS GUARANTOR OF AUTOMOTIVE LIABILITIES.
Except as otherwise contemplated in the Corporate Restructuring
Transactions or otherwise specified in any Ancillary Agreement, each of
Tenneco and Packaging shall use its commercially reasonable efforts to
have, on or prior to the Distribution Date, or as soon as practicable
thereafter, Packaging and any other member of the Packaging Group removed
as a guarantor of, or obligor under or for, any Automotive Liability.
SECTION 5.07. PUBLIC ANNOUNCEMENTS. Each party hereto shall consult with
each other before issuing any press release or otherwise issuing any other
similar written public statement with respect to this Agreement or the
Distribution and shall not issue any such press release or make any such public
statement without the prior consent of each other party, which shall not be
unreasonably withheld or delayed; provided, however, that a party may, without
the prior consent of any other party, issue such press release or other similar
written public statement as may be required by law or any listing agreement with
a national securities exchange to which any party hereto (or any member of such
party's Group) is a party if it has used all reasonable efforts to consult with
such other party and to obtain such party's consent but has been unable to do so
in a timely manner.
SECTION 5.08. INTERCOMPANY AGREEMENTS. Effective as of the consummation of
the Distribution, each of Packaging and Tenneco shall (and shall cause each
other member of its respective Group over which it has legal or effective direct
or indirect control to) terminate each and every agreement between it and any
member of the other Group other than this Agreement, any of the Ancillary
Agreements, and any agreements between third Persons who are not members of
either Group, on the one hand, and members of both Groups, on the other hand;
provided, however, that such termination shall not have any effect whatsoever on
any of its rights or obligations that accrued or were incurred prior to the
Distribution Date (subject to the terms of Section 2.12 above).
SECTION 5.09. TAX MATTERS. Each of Tenneco and Packaging intend the
Distribution to be treated as a tax-free distribution under Code Sections 355(a)
and 361(c)(1) and each such party shall use its reasonable best efforts to cause
the Distribution to so qualify. Neither Tenneco, on the one hand, nor Packaging,
on the other hand, shall take, or permit any member of its Group over which it
has legal or effective direct or indirect control to take, any action which
might cause:
(i) the Distribution to fail to qualify as a tax-free distribution
under Code Section 355(a) or Code Section 361(c)(1);
(ii) the merger, pursuant to a plan of complete liquidation, of
Tenneco Packaging Specialty and Consumer Products Inc. with and into
Packaging to not be tax-free for federal income tax purposes to Packaging
and Tenneco Packaging Specialty and Consumer Products Inc. under Sections
332 and 337 of the Code, respectively;
(iii) the transfers of property by Tenneco to Packaging and the entity
now known as Tenneco Automotive Inc. to not be tax-free for federal income
tax purposes under Sections 361(a) and 351(a), respectively;
(iv) the foregoing transactions to have an adverse effect on the Prior
Rulings; or
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(v) any other transfer described in the Corporate Restructuring
Transactions that is intended (as described in Tenneco's request for
rulings from the Internal Revenue Service) to qualify as a tax-free
transfer under Code Sections 332, 351, 355 or 368 to fail to so qualify.
SECTION 5.10. 1996 AGREEMENTS.
(a) ALLOCATION OF BENEFITS AND LIABILITIES. Except as expressly
provided otherwise in an Ancillary Agreement, Tenneco and Packaging each
shall use its commercially reasonable efforts to allocate and provide to
the other party to the greatest extent feasible the economic and
operational benefits and liabilities of the 1996 Distribution Agreement and
the 1996 Debt and Cash Allocation Agreement, which allocation shall be
based on the nature of the underlying asset or liability giving rise to the
allocated benefit or liability. To the extent such benefit or liability is
derived from or relates to an Automotive Asset, an Automotive Liability,
the Automotive Business, or the Prior Automotive Business, it shall be
allocated to Tenneco. To the extent such benefit or liability is derived or
related to a Packaging Asset, a Packaging Liability, the Packaging
Business, or the Prior Packaging Business, it shall be allocated to
Packaging.
(b) ASSIGNMENT OF CERTAIN AGREEMENTS. Tenneco and Packaging each shall
use its commercially reasonable efforts to cause the Newport News License
and the El Paso License to be assigned to Tenneco.
ARTICLE VI
ACCESS TO INFORMATION
SECTION 6.01. PROVISION, TRANSFER AND DELIVERY OF APPLICABLE CORPORATE
RECORDS.
(a) PROVISION, TRANSFER AND DELIVERY OF PACKAGING RECORDS. Tenneco
shall (and shall cause each other member of its Group over which it has
legal or effective direct or indirect control to) arrange as soon as
practicable following the Distribution Date for the transportation (at
Packaging's cost) to Packaging of the Books and Records in its possession,
if any, that relate primarily to the Packaging Business or are necessary to
operate the Packaging Business (collectively, the "Packaging Records"),
except to the extent such items are already in the possession of any member
of the Packaging Group. The Packaging Records shall be available to Tenneco
for review and duplication, at its cost, pursuant to the terms of this
Agreement.
(b) PROVISION, TRANSFER AND DELIVERY OF AUTOMOTIVE RECORDS. Packaging
shall (and shall cause each other member of its Group over which it has
legal or effective direct or indirect control to) arrange as soon as
practicable following the Distribution Date for the transportation (at
Tenneco's cost) to Tenneco of the Books and Records in its possession, if
any, (i) that relate primarily to the Automotive Business or are necessary
to operate the Automotive Business (collectively, the "AUTOMOTIVE
RECORDS"), (ii) that relate to any Tenneco business other than the
Packaging Business, or (iii) that consist of the corporate minutes of the
Board of Directors (or committees thereof) of Tenneco or otherwise relate
to the business, administrative and management operations of Tenneco as the
parent holding company of the Automotive Business, Packaging Business and
all other Tenneco businesses or operations (collectively, the "TENNECO
CORPORATE RECORDS") except to the extent such items are already in the
possession of any member of the Automotive Group. The Automotive Records
and the Tenneco Corporate Records shall be the property of Tenneco, but
shall be available to Packaging for review and duplication, at its cost,
pursuant to the terms of this Agreement.
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SECTION 6.02. ACCESS TO INFORMATION. Unless otherwise contemplated by
Section 6.06, from and after the Distribution Date, each of Tenneco and
Packaging shall (and shall cause each of the other members of its respective
Group over which it has legal or effective direct or indirect control to) afford
to each other party and its authorized accountants, counsel and other designated
representatives reasonable access and duplicating rights (all such duplicating
costs to be borne by the requesting party) during normal business hours, subject
to appropriate restrictions for classified, privileged or confidential
information, to the personnel, properties, Books and Records and other data and
information of such party and each other member of such party's Group relating
to operations prior to the Distribution insofar as such access is reasonably
required by the other requesting party for the conduct of the requesting party's
business (but not for competitive purposes).
SECTION 6.03. REIMBURSEMENTS, OTHER MATTERS. Except to the extent otherwise
contemplated hereby or by any Ancillary Agreement, a party providing Books and
Records or access to information to any other party (or such party's
representatives) under this Article VI shall be entitled to receive from such
other party, upon the presentation of invoices therefor, payments for such
amounts, relating to supplies, disbursements and other out-of-pocket expenses,
as may be reasonably incurred in providing such Books and Records or access to
information.
SECTION 6.04. CONFIDENTIALITY.
(a) GENERAL RESTRICTION ON DISCLOSURE. Each of Tenneco and Packaging
shall not (and shall not permit any other member of its respective Group
over which it has legal or effective direct or indirect control to) use or
permit the use of (without the prior written consent of the other) and
shall hold, and shall cause its consultants, advisors and other
representatives and any other member of its respective Group (over which it
has legal or effective direct or indirect control) to hold, in strict
confidence, all information concerning each other party hereto and the
other members of such other party's Group in its possession, custody or
control to the extent such information either
(i) relates to the period up to the Distribution Date,
(ii) relates to any Ancillary Agreement, or
(iii) is obtained in the course of performing services for the
other party pursuant to any Ancillary Agreement, and each party hereto
shall not (and shall cause each other member of its respective Group
over which it has legal or effective direct or indirect control not to)
otherwise release or disclose such information to any other Person,
except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors, without the prior written consent of the other
affected party or parties, unless compelled to disclose such information
by judicial or administrative process or unless such disclosure is
required by Law and such party has used commercially reasonable efforts
to consult with the other affected party or parties prior to such
disclosure.
(b) COMPELLED DISCLOSURE. To the extent that a party hereto or a
member of its Group over which it has legal or effective direct or indirect
control is compelled by judicial or administrative process to disclose such
information under circumstances in which any evidentiary privilege would be
available, such party agrees to assert or cause to be asserted such
privilege in good faith prior to making such disclosure. Each of the
parties shall consult with each relevant other party in connection with any
such judicial or administrative process, including without limitation, in
determining whether any privilege is available, and shall not object to
each such relevant party and its counsel participating in any hearing or
other proceeding (including, without limitation, any appeal of an initial
order to disclose) in respect of such disclosure and assertion of
privilege.
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(c) EXCEPTIONS TO CONFIDENTIAL TREATMENT. Anything herein to the
contrary notwithstanding, no party hereto shall be prohibited from using or
permitting the use of, or required to hold in confidence, any information
to the extent that (i) such information has been or is in the public domain
through no fault of such party, (ii) such information is, after the
Distribution Date, lawfully acquired from other sources by such party, or
(iii) this Agreement, any Ancillary Agreement or any other agreement
entered into pursuant hereto permits the use or disclosure of such
information by such party.
SECTION 6.05. WITNESS SERVICES. At all times from and after the
Distribution Date, each of Tenneco and Packaging shall use its reasonable
efforts to make available to each other party hereto, upon reasonable written
request, the officers, directors, employees and agents of each member of its
respective Group for fact finding, consultation or interviews and as witnesses
to the extent that:
(a) such persons may reasonably be required in connection with the
prosecution or defense of any Action in which the requesting party or any
member of its respective Group may from time to time be involved; and
(b) there is no conflict in the Action between the requesting party or
any member of its respective Group and the party to which a request is made
pursuant to this Section 6.05 or any member of such party's Group.
Except as otherwise agreed by the parties, a party providing witness
services to any other party under this Section shall be entitled to receive
from the recipient of such services, upon the presentation of invoices
therefor, payments for such amounts relating to supplies, disbursements and
other out-of-pocket expenses (but not salary expenses) of employees who
participate in fact finding, consultation or interviews or are witnesses,
as are actually and reasonably incurred in providing such fact finding,
consulting, interviews or witness services by the party providing such
services.
SECTION 6.06. RETENTION OF RECORDS. Except when a longer period is required
by Law or is specifically provided for herein or in any Ancillary Agreement,
each party hereto shall cause the members of its Group over which it has legal
or effective direct or indirect control, to retain, for a period of at least
seven years following the Distribution Date, all material information (including
without limitation all material Books and Records) relating to such Group and
its operations prior to the Distribution Date. Notwithstanding the foregoing,
any party hereto may offer in writing to deliver to the other parties all or a
portion of such information as it relates to members of the offering party's
Group and, if such offer is accepted in writing within 90 days after receipt
thereof, the offering party shall promptly arrange for the delivery of such
information (or copies thereof) to each accepting party (at the expense of such
accepting party). If such offer is not so accepted, except as required by Law
the offered information may be destroyed or otherwise disposed of by the
offering party at any time thereafter.
SECTION 6.07. PRIVILEGED MATTERS.
(a) PRIVILEGED INFORMATION. Each of the parties hereto shall, and
shall cause the members of its Group over which it has legal or effective
direct or indirect control to, use its reasonable efforts to maintain,
preserve, protect and assert all privileges including, without limitation,
all privileges arising under or relating to the attorney-client
relationship (including without limitation the attorney-client and attorney
work product privileges) that relate directly or indirectly to any member
of any other Group for any period prior to the Distribution Date
("PRIVILEGE" or "PRIVILEGES"). Each of the parties hereto shall use its
reasonable efforts not to waive, or permit any member of its Group over
which it has legal or effective direct or indirect control to waive, any
such Privilege that could be asserted under applicable Law without the
prior written consent of the other parties. With respect to each party, the
rights and obligations created by this Section 6.07 shall apply to all
information as to which a member of any Group did assert or, but for the
Distribution,
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would have been entitled to assert the protection of a Privilege
("PRIVILEGED INFORMATION") including, but not limited to, any and all
information that either:
(i) was generated or received prior to the Distribution Date but
which, after the Distribution, is in the possession of a member of
another Group; or
(ii) is generated or received after the Distribution Date but
refers to or relates to Privileged Information that was generated or
received prior to the Distribution Date.
(b) PRODUCTION OF PRIVILEGED INFORMATION. Upon receipt by a party or
any member of its Group of any subpoena, discovery or other request that
arguably calls for the production or disclosure of Privileged Information,
or if a party or any member of its Group obtains knowledge that any current
or former employee of such party or any member of its Group has received
any subpoena, discovery or other request which arguably calls for the
production or disclosure of Privileged Information, such party shall
promptly notify the other parties of the existence of the request and shall
provide the other parties a reasonable opportunity to review the
information and to assert any rights it may have under this Section 6.07 or
otherwise to prevent the production or disclosure of Privileged
Information. No party will, or will permit any member of its Group over
which it has direct or indirect legal or effective control to, produce or
disclose any information arguably covered by a Privilege under this Section
6.07 unless:
(i) each other party has provided its express written consent to
such production or disclosure; or
(ii) a court of competent jurisdiction has entered an order which
is not then appealable or a final, nonappealable order finding that the
information is not entitled to protection under any applicable
privilege.
(c) NO WAIVER. The parties hereto understand and agree that the
transfer of any Books and Records or other information between any members
of the Automotive Group or the Packaging Group shall be made in reliance on
the agreements of Tenneco and Packaging, as set forth in Section 6.04 and
Section 6.07 hereof, to maintain the confidentiality of Privileged
Information and to assert and maintain all applicable Privileges. The Books
and Records being transferred pursuant to Section 6.01 hereof, the access
to information being granted pursuant to Section 6.02 hereof, the agreement
to provide witnesses and individuals pursuant to Section 6.05 hereof and
the transfer of Privileged Information to either party pursuant to this
Agreement shall not be deemed a waiver of any Privilege that has been or
may be asserted under this Section or otherwise.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. INDEMNIFICATION BY TENNECO. Except as otherwise specifically
set forth in any provision of this Agreement or of any Ancillary Agreement,
Tenneco shall, to the fullest extent permitted by law, indemnify, defend and
hold harmless the Packaging Indemnitees from and against any and all
Indemnifiable Losses of the Packaging Indemnitees arising out of, by reason of
or otherwise in connection with (i) the Automotive Liabilities, (ii) to the
extent Tenneco has not discharged its obligations under Section 5.04(c) above,
Tenneco's share of any Transaction Liability, or (iii) the breach by Tenneco or
any Automotive Subsidiary of any provision of this Agreement or any Ancillary
Agreement.
SECTION 7.02. INDEMNIFICATION BY PACKAGING. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, Packaging shall, to the fullest extent permitted by law, indemnify,
defend and hold harmless the Automotive Indemnitees from and against any and all
Indemnifiable Losses of the Automotive Indemnitees arising out of, by reason of
or otherwise in
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connection with either (i) the Packaging Liabilities, (ii) to the extent
Packaging has not discharged its obligations under Section 5.04(c) above,
Packaging's share of any Transaction Liability, or (iii) the breach by Packaging
or any Packaging Subsidiary of any provision of this Agreement or any Ancillary
Agreement.
SECTION 7.03. NO INDEMNIFICATION IN RESPECT OF INDEMNITEE'S INVESTMENT.
Notwithstanding anything to the contrary contained herein, Tenneco shall not be
obligated to indemnify, defend and hold harmless the Packaging Indemnitees from
and against, and Packaging shall not be obligated to indemnify, defend and hold
harmless the Automotive Indemnitees from and against, any Indemnifiable Losses
to the extent such Indemnifiable Losses arise out of, by reason of or otherwise
in connection with (i) the direct or indirect ownership, from and after the
Distribution Date, of any equity or other investment interest by such Indemnitee
in a member of the Indemnifying Party's Group or (ii) any direct or indirect
contractual or similar arrangement arising in the ordinary course of business
between a member of the Automotive Group and a member of the Packaging Group,
except as otherwise contemplated by the terms of such arrangement.
SECTION 7.04. LIMITATIONS ON INDEMNIFICATION OBLIGATIONS.
(a) REDUCTIONS FOR INSURANCE PROCEEDS AND OTHER RECOVERIES. The amount
that any party (an "INDEMNIFYING PARTY") is or may be required to pay to
any other Person (an "INDEMNITEE") pursuant to Section 7.01 or Section 7.02
above, as applicable, shall be reduced (retroactively or prospectively) by
any Insurance Proceeds or other amounts actually recovered from third
parties by or on behalf of such Indemnitee in respect of the related
Indemnifiable Losses. The existence of a claim by an Indemnitee for
insurance or against a third party in respect of any Indemnifiable Loss
shall not, however, delay any payment pursuant to the indemnification
provisions contained herein and otherwise determined to be due and owing by
an Indemnifying Party. Rather, the Indemnifying Party shall make payment in
full of such amount so determined to be due and owing by it against an
assignment by the Indemnitee to the Indemnifying Party of the entire claim
of the Indemnitee for such insurance or against such third party.
Notwithstanding any other provisions of this Agreement, it is the intention
of the parties hereto that no insurer or any other third party shall be (i)
entitled to a benefit it would not be entitled to receive in the absence of
the foregoing indemnification provisions, (ii) relieved of the
responsibility to pay any claims for which it is obligated or (iii)
entitled to any subrogation rights with respect to any obligation
hereunder. If an Indemnitee shall have received the payment required by
this Agreement from an Indemnifying Party in respect of any Indemnifiable
Losses and shall subsequently actually receive Insurance Proceeds or other
amounts in respect of such Indemnifiable Losses, then such Indemnitee shall
hold such Insurance Proceeds in trust for the benefit of such Indemnifying
Party and shall pay to such Indemnifying Party a sum equal to the amount of
such Insurance Proceeds or other amounts actually received, up to the
aggregate amount of any payments received from such Indemnifying Party
pursuant to this Agreement in respect of such Indemnifiable Losses.
(b) FOREIGN CURRENCY ADJUSTMENTS. In the event that any
indemnification payment required to be made hereunder or under any
Ancillary Agreement shall be denominated in a currency other than U.S.
Dollars, the amount of such payment shall be translated into U.S. Dollars
using the foreign exchange rate for such currency determined in accordance
with the following rules:
(i) with respect to any Indemnifiable Losses arising from the
payment by a financial institution under a guarantee, comfort letter,
letter of credit, foreign exchange contract or similar instrument, the
foreign exchange rate for such currency shall be determined as of the
date on which such financial institution shall have been reimbursed;
(ii) with respect to any Indemnifiable Losses covered by insurance,
the foreign exchange rate for such currency shall be the foreign
exchange rate employed by the insurance company providing such insurance
in settling such Indemnifiable Losses with the Indemnifying Party; and
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(iii) with respect to any Indemnifiable Losses not covered by
either clause (i) or (ii) above, the foreign exchange rate for such
currency shall be determined as of the date that notice of the claim
with respect to such Indemnifiable Losses shall be given to the
Indemnitee.
SECTION 7.05. PROCEDURES FOR INDEMNIFICATION. Except as otherwise
specifically provided in any Ancillary Agreement, including, without limitation,
the Tax Sharing Agreement and the Human Resources Agreement:
(a) NOTICE OF THIRD PARTY CLAIMS. If a claim or demand is made against
an Indemnitee by any Person who is not a member of the Automotive Group or
the Packaging Group (a "THIRD PARTY CLAIM") as to which such Indemnitee is
entitled to indemnification pursuant to this Agreement, such Indemnitee
shall notify the Indemnifying Party in writing, and in reasonable detail,
of the Third Party Claim promptly (and in any event within 30 business
days) after receipt by such Indemnitee of written notice of the Third Party
Claim, provided, however, that failure to give such notification shall not
affect the Indemnitee's right to indemnification hereunder except to the
extent the Indemnifying Party shall have been actually prejudiced as a
result of such failure (except that the Indemnifying Party shall not be
liable for any expenses incurred during the period in which the Indemnitee
failed to give such notice). The Indemnifying Party shall have 30 days from
personal delivery or mailing of such written notice to notify the
Indemnitee (i) whether or not the Indemnifying Party disputes the liability
of the Indemnifying Party to the Indemnitee with respect to such claim or
demand and (ii) whether or not it assumes the defense of such claim or
demand. Thereafter, the Indemnitee shall deliver to the Indemnifying Party,
promptly (and in any event within 15 business days) after the Indemnitee's
receipt thereof, copies of all notices and documents (including court
papers) received by the Indemnitee relating to the Third Party Claim.
(b) LEGAL DEFENSE OF THIRD PARTY CLAIMS. If a Third Party Claim is
made against an Indemnitee, the Indemnifying Party shall be entitled to
participate in the defense thereof and, if it so chooses, to assume the
defense thereof with counsel selected by the Indemnifying Party, which
counsel shall be reasonably satisfactory to the Indemnitee. Should the
Indemnifying Party so elect to assume the defense of a Third Party Claim,
the Indemnifying Party shall not be liable to the Indemnitee for legal or
other expenses subsequently incurred by the Indemnitee in connection with
the defense thereof. If the Indemnifying Party assumes such defense the
Indemnitee shall have the right to participate in the defense thereof and
to employ counsel, at its own expense, separate from the counsel employed
by the Indemnifying Party, it being understood that the Indemnifying Party
shall control such defense. The Indemnifying Party shall be liable for the
reasonable fees and expenses of counsel employed by the Indemnitee for any
period during which the Indemnifying Party has failed to assume the defense
of the Third Party Claim (other than during the period prior to the time
the Indemnitee shall have given notice of the Third Party Claim as provided
above). If the Indemnifying Party so elects to assume the defense of any
Third Party Claim, all of the Indemnitees shall cooperate with the
Indemnifying Party in the defense or prosecution thereof. Notwithstanding
the foregoing:
(i) the Indemnifying Party shall not be entitled to assume the
defense of any Third Party Claim (and shall be liable to the Indemnitee
for the reasonable fees and expenses of counsel incurred by the
Indemnitee in defending such Third Party Claim) if the Third Party Claim
either seeks an order, injunction or other equitable relief or relief
for other than money damages against the Indemnitee which the Indemnitee
reasonably determines, after conferring with its counsel, cannot be
separated from any related claim for money damages; provided, however,
that if such equitable relief or other relief portion of the Third Party
Claim can be so separated from that for money damages, the Indemnifying
Party shall be entitled to assume the defense of the portion relating to
money damages;
TENNECO DISTRIBUTION AGREEMENT
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(ii) an Indemnifying Party shall not be entitled to assume the
defense of any Third Party Claim (and shall be liable for the reasonable
fees and expenses of counsel incurred by the Indemnitee in defending
such Third Party Claim) if, in the Indemnitee's reasonable judgment, a
conflict of interest between such Indemnitee and such Indemnifying Party
exists in respect of such Third Party Claim or if the claim for
indemnification relates to a matter that, if determined adversely, could
reasonably be expected to expose the Indemnitee to criminal prosecution
or penalties; and
(iii) if at any time after assuming the defense of a Third Party
Claim an Indemnifying Party shall fail to prosecute or withdraw from the
defense of such Third Party Claim, the Indemnitee shall be entitled to
resume the defense thereof and the Indemnifying Party shall be liable
for the reasonable fees and expenses of counsel incurred by the
Indemnitee in such defense.
(c) SETTLEMENT OF THIRD PARTY CLAIMS. Except as otherwise provided
below in this Section 7.05(c), or as otherwise specifically provided in any
Ancillary Agreement, if the Indemnifying Party has assumed the defense of
any Third Party Claim, then:
(i) in no event will the Indemnitee admit any liability with
respect to, or settle, compromise or discharge, any Third Party Claim
without the Indemnifying Party's prior written consent (which consent
shall not be unreasonably withheld or delayed); provided, however, that
the Indemnitee shall have the right to settle, compromise or discharge
such Third Party Claim without the consent of the Indemnifying Party if
the Indemnitee releases the Indemnifying Party from its indemnification
obligation hereunder with respect to such Third Party Claim and such
settlement, compromise or discharge would not otherwise adversely affect
the Indemnifying Party, and
(ii) the Indemnitee will agree to any settlement, compromise or
discharge of a Third Party Claim that the Indemnifying Party may
recommend and that by its terms obligates the Indemnifying Party to pay
the full amount of the liability in connection with such Third Party
Claim and releases the Indemnitee completely in connection with such
Third Party Claim and that would not otherwise adversely affect the
Indemnitee;
provided, however, that the Indemnitee may refuse to agree to any such
settlement, compromise or discharge if the Indemnitee agrees that the
Indemnifying Party's indemnification obligation with respect to such Third
Party Claim shall not exceed the amount that would be required to be paid
by or on behalf of the Indemnifying Party in connection with such
settlement, compromise or discharge. If the Indemnifying Party has not
assumed the defense of a Third Party Claim then in no event shall the
Indemnitee settle, compromise or discharge such Third Party Claim without
providing prior written notice to the Indemnifying Party, which shall have
the option within 15 business days following receipt of such notice to
(i) approve and agree to pay the settlement,
(ii) approve the amount of the settlement, reserving the right to
contest the Indemnitee's right to indemnity pursuant to this Agreement,
(iii) disapprove the settlement and assume in writing all past and
future responsibility for such Third Party Claim (including all of
Indemnitee's prior expenditures in connection therewith), or
(iv) disapprove the settlement and continue to refrain from
participation in the defense of such Third Party Claim, in which event
the Indemnifying Party shall have no further right to
TENNECO DISTRIBUTION AGREEMENT
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contest the amount or reasonableness of the settlement if the Indemnitee
elects to proceed therewith.
In the event the Indemnifying Party does not respond to such written notice
from the Indemnitee within such 15 business-day period, the Indemnifying
Party shall be deemed to have elected option (i) above.
(d) OTHER CLAIMS. Any claim on account of an Indemnifiable Loss which
does not result from a Third Party Claim shall be asserted by written
notice given by the Indemnitee to the applicable Indemnifying Party. Such
Indemnifying Party shall have a period of 30 business days after the
receipt of such notice within which to respond thereto. If such
Indemnifying Party does not respond within such 30 business-day period,
such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 30 business-day period or rejects such claim in whole or in
part, such Indemnitee shall be free to pursue such remedies as may be
available to such party under applicable Law or under this Agreement.
(e) EXISTING THIRD PARTY CLAIMS. Effective as of the Distribution
Date, Tenneco and Packaging shall each be deemed to have (i) received
notification of a claim for indemnification from the other party with
respect to the Third Party Claims allocated to it under the Litigation
Letter, and (ii) elected to assume the defense of the Third Party Claims
allocated to it under the Litigation Letter pursuant to Section 7.05(b).
Thereafter, the relationships of the parties with respect to such Third
Party Claims shall be governed by the provisions of Section 7.05.
SECTION 7.06. INDEMNIFICATION PAYMENTS. Indemnification required by this
Article VII shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when invoices or bills are
received or loss, liability, claim, damage or expense is incurred.
SECTION 7.07. OTHER ADJUSTMENTS.
(a) ADJUSTMENTS FOR TAXES. The amount of any Indemnifiable Loss shall
be:
(i) increased to take into account any net Tax cost actually
incurred by the Indemnitee arising from any payments received from the
Indemnifying Party (grossed up for such increase); and
(ii) reduced to take account of any net Tax benefit actually
realized by the Indemnitee arising from the incurrence or payment of any
such Indemnifiable Loss.
In computing the amount of such Tax cost or Tax benefit, the Indemnitee
shall be deemed to recognize all other items of income, gain, loss,
deduction or credit before recognizing any item arising from the receipt of
any payment with respect to an Indemnifiable Loss or the incurrence or
payment of any Indemnifiable Loss, and such Tax cost or Tax benefit shall
be determined on a stand-alone basis (based upon the operations of such
Indemnitee) after eliminating any effect resulting from the consolidation
or inclusion for Tax purposes of the operations of any affiliates,
companies, partnerships, or any other Person with the Indemnitee.
(b) REDUCTIONS FOR SUBSEQUENT RECOVERIES OR OTHER EVENTS. In addition
to any adjustments required pursuant to Section 7.04 hereof or Section
7.07(a) above, if the amount of any Indemnifiable Losses shall, at any time
subsequent to any indemnification payment made by the Indemnifying Party
pursuant to this Article VII, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party, up to the aggregate amount of any payments received
from such Indemnifying Party pursuant to this Agreement in respect of such
Indemnifiable Losses.
TENNECO DISTRIBUTION AGREEMENT
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SECTION 7.08. OBLIGATIONS ABSOLUTE. The foregoing contractual obligations
of indemnification set forth in this Article VII shall:
(i) also apply to any and all Third Party Claims that allege that any
Indemnitee is independently, directly, vicariously or jointly and severally
liable to such third party;
(ii) to the extent permitted by applicable law, apply even if the
Indemnitee is partially negligent or otherwise partially culpable or at
fault, whether or not such liability arises under any doctrine of strict
liability; and
(iii) be in addition to any liability or obligation that an
Indemnifying Party may have other than pursuant to this Agreement.
SECTION 7.09. SURVIVAL OF INDEMNITIES. The obligations of Tenneco and
Packaging under this Article VII shall survive the sale or other transfer by any
of them of any assets or businesses or the assignment by any of them of any
Liabilities, with respect to any Indemnifiable Loss of any Indemnitee related to
such assets, businesses or Liabilities.
SECTION 7.10. REMEDIES CUMULATIVE. The remedies provided in this Article
VII shall be cumulative and shall not preclude assertion by any Indemnitee of
any other rights or the seeking of any and all other remedies against any
Indemnifying Party.
SECTION 7.11. COOPERATION OF THE PARTIES WITH RESPECT TO ACTIONS AND THIRD
PARTY CLAIMS.
(a) IDENTIFICATION OF PARTY IN INTEREST. Any party to this Agreement
that has responsibility for an Action or Third Party Claim shall identify
itself as the true party in interest with respect to such Action or Third
Party Claim and shall use its commercially reasonable efforts to obtain the
dismissal of any other party to this Agreement from such Action or Third
Party Claim.
(b) DISPUTES REGARDING RESPONSIBILITY FOR ACTIONS AND THIRD PARTY
CLAIMS. If there is uncertainty or disagreement concerning which party to
this Agreement has responsibility for any Action or Third Party Claim
(including any Action or Third Party Claim with respect to any 1996
Agreement not otherwise provided for), the following procedure shall be
followed in an effort to reach agreement concerning responsibility for such
Action or Third Party Claim:
(i) In general, each party shall control the portion of such
dispute or controversy that directly and exclusively relates to a
liability or benefit borne by such party. To the extent any issue
involved in, or aspect of, such dispute or controversy does not directly
and exclusively relate to the liability or benefit of one party, Tenneco
and Packaging shall jointly control and otherwise handle such issue or
matter upon such terms as they may agree. The parties in disagreement
over the responsibility for an Action or Third Party Claim shall
exchange brief written statements setting forth their position
concerning which party has responsibility for the Action or Third Party
Claim in accordance with the provisions of this Article VII. These
statements shall be exchanged within 10 days of a party putting another
party on written notice that the other party is or may be responsible
for the Action or Third Party Claim.
(ii) If within 10 days of the exchange of the written statement of
each party's position agreement is not reached on responsibility for the
Action or Third Party Claim, the General Counsel for each of the parties
in disagreement over responsibility for the Action or Third Party Claim
shall speak either by telephone or in person to attempt to reach
agreement on responsibility for the Action or Third Party Claim.
TENNECO DISTRIBUTION AGREEMENT
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(c) EFFECT OF FAILURE TO FOLLOW PROCEDURE. Failure to follow the
procedure set forth in clause (b) above shall not affect the rights and
responsibilities of the parties as established by the other provisions of
this Article VII.
(d) EXCHANGE OF INFORMATION. In connection with the handling of
current or future Actions or Third Party Claims, the parties may determine
that it is in their mutual interest to exchange privileged or confidential
information. If so, the parties agree to discuss whether it is in their
mutual interest to enter into a joint defense agreement or information
exchange agreement to maintain the confidentiality of their communications
and to permit them to maintain the confidentiality of proprietary
information or information that is otherwise confidential or subject to an
applicable privilege, including but not limited to the attorney-client,
work product, executive, deliberative process or self-evaluation
privileges.
SECTION 7.12. CONTRIBUTION. To the extent that any indemnification provided
for under Section 7.01 or Section 7.02 is unavailable to an Indemnitee or is
insufficient in respect of any of the Indemnifiable Losses of such Indemnitee
then the Indemnifying Party under such Section, in lieu of indemnifying such
Indemnitee thereunder, shall contribute to the amount paid or payable by such
Indemnitee as a result of such Indemnifiable Losses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying Party
on the one hand and the Indemnitee on the other hand from the transaction or
other matter which resulted in the Indemnifiable Losses or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Indemnifying
Party on the one hand and of the Indemnitee on the other hand in connection with
the action, inaction, statements or omissions that resulted in such
Indemnifiable Losses as well as any other relevant equitable considerations.
SECTION 7.13. PROCEDURES WITH RESPECT TO TRANSACTION LIABILITIES.
(a) NOTICE. If a Third Party Claim is made against either party or
such party's Group which may give rise to a Transaction Liability, such
party shall notify the other party in writing, and in reasonable detail, of
the Third Party Claim promptly (and in any event within 15 business days)
after receipt by such party of written notice of the Third Party Claim,
provided, however, that failure to give such notification shall not affect
either party's right to indemnification hereunder except to the extent a
party shall have been actually prejudiced as a result of such failure. The
parties shall deliver to each other, promptly (and in any event within 15
business days) after the receipt thereof, copies of all notices and
documents (including court papers) received by a party relating to such
Third Party Claim.
(b) LEGAL DEFENSE. If the parties jointly determine that a Third Party
Claim may give rise to a Transaction Liability, the parties shall jointly
agree on the manner of the defense of such Third Party Claim, including the
selection of counsel and responsibility for strategic decisions, and share
equally all costs and expenses incurred in connection with defending such
Claim. If the parties disagree as to whether any Third Party Claim may or
may not give rise to a Transaction Liability, the parties shall proceed in
accordance with Section 7.11(b) above with respect to such Third Party
Claim.
(c) SETTLEMENT. In no event will either party admit any liability with
respect to, or settle, compromise or discharge, any Third Party Claim that
the parties have jointly determined may give rise to a Transaction
Liability without the other party's prior written consent (which consent
shall not be unreasonably withheld or delayed); provided, however, that
either party shall have the right to settle, compromise or discharge such
Third Party Claim without the consent of the other party if such party
releases the other party from its indemnification obligation hereunder with
respect to such Third Party Claim and such settlement, compromise or
discharge contains a full and unconditional release
TENNECO DISTRIBUTION AGREEMENT
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of the other party with no obligation to pay any amounts on account of such
Claim and would not otherwise adversely affect the other party.
ARTICLE VIII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
SECTION 8.01. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Packaging and
Tenneco shall, to the fullest extent permitted by law, indemnify, defend and
save harmless the persons who were officers and directors of Tenneco Inc.,
immediately prior to the Distribution Date, from and against any and all
liability (including any judgments, losses, damages, civil penalties, excise
taxes, interest and any other form of liability or expense of any kind) or claim
of liability (as defined above and including any investigatory action) to which
they may be subjected by reason of any act alleged to have been done or omitted
to be done in connection with their service as officers and directors of Tenneco
Inc. and any related or affiliated entity, including all expenses reasonably
incurred in their defense if Packaging and Tenneco fail to provide such defense
after having been requested to do so in writing. Regardless of whether Packaging
or Tenneco assumes such defense, counsel for such defense shall be selected by
the indemnified officer or director. Defense costs shall be indemnified as
incurred in the course of the defense or investigation. The remedies provided by
this Section 8.01 shall be cumulative and without prejudice to the assertion of
any other rights. To the extent that an officer or director receives payment
under any liability insurance or other indemnification arrangement with respect
to a matter covered by this Section 8.01, that officer or director shall
reimburse the party which has made payments to him or her hereunder, but no
reimbursement shall be required except to the extent that the total which he or
she has received from all sources is greater than the aggregate amount of his or
her liability and expense with respect to that matter. The liability of Tenneco
and Packaging with respect to the indemnification provided in this Section 8.01
shall be joint and several as to the officer or director in question, but as
between Tenneco and Packaging, such liability shall be allocated as provided
under this Agreement. Tenneco and Packaging each jointly and severally agrees to
purchase and keep in force, or cause one of their respective subsidiaries to
purchase and keep in force, director and officer "run-off" insurance policies
that remain in effect for a period of seven years and provide coverage for acts
prior to the distribution by directors and officers. Notwithstanding the
provisions of Section 9.12 hereof, the officers and directors covered by this
Section 8.01 shall be and shall be deemed to be beneficiaries of this Article
VIII and shall be entitled to enforce their rights hereunder through legal
action or otherwise.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. COMPLETE AGREEMENT, CONSTRUCTION. This Agreement, including
the Exhibits and Schedules hereto, and the Ancillary Agreements shall constitute
the entire agreement between the parties with respect to the subject matter
hereof and shall supersede all previous negotiations, commitments and writings
with respect to such subject matter. In the event of any inconsistency between
this Agreement and any Schedule or Exhibit hereto, the Schedule or Exhibit, as
the case may be, shall prevail. Notwithstanding any other provisions in this
Agreement to the contrary, in the event and to the extent that there shall be a
conflict between the provisions of this Agreement and the provisions of any
Ancillary Agreement, such Ancillary Agreement shall control.
SECTION 9.02. ANCILLARY AGREEMENTS. This Agreement is not intended to
address, and should not be interpreted to address, the matters specifically and
expressly covered by the Ancillary Agreements except as specifically and
expressly provided by the Ancillary Agreements.
TENNECO DISTRIBUTION AGREEMENT
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SECTION 9.03. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 9.04. SURVIVAL OF AGREEMENTS. Except as otherwise expressly
provided herein, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
SECTION 9.05. RESPONSIBILITY FOR EXPENSES. Subject to the provisions of the
Debt Realignment, Tenneco and Packaging will each pay for all fees, costs and
expenses incurred by it or a member of its respective Group on or prior to the
Distribution Date. Except as otherwise set forth in this Agreement or any
Ancillary Agreement each party shall bear its own costs and expenses incurred
after the Distribution Date; provided, however, that all fees, costs and
expenses described on Schedule 1 of Exhibit D ("Transaction Costs") (i) that are
not paid out of assets of Fund B of the Tenneco Rabbi Trust, and (ii) that are
incurred by Tenneco or Packaging or any member of its respective Group after the
Distribution Date, shall be shared equally by Tenneco and Packaging. Transaction
Costs shall be paid to the vendor by the party receiving the invoice for such
Transaction Costs in accordance with the terms of the invoice. The party paying
such Transaction Costs may submit to the other party a request for reimbursement
of an amount equal to not more than one-half of the payment no later than 30
days after payment of such invoice. Such reimbursement request shall include a
copy of the vendor's invoice and a statement by the chief accounting or other
responsible officer attesting to the payment of such invoice. Not later than 30
days after receipt of a reimbursement request under this Section 9.05, the party
receiving the reimbursement request shall pay the amount requested or advise the
other party that it disputes the reimbursement request and the basis for such
dispute. The failure to submit a dispute notice within ten days of receipt of
the reimbursement request shall constitute a waiver of any right to dispute the
reimbursement request.
SECTION 9.06. NOTICES. All notices and other communications to a party
hereunder shall be in writing and hand delivered or mailed by registered or
certified mail (return receipt requested) or sent by any means of electronic
message transmission with delivery confirmed (by voice or otherwise) to such
party (and will be deemed given on the date on which the notice is received by
such party) at the address.
for such party set forth below (or at such other address for the party as
the party shall, from time to time, specify by like notice to the other
parties):
If to Tenneco, at: 500 North Field Drive
Lake Forest, Illinois 60045
Telecopier:
Attention: General Counsel
If to Packaging, at: 1900 West Field Court
Lake Forest, Illinois 60045
Telecopier:
Attention: General Counsel
SECTION 9.07. WAIVERS. The failure of any party hereto to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish that party's right to demand strict performance thereafter of that
or any other provision hereof.
SECTION 9.08. AMENDMENTS. Subject to the terms of Section 8.11 hereof, this
Agreement may not be modified or amended except by an agreement in writing
signed by the parties hereto.
SECTION 9.09. ASSIGNMENT. This Agreement shall be assignable in whole in
connection with a merger or consolidation or the sale of all or substantially
all the assets of a party hereto so long as the resulting, surviving or
transferee entity assumes all the obligations of the relevant party hereto by
operation of law or pursuant to an agreement in form and substance reasonably
satisfactory to the parties to this
TENNECO DISTRIBUTION AGREEMENT
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Agreement. Otherwise this Agreement shall not be assignable, in whole or in
part, directly or indirectly, by any party hereto without the prior written
consent of the other, and any attempt to assign any rights or obligations
arising under this Agreement without such consent shall be void.
SECTION 9.10. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective permitted successors and permitted assigns.
SECTION 9.11. TERMINATION. This Agreement may be terminated and the
Distribution may be amended, modified or abandoned at any time prior to the
Distribution by and in the sole discretion of Tenneco without the approval of
Packaging or the stockholders of Tenneco. In the event of such termination, no
party shall have any liability of any kind to any other party or any other
person. After the Distribution, this Agreement may not be terminated except by
an agreement in writing signed by all of the parties hereto; provided, however,
that Article VII shall not be terminated or amended after the Distribution in
respect of the third party beneficiaries thereto without the consent of such
persons.
SECTION 9.12. THIRD PARTY BENEFICIARIES. Except as provided in Article VII
hereof (relating to Indemnitees), this Agreement is solely for the benefit of
the parties hereto and the members of their respective Groups and Affiliates,
and should not be deemed to confer upon third parties any remedy, claim,
liability, right of reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
SECTION 9.13. ATTORNEY FEES. A party in breach of this Agreement shall, on
demand, indemnify and hold harmless the other parties hereto for and against all
out-of-pocket expenses, including, without limitation, reasonable legal fees,
incurred by such other party by reason of the enforcement and protection of its
rights under this Agreement. The payment of such expenses is in addition to any
other relief to which such other party may be entitled hereunder or otherwise.
SECTION 9.14. TITLE AND HEADINGS. Titles and headings to sections herein
are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
SECTION 9.15. EXHIBITS AND SCHEDULES. The Exhibits and Schedules attached
hereto shall be construed with and as an integral part of this Agreement to the
same extent as if the same had been set forth verbatim herein.
SECTION 9.16. SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges
that there is no adequate remedy at law for the failure by such parties to
comply with the provisions of this Agreement and that such failure would cause
immediate harm that would not be adequately compensable in damages. Accordingly,
each of the parties hereto agrees that their agreements contained herein may be
specifically enforced without the requirement of posting a bond or other
security, in addition to all other remedies available to the parties hereto
under this Agreement.
SECTION 9.17. GOVERNING LAW. ALL QUESTIONS OR DISPUTES CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE SCHEDULES
AND EXHIBITS HERETO SHALL BE GOVERNED BY THE INTERNAL LAWS, AND NOT THE LAW OF
CONFLICTS, OF THE STATE OF DELAWARE. EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY IRREVOCABLY AND UNCONDITIONALLY (i) AGREES TO BE SUBJECT TO, AND HEREBY
CONSENTS AND SUBMITS TO, THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE
AND OF THE FEDERAL COURTS SITTING IN THE STATE OF DELAWARE, (ii) TO THE EXTENT
SUCH PARTY IS NOT OTHERWISE SUBJECT TO SERVICE OF PROCESS IN THE STATE OF
DELAWARE, HEREBY APPOINTS THE CORPORATION TRUST COMPANY, AS SUCH PARTY'S AGENT
IN THE STATE OF DELAWARE FOR ACCEPTANCE OF LEGAL PROCESS AND (iii) AGREES THAT
SERVICE MADE ON ANY SUCH AGENT SET FORTH IN (ii) ABOVE SHALL HAVE THE SAME LEGAL
FORCE AND EFFECT AS IF SERVED UPON SUCH PARTY PERSONALLY WITHIN THE STATE OF
DELAWARE.
TENNECO DISTRIBUTION AGREEMENT
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SECTION 9.18. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 9.19. SUBSIDIARIES. Each of the parties hereto shall cause to be
performed, and hereby guarantee the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such party
which is contemplated to be a Subsidiary of such party on and after the
Distribution Date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
TENNECO INC.
By
-----------------------------------
Name:
Title:
TENNECO PACKAGING INC.
By
-----------------------------------
Name:
Title:
TENNECO DISTRIBUTION AGREEMENT
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EXHIBIT A
TENNECO
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------
SPIN-OFF CONSOLIDATED
TENNECO DEBT AND RELATED TENNECO
AS REPORTED REALIGNMENT TRANSACTIONS PRO FORMA
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments.............. $ 40 $ -- $ -- $ 40
Receivables...................................... 606 -- 100(c) 785
79 (b)
Inventories...................................... 401 -- -- 401
Other current assets............................. 129 31(a) -- 160
------ ----- ------- ------
Total current assets........................... 1,176 31 179 1,386
Plant, property, and equipment, net................ 1,049 -- -- 1,049
Goodwill and intangibles, net...................... 510 -- -- 510
Other assets and deferred charges.................. 260 41(a) (54)(f) 247
Net assets of discontinued operations.............. 1,421 -- (1,421)(d) --
------ ----- ------- ------
Total assets................................... $4,416 $ 72 $(1,296) $3,192
====== ===== ======= ======
LIABILITIES AND
SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt (including current maturities on
long-term debt)................................ $ 206 $(206)(a) $ -- $ --
Trade payables................................... 351 -- 20(c) 371
Other current liabilities........................ 287 -- -- 287
------ ----- ------- ------
Total current liabilities...................... 844 (206) 20 658
Long-term debt..................................... 832 841(a) -- 1,673
Deferred income taxes.............................. 39 -- (22)(f) 17(e)
Other liabilities and deferred credits............. 168 -- -- 168
Minority interest.................................. 411 (394)(a) -- 17
Shareowners' equity................................ 2,122 (169)(a) (1,421)(d) 659
80(c)
(32)(f)
79(b)
------ ----- ------- ------
Total liabilities and shareowners' equity...... $4,416 $ 72 $(1,296) $3,192
====== ===== ======= ======
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Combined Balance Sheet.
TENNECO DISTRIBUTION AGREEMENT
A-1
<PAGE> 41
TENNECO
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) To reflect adjustments to Tenneco's debt for the debt realignment and the
assumed payment of interest on Tenneco consolidated debt tendered or
exchanged as part of the pre-spin-off debt realignment. The adjustment to
equity reflects the net impact of the debt realignment, the recording of
debt issue costs and deferred income taxes related to the debt realignment.
Tenneco will acquire certain subsidiary preferred stock as part of the debt
realignment. At this time, Tenneco cannot determine the ultimate amount of
its outstanding public debt securities which will be (1) purchased in the
cash tender offers that Tenneco plans to make as part of its debt
realignment, or (2) exchanged for new securities in the exchange offers, and
the amounts could vary significantly. These pro forma adjustments assume
that 100% of the securities subject to the cash tender offers are purchased
and 100% of the original securities are exchanged for new securities. These
pro forma adjustments also assume that the new securities will be recorded
at the net carrying amount of the original securities (in other words, the
new securities are assumed not to be "substantially different." See the
section titled "Accounting Treatment of the Exchange Offers" contained in
Tenneco Packaging Inc.'s Registration Statement on Form S-4, File No.
333-82923). The results of the exchange offers could vary based on a number
of factors, including the level of acceptance of the exchange offers, the
ultimate interest rate of the exchanged securities and whether the exchanges
will be considered extinguishments for accounting purposes. Based on current
interest rate markets, it is expected that the exchange offers will not be
extinguishments for accounting purposes. Tenneco expects to incur an
extraordinary charge as a result of the debt realignment related to the cash
tender offers. Tenneco estimates that this cost will be approximately $20 to
$25 million after-tax based on current market rates of interest. Other
costs, including transaction costs related to the acquisition of certain
subsidiary preferred stock and costs associated with foreign tax
restructuring initiatives, will be incurred by Tenneco in connection with
the corporate restructuring transactions and the spin-off which Tenneco
estimates will be approximately $50 million after-tax. The effect on
Tenneco's debt of these costs has been reflected in this pro forma
adjustment. However, these charges have not been included in the unaudited
pro forma consolidated statements of income. See the section titled
"Unaudited Pro Forma Consolidated Financial Statements of Tenneco" contained
in Tenneco Packaging Inc.'s Registration Statement on Form S-4, File No.
333-82923.
(b) To reflect the purchase of Automotive accounts receivable at fair value
which had previously been sold to a third party.
(c) To reflect affiliated receivables and payables with Packaging that were
eliminated in the Tenneco consolidated balance sheet.
(d) To reflect the spin-off of Packaging common stock to holders of Tenneco
common stock at an exchange ratio of one share of Packaging common stock for
each share of Tenneco common stock.
(e) Deferred income taxes at June 30, 1999 include $79 million of net operating
loss carryforwards which will be utilized by Packaging upon the planned sale
of Packaging's remaining interest in its containerboard joint venture.
(f) To reflect the increase in net periodic pension costs resulting from the
transfer to Packaging of prepaid pension costs attributable to Automotive
employees. Automotive employees will no longer participate in the Tenneco
Retirement Plan following the spin-off and Packaging will become the sponsor
of this plan. These prepaid pension costs will be transferred to Packaging
in connection with the corporate restructuring transactions.
TENNECO DISTRIBUTION AGREEMENT
A-2
<PAGE> 42
EXHIBIT B
AUTOMOTIVE SUBSIDIARIES
<TABLE>
<S> <C>
TENNECO INC. (DELAWARE) (to be renamed Tenneco Automotive
Inc.)
Tenneco Automotive Inc. (to be renamed)................... 100%
Beijing Monroe Automobile Shock Absorber Company Ltd.
(Peoples Republic of China)........................... 51
(Tenneco Automotive Inc. owns 51%; and Beijing
Automotive Industry Corporation, an unaffiliated
company, owns 49%)
Dalian Walker-Gillet Muffler Co. Ltd. (Peoples Republic
of China)............................................. 55
(Tenneco Automotive Inc. owns 55%; and non-affiliates
own 45%)
McPherson Strut Company Inc. (Delaware)................ 100
Precision Modular Assembly Corp. (Delaware)............ 100
Shanghai Walker Exhaust Company, Ltd. (Peoples Republic
of China)............................................. 55
(Tenneco Automotive Inc. owns 55%; and Shanghai
Tractor and Internal Combustion Engine Company,
Ltd., an unaffiliated company, owns 45%)
Tenneco Asheville Inc. (Delaware)...................... 100
Tenneco Asia Inc. (Delaware)........................... 100
Tenneco Automotive Foreign Sales Corporation Limited
(Jamaica)............................................. 100
Tenneco Automotive Japan Ltd. (Japan).................. 100
Tenneco Automotive Nederlands B.V. (Netherlands)....... 100
Tenneco Automotive RSA Company (Delaware).............. 100
Tenneco Automotive Trading Company (Delaware).......... 100
Tenneco Brake, Inc. (Delaware)......................... 100
Tenneco Europe Limited (Delaware)...................... 100
Wimetal S. A. (France)............................... ,1
(Tenneco Europe Limited owns 1 share; Walker
Limited owns 1 share; Walker France S.A. owns 99%;
and each of David Zerhusen, Howard van Schoyck,
Daniel Barth, Daniel Bellanger, Herman Weltens and
Theo Bonneu, affiliated persons, owns 1 share)
Tenneco Inc. (Nevada).................................. 100
Tenneco International Finance Limited (United
Kingdom)(1)........................................... 100
Tenneco International Holding Corp. (Delaware)......... 100
Monroe Australia Pty. Limited (Australia)............ 100
Monroe Springs (Australia) Pty. Ltd.
(Australia)....................................... 100
Monroe Superannuation Pty. Ltd. (Australia)....... 100
Walker Australia Pty. Limited (Australia)......... 100
Tenneco Automotive Europe N.V. (Belgium)............. 100
Monroe Amortisor Imalat Ve Ticaret A.S.
(Turkey).......................................... 99.85
(Tenneco Automotive Europe N.V. owns 99.85%; and
various unaffiliated individual stockholders own
0.15%)
Tenneco Automotive Italia S.r.l. (Italy)............. 85
(Tenneco International Holding Corp. owns 85%; and
Tenneco Automotive France, S.A. owns 15%)
Tenneco Automotive Polska Sp. z.O.O.................. 1
(Tenneco International Holding Corp. owns 1%; and
Tenneco Global Holdings Inc. owns 99%)
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
B-1
<PAGE> 43
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO INC.
SUBSIDIARIES OF TENNECO AUTOMOTIVE INC.
SUBSIDIARIES OF TENNECO INTERNATIONAL HOLDING CORP.
Tenneco Romania Sr(1)(Romania)....................... 0.14%
(Tenneco International Holding Corp. owns 0.14%;
and Tenneco Global Holdings Inc. owns 99.86%)
Tenneco Automotive Sverige A.B.(Sweden).............. 100
Tenneco Canada Inc.(Ontario)......................... 100
Tenneco Global Holdings Inc.(Delaware)............... 100
Fric-Rot S.A.I.C. (Argentina)..................... 55
(Tenneco Global Holdings Inc. owns 55%; Maco
Inversiones S.A. owns 44.85%; and unaffiliated
parties own .15%)
Maco Inversiones S.A.(Argentina).................. 100
Fric-Rot S.A.I.C. (Argentina)................... 44.85
(Maco Inversiones S.A. owns 44.85%; Tenneco
Global Holdings Inc. owns 55%; and
unaffiliated parties own .15%)
Monroe Springs (New Zealand) Pty. Ltd. (New
Zealand).......................................... 100
Monroe Czechia s.r.o. (Czech Republic)............ 100
Tenneco Automotive Iberica, S.A. (Spain).......... 100
Tenneco Automotive Polska Sp. z.O.O. (Poland)..... 99
(Tenneco Global Holdings Inc. owns 99%; and
Tenneco International Holding Corp. owns 1%)
Tenneco Romania Srl (Romania)..................... 99.86
(Tenneco Global Holdings Inc. owns 99.86%; and
Tenneco International Holding Corp. owns 0.14%)
Tenneco Mauritius Limited (Mauritius)............. 100
Hydraulics Limited (India)...................... 51
(Tenneco Mauritius Limited owns 51% and
Bangalore Union Services Limited, an
unaffiliated company, owns 49%) Renowned
Automotive Products Manufacturers Ltd.
(India)....................................... 83
(Hydraulics Limited owns 83%; and
non-affiliates own 17%)
Tenneco Automotive India Private Limited
(India)......................................... 100
Walker Exhaust India Private Limited
(India)....................................... 100
(Tenneco Automotive India Private Limited
owns less than 100%; and an unaffiliated
party owns the balance)
Tenneco Holdings Danmark A/S (Denmark)............... 100
Gillet Exhaust Technologie (Proprietary) Limited
(South Africa).................................... 100
Gillet Lazne Belohrad, s.r.o. (Czech Republic).... 100
Kinetic Ltd. (Australia).......................... 99
(Tenneco Holdings Danmark A/S owns 99%+; and
unaffiliated entities own less than 1%)
Tenneco Automotive Holdings South Africa Pty. Ltd.
(South Africa).................................... 51
(Tenneco Holdings Danmark A/S owns 51%; and an
unaffiliated party owns 49%)
Armstrong Hydraulics South Africa (Pty.) Ltd.
(South Africa).................................. 100
Armstrong Properties (Pty.) Ltd. (South
Africa)......................................... 100
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) In dissolution.
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
B-2
<PAGE> 44
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO INC.
SUBSIDIARIES OF TENNECO AUTOMOTIVE INC.
SUBSIDIARIES OF TENNECO GLOBAL HOLDINGS INC.
SUBSIDIARIES OF TENNECO AUTOMOTIVE HOLDINGS SOUTH
AFRICA PTY. LTD.
Monroe Manufacturing (Pty.) Ltd. (South
Africa)......................................... 100%
Smiths Industrial (SWA) (Pty.) Ltd. (South
Africa)......................................... 100
Tenneco Automotive Port Elizabeth (Proprietary)
Limited (South Africa)............................ 100
Tenneco Automotive Portugal -- Componentes para
Automovel, S.A. (Portugal)........................ 100
Walker Danmark A/S (Denmark)...................... 100
Tenneco Automotive France S.A. (France).............. 100
(Tenneco International Holding Corp. owns 470,371
shares; Daniel Bellanger owns 16 shares; Robert
Bellanger owns 8 shares; and each of Walker
Europe, Inc., Alain Bellanger, Theodore Bonneu,
Roy Kolotylo and David Zerhusen owns 1 share)
Gillet Tubes Technologies G.T.T. (France)......... 100
Monroe Packaging N.V. (Belgium)................... 99.9
(Tenneco Automotive Europe N.V. owns 99.9%; and
Tenneco Automotive France S.A. owns 0.1%)
Tenneco Automotive Europe Coordination Center N.V.
(Belgium)......................................... 99.9
(Tenneco Automotive Europe N.V. owns 99.9%; and
Tenneco Automotive France S.A. owns 0.1%)
Tenneco Automotive Italia S.r.l. (Italy).......... 15
(Tenneco International Holding Corp. owns 85%;
and Tenneco Automotive France S.A. owns 15%)
Walker France Constructeurs S.A.R.L. (France)..... 100
Wimetal S.A. (France)............................. 99
(Tenneco Automotive France S.A. owns 99%;
Tenneco Europe Limited owns 1 share, Walker
Limited owns 1 share; and each of David
Zerhusen, Howard van Schoyck, Daniel Barth,
Daniel Bellanger, Herman Weltens and Theo
Bonneu, affiliated persons, owns 1 share)
The Pullman Company (Delaware)......................... 100
Autopartes Walker S.A. de C.V. (Mexico).............. 100
Consorcio Terranova S.A. de C.V. (Mexico)......... 99.99
(Autopartes Walker S.A. de C.V. owns 99.99%; and
Josan Latinamericana S.A. de C.V., an
unaffiliated company, owns 0.01%)
Monroe-Mexico S.A. de C.V. (Mexico)............... 100
Tenneco Automotive Servicios de Mexico, S.A. de
C.V. (Mexico)................................... 0.01
(Monroe-Mexico, S.A. de C.V. owns 1 share;
and Proveedora Walker S. de R.L. de C.V. owns
49,999 shares)
Proveedora Walker S. de R.L. de C.V. (Mexico)..... 99.99
(Autopartes Walker S.A. de C.V.owns 99.99%; and
Pullmex S. de R.L. de C.V. owns .01%)
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
B-3
<PAGE> 45
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO INC.
SUBSIDIARIES OF TENNECO AUTOMOTIVE INC.
SUBSIDIARIES OF THE PULLMAN COMPANY
SUBSIDIARIES OF PROVEEDORA WALKER S. DE R.L. DE CV
Pullmex S. de R.L. de C.V. (Mexico)............. 0.01%
(Proveedora Walker S. de R.L. de C.V. owns
0.01% and Autopartes Walker S.A. de C.V. owns
99.99%)
Tenneco Automotive Servicios de Mexico, S.A. de
C.V. (Mexico)................................... 99.99
(Proveedora Walker S. de R.L. de C.V. owns
49,999 shares, and Monroe-Mexico, S.A. de C.V.
owns 1 share)
Pullmex S. de R.L. de C.V......................... 99.99
(Autopartes Walker S.A. de C.V. owns 99.9%; and
Proveedora Walker S. de R.L. de C.V. owns 0.1%)
Proveedora Walker S. de R.L. de C.V. (Mexico)... 0.01
(Pullmex S. de R.L. de C.V. owns 0.01%; and
Autopartes Walker S.A. de C.V. owns 99.99%)
Clevite Industries Inc. (Delaware)................... 100
Peabody International Corporation (Delaware)......... 100
Barasset Corporation (Ohio)....................... 100
Peabody Galion Corporation (Delaware)............. 100
Peabody Gordon-Piatt, Inc. (Delaware)............. 100
Peabody N.E., Inc. (Delaware)..................... 100
Peabody World Trade Corporation (Delaware)........ 100
Peabody-Myers Corporation (Illinois).............. 100
Pullman Canada Ltd. (Canada)...................... 61
(Peabody International Corporation owns 61%; and
The Pullman Company owns 39%)
Pullman Canada Ltd. (Canada)......................... 39
(The Pullman Company owns 39%; and Peabody
International Corporation owns 61%)
Pullman Standard Inc. (Delaware)..................... 100
Tenneco Brazil Ltda. (Brazil)........................ 100
Tenneco Automotive Brasil Ltda. (Brazil).......... 100
Thompson and Stammers Dunmow (Number 6) Limited (United
Kingdom).............................................. 100
Thompson and Stammers Dunmow (Number 7) Limited (United
Kingdom).............................................. 100
TMC Texas Inc. (Delaware).............................. 100
Walker Electronic Silencing Inc. (Delaware)............ 100
Walker Europe, Inc. (Delaware)......................... 100
Tenneco Automotive France S.A. (France).............. 1
(Tenneco International Holding Corp. owns 470,371
shares; Daniel Ballenger owns 16 shares; Robert
Bellanger owns 8 shares; and each of Walker
Europe, Inc., Alain Bellanger, Theodore Bonneu,
Roy Kolotylo and David Zerhusen owns 1 share)
Walker Limited (United Kingdom)........................ 100
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
B-4
<PAGE> 46
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO INC.
SUBSIDIARIES OF TENNECO AUTOMOTIVE INC.
SUBSIDIARIES OF WALKER LIMITED (UNITED KINGDOM)
Gillet Torsmaskiner UK Limited (United Kingdom)...... 50
(Walker Limited owns 100 A Ordinary Shares, 50% of
total equity; and AB Torsmaskiner, an unaffiliated
company, owns 100 B Ordinary Shares, 50% of total
equity)
Exhaust Systems Technology Limited (United
Kingdom).......................................... 99.99%
(Gillet Torsmaskiner UK Limited owns 99.99%; and
Heinrich Gillet GmbH & Co. owns .01%)
Tenneco Automotive UK Limited (United Kingdom)....... 100
Gillet Exhaust Manufacturing Limited (United
Kingdom).......................................... 100
Gillet Pressings Cardiff Limited (United
Kingdom).......................................... 100
Walker (UK) Limited (United Kingdom).............. 100
J.W. Hartley (Motor Trade) Limited (United
Kingdom)........................................ 100
Tenneco -- Walker (U.K.) Ltd. (United
Kingdom)........................................ 100
Tenneco Management (Europe) Limited (United
Kingdom)............................................ 100
Wimetal S. A. (France)............................... 1
(Walker Limited owns 1 share; Tenneco Europe
Limited owns 1 share; Tenneco Automotive France
S.A. owns 99%; and each of David Zerhusen, Howard
van Schoyck, Daniel Barth, Daniel Bellanger,
Herman Weltens and Theo Bonneu, affiliated
persons, owns 1 share)
Walker Manufacturing Company (Delaware)................ 100
Ced's Inc. (Illinois)................................ 100
Walker Norge A/S (Norway).............................. 100
Tenneco Deutschland Holdinggesellschaft mbH (Germany)..... 99.97
(Tenneco Inc. owns 99.97%; and Atlas
Vermoegensverwaltung, an unaffiliated company, owns
0.03%)
GILLET Unternehmesverwaltungs GmbH (Germany)........... 100
Heinrich Gillet GmbH & Co. KG (Germany).............. 0.1
(GILLET Unternehmesverwaltungs GmbH owns 0.1%; and
Tenneco Deutschland Holdinggesellschaft mbH owns
99.9%. The subsidiaries of Heinrich Gillet GmbH &
Co. KG are listed below.)
Heinrich Gillet GmbH & Co. KG (Germany)................ 99.9
(Tenneco Deutschland Holdinggesellschaft mbH owns
99.9%; and GILLET Unternehmesverwaltungs GmbH owns
0.1%)
ELGIRA Montagebetrieb fur Abgasanlagen Rastatt GmbH
(Germany)........................................... 50
(Heinrich Gillet GmbH & Co. KG owns 50%; and an
unaffiliated party owns 50%)
Exhaust Systems Technology Limited (United
Kingdom)............................................ 0.01
(Heinrich Gillet GmbH & Co. KG owns 0.01%; and
Gillet Torsmaskiner UK Limited owns 99.99%)
Gillet-Abgassysteme Zickau Gmbh (Germany)............ 100
Elagest AB (Sweden)............................... 50
(Gillet-Abgassysteme Zickau GmbH owns 50%; and
an unaffiliated party owns 50%)
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
B-5
<PAGE> 47
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO INC.
SUBSIDIARIES OF TENNECO AUTOMOTIVE INC.
SUBSIDIARIES OF TENNECO DEUTSCHLAND HOLDINGGESELLSCHAFT
MBH
SUBSIDIARIES OF HEINRICH GILLET GMBH & CO. KG
Mastra-Gillet Industria e Comercio Ltda. (Brazil).... 50
(Heinrich Gillet GmbH & Co. KG owns 50%; and
Mastra Industriae Comercio Ltda., an unaffiliated
company, owns 50%)
Montagewerk Abgastechnik Emden GmbH (Germany......... 50%
(Heinrich Gillet GmbH & Co. KG owns 50%; and an
unaffiliated party owns 50%)
Tenneco Automotive Deutschland GmbH (Germany).......... 100
WALKER GILLET (Europe) GmbH (Germany).................. 100
</TABLE>
- ---------------
(1) In dissolution.
TENNECO DISTRIBUTION AGREEMENT
B-6
<PAGE> 48
EXHIBIT C
CORPORATE RESTRUCTURING TRANSACTIONS
Set forth below are the transactions that, as applicable, the members of
each of the Packaging and Automotive Groups will consummate in connection with
the Distributions and Spin. A list of defined terms is included as Schedule 1 to
this Exhibit. Capitalized terms used but not otherwise defined in Schedule 1
have the meaning ascribed to them under the Distribution Agreement.
A. REALIGNMENT OF INTERCOMPANY OBLIGATIONS.
The following transactions will be effected to realign the intercompany
accounts of the Automotive and Packaging Groups. After the completion of these
transactions, TI will have a single net intercompany obligation from TPI and all
other intercompany obligations (other than trade accounts) will be exclusively
between entities which are members of the same Group. Following the completion
of these transactions, there will be no further transfers of funds between
members of different Groups other than pursuant to transactions occurring in the
ordinary course of business (trade accounts) and transfers required or otherwise
permitted pursuant to these Corporate Restructuring Transactions.
1. Realignment of AG Intercompany Obligations.
Realignment of AG Foreign Intercompany Accounts. Each foreign member of AG
having a net intercompany obligation owing from a member of PG (excluding trade
accounts receivable) will transfer such net intercompany obligation to TMEL in
exchange for an intercompany advance receivable from TMEL in an amount equal to
the aggregate amount of the net intercompany receivables and notes transferred.
TMEL will assume the net intercompany obligation owed by each foreign member of
AG having a net intercompany obligation to a member of PG (excluding trade
accounts payable) in exchange for the issuance by each such AG member of an
intercompany advance payable to TMEL in an amount equal to the aggregate amount
of the net intercompany obligations assumed.
Realignment of AG Domestic Intercompany Obligations. Each domestic member
of AG having a net intercompany obligation owing from a member of PG (excluding
trade accounts receivable) will transfer such net intercompany obligation to TI
in exchange for an intercompany advance receivable from TI in an amount equal to
the aggregate amount of the net intercompany receivables and notes transferred.
TI will assume the net intercompany obligations owed by each domestic member of
AG having a net intercompany obligation to a member of PG (excluding trade
accounts payable) in exchange for the issuance by each such AG member of an
intercompany advance payable to TI in an amount equal to the aggregate amount of
the net intercompany obligations assumed.
2. Realignment of PG Intercompany Obligations
Realignment of PG Foreign Intercompany Accounts. Each foreign member of PG
having a net intercompany obligation from a member of AG (excluding trade
accounts receivable) will transfer such net intercompany obligation to TPUKL in
exchange for an intercompany advance receivable from TPUKL in an amount equal to
the aggregate amount of the net intercompany receivables and notes transferred.
TPUKL will assume the net intercompany obligations owed by each foreign member
of PG having a net intercompany obligation to a member of the AG (excluding
trade accounts payable) in exchange for the issuance by each such PG member of
an intercompany advance payable to TPUKL in an amount equal to the aggregate
amount of the net intercompany obligations assumed.
Realignment of PG Domestic Intercompany Obligations. Each domestic member
of PG having a net intercompany obligation owing from a member of AG (excluding
trade accounts receivable) will transfer such net intercompany obligation to TPI
in exchange for an intercompany advance receivable from TPI in
TENNECO DISTRIBUTION AGREEMENT
C-1
<PAGE> 49
an amount equal to the aggregate amount of the net intercompany receivables and
notes transferred. TPI will assume the net intercompany obligations owed by each
domestic member of PG having a net intercompany obligation to a member of AG
(excluding trade accounts payable) in exchange for the issuance by each such PG
member of an intercompany advance payable to TPI in an amount equal to the
aggregate amount of the net intercompany obligations assumed.
B. DEBT REALIGNMENT
1. Each of TI and TPI shall participate in the Debt Realignment.
C. IMPLEMENTATION OF CORPORATE RESTRUCTURING TRANSACTIONS. The following
transactions will be effected pursuant to the requirement in Section 2.01 of the
Distribution Agreement that the parties and their affiliates "take such action
or actions as is necessary to cause, effect and consummate the Corporate
Restructuring Transactions." Transactions occurring on the same day shall be
deemed to have occurred in the order listed herein regardless of the order in
which the documentation is executed, filed, or accepted, and regardless of the
order in which the funds or other assets are transferred.
1. Separation of the German and U.K. Packaging and Automotive Parts Businesses
German Restructuring:
a. TDH will form six new German corporate subsidiaries (each, a"GP
GmbH") and PDH:
(1) Omni-Pac GP GmbH;
(2) OPE GP GmbH;
(3) Sengewald V GP GmbH;
(4) Kobusch GP GmbH;
(5) Sengewald K GP GmbH;
(6) Nord-West GP GmbH; and
(7) PDH
b. The TDH corporate subsidiaries will be converted to German
partnerships or GmbH & Co KGs ("operating target KGs").
c. TDH will transfer (in trust) a nominal interest (.1%) in each of
OPE GmbH, Kobusch GmbH, Nord-West GmbH, Sengewald V GmbH, and Sengewald K
GmbH to the corresponding GP GmbHs.
d. TI will sell its 1% interest in Omni-Pac to Omni-Pac GP GmbH.
An entity classification election will be made for US tax purposes so that
each of the operating target KGs, as well as all other direct and indirect
subsidiaries of the operating target KGs will be treated as divisions/branches
of TDH effective as of the conversion date.
e. Packaging Deutschland will form six new German limited partnerships
("financing KGs" or "F KGs") corresponding to the six operating target KGs
created in b. above: Omni-Pac F KG; OPE F KG; Omni-Pac F KG; Nord-West F
KG; Sengewald V F KG; and Sengewald K F KG.
An entity classification election will be made for US tax purposes so that
each of the financing KGs will be treated as divisions of Packaging Deutschland
GmbH effective as of the date of formation.
f. Each of the six general partner GmbHs formed in a. above will
become a general partner of one of the respective financing KGs formed in
e. above. Packaging Deutschland GmbH will receive 100% limited partnership
interest in each of the newly created financing KGs in exchange for nominal
equity contribution.
g. TDH will sell Halle real estate to Sengewald V F KG.
TENNECO DISTRIBUTION AGREEMENT
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<PAGE> 50
h. Each of the financing KGs will acquire respective operating target
KG limited partnership interests from TDH.
i. TDH will sell the following entities to PDH:
(1) Omni-Pac GP GmbH;
(2) OPE GP GmbH;
(3) Kobusch GP GmbH;
(4) Nord-West GP GmbH;
(5) Sengewald V GP GmbH; and
(6) Sengewald K GP GmbH.
j. TDH will sell its entire limited partnership interests in the
following entities:
(1) Omni-Pac KG to Omni-Pac F KG;
(2) OPE KG to OPE F KG;
(3) Kobusch KG to Kobusch F KG;
(4) Nord-West KG to Nord-West F KG; and
(5) Sengewald V KG to Sengewald V F KG.
k. Sengewald V KG will sell its entire limited partnership interests
in Sengewald K KG to Sengewald K F KG.
l. TI will transfer 99.97% share in Sentinel GmbH Verpackungen to TPI
as equity contribution.
m. The following mergers will occur:
(1) Omni-Pac F KG (survivor) and Omni-Pac KG;
(2) OPE F KG (survivor) and OPE KG;
(3) Kobusch F KG (survivor) and Kobusch KG;
(4) Nord-West F KG (survivor) and Nord-West KG;
(5) Sengewald V F KG (survivor) and Sengewald V KG; and
(6) Sengewald K F KG (survivor) and Sengewald K KG.
UK Restructuring.
a. TI will make an entity classification election for US tax purposes
so that each of the following entities will be treated as a division of its
parent:
(1) OPUKL;
(2) Packaging Scotland;
(3) Alpha;
(4) Caerphilly;
(5) Films;
(6) Livingston;
(7) Stanley;
(8) Brucefield; and
(9) Polbeth.
b. Baldwin will purchase all of the stock of the following
subsidiaries from Walker: TPUKL; OPUKL; and Packaging Scotland.
c. TPUKL will become PG internal finance company.
d. Walker Ltd will transfer its shares in Omni-Pac UK and TPL to
Baldwin.
2. Albright and Wilson Note. TI will transfer the Albright and Wilson note
to TMC.
TENNECO DISTRIBUTION AGREEMENT
C-3
<PAGE> 51
3. TPI Name Change. TPI will change its name to and will register
to do business in the following states (where Specialty is registered and TPI is
not): Arkansas, Louisiana, New Hampshire, and South Dakota
4. TI Contribution of Capital to TPI. TI will transfer all of its ownership
interests (100% unless otherwise indicated) in the following entities to TPI as
a contribution to capital:
a. Baldwin
b. Wood Products Leasing Company (DE)
c. Tenneco Packaging Hungary Holdings Inc. (DE)
d. Tenneco Packaging International Holdings Inc. (DE)
e. Scriptoria N.V. (Belgium)(1)
f. Airpack Polska SP z.O.O. (Poland)
g. Airpack Japan K.K. (Japan)
h. Tenneco Packaging Europe B.V. (Netherlands)
i. Wellenfoam N.V. (Belgium)(2)
j. Kobusch Packaging Egypt Ltd. (Egypt)(3)
k. Tenneco Packaging -- Chile Holdings Inc. (Delaware)
l. Airpack SPA (Italy)(4)
m. Aircal S.A. (France)(5)
n. Tenneco PPI Company (DE)
o. Omni-Pac S.A.R.L. (France)(6)
p. Tenneco Packaging Hexacomb S.A. (Spain)
q. Tenneco Romania Holdings Inc. (DE)
r. Tenneco Packaging Leasing Company (DE)
s. TBSHI
t. Tenneco NV Inc.
u. Tenneco International Finance B.V. (Netherlands)
v. Tenneco International Business Development Limited (DE)
w. Tenneco Management Company (DE)
x. Tenneco Retail Receivables Co. (DE)
y. Sentinel GmbH Verpackungen (Germany)(7)
z. Alupak
aa. Tenneco Packaging RSA Company (DE)
5. Tenneco Trademarks and Trade Names. The Tenneco Trademarks and
tradenames will be assigned to a member of the AG.
- ---------------
(1) TI owns 99.56%; Tenneco Packaging International Holdings Inc. holds 18
shares; the balance of shares outstanding are held by unaffiliated persons.
(2) TI owns all of the shares except for one, which is owned by Tenneco
Packaging International Holdings Inc. (Delaware).
(3) TI owns 99% and Kobusch Folien GmbH (Germany) owns 1%.
(4) TI owns 98%; Tenneco Packaging International Holdings Inc. (Delaware) owns
2%.
(5) TI owns all of the shares except seven which are held by the company's four
directors and TPI, Tenneco Protective Packaging Inc. (Delaware), and Tenneco
Packaging International Holdings Inc. (Delaware).
(6) TI owns 97% and Omni-Pac GmbH (Germany) owns 3%.
(7) A small percentage of shares is owned by Scriptoria N.V. (Belgium).
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6. TPI Recapitalization. Immediately before the Distribution, TPI will be
recapitalized as provided in Section 2.02 of the Distribution Agreement.
7. Specialty Merger. Pursuant to a plan of complete liquidation, Specialty
will be merged with and into TPI, with TPI as the surviving corporation.
8. TI Contribution of Capital to TAI. Following step C4, TI will transfer
all of its remaining assets (other than its ownership interests in TAI, TPI,
Tenneco Automotive Merger Sub Inc. and Tenneco Deutschland) to TAI as a
contribution to capital.
9. TAI Name Change. Prior to the Distribution Date, TAI will change its
name to .
D. DISTRIBUTIONS
1. Dividend of TPI Stock. On the Distribution Date following the
consummation of steps C1 through C7, TI will distribute all of the stock of TPI
to Tenneco shareholders as a distribution with respect to stock (i.e., return of
contributed surplus) pro rata on the basis of one share of TPI stock for one
share of Tenneco common stock outstanding. Cash will be paid in lieu of issuing
fractional shares of TPI stock. Each share of stock of TPI will have attached to
it stock purchase rights (the "Rights") which will entitle the holder to
purchase certain stock of TPI, as the case may be, upon the occurrence of
certain triggering events.
2. TI Stock Split. One day after the Distribution Date, TI will effect a
reverse stock split. Cash will be paid in lieu of issuing fractional shares of
TI stock.
3. TI Name Change. Prior to the Distribution Date, but after C9, a merger
subsidiary will be incorporated in Delaware as Tenneco Automotive Merger Sub
Inc. Effective as of 8:00 a.m. EST on the day following the Distribution Date,
TI will merge with the Merger Subsidiary with TI as survivor under the name
Tenneco Automotive Inc.
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SCHEDULE 1
CORPORATE RESTRUCTURING TRANSACTIONS
LIST OF DEFINED TERMS
<TABLE>
<S> <C>
"AG" = Automotive Group
"Alpha" = Alpha Products (Bristol) Limited (UK)
"Alupak" = Alupak A.G. (Switzerland)
"ASCC" = Asset Securitization Cooperative Corporation
"Baldwin" = The Baldwin Group, Ltd. (UK)
"Brucefield" = Brucefield Plastics Limited (Scotland)
"Caerphilly" = Tenneco Packaging (Caerphilly) Limited (UK)
"CIBC" = Canadian Imperial Bank of Commerce
"Films" = Tenneco Packaging (Films) Limited (UK)
"Hexacomb" = Tenneco Packaging Hexacomb S.S. (Spain)
"Iberica" = Tenneco Automotive Iberica S.A. (Spain)
"KG" = German limited partnership
"Klinik" = Klinik GmbH (Germany)
"Kobusch" = Kobusch Folien GmbH (Germany
"Livingston" = Tenneco Packaging (Livingston) Limited (Scotland)
"Nord-West" = Nord-West Verpackung GmbH (Germany)
"Omni-Pac = Omni-Pac GmbH (Germany)
"OPE" = Omni-Pac Ekco GmbH (Germany)
"OPUKL" = Omni-Pac U.K. Limited (UK)
"Packaging Deutschland" = Packaging Deutschland GmbH (Germany)
"Packaging Scotland" = Tenneco Packaging Limited (Scotland)
"PCA" = Packaging Corporation of America
"PDH" = Tenneco Packaging Deutschland Holdinggesellschaft mbH
(Germany)
"PG" = Packaging Group
"Polbeth" = Polbeth Packaging (Corby) Limited (Scotland)
"Sengewald V" = Sengewald Verpackungen GmbH (Germany)
"Sengewald K" = Sengewald Klinicprodukte GmbH (Germany)
"Specialty" = Tenneco Packaging Specialty and Consumer Products Inc.
(DE)
"Stanley" = Tenneco Packaging (Stanley) Limited (UK)
"TA France" = Tenneco Automotive France S.A. (France)
"TAI" = Tenneco Automotive Inc. (DE)
"TARSAC" = Tenneco Automotive RSA Company Inc. (DE)
"TAVIAI" = Tenneco AVI Acquisition Inc, (DE)
"TBSHI" = Tenneco Business Services Holdings Inc. (DE)
"TBSI" = Tenneco Business Services Inc. (DE)
"TCI" = Tenneco Canada Inc.
"TDH" = Tenneco Deutschland Holinggessellschaft mbH (Germany)
"TI" = Tenneco Inc. (DE)
"TIHC" = Tenneco International Holdings Corp. (DE)
"TMC" = Tenneco Management Company (DE)
"TMC Texas" = TMC Texas Inc. (DE)
"TMEL" = Tenneco Management (Europe) Limited (UK)
"TPI" = Tenneco Packaging Inc. (DE)
"TPRSAC" = Tenneco Packaging RSA Company Inc. (DE)
"TPUKL" = Tenneco Packaging (UK) Limited (UK)
"Walker" = Walker Limited (UK)
"WE" = W.E. Verwaltungsgesellschaft mbH
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
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EXHIBIT D
DEBT REALIGNMENT
(Capitalized terms used but not otherwise defined herein have the meanings
ascribed to them in the Distribution Agreement to which this is attached.)
1. The specific goal of the Debt Realignment is to reach the allocation
between Packaging and Tenneco of Tenneco's Consolidated Debt at the time of the
Distribution (after giving effect to the repurchase of subsidiary preferred
stock and payment of transaction fees and expenses) that is reflected in the
June 30, 1999 pro forma balance sheets of Tenneco and Packaging, and the related
notes thereto, that are included as Exhibits A and F, respectively, to the
Distribution Agreement. Such allocation may be adjusted by Tenneco in its sole
discretion at any time prior to the Distribution to ensure Tenneco and Packaging
are in compliance with their respective financing arrangements.
2. Tenneco shall in its discretion tender for, prepay or otherwise
refinance, or shall offer Packaging debt in exchange for or otherwise refinance,
one or more of the issues of Consolidated Debt (as defined below). Concurrently
with the Debt Realignment, Tenneco will, if in its discretion it deems such to
be advisable, solicit the consent of the holders of such Consolidated Debt to
certain aspects of the Debt Realignment. Tenneco reserves the right to determine
whether or not it tenders for, prepays, otherwise refinances or leaves
outstanding, or offers to exchange Packaging debt for or otherwise refinance,
any particular issue of Consolidated Debt. The term "CONSOLIDATED DEBT" means
the following obligations that are outstanding or have been accrued as of the
Distribution Date:
a. indebtedness for money borrowed, including accrued interest, of
Tenneco and its consolidated subsidiaries before the Distribution,
including public debt, short-term borrowings and bank debt, and borrowings
to fund a rabbi trust for actual and estimated transaction costs,
including, without limitation, the expenses listed on Schedule 1 to this
Exhibit;
b. to the extent not included in the computation of the cash funding
of a rabbi trust prior to the Distribution, the current and deferred
obligations under severance packages, SERP (other than the Tenneco Inc.
Pilots' Supplemental Retirement Plan) and deferred compensation for persons
who meet all of the following criteria:
(i) they are treated as active employees of TMC under the Human
Resources Agreement as of the Distribution Date;
(ii) liabilities with respect to them (other than the liabilities
under the Tenneco Retirement Plan) are allocated to the Packaging Group
under the Human Resources Agreement; and
(iii) they do not continue in the active employment of Packaging
Group (excluding TMC) or Automotive Group after the Distribution Date.
c. obligations in respect of the preferred stock issued by Tenneco
International Holding Corporation; and
d. the cost to purchase accounts receivable previously sold by Tenneco
or its consolidated subsidiaries.
3. Tenneco shall have the sole right and authority to have in place a
credit facility(ies) and/or other financing for itself (with such guarantees of
its obligations thereunder by the Automotive Subsidiaries as it deems necessary)
and for Packaging (with such guarantees of Packaging's obligations thereunder by
the
TENNECO DISTRIBUTION AGREEMENT
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Packaging Subsidiaries as it deems necessary in an aggregate principal amount
sufficient (together with other funds available to Tenneco) to fund such
tenders, prepayments and other refinancings and for other general corporate
purposes (including, without limitation, working capital). These facility(ies)
and/or other financings shall be in effect on or prior to the Distribution Date.
4. Accordingly, after giving effect to the Debt Realignment and the
Distribution, (i) Tenneco will be responsible for all of Tenneco Inc.'s public
debt that remains outstanding, any borrowings under its new credit facility(ies)
and/or other financing described above and any Consolidated Debt for which a
member of the Automotive Group is the primary obligor as of the Distribution
which remains outstanding and (ii) Packaging will be responsible for any public
debt of Packaging issued in exchange for Tenneco Inc.'s public debt, any
borrowings under its new credit facility(ies) and/or other financings described
above and any Consolidated Debt for which a member of the Packaging Group is the
primary obligor as of the Distribution which remains outstanding.
5. All aspects of (x) the Debt Realignment and any financing thereof and
(y) the terms of any consents solicited in respect of Consolidated Debt, shall
be controlled solely and exclusively by Tenneco. Tenneco shall select, in its
sole discretion, the dealer manager(s) for any and all consent solicitations,
debt tenders and debt exchanges in respect of Consolidated Debt.
6. Tenneco and Packaging shall comply with all applicable securities, blue
sky and other laws in connection with the Debt Realignment and the other
transactions contemplated hereunder.
TENNECO DISTRIBUTION AGREEMENT
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SCHEDULE 1
TRANSACTION COSTS
Transaction costs shall include the following fees, costs and expenses related
or attendant to the Corporate Restructuring Transactions, the Distribution and
the Debt Realignment incurred by Tenneco or Packaging or any member of its
respective Group, provided that such expenses either were or are incurred by or
with the approval of Tenneco Inc. headquarters personnel in Greenwich,
Connecticut or are for goods or services to be provided by entities that
provided goods or services in connection with or attendant to the Corporate
Restructuring Transactions, the Distribution or the Debt Realignment with the
approval of such personnel:
Accounting fees and expenses
Actuarial fees and expenses
Appraisal fees and expenses
Audit fees and expenses
Broker/dealer fees and expenses
Consulting fees and expenses
Costs to purchase "wrap-around" and run-off D&O and fiduciary insurance policies
Costs to transfer Tenneco Trade Names and Trademarks (but not expenses
associated with the Tenneco Packaging name change).
Exchange/paying agent fees and expenses
Exit consent fees
Fees and expenses incurred in connection with arranging revolving debt,
including commitment fees, drawdown fees, agent's fees, facility fees and
similar fees and expenses, and lender's costs and expenses payable by the
borrower
Filing fees, including SEC, NYSE, NASD, HSR and other similar fees
Information agent fees and expenses
Investment banking fees and expenses, dealer manager fees and expenses, and
similar fees and expenses
Fees and expenses with respect to legal matters and solvency opinions pertaining
to the transactions
Mailing expenses
Newspaper advertising costs
Printing fees and expenses
Proxy solicitation fees and expenses
Soliciting dealer fees and expenses
Rating Agency fees
TENNECO DISTRIBUTION AGREEMENT
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EXHIBIT E
FORM OF
HUMAN RESOURCES AGREEMENT
THIS HUMAN RESOURCES AGREEMENT is made and entered into as of this
day of , 19 , by, between and among TENNECO INC., a Delaware
corporation to be renamed Tenneco Automotive Inc. ("Tenneco" or "Automotive
Company"), and Tenneco Packaging Inc. (to be renamed), a Delaware corporation
("Packaging Company").
WHEREAS, pursuant to the terms of that certain Distribution Agreement by
and between Tenneco and Packaging Company and dated as of (the
"Distribution Agreement"), the parties have entered into this Agreement
regarding certain labor, employment, compensation and benefit matters occasioned
by the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement and the Distribution Agreement, each of
the parties hereto, on behalf of itself and each other entity over which it has
direct or indirect legal or effective control, hereby agrees as follows:
SECTION 1. DEFINITIONS. The following terms, when capitalized herein, shall
have the meanings set forth below in this Section 1. All other capitalized terms
which are used but are not otherwise defined herein shall have the meanings
ascribed to them in the Distribution Agreement.
"Active Employees" means, with respect to each Group, all employees
regularly engaged in the performance of services to, for or on behalf of
any member of such Group as of the close of business on the Distribution
Date; provided, that all such employees of Tenneco Management Company
("TMC") who are employed by a member of the Automotive Group immediately
after the Distribution shall, for all purposes hereunder, be treated as
Active Employees of the Automotive Group and; provided further that for
purposes of allocation of liabilities, non-employee officers of Tenneco
Inc. shall be treated as Active Employees of TMC.
"Common Stock" means Tenneco Common Stock or Packaging Common Stock,
as applicable.
"Former Employees" means, with respect to each Group, all former
employees of Tenneco and/or its Subsidiaries (including, but not limited
to, such employees who, as of the close of business on the Distribution
Date, are on leave of absence, long-term disability or layoff with recall
rights) who, if they were regularly engaged in the performance of services
to, for or on behalf of Tenneco or any of its Subsidiaries at the close of
business on the Distribution Date, would be an Active Employee of such
Group, determined on a basis consistent with the determination of the
Active Employees of such Group.
"Tenneco Salaried Welfare Plans" means, collectively, the Tenneco Inc.
Health Care Plan, the Tenneco Inc. Group Life Insurance Plan, the Tenneco
Inc. Long Term Disability Plan, the Tenneco Inc. Travel Accident Insurance
Plan, the Tenneco Inc. Health Care Flexible Spending Account Program and
the Tenneco Inc. Dependent Day Care Flexible Spending Account Plan.
SECTION 2. GENERAL EMPLOYMENT MATTERS.
2.01 General Obligations. From and after the Distribution Date, each of
Automotive Company and Packaging Company shall (and shall, as applicable, cause
each of the other members of its respective Group over which it has direct or
indirect legal or effective control to) (a) continue the employment of all of
the Active Employees of its respective Group, subject, however to the terms of
Section 2.03 below and (b) except as otherwise specifically provided herein,
pay, perform and discharge any and all labor, employment, compensation and
benefit liabilities, whether arising prior to, on or after the Distribution
Date, with respect to all such Active Employees and all Former Employees of its
respective Group.
TENNECO DISTRIBUTION AGREEMENT
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Notwithstanding the foregoing, all payments to be made to Active Employees and
Former Employees of TMC who are not employed by the Automotive Group or the
Packaging Group (excluding TMC) immediately after the Distribution out of
general corporate assets shall be made, processed and administered by Tenneco
Business Services Inc. ("TBS") (rather than by Packaging Company or another
member of the Packaging Group). Packaging Group shall maintain one or more rabbi
trusts to facilitate such payments.
2.02 Initial Compensation of Active Employees. The initial compensation
(base salary or wage level) of each Active Employee of each such Group as of the
Distribution Date shall be the same as the compensation (base salary or wage
level) of such Active Employee immediately prior to the Distribution Date.
2.03 No Additional Employment Rights Created. Nothing in this Agreement
shall give any Active Employee of any Group any right to continued employment by
any member of that Group or the other Group beyond the Distribution Date, which
is in addition to or supplemental to any such right he or she may have arising
under contract or otherwise.
SECTION 3. COLLECTIVE BARGAINING.
3.01 Continuation of Existing Collective Bargaining Agreements. Each of
Automotive Company and Packaging Company shall (and shall cause, as applicable,
each other member of its Group over which it has direct or indirect legal or
effective control to) continue to honor all collective bargaining agreements
covering the Active Employees of its respective Group which are in effect as of
the close of business on the Distribution Date, in accordance with and subject
to the terms of each such collective bargaining agreement.
3.02 Recognition of Incumbent Labor Organizations. Each of Automotive
Company and Packaging Company shall (and shall cause, as applicable, each other
member of its Group over which it has direct or indirect legal or effective
control to) continue to recognize all incumbent labor organizations which, as of
the close of business on the Distribution Date, have established collective
bargaining relationships in respect of the Active Employees of its respective
Group.
3.03 Continued Sponsorship of Hourly Employee Benefit Plans. Except as
otherwise specifically provided herein, each of Automotive Company and Packaging
Company shall continue (and shall, as applicable, cause each other member of its
respective Group over which it has direct or indirect legal or effective control
to continue) to sponsor all employee benefit plans for hourly employees which,
as of the close of business on the Distribution Date, are in existence and
relate to the Active Employees and/or Former Employees of its respective Group,
subject to its rights under such plans to amend or terminate such plans.
3.04 Provisions of Wages, Rights and Other Employment Benefits Required
Under Existing Collective Bargaining Agreements. Without limiting the generality
of the foregoing, each of Automotive Company and Packaging Company shall (and
shall cause each other member of its respective Group over which it has direct
or indirect legal or effective control to) provide those of its Active Employees
whose employment is subject to collective bargaining agreements and/or
established collective bargaining relationships as of the close of business on
the Distribution Date with the wages, benefits, and terms and conditions of
employment required by such agreements or relationships, except that (i)
participation in the Tenneco Inc. Employee Stock Purchase Plan will be suspended
as provided in Section 4.06 hereof, and (ii) the provisions of any defined
contribution plan calling for contributions or investment in the common stock of
Tenneco Inc. shall be amended in accordance with Section 4.05 hereof.
3.05 Limitation on Obligations. Each of the parties hereto hereby agrees
and acknowledges that nothing contained in this Agreement, including its
obligation to continue its applicable collective bargaining agreements or
relationships, shall be construed to restrict any right it, or any other member
of
TENNECO DISTRIBUTION AGREEMENT
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its respective Group, may have to terminate, renegotiate, reopen or otherwise
seek changes in any of its collective bargaining agreements or relationships.
SECTION 4. UNITED STATES SALARIED PENSION AND THRIFT BENEFITS AND STOCK
PURCHASE PLAN.
4.01 Tenneco Retirement Plan. Effective as of the Impact Date (as defined
below), Automotive Company and all other members of that Group shall cease to be
sponsors of the Tenneco Retirement Plan (the "TRP"), and Packaging Company shall
become the sponsor of the TRP; provided that Packaging's sponsorship shall be
subject to the terms and conditions of the TRP. The TRP shall retain liability
for all pension benefits accrued by the Active Employees and Former Employees of
the Automotive Group who are or were formerly participants in the TRP through
the last day of the calendar month in which the Distribution Date occurs (the
"Impact Date"). Following the Distribution Date, Automotive Group will have no
liability, contingent or otherwise, with respect to the TRP, including without
limitation any liability for benefits accrued through the Impact Date (including
early retirement benefits and related subsidies, as to which all age, service
and participation requirements were satisfied on or before the Impact Date) for
Active Employees or Former Employees of the Automotive Group, and Packaging
Company shall assume or retain, as the case may be, all such liabilities.
Packaging Company shall succeed Tenneco Inc. under and with respect to the
Tenneco General Employee Benefit Trust (the "GEBT"). As soon as practicable
after the Distribution Date, Packaging Company shall cause the GEBT to transfer
to a trustee designated by Automotive Company the assets of the GEBT
attributable to the Automotive Group's hourly defined benefit pension plans.
Such transfer shall be in cash, except that Tenneco Common Stock may be
transferred, subject to the limitations of applicable law, and the assets
managed by one of more managers may be transferred.
Packaging Company shall create an investment committee (the "New
Committee") to manage the assets of the GEBT, equivalent to the committee which
performed those functions as of the Distribution Date (the "Old Committee"), and
the New Committee shall have as members, the members of the Old Committee as of
the Distribution Date until the earlier of March 31, 2000 or the date such
persons die, resign or are removed in accordance with rules equivalent to the
rules applicable to the Old Committee.
4.02 Amendment of TRP. The sponsor of the TRP shall amend the TRP to (a)
"freeze" the benefit accruals of the Active Employees of the Automotive Group as
of the Impact Date, and (b) provide that all benefits accrued as of the Impact
Date by the Active Employees of the Automotive Group shall be fully vested and
non-forfeitable (as will the benefits to Former Employees of the Automotive
Group to the extent required by applicable laws) and the sponsor shall inform,
in writing, as soon as practicable following the Impact Date, each such Employee
of his or her accrued benefits under the TRP as of the Impact Date.
4.03 No Credit for Post-Impact Date Service. Except as may be required by
law, the TRP shall not be required to count service with any entity other than a
member of the Packaging Group after the Impact Date for any purpose, nor shall
there be any requirement that Active Employees of the Automotive Group be
permitted to "grow into" normal or early retirement benefits under the TRP based
upon events occurring after the Impact Date.
4.04 Tenneco Thrift Plan. The active participation in the Tenneco Thrift
Plan and the Tenneco Thrift Plan for Hourly Employees (collectively the "Tenneco
DC Plan") by persons other than the Active Employees of the Packaging Group
shall cease effective as of January 31, 2000 (the "Transition Date"). In
addition, Automotive Company and all other members of that Group shall cease to
be sponsors of the Tenneco DC Plan as of the Transition Date, and Packaging
Company shall become the sponsor of the Tenneco DC Plan from and after the
Transition Date. Automotive Group shall bear the costs of employer matching
contributions attributable to the participation of its employees in the Tenneco
DC Plan for the period commencing with the Distribution Date.
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4.05 Establishment of DC Plans.
(a) Automotive Thrift Plan. Automotive Company shall (and/or cause its
respective Group members to) establish or make available on or with effect
from the Transition Date, one or more defined contribution plans for the
benefit of its Active Employees (collectively, the "Automotive Thrift
Plan") which may, subject to Section 4.05(d) hereof, be subject to
amendment or termination by Automotive Company or the applicable member of
the Automotive Group.
(b) Transfer of Account Balances to Automotive Thrift Plan. As soon as
practicable following the Transition Date, Packaging Company shall cause
the Tenneco DC Plan to transfer to the Automotive Thrift Plan, the account
balances of each Active Employee of the Automotive Group and each Former
Employee of the Automotive Group with respect to whom the Tenneco DC Plan
maintains an account as of the close of business on the Transition Date.
Such transfers shall be in cash, except that the Automotive Thrift Plan
will accept the following: (i) Tenneco Common Stock, Packaging Common Stock
received in the Distribution, stock of Newport News Shipbuilding Inc. (if
any remains in such account balances) and stock of El Paso Energy
Corporation (if any remains in such account balances) for the Tenneco
Common Stock fund portion of such account balances; (ii) amounts credited
to the Tenneco DC Plan which are held in mutual funds which are also
investment media in the Automotive Thrift Plan; and (iii) participant
loans.
(c) Investment Options. Tenneco Common Stock shall not be offered as
an investment option with respect to contributions made after the
Distribution Date by the Packaging Group employees to the thrift plans of
the Packaging Group. The sponsor of each of the Tenneco DC Plan and the
Automotive Thrift Plan shall cause the plan to afford each participant
therein, for a period of at least 90 days following the Distribution Date,
an election to sell the Common Stock of the entities held in the plan's
stock fund which does not directly or indirectly employ him or her
immediately following the Distribution Date. From and after the
Distribution Date employer stock contributions with respect to Packaging
Group employees shall be in Packaging Common Stock and employer stock
contributions with respect to the Automotive Group employees shall be in
Tenneco Common Stock.
(d) Certain Automotive Obligations. The Automotive Company shall (and
shall cause each member of its Group over which it has legal or effective
direct or indirect control to) sponsor, establish, administer, maintain,
amend and otherwise deal with one or more defined contribution pension
plans (including the Automotive Thrift Plan) in a manner consistent with
any and all representations which Tenneco or its affiliates at the time
makes or has made to the Internal Revenue Service, including without
limitation, any actions that may be required to increase and/or maintain
the amount of Tenneco Common Stock held by such plans.
4.06 Tenneco Stock Purchase Plan. Participation in the Tenneco Inc.
Employee Stock Purchase Plan will be suspended effective June 30, 1999 and will
not resume prior to the Distribution Date.
SECTION 5. PENSION MATTERS OUTSIDE THE UNITED STATES. With respect to the
business and operations of each Group in jurisdictions outside the United
States, each of the parties hereto shall (and, as applicable, shall cause each
other member of its Group over which it has direct or indirect legal or
effective control to) assume and retain any and all pension liabilities and
attendant plans and their assets related to its Active Employees and Former
Employees.
SECTION 6. EXECUTIVE AND DIRECTORS' COMPENSATION.
6.01 Tenneco Supplemental Executive Retirement Plan. Effective upon the
Distribution Date, Tenneco and Packaging Company shall cause the Tenneco Inc.
Supplemental Executive Retirement Plan and the Tenneco Inc. Pilots' Supplemental
Retirement Plan (collectively, the "SERP") to be amended to cause the separation
of participation in, and liabilities under, the SERP as follows: (1) Packaging
Company shall (a) become the sponsor of the SERP with respect to all Active
Employees and Former Employees of its respective Group and, subject to the terms
of the 1996 Benefits Agreement (as defined
TENNECO DISTRIBUTION AGREEMENT
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below), all active and former employees of the Shipbuilding Group and Energy
Group (each as defined below), and all other participants in the SERP not
specifically allocated to Automotive Company below and (b) assume and agree to
pay, perform and discharge all liabilities under the SERP with respect to such
employees, whether accrued before, on or after the Distribution Date; and (2)
Automotive Company shall continue sponsorship of the SERP with respect to all
Active Employees and Former Employees of its respective Group and shall assume
and agree to pay, perform and discharge all liabilities under the SERP with
respect to such employees, whether accrued before, on or after the Distribution
Date. All accrued benefits under the SERP as of the close of business on the
Distribution Date shall be fully vested and nonforfeitable; provided, that this
rule shall not be applied to grant an employee an amount equal to the benefit he
or she has accrued under the Tenneco Retirement Plan but only the amount
provided by the SERP, nor shall it be applied to alter or diminish any service
requirement contained in any special appendix or other document providing
benefits in addition to those called for by the SERP generally.
6.01A Pullman Supplemental Pension Benefits. Notwithstanding any other
provision hereof, the Automotive Company shall retain and succeed to any and all
liabilities for non-qualified defined benefit pension benefits for Active
Employees and Former Employees of its respective Group who were formerly
employed by The Pullman Company, Peabody International Corporation or any
predecessor of either, including without limitation, benefits under the Peabody
Special Benefits Plan, the Peabody Supplemental Plan and the Pullman
Supplemental Plan (the "Pullman Plans"). Automotive Company shall retain
sponsorship of the rabbi trust created in connection with the Pullman Plans.
6.02 Tenneco Inc. Deferred Compensation Plan. The participation of the
Active Employees and Former Employees of the Automotive Group in the Tenneco
Inc. Deferred Compensation Plan (the "DC Plan") shall cease as of the
Distribution Date. As of the Distribution Date, (i) Automotive Company shall
assume the liability for the accounts of its Active Employees and Former
Employees in the DC Plan, (ii) Packaging Company shall assume the liability for
the accounts of the Active Employees and Former Employees of the Packaging Group
in the DC Plan, and (iii) Packaging Company shall succeed to sponsorship of the
DC Plan. The Automotive Group Active Employee's or Former Employee's account in
the DC Plan as of the Distribution Date shall become the opening balance of such
Active Employee's or Former Employee's account in a nonqualified deferred
compensation plan created, as of the Distribution Date by the Automotive Group.
Such opening balances shall become fully vested as of the close of business on
the Distribution Date.
6.03 Tenneco Benefits Protection Program and Rabbi Trust. The Tenneco Inc.
Benefits Protection Trust (the "BPT") and the Tenneco Inc. Rabbi Trust
(collectively the "Trusts") shall be terminated prior to the Distribution, and
neither Packaging Company nor Automotive Company shall have any liability with
respect to either of the Trusts or any of the terms of either.
6.04 [RESERVED]
6.05 Stock Options. Effective as of the Distribution Date, Tenneco shall
cause all outstanding options to purchase Tenneco Common Stock held by employees
and officers other than (i) Active Employees and Former Employees of Automotive
Group, (ii) employees of Packaging Corporation of America and (iii) employees of
the folding carton division (or persons who have succeeded to the rights of any
persons described in (i), (ii) or (iii) with respect to options to purchase
Tenneco Common Stock) to be replaced by options to purchase Packaging Common
Stock. Subject to the requirements of applicable law and generally accepted
accounting principles, the number, exercise price and other terms of such
replacement options shall be determined in a manner consistent with that
described in Exhibit A attached hereto. Options held by persons described in
clause (ii) or (iii) above, not exercised prior to the Distribution Date shall
be canceled effective as of the Distribution Date.
Options held by Active Employees and Former Employees of Automotive Group
(or persons who have succeeded to the rights of such persons) shall, unless
exercised prior to the Distribution Date, remain outstanding as adjusted as
provided herein after the Distribution Date, subject to the requirements of
TENNECO DISTRIBUTION AGREEMENT
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<PAGE> 62
applicable law and generally accepted accounting principles. The parties
recognize that in some jurisdictions, Automotive employees were granted rights
other than stock options in lieu of the Special Stock Option Award of 100
options per grantee, and in those jurisdictions, the outstanding rights will be
adjusted comparably. The Automotive Company options and rights shall have the
same terms and conditions as prior to the Distribution Date except that the
number of options and the option exercise price shall be adjusted as described
in Exhibit A attached hereto.
To the extent that the exercisability of options to purchase Tenneco Common
Stock currently is subject to the attainment of share price hurdles, those
hurdles will also be adjusted with respect to both options to purchase Packaging
Common Stock and Tenneco Common Stock.
Tenneco may grant special pre-Distribution Date exercisability with respect
to some or all options which are not otherwise exercisable.
6.06 Directors. Except for stock options which will expire at the
Distribution in accordance with their terms, stock options held by directors of
Tenneco and/or Packaging Company shall be treated as provided in Section 6.05
hereof as if the director in question were an employee. Notwithstanding the
foregoing, stock options held by directors who do not continue on the board of
Packaging Company or Automotive Company will be replaced by Packaging Company
options in accordance with Section 6.05 hereof. The 1997 Tenneco Inc. Board of
Directors Deferred Compensation Plan shall be treated as provided in Section
6.02 hereof, and the directors' accounts shall be treated as if the directors
were employees; however, the accounts of directors who do not continue on the
board of Packaging Company or Automotive Company shall be the obligation of
Packaging Company. If an individual becomes a director of both Packaging Company
and Automotive Company immediately after the Distribution Date, his or her
options, unless they expire at the Distribution, shall be split and maintained
one-half by Packaging Company and one-half by Automotive Company; and with
respect to individuals who were outside directors prior to the Distribution
Date, their deferred compensation accounts shall be split similarly.
Any continuing liabilities under the terminated Outside Directors'
Retirement Plan including the obligation to grant restricted stock in lieu of
such plan shall be retained and performed by Automotive Company.
SECTION 7. WELFARE PLANS.
7.01 Tenneco Salaried Welfare Plans. Effective on December 31, 1999, each
member of the Automotive Group shall cease to be a sponsor of the Tenneco
Salaried Welfare Plans, Active Employees and Former Employees of Automotive
Group shall cease to participate in the Tenneco Salaried Welfare Plans as of
that date, and Packaging Company shall serve as the sponsor of the Tenneco
Salaried Welfare Plans from and after that date. Automotive Company shall
reimburse Packaging Company for all claims paid with respect to the
participation of its employees in such plans.
SECTION 8. GENERAL.
8.01 Post-Distribution Administration of Plans. The parties hereto agree
to administer all plans consistently herewith, and to the extent necessary to
amend plans accordingly.
8.02 Cost and Expenses. Except as otherwise expressly provided herein,
each party shall bear all costs and expenses, including but not limited to
legal, administrative and actuarial fees, incurred in the design, drafting,
administration and implementation of any and all plans and compensation
structures which it enables or creates and the amendment of its existing plans
or compensation structures.
8.03 Reserved
8.04 Human Resources Support Services. Subject to the rules set forth
below, Packaging Company shall provide (or have provided by TBS or otherwise to)
Automotive Company or its Affiliates the
TENNECO DISTRIBUTION AGREEMENT
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<PAGE> 63
following corporate-wide human resource support services that are currently
being provided to the Automotive Company and/or members of the Automotive Group:
a. Benefits administration by Hewitt & Associates LLC and other
outside administrators. Packaging Company will provide management of the
services that are outsourced and continue benefits administration services
currently being provided by TBS.
b. Assistance in executive compensation plans, including stock
options, restricted stock, performance shares, deferred compensation,
director's stock options, and director's restricted stock.
c. Generation of EEO reports.
d. Packaging Company will prepare, process and disburse invoices and
check requests for Prudential relocations or cause such services to be
provided.
Packaging Company shall provide the services described in this Section 8.04
for the period from the Distribution Date through the earlier of (i) December
31, 2000 and (ii) the date as of which Automotive Company no longer desires such
services, provided that Automotive Company shall have given Packaging Company at
least 60 days' advance written notice of such date.
In consideration for such services, other than third party fees as
described in the next sentence, Automotive Company shall pay Packaging Company
per . Any third party fees for such services for
outsourced providers utilized with respect to the Automotive Group as of the
date hereof, or for new outsourced providers selected with prior consent of
Automotive Company (which consent shall not be unreasonably withheld or
delayed), will be billed directly by the third party to Automotive Company;
provided, that if the third party refuses to bill Automotive Company directly,
Automotive Company shall reimburse Packaging Group for all amounts which it pays
such third party on behalf of Automotive Company. Reference is made to the
Transition Services Agreement between Tenneco and Packaging Company of even date
herewith (the "Transition Services Agreement"). The services described in this
Section 8.04 shall be considered Packaging Services (as such term is defined in
the Transition Services Agreement) for purposes of Sections 2.3, 3, 4, 5 and 7
of the Transition Services Agreement and shall be provided in accordance with
and subject to the terms and conditions thereof. The provisions of Sections 4.2,
4.3, 4.4 and 7 of the Transition Services Agreement shall survive termination of
the provision of services hereunder.
SECTION 9. MISCELLANEOUS.
9.01 1996 Benefits Agreement. Effective on the Distribution Date, Tenneco
shall assign to Packaging Company all of its rights under, and Packaging Company
shall assume and agree to pay, perform and discharge when due (and will
thereafter indemnify each member of the Automotive Group against) all
obligations, liabilities and responsibilities of Industrial Company under, the
certain Benefits Agreement (the "1996 Benefits Agreement"), dated as of December
11, 1996, by and among New Tenneco Inc., Newport News Shipbuilding Inc. and the
company then known as Tenneco Inc. The rights Tenneco shall assign to Packaging
Company under the 1996 Benefits Agreement shall include, without limitation, the
right to receive and retain all reimbursements for the payment of SERP benefits
to employees and former employees of the Shipbuilding Group and Energy Group
(capitalized terms used in this Section 9.01 and in Section 6.01 and not
otherwise defined in this Agreement shall have the meanings ascribed to such
terms in the 1996 Benefits Agreement).
9.02 Complete Agreement; Construction. This Agreement and the Distribution
Agreement shall constitute the entire agreement between the parties with respect
to the subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter. Notwithstanding
any other provisions in this Agreement or the Distribution Agreement to the
contrary, in the event and to the extent that there shall be a conflict between
the provisions of this Agreement and the provisions of the Distribution
Agreement or any other Ancillary Agreement, this Agreement shall control.
TENNECO DISTRIBUTION AGREEMENT
E-7
<PAGE> 64
9.03 Other Ancillary Agreements. This Agreement is not intended to
address, and should not be interpreted to address, the matters specifically and
expressly covered by any of the other Ancillary Agreements.
9.04 Counterparts. This Agreement may be executed in one or more counter
parts, all of which shall be considered one and the same agreement, and shall
become effective when one or more such counterparts have been signed by each of
the parties and delivered to the other parties.
9.05 Survival of Agreements. Except as otherwise expressly provided
herein, all covenants and agreements of the parties contained in this Agreement
shall survive the Distribution Date.
9.06 Notices. All notices and other communications to a party hereunder
shall be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to such party (and
will be deemed given on the date on which the notice is received by such party)
at the address for such party set forth in the Distribution Agreement (or at
such other address for the party as the party shall, from time to time, specify
by like notice to the other parties).
9.07 Waivers. The failure of any party hereto to require strict
performance by any other party of any provision in this Agreement will not waive
or diminish the party's right to demand strict performance thereafter of that or
any other provision hereof.
9.08 Amendments. This Agreement may not be modified or amended except by
an agreement in writing signed by the parties hereto.
9.09 Assignment. This Agreement shall be assignable in whole in connection
with a merger or consolidation or the sale of all or substantially all the
assets of a party hereto so long as the resulting, surviving or transferee
entity assumes all the obligations of the relevant party hereto by operation of
law or pursuant to an agreement in form and substance reasonably satisfactory to
the other parties to this Agreement. Otherwise this Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any party hereto
without the prior written consent of the other (which consent shall not be
unreasonably withheld or delayed), and any attempt to assign any rights or
obligations arising under this Agreement without such consent shall be void.
9.10 Successors and Assigns. The provisions of this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective permitted successors and permitted assigns.
9.11 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and the members of their respective Groups, after
giving effect to the Distribution, and should not be deemed to confer upon other
third parties any remedy, claim, liability, right of reimbursement, claim of
action or other right in excess of those existing without reference to this
Agreement.
9.12 Attorney Fees. A party determined to be in breach of this Agreement
shall, on demand, indemnify and hold harmless the other party hereto for and
against all out-of-pocket expenses, including, without limitation, reasonable
legal fees, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement; provided, that such determination
shall be effective only when made by the court having final jurisdiction of the
matter and the period for appeal from that court, if any, shall have expired.
The payment of such expenses is in addition to any other relief to which such
other party may be entitled hereunder or otherwise.
9.13 Title and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
TENNECO DISTRIBUTION AGREEMENT
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<PAGE> 65
9.14 Governing Law. All questions and/or disputes concerning the
construction, validity and interpretation of this agreement and the exhibits
hereto shall be governed by the internal laws, and not the law of conflicts, of
the State of Delaware. Each of the parties to this agreement hereby irrevocably
and unconditionally (i) AGREES TO BE SUBJECT TO, AND HEREBY CONSENTS AND SUBMITS
TO, THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE AND THE FEDERAL
COURTS SITTING IN THE STATE OF DELAWARE, (ii) TO THE EXTENT SUCH PARTY IS NOT
OTHERWISE SUBJECT TO SERVICE OF PROCESS IN THE STATE OF DELAWARE, HEREBY
APPOINTS THE CORPORATION TRUST COMPANY, AS SUCH PARTY'S AGENT IN THE STATE OF
DELAWARE FOR ACCEPTANCE OF LEGAL PROCESS AND (iii) AGREES THAT SERVICE MADE ON
ANY SUCH AGENT SET FORTH IN (ii) ABOVE SHALL HAVE THE SAME LEGAL FORCE AND
EFFECT AS IF SERVED UPON SUCH PARTY PERSONALLY WITHIN THE STATE OF DELAWARE.
9.15 Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
9.16 Subsidiaries. Each of the parties hereto shall cause to be performed,
and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such party
which is contemplated to be a Subsidiary of such party on and after the
Distribution Date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
TENNECO INC.
By:
----------------------------------
Name:
Title:
TENNECO PACKAGING INC. (to be
renamed)
By:
----------------------------------
Name:
Title:
TENNECO DISTRIBUTION AGREEMENT
E-9
<PAGE> 66
EXHIBIT A
OPTION CONVERSION FORMULA*/
FORMULA
<TABLE>
<S> <C> <C> <C> <C>
Original option exercise price New market price of Tenneco
- -------------------------------- X Common Stock or Packaging = New option exercise price
Original market price of Tenneco Common Stock, as applicable***/ ("New Option Price")
Common Stock**/
</TABLE>
<TABLE>
<S> <C> <C>
No. of shares underlying original option X original option
exercise price Number of shares
- ------------------------------------------------------------ = underlying new option
New Option Price
</TABLE>
ASSUME
<TABLE>
<S> <C>
No. of shares Tenneco Common Stock underlying original
1,000 option
$45.31 Original option exercise price
$25.00 Original market price of Tenneco Common Stock
$ 7.00 New market price for Tenneco Common Stock
$18.00 New market price for Packaging Common Stock
</TABLE>
ADJUSTED TENNECO OPTIONS (for Automotive Group employees)
<TABLE>
<S> <C> <C> <C> <C>
$45.31
- ------ X $7.00 = $12.69 New Option Price
$25.00
</TABLE>
<TABLE>
<S> <C> <C>
1,000 X $45.31
- -------------- = 3,571 shares Tenneco Common Stock
$12.69 underlying new option
</TABLE>
NEW PACKAGING COMPANY OPTIONS (for Packaging Group employees)
<TABLE>
<S> <C> <C> <C> <C>
$45.31
- ------ X $18.00 = $32.62 New Option Price
$25.00
</TABLE>
<TABLE>
<S> <C> <C>
1,000 X $45.31
- -------------- = 1,389 shares Packaging Common Stock
$32.62 underlying new option
</TABLE>
- ---------------
*/ May be adjusted, as necessary, to reflect a reverse stock split by Tenneco
which becomes effective after the Distribution.
**/ Based on the closing sale price of the "full value" Tenneco Common Stock
(i.e. not giving effect to the declaration of any dividend) on the New York
Stock Exchange ("NYSE") on the day immediately prior to the Distribution
Date.
***/ For the new market price of Tenneco Common Stock: Based on the closing sale
price of Tenneco Common Stock "without due bills" on the day immediately
prior to the Distribution Date, unless "when issued" trading for Tenneco
Automotive Inc. Common Stock exists on such date, in which case the new
market price of the Tenneco Common Stock would be based on the closing
"when issued" market sale price of Tenneco Automotive Inc. Common Stock on
such date. For the new market price of Packaging Common Stock: Based on the
closing "when issued" market sale price of Packaging Common Stock on the
day immediately prior to the Distribution Date, as applicable.
TENNECO DISTRIBUTION AGREEMENT
E-10
<PAGE> 67
NEW PACKAGING COMPANY OPTIONS (for Packaging Group employees)
<TABLE>
<S> <C> <C> <C> <C>
$45.31
- ------ X $18.00 = $32.62 New Option Price
$25.00
</TABLE>
<TABLE>
<S> <C> <C>
1,000 X $45.31
- -------------- = 1,389 shares Packaging Common Stock
$32.62 underlying new option
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
E-11
<PAGE> 68
EXHIBIT F
PACKAGING
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1999
(IN MILLIONS)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------- PACKAGING
SPIN-OFF PRO
PACKAGING DEBT AND RELATED FORMA
HISTORICAL REALIGNMENT TRANSACTIONS COMBINED
---------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
Current assets:
Cash and temporary cash investments...... $ 18 $ -- $ -- $ 18
Receivables.............................. 375 -- 119(b) 494
Inventories.............................. 447 -- -- 447
Prepayments and other.................... 72 -- -- 72
------ ----- ------- ------
Total current assets............. 912 -- 119 1,031
Plant, property, and equipment, net........ 1,495 -- -- 1,495
Goodwill and intangibles, net.............. 1,028 -- -- 1,028
Other assets and deferred charges.......... 918 59(a) 85(c) 1,062
Net assets of discontinued operations...... 133 -- -- 133
------ ----- ------- ------
Total assets..................... $4,486 $ 59 $ 204 $4,749
====== ===== ======= ======
</TABLE>
LIABILITIES AND EQUITY
<TABLE>
<S> <C> <C> <C> <C>
Current liabilities:
Short-term debt.......................... $ 367 $ 829(a) $ -- $1,196(e)
Trade payables........................... 357 -- -- 357
Other current liabilities................ 336 -- -- 336
------ ----- ------- ------
Total current liabilities........ 1,060 829 -- 1,889
Long-term debt............................. 1,494 (494)(a) -- 1,000(e)
Deferred income taxes...................... 380 (52)(a) 34(c) 362
Other liabilities and deferred credits..... 198 -- -- 198
Minority interest.......................... 14 -- -- 14
Equity:
Combined equity.......................... 1,340 (224)(a) 119(b) --
51(c)
(1,286)(d)
Common stock............................. -- -- 2(d) 2
Paid-in capital.......................... -- -- 1,284(d) 1,284
Retained earnings........................ -- -- --(d) --
------ ----- ------- ------
Total liabilities and equity..... $4,486 $ 59 $ 204 $4,749
====== ===== ======= ======
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Combined Balance Sheet.
TENNECO DISTRIBUTION AGREEMENT
F-1
<PAGE> 69
PACKAGING
NOTES TO UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
(a) To reflect debt allocated to Packaging in the debt realignment. The
adjustment to equity reflects the net impact of the debt realignment, the
recording of debt issue costs and deferred income taxes related to the exchange
offers and other transaction costs. Pro forma long-term debt includes $980
million of new securities ($ million aggregate principal amount) assumed to be
exchanged in the exchange offers, and $20 million of long-term debt of Packaging
subsidiaries. Pro forma short-term debt includes $1,187 million borrowed under
Packaging's new credit facilities to be entered into as part of this debt
realignment and $9 million of short-term debt of Packaging subsidiaries. At this
time, Packaging and Tenneco cannot determine the ultimate amount of the original
securities which will be exchanged into new securities, and this amount could
vary significantly. These pro forma adjustments assume that 100% of the original
securities subject to the exchange offers will be tendered before the early
exchange time and exchanged for the new securities and the new securities will
be recorded at the net carrying amount of the original securities (in other
words, the new securities are assumed not to be "substantially different." See
the section titled "Accounting Treatment of the Exchange Offers" contained in
Tenneco Packaging Inc.'s Registration Statement on Form S-4, File No.
333-82923). The results of the exchange offers could vary based on a number of
factors, including the timing and level of acceptance of the exchange offers,
the interest rate of the exchanged securities and whether the exchanges will be
considered extinguishments for accounting purposes. Based on current interest
rate markets, Packaging expects that the exchange offers will not be
extinguishments for accounting purposes. Therefore, Packaging does not expect to
recognize an extraordinary loss attributable to the debt exchange. Other costs,
including transaction costs related to the spin-off and contractual employment
obligations, are expected to be incurred by Packaging in connection with the
corporate restructuring transactions and the spin-off which Packaging estimates
will be approximately $70 million after-tax. The effects on Packaging's debt of
these costs has been reflected in this pro forma adjustment. However, these
charges have not been included in the unaudited pro forma combined statement of
income. See the section titled "Unaudited Pro Forma Combined Financial
Statements of Packaging" contained in Tenneco Packaging Inc.'s Registration
Statement on Form S-4, File No. 333-82923.
(b) To reflect the purchase of Packaging accounts receivable at fair value
which had previously been sold to a third party.
(c) To reflect the transfer to Packaging of prepaid pension costs
attributable to Automotive employees and the corresponding reduction in net
periodic pension costs and the increase in prepaid pension cost attributable to
the curtailment of the pension benefits related to Automotive employees.
Automotive employees will no longer participate in the Tenneco Retirement Plan
following the spin-off and Packaging will become the sponsor of this plan. These
prepaid pension costs will be transferred to Packaging in connection with the
corporate restructuring transactions. Packaging estimates that a curtailment
gain of approximately $30 million will be recognized relating to the freezing of
Automotive employees' pension benefits in connection with the spin-off. This
gain has not been included in the unaudited pro forma combined statements of
income.
(d) To reflect the spin-off of Packaging common stock to holders of Tenneco
common stock at an exchange ratio of one share of Packaging common stock for
each share of Tenneco common stock.
(e) The Packaging pro forma debt balances do not give effect to the
application of any proceeds from the planned sale of Packaging's remaining
interest in Packaging's containerboard joint venture. Packaging expects the sale
to be completed before the spin-off, with the proceeds used to repay the Tenneco
debt that would otherwise be allocated to Packaging in the debt realignment. If
the sale occurs after the spin-off, the net proceeds will be used to retire
Packaging debt. In September 1999, the joint venture, Packaging Corporation of
America, filed a registration statement for Packaging to sell its interest in a
TENNECO DISTRIBUTION AGREEMENT
F-2
<PAGE> 70
PACKAGING
NOTES TO UNAUDITED PRO FORMA
COMBINED BALANCE SHEET -- (CONTINUED)
registered public offering. Based on indications of value in that registration
statement, estimated net proceeds ranging from $525 million to $600 million are
anticipated to be received from the sale of Packaging's remaining interest in
its containerboard joint venture. For each $50 million of after-tax proceeds
received from the sale, pro forma interest expense would be reduced by
approximately $3 million on an annual basis and pro forma income from continuing
operations would be increased by approximately $2 million on an annual basis, or
$0.01 per diluted common share.
TENNECO DISTRIBUTION AGREEMENT
F-3
<PAGE> 71
EXHIBIT G
PACKAGING SUBSIDIARIES
<TABLE>
<S> <C>
TENNECO PACKAGING INC. (DELAWARE)
A&E Plastics, Inc. (Delaware)............................. 100%
Aircal S.A. (France)...................................... 100
(Tenneco Packaging Inc. owns all shares except seven
which are held by its four directors and Tenneco
Protective Packaging Inc. and Tenneco Packaging
International Holdings Inc.)
Airpack Japan K.K. (Japan)................................ 100
Airpack Polska Sp.Z.O.O. (Poland)......................... 100
Airpack SPA (Italy)....................................... 98
(Tenneco Packaging Inc. owns 98%; Tenneco Packaging
International Holdings Inc. owns 2%)
Altapack SPA (Italy)................................... 100
Alupak, A.G. (Switzerland)................................ 100
Counce Finance Corporation (Delaware)..................... 100
Dongguan PCA Packaging Co., Ltd. (Peoples Republic of 50
China).................................................
(Tenneco Packaging Inc. owns 50%; and Dongguan Dong Ya
Color Printing & Packaging Factory, an unaffiliated
company, owns 50%)
EKCO Products, Inc. (Illinois)............................ 100
E-Z Por Corporation (Delaware)............................ 100
Glacier-Cor US Corporation (Delaware)..................... 100
Glacier-Cor US Holding Corporation (Delaware).......... 100
E. H. Carton Products -- Management Company Ltd. 50
(Israel)............................................
(Glacier-Cor US Holding Corporation owns 50%; and 2
non-affiliates owns 50%) Glacier-Cor 1995 L.P.
(Israel)............................................
(E.H. Carton Products -- Management Company Ltd.
owns 2%; Ha'Lakoach Ha'Neeman Ha'Sheesheen
Ou'Shena'yim Ltd. owns 49%; and non-affiliates
own 49%)
Ha'Lakoach Ha'Neeman Ha'Sheesheem Ou'Shena'yim Ltd. 99
(Israel)............................................
(Glacier-Cor US Holding Corporation owns 99%;
and Hexacomb Corporation owns 1%)
Glacier-Cor 1995 L.P. (Israel).................. 49
(Ha'Lakoach Ha'Neeman Ha'Sheesheen Ou'Shena'yim
Ltd. owns 49%; non-affiliates own 49%; and E. H.
Carton Products -- Management Company Ltd. owns
2%)
Kinarot Pallet Ltd. (Israel)...................... 50
(Ha'Lakoach Ha'Neeman owns 50%; and I.M.A.
Engineering, an Israeli company and a
non-affiliate, owns 50%
Yamaton Ltd. (Israel.............................. 33.3
(Ha'Lakoach Ha'Neeman owns 33.3%; and
non-affiliates, Kibbutz Ein Hamifietz and
Kibbutz Ga'aton own 66.7%)
Hexacomb Corporation (Illinois)........................... 100
Ha'Lakoach Ha' Neeman Ha' Sheesheem Ou' Shena'yim Ltd. 1
(Israel)..............................................
(Hexacomb Corporation owns 1%; and Glacier-Cor US
Holding Corporation owns 99%. Subsidiaries are
listed above.)
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
G-1
<PAGE> 72
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO PACKAGING INC.
SUBSIDIARIES OF HEXACOMB CORPORATION
Hexajapan Company, Ltd. (Japan)........................ 60%
(Hexacomb Corporation owns 60%; and non-affiliates
own 40%)
Kobusch Packaging Egypt Ltd. (Egypt)...................... 99.75
(Tenneco Packaging Inc. owns 99.75%; and Tenneco
Kobusch-Folien GmbH owns .25%)
Omni-Pac S.A.R.L. (France)................................ 97
(Tenneco Packaging Inc. owns 97%; and Tenneco Omni-Pac
GmbH & Co. KG Verpackungsmittel owns 3%)
Packaging Corporation of America (Delaware)............... 43.5
(Tenneco Packaging Inc. owns 43.5%; PCA Holdings LLC,
an unaffiliated limited liability company, owns 53.2%;
and PCA's management owns 3.3%)
American Cellulose Corporation (Delaware).............. 50
(Packaging Corporation of America owns 50%; and Larry
E. Homan, an unaffiliated individual, owns 50%)
Dahlonega Packaging Corporation (Delaware)............. 100
Dixie Container Corporation (Virginia)................. 100
PCA Hydro, Inc. (Delaware)............................. 100
PCA Tomahawk Corporation (Delaware).................... 100
PCA Valdosta Corporation (Delaware).................... 100
PCA Box Company (Delaware)(1)............................. 100
PCA Romania Srl (Romania)................................. 50
(Tenneco Packaging Inc. owns 50%; and Kraftcorr Inc.,
an unaffiliated company, owns 50%)
PCA West Inc. (Delaware).................................. 100
Coast-Packaging Company (California General 50
Partnership)..........................................
(PCA West Inc. owns 50%, as General Partner; and J.
G. Haddy Sales Company, an unaffiliated company,
owns 50%, as General Partner)
Pressware International, Inc. (Delaware).................. 100
Revere Foil Containers, Inc. (Delaware)................... 100
Scriptoria N.V. (Belgium)................................. 99.6
(Tenneco Packaging Inc. owns approximately 99.6%;
Tenneco Packaging International Holdings Inc. owns 18
shares; and the remainder of the shares are held by
unknown third parties)
Sentinel GmbH Verpackungen (Germany)................... ,1
(Scriptoria N.V. owns ,1%; and Tenneco Packaging Inc.
owns .99%)
Sentinel GmbH Verpackungen (Germany)...................... 99
(Tenneco Packaging Inc. owns .99%; and Scriptoria N.V.
owns ,1%)
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) In dissolution.
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
G-2
<PAGE> 73
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO PACKAGING INC
Sentinel Polyolefins, L.L.C............................... 50%
(Tenneco Packaging Inc. owns 50%; and Sentinel Products
Corp., an unaffiliated company and its principals, own
50%)
Suncor, Inc. (South Carolina)............................. 100
Tenneco AVI Acquisition Inc. (Delaware)................... 100
Tenneco Business Services Holdings Inc. (Delaware)........ 100
Tenneco Business Services Inc. (Delaware).............. 100
Tenneco CAP Acquisition Inc. (Delaware)(1)................ 100
Tenneco CPI Holding Company (Delaware).................... 100
Tenneco Forest Products GmbH (Germany).................... 100
PCA Embalajes Espana S.L. (Spain)...................... 99
(Tenneco Forest Products GmbH owns 99%; and
Tenneco Omni-Pac Ekco Verpackungsmittel GmbH & Co.
KG owns 1%)
Tenneco International Business Development Limited 100
(Delaware).............................................
Ambassador Packaging (Ireland) Limited (Ireland)....... 100
Tenneco International Finance B.V. (Netherlands).......... 100
Tenneco Management Company (Delaware)..................... 100
Tenneco Management (Europe) Limited (United Kingdom)...... 100
Tenneco NHC Inc. (Nevada)................................. 100
Tenneco Packaging -- Chile Holdings Inc. (Delaware)....... 100
Tenneco Packaging -- Chile S.A. (Chile)................ 100
Tenneco Packaging de Mexico, S.A. de C.V. (Mexico)........ 0.01
(Tenneco Packaging Inc. owns 1 share; and Tenneco
Packaging International Holdings Inc. owns 499,999
shares)
Tenneco Packaging Deutschland Holdinggesellschaft mbH 100
(Germany)..............................................
Kobusch Folien Verwaltungsgesellschaft mbH (Germany)... 100
Tenneco Kobusch-Folien GmbH & Co. KG (Germany).... 100
(Tenneco Packaging Deutschland
Holdinggesellschaft mbH is the Limited Partner;
and Kobusch-Folien Verwaltungsgesellschaft mbH
is the General Partner)
Kobusch Packaging Egypt Ltd. (Egypt)............ 0.25
(Tenneco Kobusch-Folien GmbH & Co. KG owns
0.25%; and Tenneco Packaging Inc. owns 99.75%)
Nord-West Verpackung Verwaltungsgesellschaft mbH 100
(Germany).............................................
Tenneco Nord-West Verpackung GmbH & Co. KG 100
(Germany).........................................
(Tenneco Packaging Deutschland
Holdinggesellschaft mbH is the Limited Partner;
and Nord-West Verpackung
Verwaltungs-gesellschaft mbH is the General
Partner)
Nord-West Wohnungsbau GmbH (Germany)............ 100
Omni-Pac Ekco Verpackungsmittel Verwaltungsgesellschaft 100
mbH (Germany).........................................
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) In dissolution.
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
G-3
<PAGE> 74
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO PACKAGING INC.
SUBSIDIARIES OF TENNECO PACKAGING DEUTSCHLAND
HOLDINGGESELLSCHAFT MBH
SUBSIDIARIES OF OMNI-PAC EKCO VERPACKUNGSMITTEL
VERWALTUNGSGESELLSCHAFT MBH
Tenneco Omni-Pac Ekco Verpackungsmittel GmbH & Co. KG 100%
(Germany)...........................................
(Tenneco Packaging Deutschland Holdinggesellschaft
mbH is the Limited Partner; and Omni-Pac Ekco
Verpackungsmittel Verwaltungsgesellschaft mbH is
the General Partner)
Omni-Pac Poland Sp. z.o.o. (Poland)............... 100
PCA Embalajes Espana S.L. (Spain)................. 1
(Tenneco Omni-Pac Ekco Verpackungsmittel GmbH &
Co. KG owns 1%; and Tenneco Forest Products GmbH
owns 99%)
Omni-Pac Verpackungsmittel Verwaltungsgesellschaft 100
mbH.................................................
Tenneco Omni-Pac GmbH & Co. KG Verpackungsmittel 100
(Germany)...........................................
(Tenneco Packaging Deutschland Holdinggesellschaft
mbH is the Limited Partner; and Omni-Pac
Verpackungsmittel Verwaltungsgesellschaft mbH is
the General Partner)
Omni-Pac ApS (Denmark)............................ 100
Omni-Pac A.B. (Sweden)............................ 100
Omni-Pac S.A.R.L. (France)........................ 3
(Tenneco Omni-Pac GmbH & Co. KG
Verpackungsmittel owns 3%; and Tenneco Packaging
Inc. owns 97%)
Sengewald Verpackungen Verwaltungsgesellschaft mbH 100
(Germany)...........................................
Tenneco Sengewald Verpackungen GmbH & Co. KG 100
(Germany)...........................................
(Tenneco Packaging Deutschland Holdinggesellschaft
mbH is the Limited Partner; and Sengewald
Verpackung Verwaltungs-gesellschaft mbH is the
General Partner)
Sengewald Klinikprodukte Verpackungsmittel GmbH...... 100
Tenneco Sengewald Klinikprodukte GmbH & Co. KG 100
(Germany)...........................................
(Tenneco Packaging Deutschland Holdinggesellschaft
mbH is the Limited Partner; and Sengewald
Klinikprodukte Verwaltungs-gesellschaft mbH is the
General Partner)
Sengewald France S.A.R.L. (France)(1)............. 100
Tenneco Omni-Pac GmbH & Co. KG Verpackungsmittel 100
(Germany)...........................................
(Tenneco Packaging Deutschland Holdinggesellschaft
mbH is the Limited Partner; and Omni-Pac
Verpackungsmittel Verwaltungs-gesellschaft mbH is
the General Partner)
Tenneco Omni-Pac Ekco Verpackungsmittel GmbH & Co. KG 100
(Germany)...........................................
(Tenneco Packaging Deutschland Holdinggesellschaft
mbH is the Limited Partner; and Omni-Pac Ekco
Verpackungsmittel Verwaltungs-gesellschaft mbH is
the General Partner)
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) In dissolution.
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
G-4
<PAGE> 75
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO PACKAGING INC.
SUBSIDIARIES OF TENNECO PACKAGING DEUTSCHLAND
HOLDINGGESELLSCHAFT MBH
Tenneco Sengewald Verpackungen GmbH & Co. KG 100%
(Germany).............................................
(Tenneco Packaging Deutschland Holdinggesellschaft
mbH is the Limited Partner; and Sengewald
Verpackung Verwaltungs-gesellschaft mbH is the
General Partner)
Tenneco Kobusch-Folien GmbH & Co. KG (Germany)......... 100
(Tenneco Packaging Deutschland Holdinggesellschaft
mbH is the Limited Partner; and Kobusch-Folien
Verwaltungsgesellschaft mbH is the General
Partner)
Tenneco Nord-West Verpackung GmbH & Co. KG (Germany)... 100
(Tenneco Packaging Deutschland Holdinggesellschaft
mbH is the Limited Partner; and Nord-West
Verpackung Verwaltungs-gesellschaft mbH is the
General Partner)
Tenneco Sengewald Klinikprodukte GmbH & Co. KG 100
(Germany).............................................
(Tenneco Packaging Deutschland Holdinggesellschaft
mbH is the Limited Partner; and Sengewald
Klinikprodukte Verwaltungs-gesellschaft mbH is the
General Partner)
Tenneco Packaging Europe B.V. (Netherlands)............... 100
Nederlandse Pillo-Pak Maatschappij B.V. 100
(Netherlands).........................................
Tenneco Packaging Hexacomb S.A. (Spain)................... 100
Tenneco Packaging Hungary Holdings Inc. (Delaware)........ 100
Tenneco Packaging Hungary Packaging Material Limited 100
(Hungary)(1)...........................................
Budafok Recycling Waste Paper Recovery Ltd. 63.8
(Hungary).............................................
(Tenneco Packaging Hungary Packaging Material
Limited owns 63.8%; and Asco Hungaria Kft., an
unaffiliated company, owns 36.2%)
Tenneco Packaging International Holdings Inc. 100
(Delaware).............................................
Airpack SPA (Italy).................................... 2
(Tenneco Packaging International Holdings Inc.
owns 2%; and Tenneco Packaging Inc. owns 98%)
Scriptoria N.V. (Belgium).............................. ,1
(Tenneco Packaging International Holdings Inc.
owns ,1% or 18 shares; Tenneco Packaging Inc. owns
approximately 99.6%; and the remainder of the shares
are held by unknown third parties)
Tenneco Packaging de Mexico, S.A. de C.V............... 99.99
(Tenneco Packaging International Holdings Inc.
owns 499,999 shares; and Tenneco Packaging Inc. owns
1 share)
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) This company is commonly referred to as "Tenneco
Packaging Hungary Kft."
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
G-5
<PAGE> 76
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO PACKAGING INC.
SUBSIDIARIES OF TENNECO PACKAGING INTERNATIONAL HOLDINGS
INC
SUBSIDIARIES OF TENNECO PACKAGING DE MEXICO, S.A. DE
C.V.
Empaques Protectores Tenneco S.A. de C.V. (Mexico)... 40%
(Tenneco Packaging de Mexico, S.A. de C.V. owns
40%; non-affiliates own 60%)
Wellenfoam N.V. (Belgium).............................. ,1
(Tenneco Packaging International Holdings Inc. owns
,1% or 1 share; and Tenneco Packaging Inc. owns
99+%)
Tenneco Packaging Leasing Company (Delaware).............. 100
Tenneco Packaging RSA Company (Delaware).................. 100
Tenneco PPI Company (Delaware)............................ 100
Tenneco Protective Packaging Inc. (Delaware).............. 100
AVI Technologies, Inc. (Delaware)...................... 100
Tenneco Retail Receivables Company (Delaware)............. 100
Tenneco Rochester Acquisition Inc. (Delaware)(1).......... 100
Tenneco Romania Holdings Inc. (Delaware).................. 100
Tenneco Forest Products S.A. (Romania)................. 100
(Shawn Kelly, Richard Bierlich, Robert Haught and
Brent Nyberg, all of whom are affiliated, each hold
share(s) of this company)
Tenneco Windsor Box & Display, Inc. (Delaware)(2)......... 100
The Baldwin Group, Ltd. (U.K.)............................ 100
Ambassador Packaging Ltd. (U.K.)....................... 100
Coastal Packaging Ltd. (U.K.)........................ 100
Prempack Limited (U.K.).............................. 100
R & H Robinson (Sheffield) Ltd. (U.K.)............... 100
Baldwin Packaging Limited (U.K.)....................... ,1
(The Baldwin Group owns ,1% or 1 share; J&W Baldwin
(Holdings) Ltd. owns 99.9%)
J&W Baldwin (Holdings) Ltd. (U.K.)..................... 100
Baldwin Packaging Limited (U.K.)..................... 99.9
(J&W Baldwin (Holdings) Ltd. owns 99.9%; and The
Baldwin Group owns ,1% or 1 share)
Jiffy Rugated Products Limited (U.K.)............. 99.9
(Baldwin Packaging Limited owns 99.9%; and The
Baldwin Group owns ,1% or 1 share)
J&W Baldwin (Manchester) Limited (U.K.)........... 99.9
(Baldwin Packaging Limited owns 99.9%; and The
Baldwin Group owns ,1% or 1 share)
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) In dissolution.
</TABLE>
<TABLE>
<S> <C>
(2) In dissolution.
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
G-6
<PAGE> 77
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO PACKAGING INC.
SUBSIDIARIES OF THE BALDWIN GROUP, LTD.
SUBSIDIARIES OF J&W BALDWIN (HOLDINGS) LTD.
Jifcour (UK) Limited (U.K.).......................... 99.9%
(J&W Baldwin (Holdings) Ltd. owns 99.9%; and The
Baldwin Group, Ltd. owns ,1% or 1 share)
Jiffy Packaging Company Ltd. (U.K.).................. 99.9
(J&W Baldwin (Holdings) Ltd. owns 99.9%; and The
Baldwin Group, Ltd. owns ,1% or 1 share)
Pentland Packaging Limited (Scotland)................ 99.9
(J&W Baldwin (Holdings) Ltd. owns 99.9%; and The
Baldwin Group, Ltd. owns ,1% or 1 share)
J&W Baldwin (Manchester) Limited (U.K.)................ ,1
(The Baldwin Group, Ltd. owns ,1% or 1 share and
Baldwin Packaging Limited owns 99.9%)
Jifcour (UK) Limited (U.K.)............................ ,1
(The Baldwin Group, Ltd. owns ,1% or 1 share and J&W
Baldwin (Holdings) Ltd. owns 99.9%)
Jiffy Packaging Company Ltd. (U.K.).................... ,1
(The Baldwin Group, Ltd. owns ,1% or 1 share; and J&W
Baldwin (Holdings) Ltd. owns 99.9%)
Jiffy Rugated Products Limited (U.K.).................. ,1
(The Baldwin Group, Ltd. owns ,1% or 1 share; and
Baldwin Packaging Limited owns 99.9%)
Omni-Pac U.K. Limited (United Kingdom)................. 100
Pentland Packaging Limited (Scotland).................. ,1
(The Baldwin Group, Ltd. owns ,1% or 1 share; and J&W
Baldwin (Holdings) Ltd. owns 99.9%)
Tenneco Packaging Limited (Scotland)................... 100
Alpha Products (Bristol) Limited (United Kingdom).... 100
Brucefield Plastics Limited (Scotland)............... 100
Polbeth Packaging (Corby) Limited (Scotland)......... 100
Tenneco Packaging (Caerphilly) Limited (United 100
Kingdom)............................................
Tenneco Packaging (Films) Limited (United Kingdom)... 100
Tenneco Packaging (Livingston) Limited (Scotland).... 100
Tenneco Packaging (Stanley) Limited (United 100
Kingdom)............................................
Tenneco Packaging (UK) Limited (United Kingdom)........ 100
The Corinth and Counce Railroad Company (Mississippi)..... 100
Valdosta Southern Railroad Company (Florida)........... 100
798795 Ontario Limited (Ontario).......................... 100
Astro-Valcour, Ltd. (Ontario).......................... 100
Tenneco Packaging Canada Inc. (Ontario)................ 100
Tenneco Packaging -- Hexacomb Limited (Ontario)........ 100
Shearmat Structures Ltd. (Manitoba).................. 100
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
G-7
<PAGE> 78
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO PACKAGING INC.
Wellenfoam N.V. (Belgium)................................. 99.9%
(Tenneco Packaging Inc. owns 99.9%; and Tenneco
Packaging International Holdings Inc. owns ,1% or 1
share)
Wood Products Leasing Company (Delaware).................. 100
Zhejing Zhongbao Packaging (Peoples Republic of China).... 62.5
(Tenneco Packaging Inc. owns 62.5%; and non-affiliates
own 37.5%)
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
G-8
<PAGE> 79
EXHIBIT H
FORM OF
TAX SHARING AGREEMENT
This Tax Sharing Agreement is entered into as of , 1999
by and between Tenneco Inc., a Delaware corporation, to be renamed Tenneco
Automotive Inc. ("Tenneco"), and , a Delaware corporation,
formerly known as Tenneco Packaging Inc. ("Packaging Company"). Tenneco and
Packaging Company are sometimes collectively referred to herein as the
"Companies." Capitalized terms used in this Agreement are defined in Section 1
below. Unless otherwise indicated, all "Section" references in this Agreement
are to sections of this Agreement.
RECITALS
WHEREAS, as of the date hereof, Tenneco is the common parent of an
affiliated group of corporations, including Packaging Company, which has elected
to file consolidated Federal income tax returns; and
WHEREAS, the Companies have entered into a Distribution Agreement setting
forth the corporate transactions pursuant to which Tenneco will distribute all
of the outstanding shares of common stock of Packaging Company to Tenneco
shareholders in a transaction intended to qualify as a tax-free distribution
under Section 355 of the Code; and
WHEREAS, as a result of the Distribution, Packaging Company and its
subsidiaries will cease to be members of the affiliated group of which Tenneco
is the common parent, effective as of the Distribution Date; and
WHEREAS, the Companies desire to provide for and agree upon the allocation
between the parties of liabilities for Taxes arising prior to, as a result of,
and subsequent to the transactions contemplated by the Distribution Agreement,
and to provide for and agree upon other matters relating to Taxes;
NOW THEREFORE, in consideration of the mutual agreements contained herein,
the Companies hereby agree as follows:
SECTION 1. DEFINITION OF TERMS. For purposes of this Agreement (including
the recitals hereof), the following terms have the following meanings:
"Accounting Cutoff Date" means, with respect to Packaging Company, any
date as of the end of which there is a closing of the financial accounting
records for such entity.
"Accounting Firm" shall have the meaning provided in Section 15.
"Adjustment Request" means any formal or informal claim or request
filed with any Tax Authority, or with any administrative agency or court,
for the adjustment, refund, or credit of Taxes, including (a) any amended
Tax Return claiming adjustment to the Taxes as reported on the Tax Return
or, if applicable, as previously adjusted, or (b) any claim for refund or
credit of Taxes previously paid.
"Affiliate" means any entity that directly or indirectly is
"controlled" by the person or entity in question. For purposes of this
Agreement, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
person, whether through ownership of voting securities, by contract or
otherwise. Except as otherwise provided herein, the term Affiliate shall
refer to Affiliates of a person as determined immediately after the
Distribution.
"Agreement" shall mean this Tax Sharing Agreement.
TENNECO DISTRIBUTION AGREEMENT
H-1
<PAGE> 80
"Available Other Group Carryback" shall have the meaning provided in
Section 4.07(c)(ii).
"Benchmark Income (Or Loss) Allocation" shall have the meaning
provided in Section 2.02(a)(ii).
"Benchmark 1997 Loss Carryforward Allocation" shall have the meaning
provided in Section 2.02(a)(iii).
"Benchmark 1998 Loss Carryforward Allocation" shall have the meaning
provided in Section 2.02(a)(iii).
"Benchmark Period" shall have the meaning provided in Section
2.02(a)(ii).
"Carryback" means any net operating loss, net capital loss, excess tax
credit, or other similar Tax item which may or must be carried from one Tax
Period to another Tax Period under the Code or other applicable Tax Law.
"Carryback Group" shall have the meaning provided in Section
4.07(c)(ii).
"Code" means the U.S. Internal Revenue Code of 1986, as amended, or
any successor law.
"Companies" means Tenneco and Packaging Company collectively, and
"Company" means any one of Tenneco or Packaging Company.
"Consolidated Or Combined Income Tax" means any Income Tax computed by
reference to the assets and activities of members of more than one Group.
"Consolidated Or Combined State Income Tax" means any State Income Tax
computed by reference to the assets and activities of members of more than
one Group.
"Consolidated Tax Liability" means, with respect to any Tenneco
Federal Consolidated Return, the "tax liability of the group" as that term
is used in Treasury Regulation Section 1.1552-1(a)(1) (including applicable
interest, additions to tax, additional amounts and penalties as provided in
the Code), provided, that such tax liability shall be treated as including
any alternative minimum tax liability under Code Section 55.
"Corporate Restructuring Transactions" shall have the meaning provided
in the Distribution Agreement.
"Debt Realignment" shall have the meaning provided in the Distribution
Agreement.
"Distribution Agreement" means the Distribution Agreement, dated as of
, 1999, between Tenneco and Packaging Company, as amended from
time to time, setting forth the corporate transactions required to effect
the distribution to Tenneco shareholders of all of the outstanding stock of
Packaging Company owned by Tenneco, and to which this Tax Sharing Agreement
is attached as an exhibit.
"Distribution Date" means the Distribution Date as that term is
defined in the Distribution Agreement.
"Distribution" shall have the meaning provided in the Distribution
Agreement.
"Estimated Tax Payments" shall have the meaning provided in Section
2.03(a)(ii)(B).
"Federal Income Tax" means any Tax imposed by Subtitle A (Income
Taxes) or F (Procedure and Administration) of the Code.
"Final Income Or Loss Allocation" shall have the meaning provided in
Section 2.02(a)(iv).
"Final 1997 Loss Carryforward Allocation" shall have the meaning
provided in Section 2.02(a)(v).
TENNECO DISTRIBUTION AGREEMENT
H-2
<PAGE> 81
"Final 1998 Loss Carryforward Allocation" shall have the meaning
provided in Section 2.02(a)(v).
"Foreign Income Tax" means any Tax imposed by any foreign country or
any possession of the United States, or by any political subdivision of any
foreign country or United States possession, which is an income tax as
defined in Treasury Regulation Section 1.901-2.
"German Restructuring Transactions" shall have the meaning provided in
Section 2.04(b).
"Group" means the Tenneco Group and the Packaging Group, as the
context requires.
"Hypothetical State Tax Liability" shall have the meaning provided in
Section 2.03(a)(ii)(A).
"Income Tax" means any Federal Income Tax, State Income Tax, or
Foreign Income Tax.
"IRS Ruling Letter" shall have the meaning provided in the
Distribution Agreement.
"Joint Adjustment" means any proposed adjustment by a Tax Authority or
claim for refund asserted in a Tax Contest which is neither a Tenneco
Adjustment nor a Packaging Adjustment.
"Old Tenneco" shall have the meaning provided in Section 2.06(a)
"Other Group" shall have the meaning provided in Section 4.07(c)(ii).
"Packaging Adjustment" means any proposed adjustment by a Tax
Authority or claim for refund asserted in a Tax Contest to the extent
Packaging Company would be exclusively liable for any resulting Tax under
this Agreement and exclusively entitled to receive any resulting Tax
Benefit under this Agreement.
"Packaging Company" means , a Delaware corporation, formerly
known as Tenneco Packaging Inc., and any successor.
"Packaging Group" means Packaging Company and its Affiliates as
determined immediately after the Distribution, modified as provided in
Section 18.
"Packaging Group Prior State Tax Liability" shall have the meaning
provided in Section 2.03(b)(i)(B).
"Packaging Group Recomputed State Tax Liability" shall have the
meaning provided in Section 2.03(b)(i)(A).
"Payment Date" means (i) with respect to any Tenneco Federal
Consolidated Return, the due date for any required installment of estimated
taxes determined under Code Section 6655, the due date (determined without
regard to extensions) for filing the return determined under Code Section
6072, and the date the return is filed, and (ii) with respect to any Tax
Return for any Consolidated or Combined State Income Tax, the corresponding
dates determined under the applicable Tax Law.
"Post-Distribution Period" means any Tax Period beginning after the
Distribution Date, and, in the case of any Straddle Period, the portion of
such Straddle Period beginning the day after the Distribution Date.
"Post-Distribution State Income Tax Return" means any State Income Tax
Return for the Tax Period ended December 31, 1999.
"Pre-Distribution Period" means any Tax Period ending on or before the
Distribution Date, and, in the case of any Straddle Period, the portion of
such Straddle Period ending on the Distribution Date.
TENNECO DISTRIBUTION AGREEMENT
H-3
<PAGE> 82
"Prime Rate" means the base rate on corporate loans charged by
Citibank, N.A., New York, New York from time to time, compounded daily on
the basis of a year of 365 or 366 (as applicable) days and actual days
elapsed.
"Prior Intercompany Tax Allocation Agreements" means any written or
oral agreement or any other arrangements relating to allocation of Taxes
existing between or among the Tenneco Group and the Packaging Group as of
the Distribution Date (other than this Agreement and other than any such
agreement or arrangement between or among persons who are members of a
single Group).
"Prohibited Action" shall have the meaning provided in Section 11.
"Responsible Company" means, with respect to any Tax Return, the
Company having responsibility for preparing and filing such Tax Return
under this Agreement.
"Restructuring Tax" means the Taxes described in Sections 2.05(a)(i)
or 2.05(a)(ii) (relating to Tax resulting from any income or gain
recognized as a result of the Transactions but excluding any Transfer Taxes
described in Section 2.05).
"Ruling Request" means the letter filed by Tenneco with the Internal
Revenue Service dated April 30, 1999 requesting a ruling from the Internal
Revenue Service regarding certain Federal Income Tax consequences of the
Transactions (including all attachments, exhibits, and other materials
submitted with such ruling request letter) and any amendment or supplement
to such ruling request letter.
"Separate Company Tax" means any Tax computed by reference to the
assets and activities of a member or members of a single Group.
"Separate Company State Income Tax" means any State Income Tax that is
a Separate Company Tax.
"Straddle Period" means any Tax Period that begins on or before and
ends after the Distribution Date.
"State Income Tax" means any Tax imposed by any State of the United
States or by any political subdivision of any such State which is imposed
on or measured by net income, including state and local franchise or
similar Taxes measured by net income (including, without limitation, any
Tax which is measured by the higher of capital or net income (e.g., Ohio
Rev. Code Ann. Title 57, Section 5733, Corporate Franchise Tax)).
"Tax" or "Taxes" means any income, gross income, gross receipts,
profits, capital stock, franchise, withholding, payroll, social security,
workers compensation, unemployment, disability, property, ad valorem,
stamp, excise, severance, occupation, service, sales, use, license, lease,
transfer, import, export, value added, alternative minimum, estimated or
other similar tax (including any fee, assessment, or other charge in the
nature of or in lieu of any tax) imposed by any governmental entity or
political subdivision thereof, and any interest, penalties, additions to
tax, or additional amounts in respect of the foregoing.
"Tax Authority" means, with respect to any Tax, the governmental
entity or political subdivision thereof that imposes such Tax, and the
agency (if any) charged with the collection of such Tax for such entity or
subdivision.
"Tax Benefit" means any refund, credit, or other reduction in
otherwise required Tax payments (including any reduction in estimated Tax
payments).
"Tax Contest" means an audit, review, examination, or any other
administrative or judicial proceeding with the purpose or effect of
redetermining Taxes of any of the Companies or their
TENNECO DISTRIBUTION AGREEMENT
H-4
<PAGE> 83
Affiliates (including any administrative or judicial review of any claim
for refund) for any Tax Period ending on or before the Distribution Date or
for any Straddle Period.
"Tax Contest Committee" shall have the meaning provided in Section
9.02(b).
"Tax Item" means, with respect to any Income Tax, any item of income,
gain, loss, deduction, and credit.
"Tax Law" means the law of any governmental entity or political
subdivision thereof relating to any Tax.
"Tax Period" means, with respect to any Tax, the period for which the
Tax is reported as provided under the Code or other applicable Tax Law.
"Tax Records" means Tax Returns, Tax Return work papers, documentation
relating to any Tax Contests, and any other books of account or records
required to be maintained under the Code or other applicable Tax Laws or
under any record retention agreement with any Tax Authority.
"Tax Return" means any report of Taxes due, any claims for refund of
Taxes paid, any information return with respect to Taxes, or any other
similar report, statement, declaration, or document required to be filed
under the Code or other Tax Law, including any attachments, exhibits, or
other materials submitted with any of the foregoing, and including any
amendments or supplements to any of the foregoing.
"Tenneco" means Tenneco Inc., a Delaware corporation, and any
successor.
"Tenneco Adjustment" means any proposed adjustment by a Tax Authority
or claim for refund asserted in a Tax Contest to the extent Tenneco would
be exclusively liable for any resulting Tax under this Agreement and
exclusively entitled to receive any resulting Tax Benefit under this
Agreement.
"Tenneco Affiliated Group" means the affiliated group (as that term is
defined in Code Section 1504) that includes Tenneco as the common parent
and includes any member of the Packaging Group.
"Tenneco Federal Consolidated Return" means any United States federal
Tax Return for the Tenneco Affiliated Group.
"Tenneco Group" means Tenneco and its Affiliates excluding any entity
that is a member of the Packaging Group.
"Transactions" means the transactions contemplated by the Distribution
Agreement (including the Corporate Restructuring Transactions, Debt
Realignment and Distribution, as defined in such agreement).
"Transfer Taxes" means all Taxes (other than Taxes imposed on income
or gains) incurred or imposed by reason of the sale, assignment or transfer
of title of the applicable property, regardless of upon whom such Taxes are
levied or imposed by the applicable Tax Law, including sales, use, value-
added, excise, stock transfer, real estate transfer, lease assignment,
transfer gains tax, stamp, documentary, filing, recording, permit, license,
authorization, intangible and similar Taxes.
"True-Up Amount" shall have the meaning provided in Section
2.02(a)(vi).
"Treasury Regulations" means the regulations promulgated from time to
time under the Code as in effect for the relevant Tax Period.
"UK Restructuring Transactions" shall have the meaning provided in
Section 2.04(c).
"1996 Spin-Off Tax Sharing Agreement" shall have the meaning provided
in Section 2.06(a).
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"1997 Loss Carryforward" shall have the meaning provided in Section
2.02(a)(i).
"1998 Loss Carryforward" shall have the meaning provided in Section
2.02(a)(i).
"1999 Tax Period" shall have the meaning provided in Section 2.02(a).
For purposes of this Agreement, any reference to "including" shall be
deemed to mean "including, without limitation."
SECTION 2. ALLOCATION OF TAX LIABILITIES. The provisions of this Section 2
are intended to determine each Company's liability for Taxes with respect to
Pre-Distribution Periods. Once the liability has been determined under this
Section 2, Section 5 determines the time when payment of the liability is to be
made, and whether the payment is to be made to the Tax Authority directly or to
another Company.
2.01 General Rule.
(a) Tenneco Liability. Tenneco shall be liable for all Taxes not
specifically allocated to Packaging Company under this Section 2. Tenneco
shall indemnify and hold harmless the Packaging Group from and against any
liability for Taxes for which Tenneco is liable under this Section 2.01(a).
(b) Packaging Company Liability. Packaging Company shall be liable
for, and shall indemnify and hold harmless the Tenneco Group from and
against any liability for, Taxes which are allocated to Packaging Company
under this Section 2.
2.02 Allocation of United States Federal Income Tax. Except as provided in
Sections 2.05 and 2.06:
(a) Allocation of Tax and Tax Attributes Relating to the 1999 Tax
Period. With respect to the Tenneco Federal Consolidated Return for the tax
period ending December 31, 1999 (the "1999 Tax Period"), the allocation and
use of net operating loss carryforwards and current year losses, and the
allocation of Consolidated Tax Liability, if any, shall be made as follows:
(i) Step One. The net operating losses attributable to the tax
period ended December 31, 1997 (the "1997 Loss Carryforward") and the
net operating losses attributable to the tax period ended December 31,
1998 (the "1998 Loss Carryforward") shall be allocated between the
Tenneco Group and Packaging Group based upon the legal entities that
incurred such losses (treating the income of any member of the Tenneco
Affiliated Group for the relevant tax period as reducing the losses of
each legal entity included in the Tenneco Affiliated Group on a pro rata
basis in accordance with Treasury Regulation Section 1.1502-21(b)(2).
(ii) Step Two. The taxable income (or loss) of each of the Tenneco
Group and Packaging Group for the portion of the 1999 Tax Period ending
on September 30, 1999 (the "Benchmark Period") shall be computed (the
"Benchmark Income (or Loss) Allocation ") subject to adjustment for
material divestments, the costs of the Debt Realignment, and similar
items.
(iii) Step Three. The taxable losses, if any, incurred by any
member of the Tenneco Affiliated Group for the Benchmark Period shall be
deemed to be utilized first to offset the taxable income, if any, of
each other member of the Tenneco Affiliated Group for such tax period
(which losses shall be deemed to be utilized by such members on a pro
rata basis). Next, the 1997 Loss Carryforward shall be deemed to be
utilized, on a pro rata basis, to offset the taxable income of each
member of the Tenneco Affiliated Group. Finally, to the extent the
taxable income for such period exceeds the losses for such period and
the 1997 Loss Carryforward, the 1998 Loss Carryforward shall be deemed
to be utilized, on a pro rata basis, to offset the remaining taxable
income of each member of the Tenneco Affiliated Group. Neither Tenneco
nor Packaging Company shall have any obligation to pay or reimburse the
other party for utilization of such party's net operating losses under
this Step Three. Each Group's allocable share of the 1997 Loss
Carryforward and 1998 Loss Carryforward following the utilization of
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losses described in this Step Three shall be referred to as such Group's
"Benchmark 1997 Loss Carryforward Allocation" and "Benchmark 1998 Loss
Carryforward Allocation," respectively. In the event the 1997 Loss
Carryforward and 1998 Loss Carryforward are fully utilized, the
Benchmark 1997 Loss Carryforward Allocation and the Benchmark 1998 Loss
Carryforward Allocation shall be deemed to equal zero.
In the event the Tax Return for the tax period ended December 31,
1998 has not been filed at the time the Benchmark 1997 and Benchmark
1998 Loss Carryforward Allocations are made pursuant to Step Three, the
parties shall use an agreed upon estimate of the net operating losses
for the tax period ended December 31, 1998, and within 30 days of the
filing the Tax Return for such tax period, the Benchmark 1997 Loss
Carryforward Allocation and Benchmark 1998 Loss Carryforward Allocation
shall be redetermined. In the case of such redetermination if Packaging
Company's Benchmark 1997 Loss Carryforward Allocation or Benchmark 1998
Loss Carryforward Allocation, as redetermined, exceeds the amount of
such allocation as initially determined under Step Three, Packaging
Company shall pay to Tenneco an amount equal to such excess multiplied
by 35%, and if Packaging Company's Benchmark 1997 Loss Carryforward
Allocation or Benchmark 1998 Loss Carryforward Allocation, as
redetermined, is less than Packaging Company's Benchmark 1997 Loss
Carryforward Allocation or Benchmark 1998 Loss Carryforward Allocation,
Tenneco shall pay to Packaging Company an amount equal to such
difference multiplied by 35%.
(iv) Step Four. The taxable income (or loss) of each of the Tenneco
Group and the Packaging Group for the 1999 Tax Period shall be computed
(in the same manner as described in Step Two) based on the Tax Return as
filed for such tax period (the "Final Income or Loss Allocation").
(v) Step Five. Based on the Tax Return as filed for the 1999 Tax
Period, the taxable losses, if any incurred by any member of the Tenneco
Group or Packaging Group for such period shall be deemed to be utilized
first to offset the taxable income, if any, of each other member of the
Tenneco Affiliated Group for such period (which losses shall be deemed
to be utilized by such members on a pro rata basis). Next, the 1997 Loss
Carryforward shall be deemed to be utilized, on a pro rata basis, to
offset the taxable income of each member of the Tenneco Affiliated
Group. Finally, to the extent the taxable income for such period exceeds
the losses for the current period and the 1997 Loss Carryforward, the
1998 Loss Carryforward shall be deemed to be utilized, on a pro rata
basis, to offset the remaining taxable income of each member of the
Tenneco Affiliated Group. Each Group's allocable share of the 1997 Loss
Carryforward and 1998 Loss Carryforward following the utilization of
losses described in this Step Five shall be referred to as the "Final
1997 Loss Carryforward Allocation" and "Final 1998 Loss Carryforward
Allocation," respectively.
(vi) Step Six. Within sixty (60) days of filing the Tenneco Federal
Consolidated Tax Return for the 1999 Tax Period, the Packaging Group
shall compute the "True-Up Amount," which amount shall equal (I) the sum
of (A) the Packaging Group's' Final Income (or Loss) Allocation less the
Packaging Group's Benchmark Income or (Loss) Allocation (any loss
allocation shall be treated as a negative number for purposes of this
computation) plus (B) the Packaging Group's Final 1997 Loss Carryforward
less the Packaging Group's Benchmark 1997 Loss Carryforward (as
redetermined under Step Three, if applicable), plus (C) the Packaging
Group's Final 1998 Loss Carryforward less the Packaging Group's
Benchmark 1998 Carryforward (as redetermined under Step Three, if
applicable), multiplied by (II) 35%.
(vii) Step Seven. In the event the Packaging Group's True-Up Amount
is positive, Packaging Company shall pay such amount to Tenneco, and in
the event the Packaging Group's True-Up Amount is negative, Tenneco
shall pay such amount to Packaging Company.
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Schedule A attached hereto sets forth the parties' agreement as to the
determinations required under Steps One, Two and Three of this Section
2.02(a). Schedule B attached hereto provides an example of the manner in
which Steps Four, Five and Six are to be computed. The actual determination
required to be made under Steps Four, Five and Six will be based on the
information contained on the Tax Return as filed for the 1999 Tax Period.
(b) Allocation of Tenneco Federal Consolidated Return Tax
Adjustments. If there is any adjustment to the reported Tax liability with
respect to any Tenneco Federal Consolidated Return, or to such Tax
liability as previously adjusted, Packaging Company shall be liable to
Tenneco for the excess (if any) of:
(i) the Consolidated Tax Liability of the Packaging Group computed
as if all members of the Packaging Group included in the Tax Return had
filed a consolidated Tax Return for such members based on the Tax Items
of such members as so adjusted (the "Packaging Group Recomputed Federal
Tax Liability"); over
(ii) the Consolidated Tax Liability of the Packaging Group computed
as if such members of the Packaging Group had filed a consolidated Tax
Return for such members based on the Tax Items of such members as
reported (or, if applicable, as previously adjusted) (the "Packaging
Group Prior Federal Tax Liability"). Solely with respect to the Tenneco
Federal Consolidated Return for the 1999 Tax Period, the Packaging Group
Prior Federal Tax Liability with respect to such Tax Return shall equal
the Consolidated Tax Liability allocable to the Packaging Group with
respect to such Tax Return under Section 2.02(a) hereof.
If the Packaging Group Prior Federal Tax Liability exceeds the Packaging
Group Recomputed Federal Tax Liability, Tenneco shall be liable to
Packaging Company for such excess. For purposes of this Section 2.02(b), if
the Packaging Group has a net operating loss after taking into account the
adjustments allocable to such Group, the Recomputed Federal Tax Liability
of the Group shall be less than zero to the extent such net operating loss
produces a Tax Benefit in consolidation for the applicable taxable year
(which shall be determined applying the principles of Section 4.07(c)(ii)).
For example, if the Packaging Group's Prior Federal Tax Liability for Year
X was $50 and taking into account all adjustments for Year X, Packaging
Group has a net operating loss of $40 resulting in a Tax Benefit of $14
(determined by computing the Consolidated Tax Liability for such Tax Period
with and without the net operating loss), then the Packaging Group's
Recomputed Federal Tax Liability for Year X would be negative $14, and
Tenneco would be liable to Packaging Company in the amount of $64, i.e.
($50 - (-$14)).
2.03 Allocation of State Income Taxes. Except as provided in Sections
2.04, 2.05 and 6.03, State Income Taxes shall be allocated as follows:
(a) Allocation of State Income Tax Liabilities for Post-Distribution
State Income Tax Returns.
(i) Separate Company Taxes. In the case of any Separate Company
State Income Tax with respect to a Post-Distribution State Income Tax
Return, Packaging Company shall be liable for such Tax imposed on any
members of the Packaging Group.
(ii) Consolidated or Combined State Income Taxes. In the case of
any Consolidated or Combined State Income Tax with respect to a
Post-Distribution State Income Tax Return, the Consolidated or Combined
State Income Tax liability shall be allocated between the Tenneco Group
and the Packaging Group as follows:
(A) Each Group shall compute its "Hypothetical State Tax
Liability," which shall equal the State Income Tax liability of such
Group (which number shall be deemed to be zero if such Group has net
operating losses for such Tax Period), computed as if all members of
such Group included in the computation of such Tax had filed a
consolidated or
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combined Tax Return for such Group's members based on the income,
apportionment factors, and other items of such members.
(B) In the event the Estimated Tax Payments (as defined below)
exceed, or are less than, the actual State Income Tax liability shown
on the Consolidated and Combined State Income Tax Return such excess
or deficit, as the case may be, shall be shared by the Tenneco Group
and the Packaging Group. Each Group's share shall be determined by
multiplying such excess or deficit by a fraction, (a) the numerator
of which is the Hypothetical State Tax Liability of such Group, and
(b) the denominator of which is the sum of the Hypothetical State Tax
Liability of the Tenneco Group and the Packaging Group, with
appropriate payments being made by Packaging Company to Tenneco, or
by Tenneco to Packaging Company, to achieve the appropriate sharing
of such excess or deficit. The term "Estimated Tax Payments" shall
mean any and all estimated payments made in connection with the
Combined or Consolidated State Income Tax Return filed for such Tax
Period; provided, however, such amount shall (i) exclude any
estimated Tax payments made after the Distribution Date and (ii)
include any overpayments of Combined or Consolidated State Income Tax
for any prior Tax Periods which are carried forward and applied as
payments on the Combined or Consolidated State Income Tax Returns for
the applicable Tax Period.
(iii) Post-Distribution Estimated Payments. Notwithstanding
anything to the contrary in the foregoing, in the case of both Separate
Company Taxes and Consolidated or Combined Income Taxes, Packaging
Company shall pay to the appropriate State Tax Authority any estimated
Taxes with respect to the Tax Period ended December 31, 1999 due after
the Distribution Date. Tenneco shall reimburse Packaging Company for (i)
any estimated Tax payments made by Packaging Company after the
Distribution Date with respect to Separate Company Taxes imposed on
members of the Tenneco Group and (ii) any and all estimated Tax payments
made by Packaging Company after the Distribution Date with respect to
any Consolidated or Combined State Income Tax.
(b) Allocation of State Income Tax Adjustments.
(i) Combined or Consolidated State Income Tax Adjustments. If there
is any adjustment to the amount of Consolidated or Combined State Income
Tax reported on any Tax Return (or as previously adjusted), the
liability of the Packaging Group shall be recomputed as provided in this
subparagraph. Packaging Company shall be liable to Tenneco for the
excess (if any) of:
(A) the State Income Tax liability computed as if all members of
the Packaging Group included in the Tax Return had filed a
consolidated or combined Tax Return for such members based on the
income, apportionment factors, and other items of such members as so
adjusted (the "Packaging Group Recomputed State Tax Liability"); over
(B) the State Income Tax liability computed as if such members
of the Packaging Group had filed a consolidated or combined Tax
Return for such members based on the income, apportionment factors,
and other items of such members as reported (or, if applicable, as
previously adjusted) (the "Packaging Group Prior State Tax
Liability").
If the Packaging Group Prior State Tax Liability exceeds the Packaging
Group Recomputed State Tax Liability, Tenneco shall be liable to Packaging
Company for such excess. For purposes of this paragraph, (i) if the
Packaging Group has a net operating loss after taking into account the
adjustments allowable to such Group, the Packaging Group Recomputed State
Tax Liability shall be less than zero to the extent such net operating loss
produces a Tax Benefit for purposes of the applicable Consolidated or
Combined State Income Tax and (ii) the determination and payment of
estimated Taxes (including the determination and payment of any Tax
required to be paid with a
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request for an extension of time to file a Tax Return) shall not be treated
as an adjustment to the related Consolidated or Combined State Income Tax.
(ii) Separate Company Taxes. In the case of any adjustment to the
amount of a Separate Company Tax Liability, Packaging Company shall be
liable for such Tax imposed on members of the Packaging Group, and Tenneco
shall be liable for such Tax imposed on members of the Tenneco Group.
2.04 Allocation of Other Taxes.
(a) General. Except as provided in Section 2.04 (b) and (c) and Section
2.05, all Taxes other than those specifically allocated pursuant to Sections
2.02 and 2.03 shall be allocated based on the legal entity on which the legal
incidence of the Tax is imposed (provided, however, that in the event the legal
entity on which the legal incidence of the tax is imposed is a member of a group
including members of both the Packaging Group and Tenneco Group, the tax shall
be allocated between the Tenneco Group and Packaging Group based on each Group's
respective share of the taxable income giving rise to such Tax. As between the
parties to this Agreement, Packaging Company shall be liable for all Taxes
imposed on any member of the Packaging Group. The Companies believe that there
is no Tax not specifically allocated pursuant to Sections 2.02 and 2.03 which is
legally imposed on more than one legal entity (e.g., joint and several
liability); however, if there is any such Tax, it shall be allocated in
accordance with past practices as reasonably determined by the affected
Companies, or in the absence of such practices, in accordance with any
allocation method agreed upon by the affected Companies.
(b) German Restructuring. Notwithstanding anything to the contrary in this
Agreement, with respect to the Corporate Restructuring Transactions involving
the restructuring of the German entities (i.e., the members of the Tenneco
Affiliated Group organized under the laws of Germany) (the "German Restructuring
Transactions"), the parties agree as follows:
(i) Packaging Company shall be liable for any and all Transfer Taxes
incurred as a result of the German Restructuring Transactions.
(ii) Tenneco Deutschland Holdinggesellschaft mBH's ("Tenneco
Deutschland") German Tax losses shall be utilized to the fullest extent
permitted under German Tax Law to offset income realized in connection with
the German Restructuring Transactions and Packaging Company shall have no
obligation to reimburse or otherwise compensate Tenneco for the use of such
Tax losses; provided, however, that (X) in the event the German Tax
Authority makes a final determination that the income realized in
connection with the German Restructuring Transactions is greater than the
amount reported on the Tax Return as originally filed, Packaging Company
shall pay to Tenneco Deutschland an amount equal to the additional German
Tax loss used to offset Tenneco Deutschland's in creased income multiplied
by the applicable German Tax rate, and (Y) in the event the German Tax
Authority makes a final determination that the income realized in
connection with the German Restructuring Transactions is less than the
amount reported on the Tax Return as originally filed, Tenneco Deutschland
shall pay to Packaging Company an amount equal to the German Tax loss
restored as a result of such determination multiplied by the applicable
German Tax rate.
(iii) In the event any member of the Packaging Group is required to
make profit and absorption payments to Tenneco Deutschland after the
Distribution Date, such payments shall be promptly repaid to Tenneco
Packaging Deutschland Holding Gesellschaft mBH as an adjustment to purchase
price with respect to Tenneco Deutschland's sale of such member to Tenneco
Packaging Deutschland Holding Gesellschaft mBH pursuant to the German
Restructuring Transactions.
(iv) In the event the German Tax Authority disallows Tenneco
Deutschland's Organschaft status for any reason whatsoever, Tenneco
Deutschland shall pay to Packaging Company the Tax Benefit
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realized by Tenneco Deutschland by reason of claiming input credits arising
out of deemed dividend payments made by members of the Packaging Group.
(c) United Kingdom Restructuring. Notwithstanding anything to the contrary
in this Agreement, with respect to the Corporate Restructuring Transactions
involving the restructuring of the United Kingdom entities (i.e., the members of
the Tenneco Affiliated Group organized under the laws of United Kingdom) (the
"UK Restructuring Transactions"), the Companies agree as follows:
(i) Packaging Company shall be liable for any and all Transfer Taxes
(including, without limitation, any stamp duty) incurred as a result of the
UK Restructuring Transactions.
(ii) Each Group shall be entitled to cause any of its members to
surrender such member's Tax losses for group relief or consortium relief
(or other amounts eligible for group or consortium relief) to another
member of such Group; provided, however, that if the Tax losses of a Group
cannot be utilized by the members of such Group, the Tax losses shall be
surrendered for group relief or consortium relief to the members of the
other Group, as designated in writing by the parent company of such other
Group (and such other Group shall have no obligation to reimburse or
otherwise compensate the surrendering Group for its losses).
2.05 Transaction and Other Taxes.
(a) General. Except as otherwise provided in this Section 2.05, any and all
liability for Taxes resulting from the Transactions shall be allocated as
follows:
(i) Any sales and use, gross receipts or other Transfer Taxes imposed
on the transfers occurring pursuant to the Transactions (together with any
Tax resulting from any income or gain recognized under Treasury Regulation
Sections 1.1502-13 or 1.1502-19 (or any other corresponding provisions of
other applicable Tax Laws) as a result of the Transactions) shall be
allocated to the legal entity on which the legal incidence of the Tax is
imposed. As between the parties to this Agreement, Packaging Company shall
be liable for all Taxes imposed on any member of the Packaging Group and
Tenneco shall be liable for all Taxes imposed on any member of the Tenneco
Group.
(ii) Any Tax liability resulting from any income or gain recognized as
a result of any of the transactions contemplated by the Distribution
Agreement failing to qualify for tax-free treatment under Code Sections
332, 351, 355, 361 or other provisions of the Code (as contemplated by the
Ruling Request) or corresponding provisions of other applicable Tax Laws,
shall be allocated fifty percent (50%) to Tenneco and fifty percent (50%)
to Packaging Company.
(b) Indemnity for Inconsistent Acts. Tenneco or Packaging Company, as the
case may be, shall be liable for, and shall indemnify and hold harmless the
members of the other Group from and against any liability for, any Restructuring
Tax to the extent arising from any breach by such party of its representations
or covenants under Section 11.
(c) Indemnity for Liability Under Code Section 355(e). Notwithstanding
anything to the contrary in this Section 2.05, any Tax liability incurred by
Tenneco under Code Section 355(e) (or any corresponding provision of other
applicable Tax Laws) by reason of the acquisition by one or more persons of a
"50-percent or greater interest" (as such term is defined in Code Section
355(d)(4)) in Tenneco or Packaging Company (a "50% Ownership Shift") shall be
allocated to that entity (i.e., Tenneco or Packaging Company) with respect to
which such Ownership Shift has occurred.
2.06 Liability Under 1996 Spin-Off Tax Sharing Agreement.
(a) With respect to any Tax liability imposed on or incurred by Tenneco (or
any Tax Benefit owing to Tenneco) under the Tax Sharing Agreement dated as of
December 11, 1996, as amended, by and among Tenneco, Newport News Shipbuilding
Inc., El Paso Natural Gas Company, and El Paso Tennessee
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Pipeline Co. ("Old Tenneco") (the "1996 Spin-Off Tax Sharing Agreement),
Packaging Company shall be liable for, and shall indemnify and hold the Tenneco
Group harmless from, any and all such Tax liabilities (and Packaging Company
shall be entitled to any and all such Tax Benefits) except to the extent such
Tax liability (or such Tax Benefit) would be treated as allocable to the Tenneco
Group under the terms of Sections 2.01 through 2.04 hereof, in which case the
Tenneco Group shall be liable for such Tax liability and shall be entitled to
such Tax Benefit. Any amount owed by Packaging Company under this Section 2.06
shall be paid by Packaging Company to Tenneco within 30 days from the date of
written notice and demand from Tenneco evidencing the payment of such amount by
Tenneco in accordance with the terms of the 1996 Spin-Off Tax Sharing Agreement.
Any amount due to Packaging Company under this Section 2.06 shall be paid to
Packaging Company by Tenneco within 30 days from the date of receipt of such
amount by Tenneco in accordance with the terms of the 1996 Spin-Off Tax Sharing
Agreement.
(b) The Companies agree that in the case of any dispute or controversy
under the 1996 Spin-Off Tax Sharing Agreement, (i) each Company shall control
the portion of such dispute or controversy that directly and exclusively relates
to a Tax liability or Tax Benefit borne by such Company under the terms hereof,
and (ii) to the extent any issue involved in, or aspect of, such dispute or
controversy does not directly and exclusively relate to the Tax liability or Tax
Benefits of one Company under the terms hereof, the Companies shall jointly
control and otherwise handle such issue or matter in accordance with the rules
for defense or prosecution of Joint Adjustments in Section 9.02(b) hereof. In
furtherance of the foregoing, Tenneco shall, upon Packaging Company's request,
execute such powers of attorney or other documentation as reasonably determined
by Packaging Company to be necessary or appropriate to permit Packaging Company
to fully exercise its rights under this Section 2.06(b). Each of Tenneco and
Packaging Company agree that, with respect to any issue which involves or could
involve the other Company's liability (or entitlement to payment) under the 1996
Spin-Off Tax Sharing Agreement pursuant to this Section 2.06, it shall not have
the right to settle such issue without the prior written consent of such other
Company.
SECTION 3. PRORATION OF TAXES FOR STRADDLE PERIODS.
3.01 General Method of Proration. In the case of any Straddle Period, Tax
Items shall be apportioned between Pre-Distribution Periods and
Post-Distribution Periods in accordance with the principles of Treasury
Regulation Section 1.1502-76(b) as reasonably interpreted and applied by the
Companies. No election shall be made under Treasury Regulation Section
1.1502-76(b)(2)(ii) (relating to ratable allocation of a year's items). If the
Distribution Date is not an Accounting Cutoff Date, the principles of Treasury
Regulation Section 1.1502-76(b)(2)(iii) will be applied to ratably allocate the
items (other than extraordinary items described in Treasury Regulation Section
1.1502-76(b)(2)(ii)(C)) for the month which includes the Distribution Date.
3.02 Transaction Treated as Extraordinary Item. In determining the
apportionment of Tax Items between Pre-Distribution Periods and
Post-Distribution Periods, any Tax Items relating to the Transactions shall be
treated as an extraordinary item described in Treasury Regulation Section
1.1502-76(b)(2)(ii)(C) and shall be allocated to Pre-Distribution Periods, and
any Taxes related to such items shall be treated under Treasury Regulation
Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item and shall be
allocated to Pre-Distribution Periods.
SECTION 4. PREPARATION AND FILING OF TAX RETURNS.
4.01 General. Except as otherwise provided in this Section 4, Tax Returns
shall be prepared and filed when due (including extensions) by the person
obligated to file such Tax Returns under the Code or applicable Tax Law. The
Companies shall provide, and shall cause their Affiliates to provide, assistance
and cooperate with one another in accordance with Section 7 with respect to the
preparation and filing of Tax Returns, including providing information required
to be provided in Section 7.
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4.02 Packaging Company's Responsibility. Packaging Company has the
exclusive obligation and right to prepare and file, or to cause to be prepared
and filed:
(a) Tenneco Federal Consolidated Returns for Tax Periods ending on or
before December 31, 1999.
(b) The U.S. federal Income Tax return for the affiliated group (as
that term is defined in Code Section 1504) of which Tenneco International
Holding Corp. is the common parent for Tax Periods ending on or before
December 31, 1999.
(c) Tax Returns for Separate Company State Income Taxes or
Consolidated or Combined State Income Taxes which the Companies reasonably
determine, in accordance with Tenneco's past practices, are required to be
filed by the Companies or any of their Affiliates for
Tax Periods ending on or before December 31, 1999 (including without
limitation, the filing of amended Tax Returns to take into account Federal
Income Tax adjustments or Carryback Items).
(d) Tax Returns that are required to be filed by the members of the
Packaging Group.
Nothing in this Section 4.02 shall impose on Packaging Company any liability for
any failure to file any Tax Return, or for failure to file any Tax Return when
due, with respect to any Pre-Distribution Period if the due date for such return
(including extensions) was prior to the Distribution Date.
4.03 Tenneco Responsibility. Tenneco shall prepare and file, or shall
cause to be prepared and filed, Tax Returns required to be filed by or with
respect to members of the Tenneco Group other than those Tax Returns which
Packaging Company is required to prepare and file under Section 4.02. The Tax
Returns required to be prepared and filed by Tenneco under this Section 4.03
shall include (a) the Tenneco Federal Consolidated Return for Tax Periods ending
after December 31, 1999, (b) the U.S. Federal Income Tax return for the
affiliated group (as that term is defined in Code Section 1504) of which Tenneco
International Holding Corp. is the common parent for Tax Periods ending after
December 31, 1999, and (c) Tax Returns for Consolidated or Combined State Income
Taxes which the Companies reasonably determine, in accordance with Tenneco's
past practices, are required to be filed by the Companies or any of their
Affiliates for Tax Periods ending after December 31, 1999.
4.04 Tax Accounting Practices.
(a) General Rule. Except as otherwise provided in this Section 4.04,
any Tax Return for any Pre-Distribution Period or any Straddle Period, and
any Tax Return for any Post-Distribution Period to the extent items
reported on such Tax Return might reasonably affect items reported on any
Tax Return for any Pre-Distribution Period or any Straddle Period, shall be
prepared in accordance with past Tax accounting practices used with respect
to the Tax Returns in question (unless such past practices are no longer
permissible under the Code or other applicable Tax Law), and to the extent
any items are not covered by past practices (or in the event such past
practices are no longer permissible under the Code or other applicable Tax
Law), in accordance with reasonable Tax accounting practices selected by
the Responsible Company.
(b) Reporting of Transaction Tax Items. The tax treatment reported on
any Tax Return of Tax Items relating to the Transactions shall be
consistent with the treatment of such item in the IRS Ruling Letter. To the
extent there is a Tax Item relating to the Transactions which is not
covered by the IRS Ruling Letter, the Companies shall agree on the tax
treatment of any such Tax Item reported on any Tax Return. For this
purpose, the tax treatment of such Tax Items on a Tax Return by the
Responsible Company with respect to such Tax Return shall be agreed to by
the other Company unless either (i) there is no reasonable basis for such
tax treatment, or (ii) such tax treatment is inconsistent with the tax
treatment contemplated in the Ruling Request. Such Tax Return shall be
submitted for review pursuant to Section 4.06(a), and any dispute regarding
such
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proper tax treatment shall be referred for resolution pursuant to Section
15, sufficiently in advance of the filing date of such Tax Return
(including extensions) to permit timely filing of the return.
4.05 Consolidated or Combined Returns. The Companies will elect and join,
and will cause their respective Affiliates to elect and join, in filing
consolidated, unitary, combined, or other similar joint Tax Returns, to the
extent each entity is eligible to join in such Tax Returns, if the Companies
reasonably determine that the filing of such Tax Returns is consistent with past
reporting practices, or in the absence of applicable past practices, will result
in the minimization of the net present value of the aggregate Tax to the
entities eligible to join in such Tax Returns.
4.06 Right to Review Tax Returns.
(a) General. The Responsible Company with respect to any Tax Return shall
make such Tax Return and related workpapers available for review by the other
Company, if requested, to the extent (i) such Tax Return relates to Taxes for
which the requesting party may be liable, (ii) such Tax Return relates to Taxes
for which the requesting party may be liable in whole or in part for any
additional Taxes owing as a result of adjustments to the amount of Taxes
reported on such Tax Return, (iii) such Tax Return relates to Taxes for which
the requesting party may have a claim for Tax Benefits under this Agreement, or
(iv) the requesting party reasonably determines that it must inspect such Tax
Return to confirm compliance with the terms of this Agreement. The Responsible
Company shall use its reasonable best efforts to make such Tax Return available
for review as required under this paragraph sufficiently in advance of the due
date for filing such Tax Returns to provide the requesting party with a
meaningful opportunity to analyze and comment on such Tax Returns and have such
Tax Returns modified before filing, taking into account the party responsible
for payment of the tax (if any) reported on such Tax Return and the materiality
of the amount of Tax liability with respect to such Tax Return. The Companies
shall attempt in good faith to resolve any issues arising out of the review of
such Tax Returns.
(b) Execution of Returns Prepared by Other Party. In the case of any Tax
Return which is required to be prepared and filed by one Company under this
Agreement and which is required by law to be signed by the other Company (or by
its authorized representative), the Company which is legally required to sign
such Tax Return shall not be required to sign such Tax Return under this
Agreement if there is no reasonable basis for the tax treatment of any material
items reported on the Tax Return.
4.07 Claims for Refund, Carrybacks, and Self-Audit Adjustments
("Adjustment Requests").
(a) Consent Required for Adjustment Requests Related to Consolidated or
Combined Income Taxes. Neither Company shall be entitled to file an Adjustment
Request with respect to any Consolidated or Combined Income Tax for a
Pre-Distribution Period without the consent in writing of the other Company
(which consent shall not be unreasonably withheld or delayed). Any Adjustment
Request which the Companies consent to make under this Section 4.07 shall be
prepared and filed by the Responsible Company under Section 4.02 for the Tax
Return to be adjusted. The Company requesting the Adjustment Request (if not the
Responsible Company) shall provide to the Responsible Company all information
required for the preparation and filing of such Adjustment Request in such form
and detail as reasonably requested by the Responsible Filing Company.
(b) Other Adjustment Requests Permitted. Nothing in this Section 4.07 shall
prevent any Company or its Affiliates from filing any Adjustment Request with
respect to Income Taxes which are not Consolidated or Combined Income Taxes or
with respect to any Taxes other than Income Taxes. Any refund or credit obtained
as a result of any such Adjustment Request (or otherwise) shall be for the
account of the person liable for the Tax under this Agreement.
(c) Ordering of and Payment for Carrybacks.
(i) In the event that a member of the Packaging Group, on the one
hand, and a member of the Tenneco Group, on the other hand, are each
entitled to carryback a Tax Item to a Pre-Distribution
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Period, the respective Tax Items shall be utilized under the rules of
applicable Tax Law (which shall be, in the case of Carrybacks to such Tax
Periods of the affiliated group of which Tenneco is the common parent, the
rules contained in Treasury Regulation Section 1.1502-21T).
(ii) Any Tax refund or other Tax Benefit resulting from the Carryback
of any member of one Group (the "Carryback Group") of any Tax Item arising
after the Distribution Date to a Pre-Distribution Period shall be for the
account of the Carryback Group (and in the event the Packaging Group is the
Carryback Group, Tenneco shall promptly pay to Packaging Company the amount
of such Tax refund or other Tax Benefit); provided, however, that if at the
time of the utilization of the Carryback Items of a member of the Carryback
Group, a member of the other Group (the "Other Group") possesses Carryback
Tax Items which, but for the ordering rule set forth in Section 4.07(c)(i),
would have been available to be utilized (the "Available Other Group
Carryback") in lieu of the Carryback Group's Tax Items, then (but only to
the extent of the Available Other Group Carryback) the Carryback Group
shall not be entitled to payment of the amount of such Tax refund or Tax
Benefit until the earlier of (X) the date on which a member of the Other
Group claims the Available Other Group Carryback on a Tax Return or (Y) the
date on which a member of the Carryback Group would have been able to
utilize the Carryback had it not been claimed with respect to the
Pre-Distribution Period Tax Return.
(iii) In the event the Carryback of Tax Items of a member of the
Packaging Group, or the Tenneco Group, as the case may be, does not result
in a Tax refund, due to an offsetting Tax adjustment to a member of the
Other Group, then the Other Group shall promptly pay the amount of any
decrease in Tax liability resulting from the Carryback claim, provided,
however, that in the event the Other Group possesses Carryback Items which,
but for the ordering rules of Section 4.07(c)(i) would have been available
to be utilized in lieu of the Carryback Group's Tax Items, then (but only
to the extent of the Available Other Group Carryback), the Other Group
shall not be required to pay the amount of such decrease in Tax liability
to the Carryback Group until the earlier of (X) the date on which a member
of the Other Group claims the Available Other Group Carryback on a Tax
Return or (Y) the date on which a member of the Carryback Group would have
been able to utilize the Carryback had it not been claimed with respect to
the Pre-Distribution Period Tax Return.
(d) Payment of Refunds. Except as otherwise provided in Section
4.07(c), any refunds or other Tax Benefits received by any Company (or any
of its Affiliates) as a result of any Adjustment Request which are for the
account of another Company (or member of such other Company's Group) shall
be paid by the Company receiving (or whose Affiliate received) such refund
or Tax Benefit to such other Company in accordance with Section 6.
SECTION 5. TAX PAYMENTS AND INTERCOMPANY BILLINGS.
5.01 Payment of Taxes With Respect to Post-Distribution Tenneco Federal
Consolidated Returns. In the case of the Tenneco Federal Consolidated Tax Return
for the 1999 Tax Period:
(a) Computation and Payment of Tax Due. At least three business days
prior to the Payment Date with respect to the Tenneco Federal Consolidated
Tax Return for the 1999 Tax Period, Packaging Company shall compute the
amount of Tax required to be paid to the Internal Revenue Service (taking
into account the requirements of Section 4.04 relating to consistent
accounting practices) with respect to such Tax Return, and Packaging
Company shall notify Tenneco in writing of the amount of Tax required to be
paid on such Payment Date. Tenneco will pay such amount to the Internal
Revenue Service on or before such Payment Date.
(b) Computation and Payment of Packaging Company Liability With
Respect to Tax Due.
(i) Within 30 days of the determination date under Section
2.01(a)(vi) with respect to the Tenneco Federal Consolidated Tax Return
for the 1999 Tax Period, Packaging Company shall pay to Tenneco an
amount equal to the True-Up Amount, if positive, as determined under
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Section 2.02(a)(vii). In the event the Packaging Group's True-Up Amount,
as determined under Section 2.02(a)(vii) is negative, Tenneco shall pay
such amount to Packaging Company within 30 days of the Payment Date with
respect to the Tenneco Federal Consolidated Return for the 1999 Tax
Period.
(ii) In the event of a redetermination of the Benchmark 1997 Loss
Allocation Carryforward or Benchmark 1998 Loss Allocation Carryforward
pursuant to Section 2.02(a)(iii), Packaging Company shall pay to
Tenneco, or Tenneco shall pay to Packaging Company, the amount, if any,
required to be paid pursuant to the last sentence of Section
2.02(a)(iii), which payment shall be due within 30 days of such
redetermination.
(b) Interest on Intergroup Tax Allocation Payments. In the case of any
payments to Tenneco required under paragraph (b) of this subsection 5.01,
Packaging Company shall also pay to Tenneco an amount of interest computed
at the Prime Rate on the amount of the payment required based on the number
of days from the applicable Payment Date to the date of payment. In the
case of any payments by Tenneco required under paragraph (b) of this
subsection 5.01, Tenneco shall also pay to Packaging Company an amount of
interest computed at the Prime Rate on the amount of the payment required
based on the number of days from the date of receipt of the Tax Benefit to
the date of payment of such amount to Packaging Company.
5.02 Payment of Federal Income Tax Related to Adjustments.
(a) Adjustments Resulting in Underpayments. Tenneco shall pay to the
Internal Revenue Service when due any additional Federal Income Tax required to
be paid as a result of any adjustment to the Tax liability with respect to any
Tenneco Federal Consolidated Return for any Pre-Distribution Period. The
Responsible Company shall compute the amount attributable to the Packaging Group
in accordance with Section 2.02(b) and Packaging Company shall pay to Tenneco
any amount due Tenneco under Section 2.02(b) within 30 days from the later of
(i) the date the additional Tax was paid by Tenneco or (ii) the date of receipt
by Packaging Company of a written notice and demand from Tenneco for payment of
the amount due, accompanied by evidence of payment and a statement detailing the
Taxes paid and describing in reasonable detail the particulars relating thereto.
Any amount due to Packaging Company under Section 2.02(b) shall be paid by
Tenneco to Packaging Company within 30 days from the date the additional Tax was
paid by Tenneco to the Internal Revenue Service. Any payments required under
this Section 5.02(a) shall include interest computed at the Prime Rate based on
the number of days from the date the additional Tax was paid by Tenneco to the
date of the payment under this Section 5.02(a).
(b) Adjustments Resulting in Overpayments. Within 30 days of receipt by
Tenneco of any Tax Benefit resulting from any adjustment to the Consolidated Tax
Liability with respect to any Tenneco Federal Consolidated Return for any
Pre-Distribution Period, Tenneco shall pay to Packaging Company or Packaging
Company shall pay to Tenneco (as the case may be), respective amounts due from
or to Tenneco as determined by the Responsible Company in accordance with
Section 2.02(b). Any payments required under this Section 5.02(b) shall include
interest computed at the Prime Rate based on the number of days from the date
the Tax Benefit was received by Tenneco to the date of payment to under this
Section 5.02(b).
5.03 Payment of State Income Tax With Respect to Post-Distribution State
Income Tax Returns.
(a) Computation and Payment of Tax Due. At least three business days prior
to any Payment Date for any Tax Return with respect to any State Income Tax
(except for post-Distribution estimated Tax payments which shall be governed by
Section 2.03(a)(iii)), the Responsible Company shall compute the amount of Tax
required to be paid to the applicable Tax Authority (taking into account the
requirements
TENNECO DISTRIBUTION AGREEMENT
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of Section 4.04 relating to consistent accounting practices) with respect to
such Tax Return on such Payment Date and:
(i) If such Tax Return is with respect to a Consolidated or Combined
State Income Tax, the Responsible Company shall, if Tenneco is not the
Responsible Company with respect to such Tax Return, notify Tenneco in
writing of the amount of Tax required to be paid on such Payment Date.
Tenneco will pay such amount to such Tax Authority on or before such
Payment Date.
(ii) If such Tax Return is with respect to a Separate Company Tax, the
Responsible Company shall, if it is not the Company liable for the Tax
reported on such Tax Return, notify the Company liable for such Tax in
writing of the amount of Tax required to be paid on such Payment Date. The
Company liable for such Tax will pay such amount to such Tax Authority on
or before such Payment Date.
(b) Computation and Payment of Packaging Company Liability. With respect to
the Consolidated or Combined State Income Tax Returns (excluding any Tax Return
with respect to payment of estimated Taxes or Taxes due with a request for
extension of time to file), within 120 days of the due date (including
extensions) for filing of the Consolidated or Combined Tax Return with the
latest due date for filing of all such Consolidated or Combined Tax Returns,
Packaging Company shall pay to Tenneco the Tax liability allocable to the
Packaging Group, or Tenneco shall pay to Packaging Company amounts owing to
Packaging Company, as the case may be, as determined by the Responsible Company
under the provisions of Section 2.03(a), plus interest computed at the Prime
Rate on the amount of the payment based on the number of days from such latest
due date (including extensions) to the date of payment.
5.04 Payment of State Income Taxes Related to Consolidated or Combined
State Income Tax Adjustments.
(a) Adjustments Resulting in Underpayments. Tenneco shall pay to the
applicable Tax Authority when due any additional State Income Tax required to be
paid as a result of any adjustment to the Tax liability with respect to any Tax
Return for any Consolidated or Combined State Income Tax for any Pre-
Distribution Period. Packaging Company shall pay to Tenneco its share of any
such additional Tax payment determined by the Responsible Company in accordance
with Section 2.03(b) within 120 days from the later of (i) the date the
additional Tax was paid by Tenneco or (ii) the date of receipt by Packaging
Company of a written notice and demand from Tenneco for payment of the amount
due, accompanied by evidence of payment and a statement detailing the Taxes paid
and describing in reasonable detail the particulars relating thereto. Packaging
Company shall also pay to Tenneco interest on its share of such additional Tax
computed at the Prime Rate based on the number of days from the date the
additional Tax was paid by Tenneco to the date of payment to Tenneco under this
Section 5.04(a). Any amount due to Packaging Company under Section 2.03(b) shall
be paid within 30 days from the date the additional Tax was paid by Tenneco to
the applicable Tax Authority (including interest computed at the Prime Rate
based on the number of days from the date the additional Tax was paid by Tenneco
to the date of payment to Packaging Company).
(b) Adjustments Resulting in Overpayments. In the case of any Tax Benefits
resulting from any adjustment to any Tax Return for any Consolidated or Combined
State Income Tax for any Pre-Distribution Period, Tenneco shall pay to Packaging
Company or Packaging Company shall pay to Tenneco (as the case may be)
respective amounts due from or to Tenneco as determined in accordance with
Section 2.03(b). Any payments owing to Packaging Company under this Section
5.04(b) shall be made within 60 days of the earlier of (i) the date of receipt
of the Tax Benefit by Tenneco or (ii) receipt by Tenneco of a written notice and
demand from Packaging Company evidencing the filing of the applicable
Consolidated or Combined Income Tax Return containing the relevant adjustments
and detailing the extent to which the resulting Tax Benefit is attributable to
Packaging Company. Any payments owing to Tenneco under this Section 5.04(b)
shall be made within 30 days of Tenneco's receipt
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of any Tax Benefit resulting from the adjustment to the applicable Consolidated
or Combined State Income Tax Return. Any payments required under this Section
5.04(b) shall include interest computed at the Prime Rate based on the number of
days from the date the Tax Benefit was received by Tenneco to the date of
payment to Packaging Company under this Section 5.04(b).
5.05 Payment of Separate Company Taxes. Each Company shall pay, or shall
cause to be paid, to the applicable Tax Authority when due all Separate Company
Taxes owed by such Company or a member of such Company's Group.
5.06 Indemnification Payments. If any Company (the "payor") is required to
pay to a Tax Authority a Tax that another Company (the "responsible party") is
liable for under this Agreement, the responsible party shall reimburse the payor
within 30 days of delivery by the payor to the responsible party of an invoice
for the amount due, accompanied by evidence of payment and a statement detailing
the Taxes paid and describing in reasonable detail the particulars relating
thereto. The reimbursement shall include interest on the Tax payment computed at
the Prime Rate based on the number of days from the date of the payment to the
Tax Authority to the date of reimbursement under this Section 5.06.
SECTION 6. TAX BENEFITS.
6.01 General Rule.
(a) If a member of one Group receives a Tax refund with respect to Taxes
for which a member of the other Group is liable hereunder, the Company receiving
such Tax refund shall make a payment to the Company who is liable for such Taxes
hereunder within 30 days following receipt of the Tax refund in an amount equal
to such Tax refund, plus interest on such amount computed at the Prime Rate
based on the number of days from the date of receipt of the Tax refund to the
date of payment under this Section 6.01.
(b) In the event one Group is reimbursed for its payment of a Tax liability
of the other Group, the amount of such reimbursement shall be computed net of
any Tax Benefit realized by the reimbursed Group as the result of payment of the
other Group's Tax liability.
6.02 Adjustment of Tax Attributes. In the event that the Carryback of Tax
Items of one Group, or a Tax adjustment attributable to such Group under the
terms of this Agreement, results in the disallowance or limitation of Tax
attributes (including Tax credits, deductions and similar items) claimed on the
Tax Return as filed, the Carryback Group shall be responsible for any increase
in Tax liability resulting from the disallowance or limitation of such Tax
attributes; provided, however, that in the event the disallowance or limitation
of Tax attributes results in a Tax Benefit resulting from the use of such Tax
attributes in another Tax Period, such Tax Benefit shall be deemed to be for the
account of the Carryback Group for purposes of this Agreement.
6.03 Correlative Adjustments. If, upon examination by any Tax Authority of
any Tax Return including a member of the Tenneco Group or Packaging Group for
any Tax Period, an item of deduction, credit or expense is disallowed for which
Tenneco is or may be liable for Taxes hereunder (or an item of income is
required to be recognized on a Tax Return which was not reported on such Tax
Return), in either such case resulting in a tax detriment suffered by the
Tenneco Group, and such disallowance (or recognition) results in a Tax Benefit
to the Packaging Group (with respect to that Tax Period or another Tax Period),
then Packaging shall pay to Tenneco the amount of such Tax Benefit (but in no
case to exceed the corresponding tax detriment). Any payment required to be made
hereunder shall be made when such Tax Benefit is realized in the form of an
actual reduction in Tax (which shall be computed by comparing the Tax which
would have been owed by Packaging but for the item giving rise to the Tax
Benefit with the Tax owed by Packaging taking such item into account). The
provisions of this Section 6.03 shall apply mutatis mutandis where an item of
deduction, credit or expense is disallowed for which Packaging is or may be
liable for Taxes hereunder (or an item of income is required to be recognized on
a Tax Return which was not reported on such Tax Return), as they apply where the
Tenneco Group suffers such a tax detriment. For avoidance of doubt, any payment
required to be made by
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Tenneco to the Packaging Group under this Section 6.03 shall, to the extent
applicable, be deemed as an offset to amounts owing by Packaging to Tenneco
under Section 2.02 hereof.
SECTION 7. ASSISTANCE AND COOPERATION.
7.01 General. After the Distribution Date, each of the Companies shall
cooperate (and cause their respective Affiliates to cooperate) with each other
and with each other's agents, including accounting firms and legal counsel, in
connection with Tax matters relating to the Companies and their Affiliates
including (i) preparation and filing of Tax Returns, (ii) determining the
liability for and amount of any Taxes due (including estimated Taxes) or the
right to and amount of any refund of Taxes, (iii) examinations of Tax Returns,
and (iv) any administrative or judicial proceeding in respect of Taxes assessed
or proposed to be assessed. Such cooperation shall include making all
information and documents in their possession relating to the other Companies
and their Affiliates available to such other Companies as provided in Section 8.
Each of the Companies shall also make available to each other, as reasonably
requested and available, personnel (including officers, directors, employees and
agents of the Companies or their respective Affiliates) responsible for
preparing, maintaining, and interpreting information and documents relevant to
Taxes, and personnel reasonably required as witnesses or for purposes of
providing information or documents in connection with any administrative or
judicial proceedings relating to Taxes. Any information or documents provided
under this Section 7 shall be kept confidential by the Company receiving the
information or documents, except as may otherwise be necessary in connection
with the filing of Tax Returns or in connection with any administrative or
judicial proceedings relating to Taxes.
7.02 Income Tax Return Information. Each Company will provide to the other
Company information and documents relating to their respective Groups required
by the other Company to prepare Tax Returns. The Responsible Company shall
determine a reasonable compliance schedule for such purpose in accordance with
Tenneco's past practices. Any additional information or documents the
Responsible Company requires to prepare such Tax Returns will be provided in
accordance with past practices, if any, or as the Responsible Company reasonably
requests and in sufficient time for the Responsible Company to file such Tax
Returns timely.
SECTION 8. TAX RECORDS.
8.01 Retention of Tax Records. Except as provided in Section 8.02, each
Company shall preserve and keep all Tax Records exclusively relating to the
assets and activities of its Group for Pre-Distribution Tax Periods, and Tenneco
shall preserve and keep all other Tax Records relating to Taxes of the Groups
for Pre-Distribution Tax Periods, for so long as the contents thereof may become
material in the administration of any matter under the Code or other applicable
Tax Law, but in any event until the later of (i) the expiration of any
applicable statutes of limitation, and (ii) seven years after the Distribution
Date. If, prior to the expiration of the applicable statute of limitation and
such seven-year period, a Company reasonably determines that any Tax Records
which it is required to preserve and keep under this Section 8 are no longer
material in the administration of any matter under the Code or other applicable
Tax Law, such Company may dispose of such records upon 90 days prior notice to
the other Company. Such notice shall include a list of the records to be
disposed of describing in reasonable detail each file, book, or other record
accumulation being disposed. The notified Company shall have the opportunity, at
its cost and expense, to copy or remove, within such 90-day period, all or any
part of such Tax Records.
8.02 State Income Tax Returns. Tax Returns with respect to State Income
Taxes and workpapers prepared in connection with preparing such Tax Returns
shall be preserved and kept, in accordance with the guidelines of Section 8.01,
by the Company responsible for preparing and filing the applicable Tax Return.
8.03 Access to Tax Records. The Companies and their respective Affiliates
shall make available to each other for inspection and copying during normal
business hours upon reasonable notice all Tax
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Records in their possession to the extent reasonably required by the other
Company in connection with the preparation of Tax Returns, audits, litigation,
or the resolution of items under this Agreement.
SECTION 9. TAX CONTESTS.
9.01 Notice. Each of the parties shall provide prompt notice to the other
party of any pending or threatened Tax audit, assessment or proceeding or other
Tax Contest of which it becomes aware related to Taxes for Tax Periods for which
it is indemnified by the other party hereunder. Such notice shall contain
factual information (to the extent known) describing any asserted Tax liability
in reasonable detail and shall be accompanied by copies of any notice and other
documents received from any Tax Authority in respect of any such matters. If an
indemnified party has knowledge of an asserted Tax liability with respect to a
matter for which it is to be indemnified hereunder and such party fails to give
the indemnifying party prompt notice of such asserted Tax liability, then (i) if
the indemnifying party is precluded from contesting the asserted Tax liability
in any forum as a result of the failure to give prompt notice, the indemnifying
party shall have no obligation to indemnify the indemnified party for any Taxes
arising out of such asserted Tax liability, and (ii) if the indemnifying party
is not precluded from contesting the asserted Tax liability in any forum, but
such failure to give prompt notice results in a monetary detriment to the
indemnifying party, then any amount which the indemnifying party is otherwise
required to pay the indemnified party pursuant to this Agreement shall be
reduced by the amount of such detriment.
9.02 Control of Tax Contests.
(a) Separate Company Taxes. In the case of any Tax Contest with respect to
any Separate Company Tax, the Company having liability for the Tax shall have
exclusive control over the Tax Contest, including exclusive authority with
respect to any settlement of such Tax liability.
(b) Consolidated or Combined Income Taxes. In the case of any Tax Contest
with respect to any Consolidated or Combined Income Tax, (i) Tenneco shall
control the defense or prosecution of the portion of the Tax Contest directly
and exclusively related to any Tenneco Adjustment, including settlement of any
such Tenneco Adjustment, and (ii) Packaging Company shall control the defense or
prosecution of the portion of the Tax Contest directly and exclusively related
to any Packaging Adjustment, including any settlement of any Packaging
Adjustment, and (iii) the two-person committee (the "Tax Contest Committee"),
comprised of one person selected by Packaging Company (as designated in writing
to Tenneco) and one person selected by Tenneco (as designated in writing to
Packaging Company) shall control the defense or prosecution of Joint Adjustments
and any and all administrative matters not directly and exclusively related to
any Tenneco Adjustment. Each person serving on the Tax Contest Committee shall
continue to serve unless and until he or she is replaced by the party
designating such person. Any and all matters to be decided by the Tax Contest
Committee shall require the unanimous approval of both persons serving on the
committee. In the event the Tax Contest Committee shall be deadlocked on any
matter, the provisions of Section 15 of this Agreement shall apply. A Company
shall not agree to any Tax liability for which another Company may be liable
under this Agreement, or compromise any claim for any Tax Benefit which another
Company may be entitled under this Agreement, without such other Company's
written consent (which consent may be given or withheld at the sole discretion
of the Company from which the consent would be required).
SECTION 10. EFFECTIVE DATE; TERMINATION OF PRIOR INTERCOMPANY TAX
ALLOCATION AGREEMENTS. This Agreement shall be effective on the Distribution
Date. Immediately prior to the close of business on the Distribution Date
Tenneco shall cause all Prior Intercompany Tax Allocation Agreements to be
terminated with respect to Packaging Company and its Affiliates. Upon such
termination, no further payments by or to Tenneco or by or to Packaging Company,
with respect to such agreements shall be made, and all other rights and
obligations resulting from such agreements between the Companies and their
Affiliates shall cease at such time.
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SECTION 11. NO INCONSISTENT ACTIONS. Each of the Companies covenants and
agrees that it will not take any action, and it will cause its Affiliates to
refrain from taking any action, which is inconsistent with the Tax treatment of
the Transactions as contemplated in the Ruling Request (any such action is
referred to in this Section 11 as a "Prohibited Action"), unless such Prohibited
Action is required by law, or the person acting has obtained the prior written
consent of each of the other parties (which consent shall not be unreasonably
withheld). With respect to any Prohibited Action proposed by a Company (the
"Requesting Party"), the other party (the "Requested Party") shall grant its
consent to such Prohibited Action if the Requesting Party obtains a ruling with
respect to the Prohibited Action from the Internal Revenue Service or other
applicable Tax Authority that is reasonably satisfactory to each of the
Requested Party (except that the Requesting Party shall not submit any such
ruling request if a Requested Party deter mines in good faith that filing such
request might have a materially adverse effect upon such Requested Party).
Without limiting the foregoing:
(a) No Inconsistent Plan or Intent. Packaging Company and Tenneco each
represent and warrant that neither it nor any of its Affiliates has any
plan or intent to take any action which is inconsistent with any factual
statements or representations in the Ruling Request. Regardless of any
change in circumstances, Packaging Company and Tenneco each covenant and
agree that it will not take, and it will cause its Affiliates to refrain
from taking, any such inconsistent action on or before the last day of the
calendar year ending after the second anniversary of the Distribution Date,
other than as permitted in this Section 11.
(b) 355(e) Covenant. Without in any manner limiting paragraph (a)
above, each of Packaging Company and Tenneco covenants and agrees that it
will not enter into any negotiations, agreement or arrangements with
respect to transactions or events (including stock issuances, option
grants, capital contributions or acquisitions, but not including the
Transactions), which may cause the Distribution to be treated as part of a
plan pursuant to which one or more persons acquire directly or indirectly
Packaging Company or Tenneco stock, as the case may be, representing a
"50-percent or greater interest" within the meaning of Section 355(d)(4) of
the Code.
(c) Amended or Supplemental Rulings. Each of the Companies covenants
and agrees that it will not file, and it will cause its Affiliates to
refrain from filing, any amendment or supplement to the Ruling Request
subsequent to the Distribution Date without the consent of the other
Company, which consent shall not be unreasonably withheld or delayed.
SECTION 12. SURVIVAL OF OBLIGATIONS. The representations, warranties,
covenants and agreements set forth in this Agreement shall be unconditional and
absolute and shall remain in effect without limitation as to time.
SECTION 13. EMPLOYEE MATTERS. Each of the Companies agrees to utilize, or
cause its Affiliates to utilize, the alternative procedure set forth in respect
to wage reporting set forth in Revenue Procedure 96-60, 1996-2 C.B. 399, with
respect to wage reporting.
SECTION 14. TREATMENT OF PAYMENTS; TAX GROSS UP.
14.01 Treatment of Tax Indemnity and Tax Benefit Payments. In the absence
of any change in tax treatment under the Code or other applicable Tax Law,
(a) any Tax indemnity payments made by a Company under Section 5 shall be
reported for Tax purposes by the payor and the recipient as distributions or
capital contributions, as appropriate, occurring immediately before the
distribution of all of the outstanding stock of Packaging Company to Tenneco
shareholders on the Distribution Date, and
(b) any Tax Benefit payments made by a Company under Section 6, shall be
reported for Tax purposes by the payor and the recipient as distributions or
capital contributions, as appropriate, occurring
TENNECO DISTRIBUTION AGREEMENT
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immediately before the distribution of all of the outstanding stock of Packaging
Company to Tenneco shareholders on the Distribution Date.
14.02 Tax Gross Up. If notwithstanding the manner in which Tax indemnity
payments and Tax Benefit payments were reported, there is an adjustment to the
Tax liability of a Company as a result of its receipt of a payment pursuant to
this Agreement, such payment shall be appropriately adjusted so that the amount
of such payment, reduced by the amount of all Income Taxes payable with respect
to the receipt thereof (but taking into account all correlative Tax Benefits
resulting from the payment of such Income Taxes), shall equal the amount of the
payment which the Company receiving such payment would otherwise be entitled to
receive pursuant to this Agreement.
14.03 Interest Under This Agreement. Anything herein to the contrary
notwithstanding, to the extent one Company ("indemnitor") makes a payment of
interest to another Company ("indemnitee") under this Agreement with respect to
the period from the date that the indemnitee made a payment of Tax to a Tax
Authority to the date that the indemnitor reimbursed the indemnitee for such Tax
payment, or with respect to the period from the date that the indemnitor
received a Tax Benefit to the date indemnitor paid the Tax Benefit to the
indemnitee, the interest payment shall be treated as interest expense to the
indemnitor (deductible to the extent provided by law) and as interest income by
the indemnitee (includible in income to the extent provided by law). The amount
of the payment shall not be adjusted under Section 14.02 to take into account
any associated Tax Benefit to the indemnitor or increase in Tax to the
indemnitee.
SECTION 15. DISAGREEMENTS. If after good faith negotiations the parties
cannot agree on the application of this Agreement to any matter, then the matter
will be referred to a nationally recognized accounting firm acceptable to each
of the parties (the "Accounting Firm"). The Accounting Firm shall furnish
written notice to the parties of its resolution of any such disagreement as soon
as practical, but in any event no later than 45 days after its acceptance of the
matter for resolution. Any such resolution by the Accounting Firm will be
conclusive and binding on all parties to this Agreement. In accordance with
Section 17, each party shall pay its own fees and expenses (including the fees
and expenses of its representatives) incurred in connection with the referral of
the matter to the Accounting Firm. All fees and expenses of the Accounting Firm
in connection with such referral shall be shared equally by the parties affected
by the matter.
SECTION 16. LATE PAYMENTS. Any amount owed by one party to another party
under this Agreement which is not paid when due shall bear interest at the Prime
Rate plus two percent, compounded semiannually, from the due date of the payment
to the date paid. To the extent interest required to be paid under this Section
16 duplicates interest required to be paid under any other provision of this
Agreement, interest shall be computed at the higher of the interest rate
provided under this Section 16 or the interest rate provided under such other
provision.
SECTION 17. EXPENSES. Except as provided in Section 15, each party and its
Affiliates shall bear their own expenses incurred in connection with preparation
of Tax Returns, Tax Contests, and other matters related to Taxes under the
provisions of this Agreement.
SECTION 18. SPECIAL RULES FOR DETERMINING MEMBERS OF GROUPS. For purposes
of this Agreement, the following special rules shall apply for determining the
members of the Packaging Group:
(a) Former Affiliates of Packaging Group. The Packaging Group shall be
deemed to include any corporation which (1) was a member of the affiliated
group (as defined in Code Section 1504(a), but treating all corporations as
"includable corporations" for purposes of such Code Section) of which
Tenneco is (or Old Tenneco was) the common parent, (2) was included in the
"packaging," "specialty packaging" or "paperboard packaging" segments for
purposes of segment reporting in Tenneco's (or Old Tenneco's) Annual
Reports on Form 10-K and (3) was sold, transferred, otherwise
TENNECO DISTRIBUTION AGREEMENT
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disposed of, or discontinued prior to the date hereof. Any entity
substantially all of the assets and liabilities of which have been
transferred to a member of the Packaging Group (e.g., by a statutory
merger) shall be treated as a member of the Packaging Group. For example,
Tenneco Packaging Specialty and Consumer Products Inc., a Delaware
corporation, shall, by virtue of its liquidation into Tenneco Packaging
Inc., be treated as a member of the Packaging Group. Similarly, Tenneco
United Kingdom Holdings Limited shall be treated as a member of the
Packaging Group.
SECTION 19. GENERAL PROVISIONS.
19.01 Addresses and Notices. Any notice, demand, request or report
required or permitted to be given or made to any party under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class mail or by other commercially reasonable means of
written communication (including delivery by an internationally recognized
courier service or by facsimile transmission) to the party at the party's
address as follows:
If to Tenneco:
With a copy to:
If to Packaging Company:
With a copy to:
A party may change the address for receiving notices under this Agreement
by providing written notice of the change of address to the other parties.
19.02 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors and assigns.
19.03 Waiver. No failure by any party to insist upon the strict
performance of any obligation under this Agreement or to exercise any right or
remedy under this Agreement shall constitute waiver of any such obligation,
right, or remedy or any other obligation, rights, or remedies under this
Agreement.
19.04 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.
19.05 Further Action. The parties shall execute and deliver all documents,
provide all information, and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement, including
the execution and delivery to the other parties and their Affiliates and
representatives of such powers of attorney or other authorizing documentation as
is reasonably necessary or appropriate in connection with Tax Contests (or
portions thereof) under the control of such other parties in accordance with
Section 9.
19.06 Integration. This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter of this Agreement and supersedes
all prior agreements and understandings pertaining thereto. In the event of any
inconsistency between this Agreement and the Distribution Agreement or any other
agreements relating to the transactions contemplated by the Distribution
Agreement, the provisions of this Agreement shall control.
19.07 Construction. The language in all parts of this Agreement shall in
all cases be construed according to its fair meaning and shall not be strictly
construed for or against any party.
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19.08 No Double Recovery; Subrogation. No provision of this Agreement
shall be construed to provide an indemnity or other recovery for any Taxes
costs, damages, or other amounts (including Tax Benefits) for which the damaged
party has been fully compensated under any other provision of this Agreement or
under any other agreement or action at law or equity. Unless expressly required
in this Agreement, a party shall not be required to exhaust all remedies
available under other agreements or at law or equity before recovering under the
remedies provided in this Agreement. Subject to any limitations provided in this
Agreement (for example, the limitation on filing claims for refund in Section
4.07), the indemnifying party shall be subrogated to all rights of the
indemnified party for recovery from any third party.
19.09 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
19.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts
executed in and to be performed in that State.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by the respective officers as of the date set forth above.
TENNECO INC.
By:
----------------------------------
Its:
------------------------------------
By:
----------------------------------
Its:
TENNECO DISTRIBUTION AGREEMENT
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EXHIBIT I
SHARED AGREEMENTS
SECTION 1.
1. Corporate Travel Agreement dated as of November 30, 1998 by and between
American Airlines, Inc. and Tenneco Business Services Inc. (travel incentive).
2. Corporate Supply Agreement dated as of July 1, 1996 by and between Boise
Cascade Office Products Corporation and Tenneco Business Services Inc. (office
supplies).
3. Corporate Supply Agreement dated as of February 1, 1999 by and between
Bowman Distribution Division of Barnes Group, Inc. and Tenneco Business Services
Inc. (fasteners).
4. Corporate Agreement dated as of October 30, 1998 by and between Delta
Air Lines, Inc. (on its own behalf and on behalf of Austrian Airlines, N.V.
Sabena S.A. and Swiss Air Transport Company) and Tenneco Business Services Inc.
(air travel incentive).
5. Global Pricing Agreement dated as of February 4, 1998 by and between
Federal Express Corporation and Tenneco Business Services Inc. (package
delivery).
6. Corporate Account Agreement dated as of October 17, 1998 by and between
The Hertz Corporation and Tenneco Business Services Inc. (vehicle rental).
7. Agreement for Services dated as of May 16, 1996 by and between Kelly
Services, Inc. and Tenneco Business Services Inc. (services/temporary workers).
8. Supply Agreement dated as of August 31, 1995 by and among Motion
Industries, Inc., Berry Bearing Company, a division of Motion Industries, Inc.
and Tenneco Business Services Inc. (bearings, etc.).
9. Preferred Carrier Agreement dated as 1998 by and between Northwest
Airlines, Inc. and Tenneco Business Services Inc. (travel incentive).
10. Security Services Contract dated as of September 15, 1995 by and
between Per Mar Security and Research Corp. and Tenneco Business Services Inc.
(security services).
11. Travel Services Agreement dated as of September 3, 1996 by and between
Rosenbluth International, Inc. and Tenneco Business Services Inc. (travel
services).
12. Agreement by and between Equilon Enterprises LLC (formerly Texaco
Lubricants Company) and Tenneco Business Services Inc. (industrial lubricants).
13. UPS Ground, Air and International Incentive Program dated as of April
28, 1997 by and between United Parcel Service, Inc. and Tenneco Business
Services Inc. (carrier/package delivery).
14. Corporate Supply Agreement dated as of April 1996 by and between
Wallace Computer Services, Inc. and Tenneco Business Services Inc. (business
forms).
15. Corporate Supply Agreement dated as of June 1, 1997 by and between
WESCO Distribution Inc. and Tenneco Business Services Inc. (electrical
supplies).
16. Copier Outsourcing Agreement and Various Configuration Changes and
Amendments dated as of May 8, 1996 by and between Xerox Business Services, a
division of Xerox Corporation, and Tenneco Business Services Inc. (copiers).
TENNECO DISTRIBUTION AGREEMENT
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SECTION 2.
1. Services Agreement dated as of November 30, 1998 by and between Aaron
Security & Investigation, Inc. and Tenneco Business Services Inc. (security
services).
2. Purchasing Card Agreement dated as of March 18, 1996 by and between
Citibank (South Dakota) N.A. and Tenneco Business Services Inc., including its
parent Tenneco Inc. (purchasing card/credit card).
3. Purchasing Card Agreement dated as of April 2, 1998 by and between
Citibank Canada and Tenneco Business Services Inc. (Canadian purchasing card
program).
4. Consultancy Services Agreement dated as of April 1, 1997 by and between
Dames & Moore and Tenneco Business Services Inc. (environmental
services/audits).
5. Central Travel System (CTS) Program Agreement dated as of July 11, 1996
by and between First Bank of South Dakota (National Association) and Tenneco
Business Services Inc. (credit card/travel and entertainment card).
6. Corporate Card Program Agreement dated as of July 11, 1996 by and
between First Bank of South Dakota (National Association) and Tenneco Business
Services Inc. (corporate card program).
7. Agreement by and between Fuchs Lubricants Company and Tenneco Business
Services Inc. (lubricants).
8. National Account Service Agreement dated as of February 3, 1999 by and
between G&K Services and Tenneco Business Services Inc. (uniforms).
9. Amended and Restated Administrative Service Agreement dated as of April
9, 1999 by and between Hewitt Associates LLC and Tenneco Business Services Inc.
(administrative services).
10. Supplier Management Agreement dated as of April 26, 1996 by and between
Lyons Safety, Inc. and Tenneco Business Services Inc. (safety equipment).
11. Special Customer Arrangement dated as of March 5, 1999 by and between
MCI Telecommunications Corporation and Tenneco Business Services Inc.
(telecommunication services).
12. Performance Based Contract for Services dated as of March 17, 1997 by
and between Price Waterhouse LLP and Tenneco Business Services Inc.
(international assignment services).
13. Relocation Services Agreement dated as of March 15, 1996 by and between
Prudential Residential Services Limited Partnership d/b/a Prudential Resources
Management, Tennessee Gas Pipeline Company and Tenneco Business Services Inc.
(relocation services).
14. Corporate Visa Card Agreement undated by and between Royal Bank of
Canada and Tenneco Business Services Inc. (credit card/Canadian travel card).
15. Parts Washing and Waste Disposal Services Agreement dated as of 1997 by
and between Safety-Kleen Corp. and Tenneco Business Services Inc. (parts
washing/waste disposal services).
16. Corporate Volume Agreement dated as of September 22, 1998 by and
between United Air Lines, Inc. and Tenneco Business Services Inc. (travel
incentive).
17. Services Contract dated as of September 1, 1995 by and between The
Wackenhut Corporation and Tenneco Business Services Inc. (security services).
18. Lease dated as of November 19, 1992 by and between Wheels, Inc. and
Tenneco Business Services Inc. (original agreement with Tennessee Gas &
Pipeline, assigned to TBS) (vehicle lease).
TENNECO DISTRIBUTION AGREEMENT
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EXHIBIT J
EXCEPTIONS TO RESIGNATIONS OF COMMON DIRECTORS, OFFICERS AND EMPLOYEES
1. Investment Committee of the Tenneco Inc. General Employee Benefit Trust
(existing members may remain as members of the Committee until March 31, 2000).
2. Tenneco Packaging (UK) Limited (David E. Zerhusen and Urszula Kitchen to
remain as directors).
3. Tenneco Rabbi Trust created in 1999 in connection with the spin-off
(existing trustees may remain trustees after the Distribution).
4. Tenneco Inc. Project Committee appointed in connection with the spin-off
(existing members may remain after the Distribution).
TENNECO DISTRIBUTION AGREEMENT
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EXHIBIT K
FORM OF
TRADEMARK TRANSITION LICENSE AGREEMENT
THIS TRADEMARK TRANSITION LICENSE AGREEMENT (this "Trademark Transition
License Agreement") is made and entered into as of , 1999, (the
"Effective Date") by and between Tenneco Inc., a Delaware company to be renamed
Tenneco Automotive Inc., a corporation organized and existing under the laws of
the State of Delaware, whose principal place of business is located at 500 North
Field Drive, Lake Forest, IL 60045 ("Licensor"), and Tenneco Packaging Inc. (to
be renamed), a corporation organized under the laws of the State of Delaware,
whose principal place of business is located at 1900 West Field Court, Lake
Forest, IL 60045 ("Licensee").
WHEREAS, Pursuant to the terms of that certain Distribution Agreement dated
, 1999, (the "DISTRIBUTION AGREEMENT"), Licensee and
Licensor have agreed to cause this Trademark Transition License Agreement to be
entered into regarding the use of certain trademarks by Licensee.
WHEREAS, Licensor has adopted and is using the name and mark "Tenneco",
alone and in combination with other terms and/or symbols and variations thereof,
in the United States and elsewhere throughout the world and is the owner of the
U.S. Trademark Applications and the U.S. Trademark Registrations, listed on
Exhibit A of this Agreement, from the United States Patent and Trademark Office,
as well as their foreign counterparts, and other foreign trademarks listed on
Exhibit A (hereinafter individually and collectively referred to as the
"Trademark"); and
WHEREAS, Licensee previously has used the Trademark and is desirous of
continuing to use said Trademark with respect to the goods and services listed
on Exhibit B, to assist Licensee during its transition to a new identity and for
the limited purposes more fully described below;
NOW, THEREFORE, in consideration of the foregoing Recitals which are hereby
incorporated into the operative terms hereof, the mutual promises contained in
this Agreement and good and valuable consideration from the Licensee to the
Licensor, the receipt and sufficiency of which is hereby acknowledged by said
Licensor, the parties hereby agree as follows:
1. LICENSE. Licensor grants to Licensee and its Subsidiaries (as such
term is defined in the Distribution Agreement), the limited, non-exclusive
right to use the Trademark under the common law and under the auspices and
privileges provided by any of the registrations covering the same during
the term of this Agreement, and Licensee hereby undertakes to use the
Trademark as follows:
a. For a period of sixty (60) days following the Effective Date of
this Agreement, Licensee and its Subsidiaries may continue to use the
Trademark in their corporate names. After sixty (60) days following the
Effective Date of this Agreement, or as soon thereafter as reasonably
practical in non-U.S. jurisdictions, Licensee shall change or cause to
be changed, if necessary, such corporate names to delete the Trademark
or any other word that is confusingly similar to the Trademark.
b. For a period of nine (9) months following the Effective Date of
this Agreement, Licensee and its Subsidiaries shall be entitled to use
their supplies and documents which have imprinted thereon the Trademark
to the extent that such supplies and documents were existing inventory
prior to the Effective Date of this Agreement. Licensee shall not print
or permit to be printed any new supplies or documents bearing the
Trademark from and after the Effective Date of this Agreement.
c. For a period of eighteen (18) months from the Effective Date of
this Agreement, Licensee and its Subsidiaries may use the Trademark on
signs, displays or other identifications or
TENNECO DISTRIBUTION AGREEMENT
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advertising material (other than supplies or documents, which shall be
governed by paragraph b above), in each case to the extent existing as
of the date hereof. Licensee shall not, and shall not permit its
Subsidiaries to, prepare or install any new signs, displays or other
identifications or advertising material bearing the Trademark. Licensee
shall remove or cause to be removed any and all references to the
Trademark from any and all signs, displays or other identifications or
advertising material by the end of the eighteen (18) month period.
2. QUALITY OF SERVICES. Licensee agrees to maintain and cause its
Subsidiaries to maintain such quality standards as shall be prescribed by
Licensor in the conduct of the business operations with which the Trademark
is used. Licensee shall, and shall cause its Subsidiaries to, use the
Trademark only with goods and services listed in Exhibit B rendered by
Licensee and/or its Subsidiaries in accordance with the terms of this
Agreement and with the guidance and directions furnished to the Licensee by
the Licensor, or its authorized representatives or agents, from time to
time, if any; but always the quality of the goods and services shall be
satisfactory to the Licensor or as specified by it.
3. INSPECTION. Licensee will permit duly authorized representatives of
the Licensor to inspect the premises of Licensee and/or its Subsidiaries
using the Trademarks at all reasonable times, for the purpose of
ascertaining or determining compliance with Paragraphs 1 and 2 hereof.
4. USE OF TRADEMARK. When using the Trademark under this Agreement,
Licensee undertakes to, and shall cause its Subsidiaries to, comply with
all laws pertaining to the Trademark. This provision includes compliance
with marking requirements. Licensee represents and warrants that all goods
and services to be sold under the Trademark and the marketing, sales, and
distribution of them shall meet or exceed all federal, state, local and
foreign laws, ordinances, standards, regulations, and guidelines pertaining
to such products or activities, including, but not limited to those
pertaining to product safety, quality, labeling and propriety. Licensee
agrees that it will not package, market, sell, or distribute any goods or
services or cause or permit any goods or services to be packaged, marketed,
sold or distributed in violation of any such federal, state, local or
foreign law, ordinance, standard, regulation or guideline.
5. EXTENT OF LICENSE. The license granted herein is for the sole
purpose of assisting Licensee in its transition to a new identity and is
not assignable or transferable in any manner whatsoever. Licensee has no
right to grant any sublicenses or to use the Trademark for any other
purpose.
6. INDEMNITY. Licensee acknowledges that neither it nor its
Subsidiaries will have any claims against Licensor hereunder for any damage
to property or injury to persons arising out of the operation of their
business. Licensee agrees to indemnify, hold harmless, and defend Licensor
and its Subsidiaries, affiliates and authorized representatives with legal
counsel acceptable to Licensor from and against any and all demands,
claims, injuries, losses, damages, actions, suits, causes of action,
proceedings, judgments, liabilities and expenses, including attorneys'
fees, court costs and other legal expenses, arising out of or connected
with:
a. the use of the Trademark by Licensee or any of its Subsidiaries
or affiliates; or
b. any breach by Licensee or any of its Subsidiaries of any
provision of this Agreement or of any warranty made by Licensee in this
Agreement.
No approval by Licensor of any action by Licensee or any of its
Subsidiaries or affiliates shall affect any right of Licensor to
indemnification hereunder.
7. TERMINATION. Except as otherwise provided herein, this Agreement
shall remain in full force and effect for the periods stated in Paragraph 1
above. However, Licensor retains the right to
TENNECO DISTRIBUTION AGREEMENT
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immediately terminate this Agreement in the event of a material breach of
any term of this Agreement by Licensee or any of its Subsidiaries, upon
written notice to the Licensee.
8. OWNERSHIP OF TRADEMARK. The Licensee acknowledges Licensor's
exclusive right, title and interest in and to the Trademark and will not at
any time do or cause or permit to be done any act or thing contesting or in
any way impairing or tending to impair any part or all of such right, title
and interest. In connection with the use of the Trademark, Licensee and
each of its Subsidiaries shall not in any manner represent that it has any
ownership in the Trademark or registrations thereof, and acknowledges that
use of the Trademark shall inure to the benefit of the Licensor. On
termination of this Agreement or any portion hereof in any manner provided
herein, the Licensee will destroy or cause to be destroyed all signs,
displays or other identifications or advertising material, supplies and
documents, and any other materials bearing the Trademark and will certify
to Licensor in writing that it has done so. Furthermore, Licensee and each
of its Subsidiaries will not at any time adopt or use without the
Licensor's prior written consent, any word or mark which is likely to be
similar to or confusing with the Trademark.
9. INFRINGEMENT OF TRADEMARK. If Licensee or any of its Subsidiaries
learns of any actual or threatened infringement of the Trademark or of the
existence, use, or promotion of any mark or design similar to the
Trademark, Licensee shall promptly notify Licensor. Licensor has the right
to decide at its sole discretion what legal proceedings or other action, if
any, shall be taken, by who, how such proceedings or other action shall be
conducted, and in whose name such proceedings or other action shall be
performed. Any legal proceedings instituted pursuant to this Section shall
be for the sole benefit of Licensor and all sums recovered in such
proceedings whether by judgment, settlement, or otherwise, shall be
retained solely and exclusively by Licensor.
10. INJUNCTIVE RELIEF. Licensee acknowledges that any breach or
threatened breach of any of Licensee's covenants in this Agreement relating
to the Trademark, including, without limitation, Licensee's and/or any of
its Subsidiaries' failure to cease the manufacture, sale, marketing, or
distribution of the goods bearing the Trademark at the termination or
expiration of this Agreement will result in immediate and irreparable
damage to Licensor and to the rights of any subsequent licensee of them.
Licensee acknowledges and admits that there is no adequate remedy at law
for failure to cease such activities, and Licensee agrees that in the event
of such breach or threatened breach, Licensor shall be entitled to
temporary and permanent injunctive relief and such other relief as any
court with jurisdiction may deem just and proper.
11. SEVERABILITY. If any provision of this Agreement shall be
determined to be illegal and unenforceable by any court of law or any
competent government or other authority, the remaining provisions shall be
severable and enforceable in accordance with their terms so as this
Agreement without such terms or provisions does not fail of its essential
purpose or purposes. The parties will negotiate in good faith to replace
any such illegal or unenforceable provision or provisions with suitable
substitute provisions which maintain the economic purposes and intentions
of this Agreement.
12. NOTICE. Any notices required or permitted to be given under this
Agreement shall be deemed sufficiently given if mailed by registered mail,
postage prepaid, addressed to the party to be notified at its address shown
above (followed by facsimile) or at such other address as may be furnished
in writing to the notifying party.
13. MISCELLANEOUS.
a. CAPTIONS. The captions for each Section have been inserted for
the sake of convenience and shall not be deemed to be binding upon the
parties for the purpose of interpretation of this Agreement.
b. INTERPRETATION. The parties agree that each party and its
counsel has reviewed this Agreement and the normal rule of construction
that any ambiguities are to be resolved
TENNECO DISTRIBUTION AGREEMENT
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against the drafting party shall not be employed in the interpretation
of this Agreement. c. WAIVER. The failure of Licensor to insist in any
one or more instance upon the performance of any term, obligation, or
condition of this Agreement by Licensee or any of its Subsidiaries or to
exercise any right or privilege herein conferred upon Licensor shall not
be construed as thereafter waiving such term, obligation, or condition,
or relinquishing such right or privilege, and the acknowledged waiver or
relinquishment by Licensor of any default or right shall not constitute
waiver of any other default or right. No waiver shall be deemed to have
been made unless expressed in writing.
d. TIME OF ESSENCE. Time is of the essence with respect to the
obligations to be performed under this Agreement, and Licensee shall use
its best efforts to cause the transition of all existing materials,
including signs and displays, bearing the Trademark to a new name and
mark.
e. RIGHTS CUMULATIVE. Except as expressly provided in this
Agreement, and to the extent permitted by law, any remedies described in
this Agreement are cumulative and not alternative to any other remedies
available at law or in equity.
f. GOVERNING LAW. ALL QUESTIONS OR DISPUTES CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE
SCHEDULES AND EXHIBITS HERETO SHALL BE GOVERNED BY THE INTERNAL LAWS,
AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE. EACH OF THE
PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY (i)
AGREES TO BE SUBJECT TO, AND HEREBY CONSENTS AND SUBMITS TO, THE
JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE AND OF THE FEDERAL
COURTS SITTING IN THE STATE OF DELAWARE, (ii) TO THE EXTENT SUCH PARTY
IS NOT OTHERWISE SUBJECT TO SERVICE OF PROCESS IN THE STATE OF DELAWARE,
HEREBY APPOINTS THE CORPORATION TRUST COMPANY, AS SUCH PARTY'S AGENT IN
THE STATE OF DELAWARE FOR ACCEPTANCE OF LEGAL PROCESS AND (iii) AGREES
THAT SERVICE MADE ON ANY SUCH AGENT SET FORTH IN (ii) ABOVE SHALL HAVE
THE SAME LEGAL FORCE AND EFFECT AS IF SERVED UPON SUCH PARTY PERSONALLY
WITHIN THE STATE OF DELAWARE.
<TABLE>
<S> <C>
Attest: LICENSOR
- -------------------------------------------- By:
--------------------------------------------
Attest: LICENSEE
- -------------------------------------------- By:
--------------------------------------------
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
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<PAGE> 110
EXHIBIT A
<TABLE>
<CAPTION>
REGISTRATION EXPIRATION
TRADEMARK NO. DATE
--------- ------------ ----------
<S> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
APPLICATION APPLICATION
TRADEMARK NO. NO.
--------- ----------- -----------
<S> <C> <C>
</TABLE>
TENNECO DISTRIBUTION AGREEMENT
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<PAGE> 111
EXHIBIT B
TENNECO DISTRIBUTION AGREEMENT
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<PAGE> 1
EXHIBIT
- --------------------------------------------------------------------------------
-------------------------
TENNECO PACKAGING INC.
and
THE CHASE MANHATTAN BANK,
Trustee
------------------
INDENTURE
Dated as of September 29, 1999
------------------
- --------------------------------------------------------------------------------
<PAGE> 2
CROSS REFERENCE SHEET(1
------------------
BETWEEN
Provisions of Trust Indenture Act of 1939 and the Indenture dated as of
September 29, 1999, between TENNECO PACKAGING INC. and THE CHASE MANHATTAN BANK,
Trustee.
SECTION OF THE ACT SECTION OF INDENTURE
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310(a(1, (2 and (5............................. 6.9
310(a(3 and (4.................................. Inapplicable
310(b............................................. 6.9 and 6.10(a, (b and (d
310(c............................................. Inapplicable
311(a............................................. 6.13
311(b............................................. 6.13
311(c............................................. Inapplicable
312(a............................................. 4.1 and 4.2
312(b............................................. 4.2
312(c............................................. 4.2
313(a............................................. 4.4
313(b(1.......................................... Inapplicable
313(b(2.......................................... Inapplicable
313(c............................................. 4.4
313(d............................................. 4.4
314(a............................................. 4.3
314(b............................................. Inapplicable
314(c(1 and (2.................................. 11.5
314(c(3.......................................... Inapplicable
314(d............................................. Inapplicable
314(e............................................. 11.5
314(f............................................. Inapplicable
315(a, (c and (d................................ 6.1
315(b............................................. 5.11
315(e............................................. 5.12
316(a(1.......................................... 5.9
316(a(2.......................................... Not required
316(a (last sentence............................. 7.4
316(b............................................. 5.7
316(c............................................. 7.2
317(a............................................. 5.2
317(b............................................. 3.4(a and (b
318(a............................................. 11.7
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(1 This Cross Reference Sheet is not part of the Indenture.
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TABLE OF CONTENTS
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PARTIES...........................................................................................................1
RECITALS..........................................................................................................1
Authorization of Indenture...............................................................................1
Compliance with Legal Requirements.......................................................................1
Purpose of and Consideration for Indenture...............................................................1
ARTICLE ONE
DEFINITIONS..............................................................................................1
SECTION 1.1 Certain Terms Defined.........................................................1
ARTICLE TWO
SECURITIES...............................................................................................8
SECTION 2.1 Forms Generally...............................................................8
SECTION 2.2 Form of Trustee's Certificate of Authentication...............................8
SECTION 2.3 Amounts Unlimited; Issuable in Series.........................................9
SECTION 2.4 Authentication and Delivery of Securities....................................11
SECTION 2.5 Execution of Securities......................................................14
SECTION 2.6 Certificate of Authentication................................................14
SECTION 2.7 Denomination and Date of Securities; Payments of Interest....................14
SECTION 2.8 Registration, Transfer and Exchange..........................................15
SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities....................18
SECTION 2.10 Cancellation of Securities; Destruction Thereof..............................19
SECTION 2.11 Temporary Securities.........................................................19
ARTICLE THREE
COVENANTS OF THE ISSUER.................................................................................20
SECTION 3.1 Payment of Principal and Interest............................................20
SECTION 3.2 Offices for Payments, etc....................................................20
SECTION 3.3 Appointment to Fill a Vacancy in Office of Trustee...........................21
SECTION 3.4 Paying Agents................................................................22
SECTION 3.5 Written Statement to Trustee.................................................22
SECTION 3.6 Negative Pledge: Limitation on Sale and Leaseback Transactions...............23
SECTION 3.7 Luxembourg Publications......................................................25
ARTICLE FOUR
SECURITYHOLDERS LISTS AND REPORTS BY THE ISSUER AND THE TRUSTEE.........................................26
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SECTION 4.1 Issuer to Furnish Trustee Information as to Names and Addresses of
Securityholders................................................................................26
SECTION 4.2 Preservation and Disclosure of Securityholders Lists.........................26
SECTION 4.3 Reports by the Issuer........................................................26
SECTION 4.4 Reports by the Trustee.......................................................26
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT.........................................26
SECTION 5.1 Event of Default Defined; Acceleration of Maturity; Waiver of Default........26
SECTION 5.2 Collection of Indebtedness by Trustee; Trustee May Prove Debt................29
SECTION 5.3 Application of Proceeds......................................................31
SECTION 5.4 Suits for Enforcement........................................................31
SECTION 5.5 Restoration of Rights on Abandonment of Proceedings..........................32
SECTION 5.6 Limitations on Suits by Securityholders......................................32
SECTION 5.7 Unconditional Right of Securityholders to Institute Certain Suits............32
SECTION 5.8 Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default......33
SECTION 5.9 Control by Holders of Securities.............................................33
SECTION 5.10 Waiver of Past Defaults......................................................33
SECTION 5.11 Trustee to Give Notice of Default, But May Withhold in Certain
Circumstances..................................................................................34
SECTION 5.12 Right of Court to Require Filing of Undertaking to Pay Costs.................34
ARTICLE SIX
CONCERNING THE TRUSTEE..................................................................................35
SECTION 6.1 Duties and Responsibilities of the Trustee; During Default; Prior to
Default........................................................................................35
SECTION 6.2 Certain Rights of the Trustee................................................36
SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities or
Application of Proceeds Thereof................................................................37
SECTION 6.4 Trustee and Agents May Hold Securities or Coupons; Collections, etc..........37
SECTION 6.5 Moneys Held by Trustee.......................................................37
SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior Claim
..............................................................................................37
SECTION 6.7 Right of Trustee to Rely on Officer's Certificate, etc.......................38
SECTION 6.8 .............................................................................38
SECTION 6.9 Persons Eligible for Appointment as Trustee..................................38
SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee....................39
SECTION 6.11 Acceptance of Appointment by Successor Trustee...............................40
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SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of Trustee.......41
SECTION 6.13 Preferential Collection of Claims Against the Issuer.........................41
SECTION 6.14 Appointment of Authenticating Agent..........................................41
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS..........................................................................42
SECTION 7.1 Evidence of Action Taken by Securityholders..................................42
SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities...............42
SECTION 7.3 Holders to Be Treated as Owners..............................................43
SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding............................44
SECTION 7.5 Right of Revocation of Action Taken..........................................44
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES.................................................................................45
SECTION 8.1 Supplemental Indentures Without Consent of Securityholders...................45
SECTION 8.2 Supplemental Indentures With Consent of Securityholders......................46
SECTION 8.3 Effect of Supplemental Indenture.............................................47
SECTION 8.4 Documents to Be Given to Trustee.............................................47
SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures.................47
ARTICLE NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE...............................................................48
SECTION 9.1 Covenant Not to Merge, Consolidate, Sell or Convey Property Except
Under Certain Conditions.......................................................................48
SECTION 9.2 Successor Corporation Substituted............................................48
SECTION 9.3 Opinion of Counsel Delivered to Trustee......................................49
ARTICLE TEN
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS...............................................49
SECTION 10.1 Satisfaction and Discharge of Indenture......................................49
SECTION 10.2 Application by Trustee of Funds Deposited for Payment of Securities..........52
SECTION 10.3 Repayment of Moneys Held by Paying Agent.....................................52
SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years....52
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ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS................................................................................53
SECTION 11.1 Incorporators, Stockholders, Officers and Directors of Issuer Exempt
from Individual Liability......................................................................53
SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and Holders of
Securities and Coupons.........................................................................53
SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture..........................53
SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of Securities
and Coupons....................................................................................53
SECTION 11.5 Officer's Certificates and Opinions of Counsel; Statements to Be
Contained Therein..............................................................................54
SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays..............................55
SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture Act of 1939......55
SECTION 11.8 New York Law to Govern.......................................................55
SECTION 11.9 Counterparts.................................................................55
SECTION 11.10 Effect of Headings...........................................................55
SECTION 11.11 Securities in a Foreign Currency or in EURO..................................55
SECTION 11.12 Judgment Currency............................................................56
ARTICLE TWELVE
REDEMPTION OF SECURITIES AND SINKING FUNDS..............................................................56
SECTION 12.1 Applicability of Article.....................................................57
SECTION 12.2 Notice of Redemption; Partial Redemptions....................................57
SECTION 12.3 Payment of Securities Called for Redemption..................................58
SECTION 12.4 Exclusion of Certain Securities from Eligibility for Selection for
Redemption.....................................................................................59
SECTION 12.5 Mandatory and Optional Sinking Funds.........................................59
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THIS INDENTURE, dated as of September 29, 1999 between TENNECO PACKAGING
INC., a Delaware corporation (the "Issuer", and THE CHASE MANHATTAN BANK, a New
York banking corporation, as trustee (the "Trustee",
W I T N E S S E T H :
WHEREAS, the Issuer has duly authorized the issue from time to time of its
unsecured debentures, notes or other evidences of indebtedness to be issued in
one or more series (the "Securities" up to such principal amount or amounts as
may from time to time be authorized in accordance with the terms of this
Indenture;
WHEREAS, the Issuer has duly authorized the execution and delivery of this
Indenture to provide, among other things, for the authentication, delivery and
administration of the Securities; and
WHEREAS, all things necessary to make this Indenture a valid indenture and
agreement according to its terms have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Securities by the
holders thereof, the Issuer and the Trustee mutually covenant and agree for the
equal and proportionate benefit of the respective holders from time to time of
the Securities and of the coupons, if any, appertaining thereto as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.1 Certain Terms Defined. The following terms (except as otherwise
expressly provided herein, in any indenture supplemental hereto or, as to any
Security, in such Security or unless the context otherwise clearly requires for
all purposes of this Indenture and of any indenture supplemental hereto shall
have the respective meanings specified in this Section. All other terms used in
this Indenture that are defined in the Trust Indenture Act of 1939 or the
definitions of which in the Securities Act of 1933 are referred to in the Trust
Indenture Act of 1939, including terms defined therein by reference to the
Securities Act of 1933 (except as herein otherwise expressly provided or unless
the context otherwise requires, shall have the meanings assigned to such terms
in said Trust Indenture Act and in said Securities Act as in force at the date
of this Indenture. All accounting terms used herein and not expressly defined
shall have the meanings assigned to such terms in accordance with generally
accepted accounting principles, and the term "generally accepted accounting
principles" means such accounting principles as are generally accepted in the
United States at the time of any computation. The words "herein," "hereof,"
"hereto" and "hereunder" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision. The terms defined in this Article include the plural as well as the
singular.
"Attributable Debt" means, as to any particular lease under which any
Person is at the time liable, at any date as of which the amount thereof is to
be determined, the total net amount of rent
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required to be paid by such Person under such lease during the remaining term
thereof, discounted from the respective due dates thereof to such date at the
Composite Rate. The net amount of rent required to be paid under any such lease
for any such period shall be the aggregate amount of the rent payable by the
lessee with respect to such period after excluding amounts required to be paid
on account of maintenance and repairs, financing services, insurance, taxes,
assessments, water or electrical rates, contingent rents (such as those based on
sales and similar charges. In the case of any lease which is terminable by the
lessee upon the payment of a penalty, such net amount shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated.
"Authenticating Agent" shall have the meaning set forth in Section 6.14.
"Authorized Newspaper" means a newspaper (which, in the case of The City of
New York, will, if practicable, be The Wall Street Journal (Eastern Edition, in
the case of the United Kingdom will, if practicable, be the Financial Times
(London Edition and, in the case of Luxembourg, will, if practicable, be the
Luxemburger Wort published in an official language of the country of
publication customarily published at least once a day for at less five days in
each calendar week and of general circulation in the City of New York, the
United Kingdom or in Luxembourg, as applicable. If it shall be impractical in
the opinion of the Trustee to make any publication of any notice required hereby
in an Authorized Newspaper, any publication or other notice in lieu thereof
which is made or given with the approval of the Trustee shall constitute a
sufficient publication of such notice.
"Board of Directors" means either the Board of Directors of the Issuer or
any committee or other designees of such Board duly authorized to act on its
behalf.
"Board Resolution" means a copy of one or more resolutions, certified by
the secretary or an assistant secretary of the Issuer to have been duly adopted
or consented to by the Board of Directors and to be in full force and effect,
and delivered to the Trustee.
"Business Day" means, with respect to any Security, a day that in the city
(or in any of the cities, if more than one in which amounts are payable, as
specified in the form of such Security, is not a day on which banking
institutions are authorized or required by law or regulation to close.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or if at
any time after the execution and delivery of this Indenture such Commission is
not existing and performing the duties now assigned to it under the Trust
Indenture Act of 1939, then the body performing such duties on such date.
"Composite Rate" means, at any time, the rate of interest, per annum,
compounded semiannually, equal to the sum of the products obtained by
multiplying the rate of interest borne by the Securities of each series (as
specified on the face of the Securities of each series, provided, that, in the
case of the Securities with variable rates of interest, the interest rate to be
used in calculating the Composite Rate shall be the interest rate applicable to
such Securities at the beginning of the year
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in which the Composite Rate is being determined and, provided, further, that, in
the case of Original Issue Discount Securities, the interest rate to be used in
calculating the Composite Rate shall be a rate equal to the yield to maturity on
such Securities, calculated at the time of issuance of such Securities by the
percentage of the aggregate principal amount of the Securities of all series Out
standing represented by the Outstanding Securities of such series. For the
purposes of this calculation, the aggregate principal amount of Outstanding
Securities that are denominated in a foreign currency shall be calculated in the
manner set forth in Section 11.11, and the aggregate principal amount of
Original Issue Discount Securities shall be the aggregate amount then payable
upon the declaration of acceleration of the maturity thereof pursuant to Section
5.1.
"Consolidated Net Tangible Assets" shall mean, at any date, the total
assets appearing on the consolidated balance sheet of the Issuer and its
consolidated Subsidiaries for the Issuer's most recently completed fiscal
quarter, prepared in accordance with generally accepted accounting principles,
less (a all current liabilities shown on such balance sheet and (b Intangible
Assets. "Intangible Assets" means the value (net of applicable reserves, as
shown on or reflected in such balance sheet of: (i all trade names, trademarks,
licenses, patents, copyrights and goodwill; (ii organizational or development
costs; (iii deferred charges (other than prepaid items such as insurance,
taxes, interest, commissions, rents and similar items and tangible assets being
amortized; and (iv unamortized debt discount and expense, less premium.
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is dated, located in 450 West 33rd Street, 15th Floor, New York, New
York, Attention: Global Trust Services.
"Coupon" means any interest coupon appertaining to a Security.
"covenant defeasance" shall have the meaning set forth in Section 10.1(C.
"Debt" of any Person shall mean any debt for money borrowed which is
issued, assumed, incurred or guaranteed in any manner by such Person.
"Depositary" means, with respect to the Securities of any series issuable
or issued in the form of one or more Registered Global Securities, the Person
designated as Depositary by the Issuer pursuant to Section 2.3 until a successor
Depositary shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Depositary" shall mean or include each Person who is
then a Depositary hereunder, and if at any time there is more than one such
Person, "Depositary" as used with respect to the Securities of any such series
shall mean the Depositary with respect to the Registered Global Securities of
that series.
"Dollar" means the coin or currency of the United States of America as at
the time of payment is legal tender for the payment of public and private debts.
"EURO" means the single currency of the participating member states of the
European union.
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"Event of Default" means any event or condition specified as such in
Section 5.1.
"Exempted Debt" shall mean the sum of (a Debt of the Issuer and its
Subsidiaries incurred after the date as of which this Indenture is dated and
secured by liens created, assumed or permitted to exist pursuant to Section
3.6(b and (b Attributable Debt of the Issuer and its Subsidiaries in respect
of all sale and leaseback transactions entered into pursuant to Section 3.6(d.
"Foreign Currency" means a currency issued by the government of a country
other than the United States.
"Holder," "Holder of Securities," "Securityholder" or other similar terms
mean (a in the case of any Registered Security, the person in whose name such
Security is registered in the security register kept by the Issuer for that
purpose in accordance with the terms hereof, and (b in the case of any
Unregistered Security, the bearer of such Security, or any Coupon appertaining
thereto, as the case may be.
"Indenture" means this instrument as originally executed and delivered or,
if amended or supplemented as herein provided, as so amended or supplemented or
both, and shall include the forms and terms of particular series of Securities
established as contemplated hereunder.
"Interest" means, when used with respect to non-interest bearing
Securities, interest payable after maturity.
"Issuer" means Tenneco Packaging Inc., a Delaware corporation and, subject
to Article Nine, its successors and assigns.
"Issuer Order" means a written statement, request or order of the Issuer
signed in its name by the chairman of the Board of Directors, the chief
executive officer, the president, any vice president, the chief financial
officer, the treasurer, the controller or any other officer designated by the
Board of Directors or any of the foregoing officers of the Issuer.
"Judgment Currency" shall have the meaning set forth in Section 11.12.
"Mortgage" shall have the meaning set forth in Section 3.6(a.
"Net Rental Payments" under any lease for any period shall mean the sum of
monies and other payments required to be paid by the lessee under such lease as
rent thereunder, not including amounts payable by the lessee for maintenance and
repairs, financing services, water or electrical rates, insurance, taxes,
assessments, contingent rents (such as those based on sales and similar
charges.
"Officer's Certificate" means a certificate signed by the chairman of the
Board of Directors, the chief executive officer, the president, the chief
financial officer, any vice president, the treasurer, the controller or any
other officer designated by the Board of Directors or any of the foregoing
officers
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of the Issuer and delivered to the Trustee. Each such certificate shall
comply with Section 314 of the Trust Indenture Act of 1939 and include the
statements provided for in Section 11.5.
"Opinion of Counsel" means an opinion in writing signed by the General
Counsel of the Issuer or by such other legal counsel who may be an employee of
or counsel to the Issuer and who shall be satisfactory to the Trustee. Each such
opinion shall comply with Section 314 of the Trust Indenture Act of 1939 and
include the statements provided for in Section 11.5.
"original issue date" of any Security (or portion thereof means the
earlier of (a the date of such Security or (b the date of any Security (or
portion thereof for which such Security was issued (directly or indirectly on
registration of transfer, exchange or substitution.
"Original Issue Discount Security" means any Security that provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to Section 5.1.
"Outstanding," when used with reference to Securities, shall, subject to
the provisions of Section 7.4, mean, as of any particular time, all Securities
authenticated and delivered by the Trustee under this Indenture, except
(a Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b Securities, or portions thereof, for the payment or redemption of
which moneys or U.S. Government Obligations (as provided for in Section
10.1 in the necessary amount shall have been deposited in trust with the
Trustee or with any paying agent (other than the Issuer or shall have been
set aside, segregated and held in trust by the Issuer for the Holders of
such Securities (if the Issuer shall act as its own paying agent, provided
that if such Securities, or portions thereof, are to be redeemed prior to
the maturity thereof, notice of such redemption shall have been given as
herein provided, or provision satisfactory to the Trustee shall have been
made for giving such notice; and
(c Securities which shall have been paid or in substitution for which
other Securities shall have been authenticated and delivered pursuant to
the terms of Section 2.9 (except with respect to any such Security as to
which proof satisfactory to the Trustee is presented that such Security is
held by a person in whose hands such Security is a legal, valid and binding
obligation of the Issuer.
In determining whether the Holders of the requisite principal amount of
Outstanding Securities of any or all series have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding for such purposes shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon a declaration
of acceleration of the maturity thereof pursuant to Section 5.1.
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"Periodic Offering" means an offering of Securities of a series from time
to time, the specific terms of which Securities, including, without limitation,
the rate or rates of interest, if any, thereon, the stated maturity or
maturities thereof and the redemption provisions, if any, with respect thereto,
are to be determined by the Issuer or its agents upon the issuance of such
Securities.
"Permitted Mortgage" means:
(i any governmental, mechanics', materialmen's, carriers' or similar
lien created in the ordinary course of business which is not yet due or
which is being contested in good faith by appropriate proceedings and any
undetermined lien which is incidental to construction;
(ii any right reserved to, or vested in, any municipality or public
authority by the terms of any right, power, franchise, grant, license,
permit or by any provision of law, to purchase or recapture or to designate
a purchaser of, any property;
(iii any lien of taxes and assessments which is (A for the current
year, or (B not at the time delinquent or (C delinquent but the validity
of which is being contested at the time by the Issuer or any Subsidiary in
good faith;
(iv any lien arising from or in connection with a conveyance by the
Issuer or any Subsidiary of any production payment with respect to oil,
gas, natural gas, carbon dioxide, sulphur, helium, coal, metals, minerals,
steam, timber or other natural resources;
(v any lien to secure obligations imposed by statute or governmental
regulations; or
(vi any lien of, or to secure performance of, leases (other than
leases relating to a sale and leaseback transaction.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"principal," whenever used with reference to the Securities or any Security
or any portion thereof, shall be deemed to include "and premium, if any."
"Principal Manufacturing Property" shall mean any manufacturing plant or
any testing or research and development facility of the Issuer or a Subsidiary
located in the United States of America (other than its territories and
possessions unless, in the opinion of the Board of Directors, the
manufacturing, testing, research and development operations performed at such
plant or facility is not of material importance to the total business conducted
by the Issuer and its consolidated Subsidiaries. Principal Manufacturing
Property shall include, without limitation, additions, improvements,
replacements, repairs, fixtures, appurtenances or component parts of any such
plant or facility attaching to or required to be attached to property or assets
pursuant to the terms of any Mortgage (including, without limitation, pursuant
to any "after-acquired property" clause or similar term thereof.
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"Record Date" shall have the meaning set forth in Section 2.7.
"Registered Global Security" means a Security evidencing all or a part of a
series of Registered Securities, issued to the Depositary for such series in
accordance with Section 2.4, and bearing the legend prescribed in Section 2.4.
"Registered Security" means any Security registered on the Security
register of the Issuer.
"Required Currency" shall have the meaning set forth in Section 11.12.
"Responsible Officer," when used with respect to the Trustee means the
chairman of the board of directors, any vice chairman of the board of directors,
the chairman of the trust committee, the chairman of the executive committee,
any vice chairman of the executive committee, the president, any vice president
(whether or not designated by numbers or words added before or after the title
"vice president", the cashier, the secretary, the treasurer, any trust officer,
any assistant trust officer, any assistant vice president, any assistant
cashier, any assistant secretary, any assistant treasurer, or any other officer
or assistant officer of the Trustee customarily performing functions similar to
those performed by the persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" shall mean any Subsidiary that owns or is the
lessee of any Principal Manufacturing Property; provided, however, that the term
"Restricted Subsidiary" does not include any Subsidiary acquired or organized
for the purpose of acquiring the stock or business or assets of any Person other
than the Issuer or any Restricted Subsidiary, whether by merger, consolidation,
acquisition of stock or assets or similar transaction, so long as such
Subsidiary does not acquire all or any substantial part of the business or
assets of the Issuer or any other Restricted Subsidiary.
"Security" or "Securities" has the meaning stated in the first recital of
this Indenture, or, as the case may be, Securities that have been authenticated
and delivered under this Indenture.
"Subsidiary" means any corporation, partnership or other entity of which at
the time of determination the Issuer owns or controls directly or indirectly
more than 50% of the shares of voting stock or equivalent interest.
"Trust Indenture Act of 1939" (except as otherwise required by applicable
law or as provided in Sections 8.1 and 8.2 means the Trust Indenture Act of
1939 as in force at the date as of which this Indenture was originally executed.
"Trustee" means the Person identified as "Trustee" in the first paragraph
hereof and, subject to the provisions of Article Six, shall also include any
successor trustee. "Trustee" shall also mean or include each Person who is then
a trustee hereunder and if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean the
trustee with respect to the Securities of such series.
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"Unregistered Security" means any Security other than a Registered
Security.
"U.S. Government Obligations" shall have the meaning set forth in Section
10.1(A.
"Yield to Maturity" means the yield to maturity on a series of Securities,
calculated at the time of issuance of such series, or, if applicable, at the
most recent redetermination of interest on such series, and calculated in
accordance with accepted financial practice.
ARTICLE TWO
SECURITIES
SECTION 2.1 Forms Generally. The Securities of each series and the Coupons,
if any, to be attached thereto shall be substantially in such form (not
inconsistent with this Indenture as shall be established by or pursuant to one
or more Board Resolutions (as set forth in a Board Resolution or, to the extent
established pursuant to rather than set forth in a Board Resolution, an
Officer's Certificate detailing such establishment or in one or more indentures
supplemental hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have imprinted or otherwise reproduced thereon such legend or
legends or endorsements, not inconsistent with the provisions of this Indenture,
as may be required to comply with any law or with any rules or regulations
pursuant thereto, or with any rules of any securities exchange or to conform to
general usage, all as may be determined by the officers executing such
Securities and Coupons, if any, as evidenced by their execution of such
Securities and Coupons.
The definitive Securities and Coupons, if any, shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers executing such Securities and
Coupons, if any, as evidenced by their execution of such Securities and Coupons,
if any.
SECTION 2.2 Form of Trustee's Certificate of Authentication. The Trustee's
certificate of authentication on all Securities shall be in substantially the
following form:
"This is one of the Securities referred to in the within-mentioned
Indenture.
----------------------------------,
as Trustee
By
--------------------------------
Authorized Officer"
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<PAGE> 15
If at any time there shall be an Authenticating Agent appointed with
respect to any series of Securities, then the Trustee's Certificate of
Authentication to be borne by the Securities of each such series shall be
substantially as follows:
"This is one of the Securities referred to in the within-mentioned
Indenture.
----------------------------------,
As Authenticating Agent
By
--------------------------------
Authorized Officer"
SECTION 2.3 Amounts Unlimited; Issuable in Series. The aggregate principal
amount of Securities which may be authenticated and delivered under this
Indenture is unlimited.
The Securities may be issued in one or more series and each such series
shall rank equally and pari passu with all other unsecured and unsubordinated
debt of the Issuer. There shall be established in or pursuant to one or more
Board Resolutions (and to the extent established pursuant to rather than set
forth in a Board Resolution, in an Officer's Certificate detailing such
establishment or established in one or more indentures supplemental hereto,
prior to the initial issuance of Securities of a series,
(1 the designation of the Securities of the series, which shall
distinguish the Securities of the series from the Securities of all other
series;
(2 any limit upon the aggregate principal amount of the Securities of
the series that may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 2.8, 2.9, 2.11, 8.5 or 12.3;
(3 if other than Dollars, the coin or currency in which the
Securities of that series are denominated (including, but not limited to,
any Foreign Currency or EURO;
(4 the date or dates on which the principal of the Securities of the
series is payable;
(5 the rate or rates at which the Securities of the series shall bear
interest, if any, the date or dates from which such interest shall accrue,
on which such interest shall be payable and (in the case of Registered
Securities on which a record shall be taken for the determination of
Holders to whom interest is payable and/or the method by which such rate or
rates or date or dates shall be determined;
(6 the place or places where the principal of and any interest on
Securities of the series shall be payable (if other than as provided in
Section 3.2;
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(7 the right, if any, of the Issuer to redeem Securities of the
series, in whole or in part, at its option and the period or periods within
which, the price or prices at which and any terms and conditions upon which
Securities of the series may be so redeemed, pursuant to any sinking fund
or otherwise;
(8 the obligation, if any, of the Issuer to redeem, purchase or repay
Securities of the series pursuant to any mandatory redemption, sinking fund
or analogous provisions or at the option of a Holder thereof and the price
or prices at which and the period or periods within which and any terms and
conditions upon which Securities of the series shall be redeemed, purchased
or repaid, in whole or in part, pursuant to such obligation;
(9 if other than denominations of $1,000 and any integral multiple
thereof in the case of Registered Securities, or $1,000 and $5,000 in the
case of Unregistered Securities, the denominations in which Securities of
the series shall be issuable;
(10 if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the maturity thereof;
(11 if other than the coin or currency in which the Securities of that
series are denominated, the coin or currency in which payment of the
principal of or interest on the Securities of such series shall be payable;
(12 if the principal of or interest on the Securities of such series
are to be payable, at the election of the Issuer or a Holder thereof, in a
coin or currency other than that in which the Securities are denominated,
the period or periods within which, and the terms and conditions upon
which, such election may be made;
(13 if the amount of payments of principal of and interest on the
Securities of the series may be determined with reference to an index based
on a coin or currency other than that in which the Securities of the series
are denominated, the manner in which such amounts shall be determined;
(14 whether the Securities of the series will be issuable as
Registered Securities (and if so, whether such Securities will be issuable
as Registered Global Securities or Unregistered Securities (with or
without Coupons, or any combination of the foregoing, any restrictions
applicable to the offer, sale or delivery of Unregistered Securities or the
payment of interest thereon and, if other than as provided in Section 2.8,
the terms upon which Unregistered Securities of any series may be exchanged
for Registered Securities of such series and vice versa;
(15 whether and under what circumstances the Issuer will pay
additional amounts on the Securities of the series held by a person who is
not a U.S. person in respect of any tax, assessment or governmental charge
withheld or deducted and, if so, whether the Issuer will have the option to
redeem such Securities rather than pay such additional amounts;
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<PAGE> 17
(16 if the Securities of such series are to be issuable in definitive
form (whether upon original issue or upon exchange of a temporary Security
of such series only upon receipt of certain certificates or other
documents or satisfaction of other conditions, the form and terms of such
certificates, documents or conditions;
(17 any trustees, depositaries, authenticating or paying agents,
transfer agents or registrars or any other agents with respect to the
Securities of such series;
(18 any other events of default or covenants with respect to the
Securities of such series;
(19 whether the Securities of the series shall be issued in the form
of one or more Registered Global Securities and, in such case, the
Depositary for such Registered Global Security or Securities; and
(20 any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture.
All Securities of any one series and Coupon, if any appertaining thereto,
shall be substantially identical, except in the case of Registered Securities,
as to denomination and except as may otherwise be provided by or pursuant to the
Board Resolution or Officer's Certificate referred to above or as set forth in
any such indenture supplemental hereto. All Securities of any one series need
not be issued at the same time and may be issued from time to time, consistent
with the terms of this Indenture, if so provided by or pursuant to such Board
Resolution, such Officer's Certificate or in any such indenture supplemental
hereto.
SECTION 2.4 Authentication and Delivery of Securities. The Issuer may
deliver Securities of any series having attached thereto appropriate Coupons, if
any, executed by the Issuer to the Trustee for authentication together with the
applicable documents referred to below in this Section, and the Trustee shall
thereupon authenticate and deliver such Securities to or upon the order of the
Issuer (contained in the Issuer Order referred to below in this Section or
pursuant to such procedures acceptable to the Trustee and to such recipients as
may be specified from time to time by an Issuer Order. The maturity date,
original issue date, interest rate and any other terms of the Securities of such
series and Coupons, if any, appertaining thereto shall be determined by or
pursuant to such Issuer Order and procedures. If provided for in such
procedures, such Issuer Order may authorize authentication and delivery pursuant
to oral instructions from the Issuer or its duly authorized agent, which
instructions shall be promptly confirmed in writing. In authenticating such
Securities and accepting the additional responsibilities under this Indenture in
relation to such Securities, the Trustee shall be entitled to receive (in the
case of subparagraphs 2, 3 and 4 below only at or before the time of the first
request of the Issuer to the Trustee to authenticate Securities of such series
and (subject to Section 6.1 shall be fully protected in relying upon, unless
and until such documents have been superseded or revoked:
(1 an Issuer Order requesting such authentication and setting forth
delivery instructions if the Securities and Coupons, if any, are not to be
delivered to the Issuer, provided that, with respect to Securities of a
series subject to a Periodic Offering, (a such Issuer Order may be
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<PAGE> 18
delivered by the Issuer to the Trustee prior to the delivery to the Trustee
of such Securities for authentication and delivery, (b the Trustee shall
authenticate and deliver Securities of such series for original issue from
time to time, in an aggregate principal amount not exceeding the aggregate
principal amount established for such series, pursuant to an Issuer Order
or pursuant to procedures acceptable to the Trustee as may be specified
from time to time by an Issuer Order, (c the maturity date or dates,
original issue date or dates, interest rate or rates and any other terms of
Securities of such series shall be determined by an Issuer Order or
pursuant to such procedures and (d if provided for in such procedures,
such Issuer Order may authorize authentication and delivery pursuant to
oral or electronic instructions from the Issuer or its duly authorized
agent or agents, which oral instructions shall be promptly confirmed in
writing;
(2 any Board Resolution, Officer's Certificate and/or executed
supplemental indenture referred to in Sections 2.1 and 2.3 by or pursuant
to which the forms and terms of the Securities and Coupons, if any, were
established;
(3 an Officer's Certificate setting forth the form or forms and terms
of the Securities and Coupons, if any, stating that the form or forms and
terms of the Securities and Coupons, if any, have been established pursuant
to Sections 2.1 and 2.3 and comply with this Indenture, and covering such
other matters as the Trustee may reasonably request; and
(4 At the option of the Issuer, either Opinions of Counsel, or
letters addressed to the Trustee permitting it to rely on Options of
Counsel, substantially to the effect that:
(a the forms of the Securities and Coupons, if any, have been
duly authorized and established in conformity with the provisions of
this Indenture;
(b in the case of an underwritten offering, the terms of the
Securities have been duly authorized and established in conformity with
the provisions of this Indenture, and, in the case of an offering that
is not underwritten, certain terms of the Securities have been
established pursuant to a Board Resolution, an Officer's Certificate or
a supplemental indenture in accordance with this Indenture, and when
such other terms as are to be established pursuant to procedures set
forth in an Issuer Order shall have been established, all such terms
will have been duly authorized by the Issuer and will have been
established in conformity with the provisions of this Indenture;
(c when the Securities and Coupons, if any, have been executed
by the Issuer and authenticated by the Trustee in accordance with the
provisions of this Indenture and delivered to and duly paid for by the
purchasers thereof, they will have been duly issued under this
Indenture and will be valid and legally binding obligations of the
Issuer, enforceable in accordance with their respective terms, and will
be entitled to the benefits of this Indenture; and
(d the execution and delivery by the Issuer of, and the
performance by the Issuer of its obligations under, the Securities and
Coupons, if any, will not contravene any provision of applicable law or
the certificate of incorporation or by-laws of the Issuer or, to the
best of
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<PAGE> 19
such counsel's knowledge, any agreement or other instrument binding
upon the Issuer or any of its Subsidiaries that is material to the
Issuer and its Subsidiaries, considered as one enterprise, or, to the
best of such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Issuer
or any Subsidiary, and no consent, approval or authorization of any
governmental body or agency is required for the performance by the
Issuer of its obligations under the Securities and Coupons, if any,
except such as are specified and have been obtained and such as may be
required by the securities or blue sky laws of the various states in
connection with the offer and sale of the Securities and Coupons, if
any.
In rendering such opinions, such counsel may qualify any opinions as to
enforceability by stating that such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium, fraudulent conveyance and
other similar laws affecting the rights and remedies of creditors and is subject
to general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law. Such counsel may rely upon
opinions of other counsel (copies of which shall be delivered to the Trustee,
who shall be counsel reasonably satisfactory to the Trustee, in which case the
opinion shall state that such counsel believes such counsel and the Trustee are
entitled so to rely. Such counsel may also state that, insofar as such opinion
involves factual matters, such counsel has relied, to the extent such counsel
deems proper, upon certificates of officers of the Issuer and its Subsidiaries
and certificates of public officials.
The Trustee shall have the right to decline to authenticate and deliver any
Securities under this Section if the Trustee, being advised by counsel,
determines that such action may not lawfully be taken by the Issuer or if the
Trustee in good faith by its board of directors or board of trustees, executive
committee, or a trust committee of directors or trustees or Responsible Officers
shall determine that such action would expose the Trustee to personal liability
to existing Holders or would affect the Trustee's own rights, duties or
immunities under the Securities, this Indenture or otherwise.
If the Issuer shall establish pursuant to Section 2.3 that the Securities
of a series are to be issued in the form of one or more Registered Global
Securities, then the Issuer shall execute and the Trustee shall, in accordance
with this Section and the Issuer Order with respect to such series, authenticate
and deliver one or more Registered Global Securities that (i shall represent
and shall be denominated in an amount equal to the aggregate principal amount of
all of the Securities of such series to be represented by such Registered Global
Security or Securities, (ii shall be registered in the name of such Depositary
for such Registered Global Security or Securities or the nominee of such
Depositary, (iii shall be delivered by the Trustee to such Depositary or
pursuant to such Depositary's instructions and (iv shall bear a legend
substantially to the following effect: "Unless this certificate is presented by
an authorized representative of a Depositary to the Issuer or its agent for
registration of transfer, exchange or payment, and any certificate issued is
registered in the name of the nominee of such Depositary or such other name as
requested by an authorized representative of such Depositary and any payment is
made to the nominee of such Depositary, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered
owner hereof, the nominee, has an interest herein."
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<PAGE> 20
Each Depositary designated pursuant to Section 2.3 must, at the time of its
designation and at all times while it serves as Depositary, be a clearing agency
registered under the Securities Exchange Act of 1934 and any other applicable
statute or regulation.
SECTION 2.5 Execution of Securities. The Securities and, if applicable,
each Coupon appertaining thereto shall be signed on behalf of the Issuer by any
two of the chairman of its Board of Directors or its chief executive officer or
its president or any vice president or its chief financial officer or its
treasurer or its controller or any other officer designated by the Board of
Directors, under its corporate seal (except in the case of Coupons, which may,
but need not, be attested. Such signatures may be the manual or facsimile
signatures of the present or any future such officers. The seal of the Issuer
may be in the form of a facsimile thereof and may be impressed, affixed,
imprinted or otherwise reproduced on the Securities. Typographical and other
minor errors or defects in any such reproduction of the seal or any such
signature shall not affect the validity or enforceability of any Security that
has been duly authenticated and delivered by the Trustee.
In case any officer of the Issuer who shall have signed any of the
Securities or Coupons, if any, shall cease to be such officer before the
Security or Coupon so signed (or the Security to which the Coupon so signed
appertains shall be authenticated and delivered by the Trustee or disposed of
by the Issuer, such Security or Coupon nevertheless may be authenticated and
delivered or disposed of as though the person who signed such Security or Coupon
had not ceased to be such officer of the Issuer; and any Security or Coupon may
be signed on behalf of the Issuer by such persons as, at the actual date of the
execution of such Security or Coupon, shall be the proper officers of the
Issuer, although at the date of the execution and delivery of this Indenture any
such person was not such an officer.
SECTION 2.6 Certificate of Authentication. Only such Securities as shall
bear thereon a certificate of authentication substantially in the form
hereinbefore recited, executed by the Trustee by the manual signature of one of
its authorized officers, shall be entitled to the benefits of this Indenture or
shall be valid or obligatory for any purpose. No Coupon shall be entitled to the
benefits of this Indenture or shall be valid and obligatory for any purpose
until the certificate of authentication on the Security to which such Coupon
appertains shall have been duly executed by the Trustee. The execution of such
certificate by the Trustee upon any Security executed by the Issuer shall be
conclusive evidence that the Security so authenticated has been duly
authenticated and delivered hereunder and that the Holder is entitled to the
benefits of this Indenture.
SECTION 2.7 Denomination and Date of Securities; Payments of Interest. The
Securities of each series shall be issuable as Registered Securities or
Unregistered Securities in denominations established as contemplated by Section
2.3 or, with respect to the Registered Securities of any series, if not so
established, in denominations of $1,000 and any integral multiple thereof. If
denominations of Unregistered Securities of any series are not so established,
such Securities shall be issuable in denominations of $1,000 and $5,000. The
Securities of each series shall be numbered, lettered or otherwise distinguished
in such manner or in accordance with such plan as the officers of the Issuer
executing the same may determine with the approval of the Trustee, as evidenced
by the execution and authentication thereof.
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<PAGE> 21
Each Registered Security shall be dated the date of its authentication.
Each Unregistered Security shall be dated as provided in the resolution or
resolutions of the Board of Directors of the Issuer referred to in Section 2.3.
The Securities of each series shall bear interest, if any, from the date, and
such interest shall be payable on the dates, established as contemplated by
Section 2.3.
Unless otherwise provided in the Registered Securities of any series, the
person in whose name any Registered Security of any series is registered at the
close of business on any record date applicable to a particular series with
respect to any interest payment date for such series shall be entitled to
receive the interest, if any, payable on such interest payment date
notwithstanding any transfer or exchange of such Registered Security subsequent
to the record date and prior to such interest payment date, except if and to the
extent the Issuer shall default in the payment of the interest due on such
interest payment date for such series, in which case such defaulted interest
shall be paid to the persons in whose names Outstanding Registered Securities
for such series are registered at the close of business on a subsequent record
date (which shall be not less than five Business Days prior to the date of
payment of such defaulted interest established by notice given by mail by or on
behalf of the Issuer to the Holders of Registered Securities not less than 15
days preceding such subsequent record date. The term "record date" as used with
respect to any interest payment date (except a date for payment of defaulted
interest for the Securities of any series shall mean the date specified as such
in the terms of the Registered Securities of such series established as
contemplated by Section 2.3, or, if no such date is so established, if such
interest payment date is the first day of a calendar month, the fifteenth day of
the next preceding calendar month or, if such interest payment date is the
fifteenth day of a calendar month, the first day of such calendar month, whether
or not such record date is a Business Day.
SECTION 2.8 Registration, Transfer and Exchange. The Issuer will keep at
each office or agency to be maintained for the purpose as provided in Section
3.2 for each series of Securities a register or registers in which, subject to
such reasonable regulations as it may prescribe, it will provide for the
registration of Registered Securities of such series and the registration of
transfer of Registered Securities of such series. Such register shall be in
written form in the English language or in any other form capable of being
converted into such form within a reasonable time. At all reasonable times such
register or registers shall be open for inspection by the Trustee.
Upon due presentation for registration of transfer of any Registered
Security of any series at any such office or agency to be maintained for the
purpose as provided in Section 3.2, the Issuer shall execute and the Trustee
shall authenticate and deliver in the name of the transferee or transferees a
new Registered Security or Registered Securities of the same series, maturity
date, interest rate and original issue date in authorized denominations for a
like aggregate principal amount.
Unregistered Securities (except for any temporary global Unregistered
Securities and Coupons (except for Coupons attached to any temporary global
Unregistered Securities shall be transferable by delivery.
At the option of the Holder thereof, Registered Securities of any series
(other than a Registered Global Security, except as set forth below may be
exchanged for a Registered Security or Registered Securities of such series
having authorized denominations and an equal aggregate principal amount,
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<PAGE> 22
upon surrender of such Registered Securities to be exchanged at the agency of
the Issuer that shall be maintained for such purpose in accordance with Section
3.2 and upon payment, if the Issuer shall so require, of the charges hereinafter
provided. If the Securities of any series are issued in both registered and
unregistered form, except as otherwise specified pursuant to Section 2.3, at the
option of the Holder thereof, Unregistered Securities of any series may be
exchanged for Registered Securities of such series having other authorized
denominations and an equal aggregate principal amount, upon surrender of such
Unregistered Securities to be exchanged at the agency of the Issuer that shall
be maintained for such purpose in accordance with Section 3.2, with, in the case
of Unregistered Securities that have Coupons attached, all unmatured Coupons and
all matured Coupons in default thereto appertaining, and upon payment, if the
Issuer shall so require, of the charges hereinafter provided. At the option of
the Holder thereof, if Unregistered Securities of any series, maturity date,
interest rate and original issue date are issued in more than one authorized
denomination, except as otherwise specified pursuant to Section 2.3, such
Unregistered Securities may be exchanged for Unregistered Securities of such
series having authorized denominations and an equal aggregate principal amount,
upon surrender of such Unregistered Securities to be exchanged at the agency of
the Issuer that shall be maintained for such purpose in accordance with Section
3.2 or as specified pursuant to Section 2.3, with, in the case of Unregistered
Securities that have Coupons attached, all unmatured Coupons and all matured
Coupons in default thereto appertaining, and upon payment, if the Issuer shall
so require, of the charges hereinafter provided. Unless otherwise specified
pursuant to Section 2.3, Registered Securities of any series may not be
exchanged for Unregistered Securities of such series. Whenever any Securities
are so surrendered for exchange, the Issuer shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive. All Securities and Coupons surrendered upon any exchange or
transfer provided for in this Indenture shall be promptly canceled and disposed
of by the Trustee and the Trustee will deliver a certificate of disposition
thereof to the Issuer.
All Registered Securities presented for registration of transfer, exchange,
redemption or payment shall (if so required by the Issuer or the Trustee be
duly endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to the Issuer and the Trustee duly executed by,
the Holder or his attorney duly authorized in writing.
The Issuer may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any exchange or
registration of transfer of Securities. No service charge shall be made for any
such transaction.
The Issuer shall not be required to exchange or register a transfer of (a
any Securities of any series for a period of 15 days next preceding the first
mailing of notice of redemption of Securities of such series to be redeemed or
(b any Securities selected, called or being called for redemption, in whole or
in part, except, in the case of any Security to be redeemed in part, the portion
thereof not so to be redeemed.
Notwithstanding any other provision of this Section 2.8, unless and until
it is exchanged in whole or in part for Securities in definitive registered
form, a Registered Global Security representing all or a portion of the
Securities of a series may not be transferred except as a whole by the
Depositary
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<PAGE> 23
for such series to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor Depositary for such series or
a nominee of such successor Depositary.
If at any time the Depositary for any Registered Securities of a series
represented by one or more Registered Global Securities notifies the Issuer that
it is unwilling or unable to continue as Depositary for such Registered
Securities or if at any time the Depositary for such Registered Securities shall
no longer be eligible under Section 2.4, the Issuer shall appoint a successor
Depositary eligible under Section 2.4 with respect to such Registered
Securities. If a successor Depositary eligible under Section 2.4 for such
Registered Securities is not appointed by the Issuer within 90 days after the
Issuer received such notice or becomes aware of such ineligibility, the Issuer's
election pursuant to Section 2.3 that such Registered Securities be represented
by one or more Registered Global Securities shall no longer be effective and the
Issuer will execute, and the Trustee, upon receipt of an Officer's Certificate
for the authentication and delivery of definitive Securities of such series,
will authenticate and deliver, Securities of such series in definitive
registered form without coupons, in any authorized denominations, in an
aggregate principal amount equal to the principal amount of the Registered
Global Security or Securities representing such Registered Securities in
exchange for such Registered Global Security or Securities.
The Issuer may at any time and in its sole discretion determine that the
Registered Securities of any series issued in the form of one or more Registered
Global Securities shall no longer be represented by a Registered Global Security
or Securities. In such event the Issuer will execute, and the Trustee, upon
receipt of an Officer's Certificate for the authentication and delivery of
definitive Securities of such series, will authenticate and deliver, Securities
of such series in definitive registered form without coupons, in any authorized
denominations, in an aggregate principal amount equal to the principal amount of
the Registered Global Security or Securities representing such Registered
Securities, in exchange for such Registered Global Security or Securities.
If specified by the Issuer pursuant to Section 2.3 with respect to
Securities represented by a Registered Global Security, the Depositary for such
Registered Global Security may surrender such Registered Global Security in
exchange in whole or in part for Securities of the same series in definitive
registered form on such terms as are acceptable to the Issuer and such
Depositary. Thereupon, the Issuer shall execute, and the Trustee shall
authenticate and deliver, without service charge,
(i to the Person specified by such Depositary a new Registered Global
Security or Securities of the same series, of any authorized denominations
as requested by such Person, in an aggregate principal amount equal to and
in exchange for such Person's beneficial interest in the Registered Global
Security; and
(ii to such Depositary a new Registered Global Security in a
denomination equal to the difference, if any, between the principal amount
of the surrendered Registered Global Security and the aggregate principal
amount of Registered Securities authenticated and delivered pursuant to
clause (i above.
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Upon the exchange of a Registered Global Security for Securities in a
definitive registered form without Coupons, in authorized denominations, such
Registered Global Security shall be canceled by the Trustee or an agent of the
Issuer or the Trustee. Securities in definitive registered form without coupons
issued in exchange for a Registered Global Security pursuant to this Section 2.8
shall be registered in such names and in such authorized denominations as the
Depositary for such Registered Global Security, pursuant to instructions from
its direct or indirect participants or otherwise, shall instruct the Trustee or
an agent of the Issuer or the Trustee. The Trustee or such agent shall deliver
such Securities to or as directed by the Persons in whose names such Securities
are so registered.
All Securities issued upon any transfer or exchange of Securities shall be
valid obligations of the Issuer, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Securities surrendered upon such
transfer or exchange.
Notwithstanding anything herein or in the terms of any series of Securities
to the contrary, none of the Issuer, the Trustee or any agent of the Issuer or
the Trustee (any of which, other than the Issuer, shall rely on an Officer's
Certificate and an Opinion of Counsel shall be required to exchange any
Unregistered Security for a Registered Security if such exchange would result in
adverse Federal income tax consequences to the Issuer (such as, for example, the
inability of the Issuer to deduct from its income, as computed for Federal
income tax purposes, the interest payable on the Unregistered Securities under
then applicable United States Federal income tax laws.
SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities. In
case any temporary or definitive Security or any Coupon appertaining to any
Security shall become mutilated, defaced or be destroyed, lost or stolen, the
Issuer in its discretion may execute, and, upon the written request of any
officer of the Issuer, the Trustee shall authenticate and deliver, a new
Security of the same series, maturity date, interest rate and original issue
date, bearing a number or other distinguishing symbol not contemporaneously
outstanding, in exchange and substitution for the mutilated or defaced Security,
or in lieu of and in substitution for the Security so destroyed, lost or stolen,
with Coupons corresponding to the Coupons appertaining to the Securities so
mutilated, defaced, destroyed, lost or stolen, or in exchange or substitution
for the Security to which such mutilated, defaced, destroyed, lost or stolen
Coupon appertained, with Coupons appertaining thereto corresponding to the
Coupons so mutilated, defaced, destroyed, lost or stolen. In every case the
applicant for a substitute Security or Coupon shall furnish to the Issuer and to
the Trustee and any agent of the Issuer or the Trustee such security or
indemnity as may be required by them to indemnify and defend and to save each of
them harmless and, in every case of destruction, loss or theft, evidence to
their satisfaction of the destruction, loss or theft of such Security or Coupon
and of the ownership thereof and in the case of mutilation or defacement shall
surrender the Security and related Coupons to the Trustee or such agent.
Upon the issuance of any substitute Security or Coupon, the Issuer may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee or its agent connected therewith. In case
any Security or Coupon which has matured or is about to mature or has been
called for redemption in full shall become mutilated or defaced or be destroyed,
lost or
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stolen, the Issuer may instead of issuing a substitute Security, pay or
authorize the payment of the same or the relevant Coupon (without surrender
thereof except in the case of a mutilated or defaced Security or Coupon, if the
applicant for such payment shall furnish to the Issuer and to the Trustee and
any agent of the Issuer or the Trustee such security or indemnity as any of them
may require to save each of them harmless, and, in every case of destruction,
loss or theft, the applicant shall also furnish to the Issuer and the Trustee
and any agent of the Issuer or the Trustee evidence to their satisfaction of the
destruction, loss or theft of such Security or Coupon and of the ownership
thereof.
Every substitute Security or Coupon of any series issued pursuant to the
provisions of this Section by virtue of the fact that any such Security or
Coupon is destroyed, lost or stolen shall constitute an additional contractual
obligation of the Issuer, whether or not the destroyed, lost or stolen Security
or Coupon shall be at any time enforceable by anyone and shall be entitled to
all the benefits of (but shall be subject to all the limitations of rights set
forth in this Indenture equally and proportionately with any and all Securities
or Coupons of such series duly authenticated and delivered hereunder. All
Securities and Coupons shall be held and owned upon the express condition that,
to the extent permitted by law, the foregoing provisions are exclusive with
respect to the replacement or payment of mutilated, defaced or destroyed, lost
or stolen Securities and Coupons and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment of negotiable instruments or
other securities without their surrender.
SECTION 2.10 Cancellation of Securities; Destruction Thereof. All
Securities and Coupons surrendered for payment, redemption, registration of
transfer or exchange, or for credit against any payment in respect of a sinking
or analogous fund, if surrendered to the Issuer or any agent of the Issuer or
the Trustee or any agent of the Trustee, shall be delivered to the Trustee or
its agent for cancellation or, if surrendered to the Trustee, shall be canceled
by it; and no Securities or Coupons shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. The Trustee or
its agent shall dispose of canceled Securities and Coupons held by it and
deliver a certificate of disposition to the Issuer. If the Issuer or its agent
shall acquire any of the Securities or Coupons, such acquisition shall not
operate as a redemption or satisfaction of the indebtedness represented by such
Securities or Coupons unless and until the same are delivered to the Trustee or
its agent for cancellation.
SECTION 2.11 Temporary Securities. Pending the preparation of definitive
Securities for any series, the Issuer may execute and the Trustee shall
authenticate and deliver temporary Securities for such series (printed,
lithographed, typewritten or otherwise reproduced, in each case in form
satisfactory to the Trustee. Temporary Securities of any series shall be
issuable as Registered Securities without Coupons, or as Unregistered Securities
with or without Coupons attached thereto, of any authorized denomination, and
substantially in the form of the definitive Securities of such series but with
such omissions, insertions and variations as may be appropriate for temporary
Securities, all as may be determined by the Issuer with the concurrence of the
Trustee as evidenced by the execution and authentication thereof. Temporary
Securities may contain such references to any provisions of this Indenture as
may be appropriate. Every temporary Security shall be executed by the Issuer and
be authenticated by the Trustee upon the same conditions and in substantially
the same manner, and with like effect, as the definitive Securities. Without
unreasonable delay the
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Issuer shall execute and shall furnish definitive Securities of such series and
thereupon temporary Registered Securities of such series may be surrendered in
exchange therefor without charge at each office or agency to be maintained by
the Issuer for that purpose pursuant to Section 3.2 and, in the case of
Unregistered Securities, at any agency maintained by the Issuer for such purpose
as specified pursuant to Section 2.3, and the Trustee shall authenticate and
deliver in exchange for such temporary Securities of such series an equal
aggregate principal amount of definitive Securities of the same series having
authorized denominations and, in the case of Unregistered Securities, having
attached thereto any appropriate Coupons. Until so exchanged, the temporary
Securities of any series shall be entitled to the same benefits under this
Indenture as definitive Securities of such series, unless otherwise established
pursuant to Section 2.3. The provisions of this Section are subject to any
restrictions or limitations on the issue and delivery of temporary Unregistered
Securities of any series that may be established pursuant to Section 2.3
(including any provision that Unregistered Securities of such series initially
be issued in the form of a single global Unregistered Security to be delivered
to a depositary or agency located outside the United States and the procedures
pursuant to which definitive or global Unregistered Securities of such series
would be issued in exchange for such temporary global Unregistered Security.
ARTICLE THREE
COVENANTS OF THE ISSUER
SECTION 3.1 Payment of Principal and Interest. The Issuer covenants and
agrees for the benefit of each series of Securities that it will duly and
punctually pay or cause to be paid the principal of, and interest on, each of
the Securities of such series (together with any additional amounts payable
pursuant to the terms of such Securities at the place or places, at the
respective times and in the manner provided in such Securities and in the
Coupons, if any, appertaining thereto and in this Indenture. The interest on
Securities with Coupons attached (together with any additional amounts payable
pursuant to the terms of such Securities shall be payable only upon
presentation and surrender of the several Coupons for such interest installments
as are evidenced thereby as they severally mature. If any temporary Unregistered
Security provides that interest thereon may be paid while such Security is in
temporary form, the interest on any such temporary Unregistered Security
(together with any additional amounts payable pursuant to the terms of such
Security shall be paid, as to the installments of interest evidenced by Coupons
attached thereto, if any, only upon presentation and surrender thereof, and, as
to the other installments of interest, if any, only upon presentation of such
Securities for notation thereon of the payment of such interest, in each case
subject to any restrictions that may be established pursuant to Section 2.3. The
interest on Registered Securities (together with any additional amounts payable
pursuant to the terms of such Securities shall be payable only to or upon the
written order of the Holders thereof and, at the option of the Issuer, may be
paid by wire transfer or by mailing checks for such interest payable to or upon
the written order of such Holders at their last addresses as they appear on the
registry books of the Issuer, unless otherwise provided in such Securities.
SECTION 3.2 Offices for Payments, etc. So long as any Registered Securities
are authorized for issuance pursuant to this Indenture or are outstanding
hereunder, the Issuer will maintain in the Borough of Manhattan, The City of New
York, an office or agency where the Registered Securities
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of each series may be presented for payment, where the Securities of each series
may be presented for exchange as is provided in this Indenture and, if
applicable, pursuant to Section 2.3 and where the Registered Securities of each
series may be presented for registration of transfer as in this Indenture
provided.
The Issuer will maintain one or more offices or agencies in a city or
cities located outside the United States (including any city in which such an
agency is required to be maintained under the rules of any stock exchange on
which the Securities of such series are listed where the Unregistered
Securities, if any, of each series and Coupons, if any, appertaining thereto may
be presented for payment. No payment on any Unregistered Security or Coupon will
be made upon presentation of such Unregistered Security or Coupon at an agency
of the Issuer within the United States nor will any payment be made by transfer
to an account in, or by mail to an address in, the United States unless pursuant
to applicable United States laws and regulations then in effect such payment can
be made without adverse tax consequences to the Issuer. Notwithstanding the
foregoing, payments in Dollars of Unregistered Securities of any series and
Coupons appertaining thereto which are payable in Dollars may be made at an
agency of the Issuer maintained in the Borough of Manhattan, The City of New
York if such payment in Dollars at each agency maintained by the Issuer outside
the United States for payment on such Unregistered Securities is illegal or
effectively precluded by exchange controls or other similar restrictions.
The Issuer will maintain in the Borough of Manhattan, The City of New York,
an office or agency where notices and demands to or upon the Issuer in respect
of the Securities of any series, the Coupons appertaining thereto or this
Indenture may be served.
The Issuer will give to the Trustee written notice of the location of each
such office or agency and of any change of location thereof. In case the Issuer
shall fail to maintain any agency required by this Section to be located in the
Borough of Manhattan, The City of New York, or shall fail to give such notice of
the location or of any change in the location of any of the above agencies,
presentations and demands may be made and notices may be served at the Corporate
Trust Office of the Trustee.
The Issuer may from time to time designate one or more additional offices
or agencies where the Securities of a series and any Coupons appertaining
thereto may be presented for payment, where the Securities of that series may be
presented for exchange as provided in this Indenture and pursuant to Section 2.3
and where the Registered Securities of that series may be presented for
registration of transfer as in this Indenture provided, and the Issuer may from
time to time rescind any such designation, as the Issuer may deem desirable or
expedient; provided, however, that no such designation or rescission shall in
any manner relieve the Issuer of its obligation to maintain the agencies
provided for in this Section. The Issuer will give to the Trustee prompt written
notice of any such designation or rescission thereof.
SECTION 3.3 Appointment to Fill a Vacancy in Office of Trustee. The Issuer,
whenever necessary to avoid or fill a vacancy in the office of Trustee, will
appoint, in the manner provided in Section 6.10, a Trustee, so that there shall
at all times be a Trustee with respect to each series of Securities hereunder.
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SECTION 3.4 Paying Agents. Whenever the Issuer shall appoint a paying agent
other than the Trustee with respect to the Securities of any series, it will
cause such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of this
Section,
(a that it will hold all sums received by it as such agent for the
payment of the principal of or interest on the Securities of such series
(whether such sums have been paid to it by the Issuer or by any other
obligor on the Securities of such series in trust for the benefit of the
Holders of the Securities of such series, or Coupons appertaining thereto,
if any, or of the Trustee,
(b that it will give the Trustee notice of any failure by the Issuer
(or by any other obligor on the Securities of such series to make any
payment of the principal of or interest on the Securities of such series
when the same shall be due and payable, and
(c that it will pay any such sums so held in trust by it to the
Trustee upon the Trustee's written request at any time during the
continuance of the failure referred to in clause (b above.
The Issuer will, on or prior to each due date of the principal of or
interest on the Securities of such series, deposit with the paying agent a sum
sufficient to pay such principal or interest so becoming due, and (unless such
paying agent is the Trustee the Issuer will promptly notify the Trustee of any
failure to take such action.
If the Issuer shall act as its own paying agent with respect to the
Securities of any series, it will, on or before each due date of the principal
of or interest on the Securities of such series, set aside, segregate and hold
in trust for the benefit of the Holders of the Securities of such series or the
Coupons appertaining thereto a sum sufficient to pay such principal or interest
so becoming due. The Issuer will promptly notify the Trustee of any failure to
take such action.
Anything in this Section to the contrary notwithstanding, but subject to
Section 10.1, the Issuer may at any time, for the purpose of obtaining a
satisfaction and discharge with respect to one or more or all series of
Securities hereunder, or for any other reason, pay or cause to be paid to the
Trustee all sums held in trust for any such series by the Issuer or any paying
agent hereunder, as required by this Section, such sums to be held by the
Trustee upon the trusts herein contained.
Anything in this Section to the contrary notwithstanding, the agreement to
hold sums in trust as provided in this Section is subject to the provisions of
Sections 10.3 and 10.4.
SECTION 3.5 Written Statement to Trustee. The Issuer will furnish to the
Trustee on or before April 30 in each year (beginning with April 30, 2000 a
brief certificate (which need not comply with Section 11.5 from the principal
executive, financial or accounting officer of the Issuer stating that in the
course of the performance by the signer of his duties as an officer of the
Issuer he would normally have knowledge of any default or non-compliance by the
Issuer in the performance of any covenants or conditions contained in this
Indenture, stating whether or not he has knowledge of any such default or
non-compliance and, if so, specifying each such default or non-compliance of
which the signer has knowledge and the nature thereof.
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SECTION 3.6 Negative Pledge: Limitation on Sale and Leaseback Transactions.
(a The Issuer will not issue, assume, incur or guarantee, and will not
permit any Restricted Subsidiary to issue, assume, incur or guarantee, any Debt
secured by any mortgage, pledge, lien or other encumbrance (any such mortgage,
pledge, lien and other encumbrance being hereinafter called a "Mortgage" upon
any Principal Manufacturing Property of the Issuer or any Restricted Subsidiary,
or upon shares of capital stock or Debt of any Restricted Subsidiary (whether
such Principal Manufacturing Property or shares of stock are now owned or
hereafter acquired or such Debt is now existing or hereafter incurred or
assumed, without in any such case effectively providing, concurrently with the
issuance or assumption of such Debt, that the Securities (together with, if the
Issuer shall so determine, any other Debt of the Issuer or such Restricted
Subsidiary ranking equally with the Securities and then existing or thereafter
created shall be secured equally and ratably with such Debt; provided, however,
that the foregoing restrictions shall not apply to:
(i the creation of Mortgages on any Principal Manufacturing Property
(including any improvements on an existing property, as to which the
Mortgage may include such underlying real property as the Issuer may deem
necessary for the improvement and unnecessary for the operation of any
theretofore existing Principal Manufacturing Property on the same or
adjoining real property hereafter acquired by the Issuer or a Restricted
Subsidiary prior to, at the time of, or within 180 days after the latest
of the acquisition, completion of construction or commencement of
commercial operation of such property, to secure or provide for the payment
of financing of all or any part of the purchase price thereof or
construction of fixed improvements thereon, or, in addition to assumptions
in transactions contemplated by subparagraph (ii below, the assumption of
any Mortgage upon any Principal Manufacturing Property hereafter acquired
existing at the time of such acquisitions, or the acquisition of any
Principal Manufacturing Property subject to any Mortgage without the
assumption thereof; provided that the aggregate principal amount of Debt
secured by any such Mortgage so issued, assumed or existing shall not
exceed 100% of the cost of such Principal Manufacturing Property to the
corporation acquiring the same or of the fair value thereof (as determined
by resolution adopted by the Board of Directors at the time of such
acquisition, whichever is less, and, provided further, that in the case of
any such acquisition, construction or improvement the Mortgage shall not
apply to any property theretofore owned by the Issuer or a Restricted
Subsidiary, other than, in the case of any such construction or
improvement, any theretofore unimproved real property on which the property
so constructed, or the improvement, is located (which unimproved real
property may at the option of the Issuer be segregated by legal description
from other real property of the Issuer appurtenant to such Principal
Manufacturing Property and subjected to the Mortgage related to such
construction or improvement;
(ii any Mortgages on any Principal Manufacturing Property of a
corporation which is merged into or consolidated with the Issuer or a
Restricted Subsidiary or substantially all of the assets of which are
acquired by the Issuer or a Restricted Subsidiary (whether or not the
obligations secured by any such Mortgage are assumed by the Issuer or a
Restricted Subsidiary; provided that such Mortgages were not created in
contemplation of such merger, consolidation or acquisition;
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(iii Mortgages on any Principal Manufacturing Property of the Issuer
or a Restricted Subsidiary in favor of the United States of America or any
State thereof, or any department, agency or instrumentality or political
subdivision of the United States of America or any State thereof, or in
favor of any other country, or any political subdivision thereof, to secure
partial, progress, advance or other payments pursuant to any contract or
statute or to secure any Debt incurred or guaranteed for the purpose of
financing all or any part of the cost of acquiring, constructing or
improving the property subject to such Mortgages (including Mortgages
incurred in connection with financings of the type contemplated by Section
103 of the Internal Revenue Code, maritime financings under Title XI of the
United States Code or similar financings;
(iv Mortgages on particular property (or any proceeds of the sale
thereof to secure all or any part of the cost of exploration, drilling,
mining, development, operation or maintenance thereof (including, without
limitation, construction of facilities for field processing intended to
obtain or increase the production and sale or other disposition of oil,
gas, coal, natural gas, carbon dioxide, sulphur, helium, metals, minerals,
steam, timber or other natural resources, or any Debt created, issued,
assumed or guaranteed to provide funds for any or all such purposes;
(v Mortgages securing Debt of a Restricted Subsidiary owing to the
Issuer and/or another Restricted Subsidiary;
(vi Mortgages on any Principal Manufacturing Property of the Issuer
or a Restricted Subsidiary which Mortgages were in existence on the date of
this Indenture; provided, however, that each such Mortgage shall be limited
to all or a part of the property which secured such Mortgage at such date
(plus improvements and construction on such Property;
(vii any extension, renewal or replacement (or successive extensions,
renewals or replacements in whole or in part, of any Mortgage referred to
in the foregoing clauses (i through (vi; provided, however, that the
principal amount of Debt so secured thereby shall not exceed the principal
amount of Debt so secured at the time of such extension, renewal or
replacement, and that such extension, renewal or replacement shall be
limited to all or a part of the property which secured the Mortgage so
extended, renewed or replaced (plus improvements and construction on such
property; and
(viii Permitted Mortgages.
(b Notwithstanding the provisions of subsection (a of this Section, the
Issuer or any one or more Restricted Subsidiaries may issue or assume Debt
secured by a Mortgage on a Principal Manufacturing Property in addition to those
permitted by subsection (a of this Section and renew, extend or replace such
Mortgages; provided that at the time of such creation, assumption, renewal,
extension or replacement, and after giving effect thereto, Exempted Debt does
not exceed 15% of Consolidated Net Tangible Assets.
(c The Issuer will not, nor will it permit any Restricted Subsidiary to,
enter into any arrangement with any Person providing for the leasing by the
Issuer or any Restricted Subsidiary of any Principal Manufacturing Property,
whether such Principal Manufacturing Property is now owned
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or hereafter acquired (except for temporary leases for a term, including
renewals at the option of the lessee, of not more than three years and except
for leases between the Issuer and a Restricted Subsidiary or between Restricted
Subsidiaries, which property has been or is to be sold or transferred by the
Issuer or such Restricted Subsidiary to such Person with the intention of taking
back a lease on such property (a "sale and leaseback transaction" unless the
net proceeds of such sale or transfer shall be at least equal to the fair value
of such property as determined by resolution adopted by the Board of Directors
and either:
(i the Issuer or such Restricted Subsidiary would be entitled,
pursuant to the provisions of subsection (a of this Section, to issue or
assume Debt secured by a Mortgage on such property at least equal in amount
to the Attributable Debt in respect of such sale and leaseback transaction
without equally and ratable securing the Securities; or
(ii since the date hereof and within a period commencing twelve months
prior to the consummation of such sale and leaseback transaction and ending
twelve months after the consummation of such sale and leaseback transaction
the Issuer or such Restricted Subsidiary, as the case may be, has expended
or will expend, or a combination of both, for facilities comprising all or
a part of a Principal Manufacturing Property an amount equal to (A the net
proceeds of such sale and leaseback transaction and the Issuer elects to
designate such amount as a credit against such sale and leaseback
transaction or (B a part of the net proceeds of such sale and leaseback
transaction and the Issuer elects to designate such amount as a credit
against such sale and leaseback transaction and applies an amount equal to
the remainder of the net proceeds as provided in clause (iii hereof; or
(iii such sale and leaseback transactions do not come within the
exceptions provided in clause (i hereof and the Issuer does not make the
election permitted by clause (ii hereof or makes such election only as to
part of such net proceeds, in either which event the Issuer will, within
180 days after such sale and leaseback transaction, apply an amount equal
to the Attributable Debt in respect of such sale and leaseback transaction
(less an amount equal to the amount, if any, elected under clause (ii
hereof to the retirement (other than any mandatory retirement or by way of
payment at maturity of Debt with a maturity of greater than one year of
the Issuer or any Restricted Subsidiary (other than Debt of the Issuer to
any Restricted Subsidiary or of any Restricted Subsidiary to the Issuer or
another Restricted Subsidiary.
(d Notwithstanding the provisions of paragraph (c of this section, the
Issuer and any Restricted Subsidiary may enter into sale and leaseback
transactions in addition to those permitted by paragraph (c of this Section and
without any obligation to make expenditures for facilities comprising a part or
all of a Principal Manufacturing Property or to retire any Debt, provided that
at the time of entering into such sale and leaseback transaction and after
giving effect thereto, Exempted Debt does not exceed 15% of Consolidated Net
Tangible Assets.
SECTION 3.7 Luxembourg Publications. In the event of the publication of any
notice pursuant to Section 5.11, 6.10 (a, 6.11, 8.2, 10.4, 12.2 or 12.5, the
party making such publication in the Borough of Manhattan, The City of New York
and London shall also, to the extent that notice is required to be given to
Holders of Securities of any series by applicable Luxembourg law or stock
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exchange regulation, as evidenced by an Officer's Certificate delivered to such
party, make a similar publication in Luxembourg.
ARTICLE FOUR
SECURITYHOLDERS LISTS AND REPORTS BY THE ISSUER AND THE TRUSTEE
SECTION 4.1 Issuer to Furnish Trustee Information as to Names and Addresses
of Securityholders. If and so long as the Trustee shall not be the Security
registrar for the Securities of any series, the Issuer and any other obligor on
the Securities will furnish or cause to be furnished to the Trustee a list in
such form as the Trustee may reasonably require of the names and addresses of
the Holders of the Registered Securities of such series pursuant to Section 312
of the Trust Indenture Act of 1939 (a semi-annually not more than 15 days after
each record date for the payment of interest on such Registered Securities, as
hereinabove specified, as of such record date and on dates to be determined
pursuant to Section 2.3 for non-interest bearing Registered Securities in each
year, and (b at such other times as the Trustee may request in writing, within
30 days after receipt by the Issuer of any such request as of a date not more
than 15 days prior to the time such information is furnished.
SECTION 4.2 Preservation and Disclosure of Securityholders Lists. Holders
may communicate pursuant to the Trust Indenture Act of 1939 Section 312(b with
other Holders with respect to their rights under this Indenture. The Issuer and
the Trustee and anyone else shall have the protection of the Trust Indenture Act
of 1939 Section 312(c.
SECTION 4.3 Reports by the Issuer. The Issuer covenants to file with the
Trustee, within 30 days after the Issuer is required to file the same with the
Commission, copies of the annual reports and of the information, documents, and
other reports that the Issuer may be required to file with the Commission
pursuant to Section 13 or Section 15(d of the Securities Exchange Act of 1934
or pursuant to Section 314 of the Trust Indenture Act of 1939.
SECTION 4.4 Reports by the Trustee. Any Trustee's report required under
Section 313(a of the Trust Indenture Act of 1939 shall be transmitted on or
before January 15 in each year beginning January 15, 2000, as provided in
Section 313(c of the Trust Indenture Act of 1939, so long as any Securities are
Outstanding hereunder, and shall be dated as of a date convenient to the Trustee
no more than 60 days prior thereto.
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT
SECTION 5.1 Event of Default Defined; Acceleration of Maturity; Waiver of
Default. "Event of Default," with respect to Securities of any series wherever
used herein, means each one of the following events which shall have occurred
and be continuing (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
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pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body:
(a default in the payment of any installment of interest upon any of the
Securities of such series as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; or
(b default in the payment of all or any part of the principal of any of
the Securities of such series as and when the same shall become due and payable
either at maturity, upon any redemption, by declaration or otherwise; or
(c failure on the part of the Issuer duly to observe or perform any other
of the covenants or agreements on the part of the Issuer in the Securities of
such series (other than a covenant or warranty in respect of the Securities of
such series a default in the performance or breach of which is elsewhere in this
Section specifically dealt with or in this Indenture contained for a period of
60 days after the date on which written notice specifying such failure, stating
that such notice is a "Notice of Default" hereunder and demanding that the
Issuer remedy the same, shall have been given by registered or certified mail,
return receipt requested, to the Issuer by the Trustee, or to the Issuer and the
Trustee by the holders of at least 25% in aggregate principal amount of the
Outstanding Securities of all series affected thereby; or
(d a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Issuer in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official of the Issuer or for any substantial part of
its property or ordering the winding up or liquidation of its affairs, and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(e the Issuer shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consent to the entry of an order for relief in an involuntary case under any
such law, or consent to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official of
the Issuer or for any substantial part of its property, or make any general
assignment for the benefit of creditors; or
(f any other Event of Default provided in the supplemental indenture under
which such series of Securities is issued or in the form of Security for such
series.
If an Event of Default described in clauses (a, (b, (c or (f (if the
Event of Default under clause (c or (f, as the case may be, is with respect to
less than all series of Securities then Outstanding occurs and is continuing,
then, and in each and every such case, except for any series of Securities the
principal of which shall have already become due and payable, either the Trustee
or the Holders of not less than 25% in aggregate principal amount of the
Securities of each such affected series then Outstanding hereunder (voting as a
single class by notice in writing to the Issuer (and to the Trustee if given by
Securityholders, may declare the entire principal (or, if the Securities of any
such affected series are Original Issue Discount Securities, such portion of the
principal amount as may
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be specified in the terms of such series of all Securities of all such affected
series, and the interest accrued thereon, if any, to be due and payable
immediately, and upon any such declaration the same shall become immediately due
and payable. If an Event of Default described in clause (c or (f (if the Event
of Default under clause (c or (f, as the case may be, is with respect to all
series of Securities then Outstanding, (d or (e occurs and is continuing,
then and in each and every such case, unless the principal of all the Securities
shall have already become due and payable, either the Trustee or the Holders of
not less than 25% in aggregate principal amount of all the Securities then
Outstanding hereunder (treated as one class, by notice in writing to the Issuer
(and to the Trustee if given by Securityholders, may declare the entire
principal (or, if any Securities are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms thereof of all
the Securities then Outstanding, and interest accrued thereon, if any, to be due
and payable immediately, and upon any such declaration the same shall become
immediately due and payable.
The foregoing provisions, however, are subject to the condition that if, at
any time after the principal (or, if the Securities are Original Issue Discount
Securities, such portion of the principal as may be specified in the terms
thereof of the Securities of any series (or of all the Securities, as the case
may be shall have been so declared due and payable, and before any judgment or
decree for the payment of the moneys due shall have been obtained or entered as
hereinafter provided, the Issuer shall pay or shall deposit with the Trustee a
sum sufficient to pay all matured installments of interest upon all the
Securities of such series (or of all the Securities, as the case may be and the
principal of any and all Securities of each such series (or of all the
Securities, as the case may be which shall have become due otherwise than by
acceleration (with interest upon such principal and, to the extent that payment
of such interest is enforceable under applicable law, on overdue installments of
interest, at the same rate as the rate of interest or Yield to Maturity (in the
case of Original Issue Discount Securities specified in the Securities of each
such series (or at the respective rates of interest or Yields to Maturity of all
the Securities, as the case may be to the date of such payment or deposit and
such amount as shall be sufficient to cover reasonable compensation to the
Trustee and each predecessor Trustee, its agents, attorneys and counsel, and all
other expenses and liabilities incurred, and all advances made, by the Trustee
and each predecessor Trustee except as a result of negligence or bad faith, and
if any and all Events of Default under the Indenture, other than the non-payment
of the principal of Securities which shall have become due by acceleration,
shall have been cured, waived or otherwise remedied as provided herein --- then
and in every such case the Holders of a majority in aggregate principal amount
of all the Securities of each such series, or of all the Securities, as the case
may be, in each case voting as a single class, then Outstanding, by written
notice to the Issuer and to the Trustee, may waive all defaults with respect to
each such series (or with respect to all the Securities, as the case may be and
rescind and annul such declaration and its consequences, but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default
or shall impair any right consequent thereon.
For all purposes under this Indenture, if a portion of the principal of any
Original Issue Discount Securities shall have been accelerated and declared due
and payable pursuant to the provisions hereof, then, from and after such
declaration, unless such declaration has been rescinded and annulled, the
principal amount of such Original Issue Discount Securities shall be deemed, for
all purposes hereunder, to be such portion of the principal thereof as shall be
due and payable as a result of such acceleration, and payment of such portion of
the principal thereof as shall be due and payable
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as a result of such acceleration, together with interest, if any, thereon and
all other amounts owing thereunder, shall constitute payment in full of such
Original Issue Discount Securities.
SECTION 5.2 Collection of Indebtedness by Trustee; Trustee May Prove Debt.
The Issuer covenants that (a in case default shall be made in the payment of
any installment of interest on any of the Securities of any series when such
interest shall have become due and payable, and such default shall have
continued for a period of 30 days or (b in case default shall be made in the
payment of all of any part of the principal of any of the Securities of any
series when the same shall have become due and payable, whether upon maturity of
the Securities of such series or upon any redemption or by declaration or
otherwise --- then upon demand of the Trustee, the Issuer will pay to the
Trustee for the benefit of the Holders of the Securities of such series the
whole amount that then shall have become due and payable on all Securities of
such series, and such Coupons, for principal or interest, as the case may be
(with interest to the date of such payment upon the overdue principal and, to
the extent that payment of such interest is enforceable under applicable law, on
overdue installments of interest at the same rate as the rate of interest or
Yield to Maturity (in the case of Original Issue Discount Securities specified
in the Securities of such series; and in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee and each predecessor Trustee, their
respective agents, attorneys and counsel, and any expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor Trustee
except as a result of its negligence or bad faith.
Until such demand is made by the Trustee, the Issuer may pay the principal
of and interest on the Securities of any series to the Holders thereof, whether
or not the Securities of such Series be overdue.
In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any such
judgment or final decree against the Issuer or other obligor upon the Securities
and collect in the manner provided by law out of the property of the Issuer or
other obligor upon the Securities, wherever situated the moneys adjudged or
decreed to be payable.
In case there shall be pending proceedings relative to the Issuer or any
other obligor upon the Securities under Title 11 of the United States Code or
any other applicable Federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor, or in case
of any other comparable judicial proceedings relative to the Issuer or other
obligor upon the Securities, or to the creditors or property of the Issuer or
such other obligor, the Trustee, irrespective of whether the principal of the
Securities shall then be due and payable as therein expressed or by declaration
or otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section, shall be entitled and empowered, by
intervention in such proceedings or otherwise:
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(a to file and prove a claim or claims for the whole amount of principal
and interest (or, if the Securities of any series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of such series owing and unpaid in respect of the Securities of any
series, and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all expenses
and liabilities incurred, and all advances made, by the Trustee and each
predecessor Trustee, except as a result of negligence or bad faith and of the
Securityholders allowed in any judicial proceedings relative to the Issuer or
other obligor upon the Securities, or to the creditors or property of the Issuer
or such other obligor,
(b unless prohibited by applicable law and regulations, to vote on behalf
of the holders of the Securities of any series in any election of a trustee or a
standby trustee in arrangement, reorganization, liquidation or other bankruptcy
or insolvency proceedings or person performing similar functions in comparable
proceedings, and
(c to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute all amounts received with
respect to the claims of the Securityholders and of the Trustee on their behalf;
and any trustee, receiver, or liquidator, custodian or other similar official is
hereby authorized by each of the Securityholders to make payments to the
Trustee, and, in the event that the Trustee shall consent to the making of
payments directly to the Securityholders, to pay to the Trustee such amounts as
shall be sufficient to cover reasonable compensation to the Trustee, each
predecessor Trustee and their respective agents, attorneys and counsel, and all
other expenses and liabilities incurred, and all advances made, by the Trustee
and each predecessor Trustee except as a result of negligence or bad faith.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities of any series or the rights of any Holders
thereof, or to authorize the Trustee to vote in respect of the claim of any
Securityholder in any such proceeding except, as aforesaid, to vote for the
election of a trustee in bankruptcy or similar person.
All rights of action and of asserting claims under this Indenture, or under
any of the Securities of any series or Coupons appertaining to such Securities,
may be enforced by the Trustee without the possession of any of the Securities
of such series or Coupons appertaining to such Securities or the production
thereof on any trial or other proceedings relative thereto, and any such action
or proceedings instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Securities or Coupons appertaining to such
Securities in respect of which such action was taken.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party the Trustee shall be held to represent all the Holders
of the Securities or Coupons appertaining to such Securities in respect to
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which such action was taken, and it shall not be necessary to make any Holders
of such Securities or Coupons appertaining to such Securities parties to any
such proceedings.
SECTION 5.3 Application of Proceeds. Any moneys collected by the Trustee
pursuant to this Article in respect of any series shall be applied in the
following order at the date or dates fixed by the Trustee and, in case of the
distribution of such moneys on account of principal or interest, upon
presentation of the several Securities and Coupons appertaining to such
Securities in respect of which monies have been collected and stamping (or
otherwise noting thereon the payment, or issuing Securities of such series in
reduced principal amounts in exchange for the presented Securities of like
series if only partially paid, or upon surrender thereof if fully paid:
First: To the payment of costs and expenses applicable to such series
in respect of which monies have been collected, including reasonable
compensation to the Trustee and each predecessor Trustee and their respective
agents and attorneys and of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee except as a result of
negligence or bad faith;
Second: In case the principal of the Securities of such series in
respect of which moneys have been collected shall not have become and be then
due and payable, to the payment of interest on the Securities of such series in
default in the order of the maturity of the installments of such interest, with
interest (to the extent that such interest has been collected by the Trustee
upon the overdue installments of interest at the same rate as the rate of
interest or Yield to Maturity (in the case of Original Issue Discount
Securities specified in such Securities, such payments to be made ratably to
the persons entitled thereto, without discrimination or preference;
Third: In case the principal of the Securities of such series in
respect of which moneys have been collected shall have become and shall be then
due and payable, to the payment of the whole amount then owing and unpaid upon
all the Securities of such series for principal and interest, with interest upon
the overdue principal, and (to the extent that such interest has been collected
by the Trustee upon overdue installments of interest at the same rate as the
rate of interest or Yield to Maturity (in the case of Original Issue Discount
Securities specified in the Securities of such series; and in case such moneys
shall be insufficient to pay in full the whole amount so due and unpaid upon the
Securities of such series, then to the payment of such principal and interest or
Yield to Maturity, without preference or priority of principal over interest or
Yield to Maturity, or of interest or Yield to Maturity over principal, or of any
installment of interest over any other installment of interest, or of any
Security of such series over any other Security of such series, ratably to the
aggregate of such principal and accrued and unpaid interest or Yield to
Maturity; and
Fourth: To the payment of the remainder, if any, to the Issuer or any
other person lawfully entitled thereto.
SECTION 5.4 Suits for Enforcement. In case an Event of Default has
occurred, has not been waived and is continuing, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or
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otherwise, whether for the specific enforcement of any covenant or agreement
contained in this Indenture or in aid of the exercise of any power granted in
this Indenture or to enforce any other legal or equitable right vested in the
Trustee by this Indenture or by law.
SECTION 5.5 Restoration of Rights on Abandonment of Proceedings. In case
the Trustee shall have proceeded to enforce any right under this Indenture and
such proceedings shall have been discontinued or abandoned for any reason, or
shall have been determined adversely to the Trustee, then and in every such case
the Issuer and the Trustee shall be restored respectively to their former
positions and rights hereunder, and all rights, remedies and powers of the
Issuer, the Trustee and the Securityholders shall continue as though no such
proceedings had been taken.
SECTION 5.6 Limitations on Suits by Securityholders. No Holder of any
Security of any series or of any Coupon appertaining thereto shall have any
right by virtue or by availing of any provision of this Indenture to institute
any action or proceeding at law or in equity or in bankruptcy or otherwise upon
or under or with respect to this Indenture, or for the appointment of a trustee,
receiver, liquidator, custodian or other similar official or for any other
remedy hereunder, unless such Holder previously shall have given to the Trustee
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of not less than 25% in aggregate
principal amount of the Securities of each affected series then Outstanding
(treated as a single class shall have made written request upon the Trustee to
institute such action or proceedings in its own name as trustee hereunder and
shall have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby
and the Trustee for 60 days after its receipt of such notice, request and offer
of indemnity shall have failed to institute any such action or proceeding and no
direction inconsistent with such written request shall have been given to the
Trustee pursuant to Section 5.9; it being understood and intended, and being
expressly covenanted by the taker and Holder of every Security or Coupon with
every other taker and Holder and the Trustee, that no one or more Holders of
Securities of any series or Coupons appertaining to such Securities shall have
any right in any manner whatever by virtue or by availing of any provision
of this Indenture to affect, disturb or prejudice the rights of any other such
Holder of Securities or Coupons appertaining to such Securities, or to obtain or
seek to obtain priority over or preference to any other such Holder or to
enforce any right under this Indenture, except in the manner herein provided and
for the equal, ratable and common benefit of all Holders of Securities of the
applicable series and Coupons appertaining to such Securities. For the
protection and enforcement of the provisions of this Section, each and every
Securityholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
SECTION 5.7 Unconditional Right of Securityholders to Institute Certain
Suits. Notwithstanding any other provision in this Indenture and any provision
of any Security, the right of any Holder of any Security or Coupon to receive
payment of the principal of and interest on such Security or Coupon on or after
the respective due dates expressed in such Security or Coupon or any date fixed
for redemption of such Security or Coupon, or to institute suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
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SECTION 5.8 Powers and Remedies Cumulative; Delay or Omission Not Waiver of
Default. Except as provided in Section 5.6, no right or remedy herein conferred
upon or reserved to the Trustee or to the Holders of Securities or Coupons is
intended to be exclusive of any right or remedy, and every right and remedy
shall, to the extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any Holder of Securities or
Coupons to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power or
shall be construed to be a waiver of any such Event of Default or an
acquiescence therein; and, subject to Section 5.6, every power and remedy given
by this Indenture or by law to the Trustee or to the Holders of Securities or
Coupons may be exercised from time to time, and as often as shall be deemed
expedient, by the Trustee or by the Holders of Securities or Coupons.
SECTION 5.9 Control by Holders of Securities. The Holders of a majority in
aggregate principal amount of the Securities of each series affected (with all
such series voting as a single class at the time Outstanding shall have the
right to direct the time, method, and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee with respect to the Securities of such series by this Indenture;
provided that such direction shall not be otherwise than in accordance with law
and the provisions of this Indenture and provided further that (subject to the
provisions of Section 6.1 the Trustee shall have the right to decline to follow
any such direction if the Trustee, being advised by counsel, shall determine
that the action or proceeding so directed may not lawfully be taken or if the
Trustee in good faith by its board of directors, the executive committee, or a
trust committee of directors or Responsible Officers of the Trustee shall
determine that the action or proceedings so directed would involve the Trustee
in personal liability or if the Trustee in good faith shall so determine that
the actions or forebearances specified in or pursuant to such direction would be
unduly prejudicial to the interests of Holders of the Securities of all series
so affected not joining in the giving of said direction, it being understood
that (subject to Section 6.1 the Trustee shall have no duty to ascertain
whether or not such actions or forebearances are unduly prejudicial to such
Holders.
Nothing in this Indenture shall impair the right of the Trustee in its
discretion to take any action deemed proper by the Trustee and which is not
inconsistent with such direction or directions by Securityholders.
SECTION 5.10 Waiver of Past Defaults. Prior to the acceleration of the
maturity of any Securities as provided in Section 5.1, the Holders of a majority
in aggregate principal amount of the Securities of all series at the time
Outstanding with respect to which an Event of Default shall have occurred and be
continuing (voting as a single class may on behalf of the Holders of all such
Securities waive any past default or Event of Default described in Section 5.1
and its consequences, except a default in respect of a covenant or provision
hereof which cannot be modified or amended without the consent of the Holder of
each Security affected. In the case of any such waiver, the Issuer, the Trustee
and the Holders of all such Securities shall be restored to their former
positions
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and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Upon any such waiver, such default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured, and not to have occurred for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
SECTION 5.11 Trustee to Give Notice of Default, But May Withhold in Certain
Circumstances. The Trustee shall, within 90 days after the occurrence of a
default with respect to the Securities of any series, give notice of all
defaults with respect to that series known to the Trustee (i if any
Unregistered Securities of that series are then Outstanding, to the Holders
thereof, by publication at least once in an Authorized Newspaper in the Borough
of Manhattan, The City of New York, and at least once in an Authorized Newspaper
in London (and, if required by Section 3.7, at least once in an Authorized
Newspaper in Luxembourg and (ii to all Holders of Securities of such series in
the manner and to the extent provided herein unless in each case such defaults
shall have been cured before the mailing or publication of such notice (the term
"defaults" for the purpose of this Section being hereby defined to mean any
event or condition which is, or with notice or lapse of time or both would
become, an Event of Default; provided that, except in the case of default in
the payment of the principal of or interest on any of the Securities of such
series, or in the payment of any sinking fund installment on such series, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee, or a trust committee of directors
or trustees and/or Responsible Officers of the Trustee in good faith determines
that the withholding of such notice is in the interests of the Securityholders
of such series.
SECTION 5.12 Right of Court to Require Filing of Undertaking to Pay Costs.
All parties to this Indenture agree, and each Holder of any Security or Coupon
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Securityholder or group of
Securityholders of any series holding in the aggregate more than 10% in
aggregate principal amount of the Securities of such series, or, in the case of
any suit relating to or arising under clause (c or (f of Section 5.1 (if the
suit relates to Securities of more than one but less than all series, 10% in
aggregate principal amount of Securities then Outstanding and affected thereby,
or in the case of any suit relating to or arising under clause (c or (f (if
the suit under clause (c or (f relates to all the Securities then
Outstanding, (d or (e of Section 5.1, 10% in aggregate principal amount of
all Securities then Outstanding, or to any suit instituted by any Securityholder
for the enforcement of the payment of the principal of or interest on any
Security on or after the due date expressed in such Security or any date fixed
for redemption.
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ARTICLE SIX
CONCERNING THE TRUSTEE
SECTION 6.1 Duties and Responsibilities of the Trustee; During Default;
Prior to Default. With respect to the Holders of any series of Securities issued
hereunder, the Trustee, prior to the occurrence of an Event of Default with
respect to the Securities of a particular series and after the curing or waiving
of all Events of Default which may have occurred with respect to such series,
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture. In case an Event of Default with respect to the
Securities of a series has occurred (which has not been cured or waived the
Trustee shall exercise with respect to such series of Securities such of the
rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct, except that:
(a prior to the occurrence of an Event of Default with respect to the
Securities of any series and after the curing or waiving of all such Events of
Default with respect to such series which may have occurred:
(i the duties and obligations of the Trustee with respect to the
Securities of any series shall be determined solely by the express
provisions of this Indenture, and the Trustee shall not be liable except
for the performance of such duties and obligations as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any statements,
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such statements,
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty
to examine the same to determine whether or not they conform to the
requirements of this Indenture;
(b the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer or Responsible Officers of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(c the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders pursuant to Section 5.9 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this Indenture.
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None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers if there shall be reasonable ground for believing that the
repayment of such funds or adequate indemnity against such liability is not
reasonably assured to it.
The provisions of this Section 6.1 are in furtherance of and subject to
Section 315 of the Trust Indenture Act of 1939.
SECTION 6.2 Certain Rights of the Trustee. In furtherance of and subject to
the Trust Indenture Act of 1939, and subject to Section 6.1:
(a the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, Officer's Certificate or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture, note, coupon, security or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party or parties;
(b any request, direction, order or demand of the Issuer mentioned herein
shall be sufficiently evidenced by an Officer's Certificate (unless other
evidence in respect thereof be herein specifically prescribed; and any
resolution of the Board of Directors may be evidenced to the Trustee by a copy
thereof certified by the secretary or an assistant secretary of the Issuer;
(c the Trustee may consult with counsel and any written advice or any
Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by it hereunder in
good faith and in reliance thereon in accordance with such advice or Opinion of
Counsel;
(d the Trustee shall be under no obligation to exercise any of the trusts
or powers vested in it by this Indenture at the request, order or direction of
any of the Securityholders pursuant to the provisions of this Indenture, unless
such Securityholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred
therein or thereby;
(e the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture;
(f prior to the occurrence of an Event of Default hereunder and after the
curing or waiving of all Events of Default, the Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, appraisal, bond, debenture, note, coupon, security, or other
paper or document unless requested in writing so to do by the Holders of a
majority in aggregate principal amount of the Securities of all series affected
then Outstanding; provided that, if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of this
Indenture, the Trustee may require reasonable
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indemnity against such expenses or liabilities as a condition to proceeding;
the reasonable expenses of every such investigation shall be paid by the Issuer
or, if paid by the Trustee or any predecessor Trustee, shall be repaid by the
Issuer upon demand; and
(g the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys not regularly in its employ and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed with due care by it hereunder.
SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities
or Application of Proceeds Thereof. The recitals contained herein and in the
Securities, except the Trustee's certificates of authentication, shall be taken
as the statements of the Issuer, and the Trustee assumes no responsibility for
the correctness of the same. The Trustee makes no representation as to the
validity or sufficiency of this Indenture or of the Securities or Coupons. The
Trustee shall not be accountable for the use or application by the Issuer of any
of the Securities or of the proceeds thereof.
SECTION 6.4 Trustee and Agents May Hold Securities or Coupons; Collections,
etc. The Trustee or any agent of the Issuer or the Trustee, in its individual or
any other capacity, may become the owner or pledgee of Securities or Coupons
with the same rights it would have if it were not the Trustee or such agent and
may otherwise deal with the Issuer and receive, collect, hold and retain
collections from the Issuer with the same rights it would have if it were not
the Trustee or such agent.
SECTION 6.5 Moneys Held by Trustee. Subject to the provisions of Section
10.4 hereof, all moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
mandatory provisions of law. Neither the Trustee nor any agent of the Issuer or
the Trustee shall be under any liability for interest on any moneys received by
it hereunder.
SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior
Claim. The Issuer covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, reasonable compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust and the Issuer covenants and agrees to pay or reimburse the
Trustee and each predecessor Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by or on behalf of it in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all agents and other persons not regularly in its employ except any such
expense, disbursement or advance as may arise from its negligence or bad faith.
Any such payments and reimbursements not made in a timely fashion shall be made
with interest at the Trustee's corporate base rate. The Issuer also covenants to
indemnify the Trustee and each predecessor Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad faith
on its part, arising out of or in connection with the acceptance or
administration of this Indenture or the trusts hereunder and its duties
hereunder, including the costs and expenses of defending itself against or
investigating any claim of liability in the premises. The
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obligations of the Issuer under this Section to compensate and indemnify the
Trustee and each predecessor Trustee and to pay or reimburse the Trustee and
each predecessor Trustee for expenses, disbursements and advances shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture. Such additional indebtedness shall be a senior
claim to that of the Securities upon all property and funds held or collected by
the Trustee as such, except funds held in trust for the benefit of the Holders
of particular Securities or Coupons, and the Securities are hereby subordinated
to such senior claim.
SECTION 6.7 Right of Trustee to Rely on Officer's Certificate, etc. Subject
to Section 6.1 and 6.2, whenever in the administration of the trusts of this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officer's Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Indenture upon the faith thereof.
SECTION 6.8
This Section intentionally left blank.
SECTION 6.9 Persons Eligible for Appointment as Trustee. The Trustee for
each series of Securities hereunder shall at all times be a corporation
organized and doing business under the laws of the United States of America or
of any State or the District of Columbia having a combined capital and surplus
of at least $5,000,000, and which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by Federal,
State or District of Columbia authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then, for the purposes of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 6.10.
The provisions of this Section 6.9 are in furtherance of and subject to
Section 310(a of the Trust Indenture Act of 1939.
This Indenture shall always have a Trustee who satisfies the requirements
of the Trust Indenture Act of 1939 Sections 310(a(1, (2 and (5. The Trustee
is subject to the Trust Indenture Act of 1939 Section 310(b; provided, however,
that there shall be excluded from the operation of the Trust Indenture Act of
1939 Section 310(b(1 any indenture or indentures under which any other
securities, or certificates of interest or participation in any other
securities, of the Issuer are outstanding, if the requirements for such
exclusion set forth in the Trust Indenture Act of 1939 Section 310(b(1 are
met.
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SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee. (a
The Trustee, or any trustee or trustees hereafter appointed, may at any time
resign and be discharged of the trusts hereby created by giving written notice
or resignation to the Issuer and (i if any Unregistered Securities are then
Outstanding, by giving notice of such resignation to the Holders thereof, by
publication at least once in an Authorized Newspaper in the Borough of
Manhattan, The City of New York, and at least once in an Authorized Newspaper in
London (and, if required by Section 3.7, at least once in an Authorized
Newspaper in Luxembourg, (ii if any Unregistered Securities are then
outstanding, by mailing notice of such resignation to the Holders thereof who
have filed their names and addresses with the Trustee at such addresses as were
so furnished to the Trustee and (iii by mailing notice of such resignation to
the Holders of then Outstanding Registered Securities at their addresses as they
shall appear on the registry books. Upon receiving such notice of resignation,
the Issuer shall promptly appoint a successor trustee or trustees by written
instrument in duplicate, executed by authority of the Board of Directors, one
copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee or trustees. If no successor trustee shall have
been so appointed and have accepted appointment within 30 days after the mailing
of such notice of resignation, the resigning trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee, or any
Securityholder who has been a bona fide Holder of a Security or Securities for
at least six months may, subject to the provisions of Section 5.12, on behalf of
himself and all others similarly situated, petition any such court for the
appointment of a successor trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, appoint a successor trustee.
(b In case at any time any of the following shall occur:
(i the Trustee shall fail to comply with the provisions of Section
310(b of the Trust Indenture Act of 1939 after written request therefor by
the Issuer or by any Securityholder who has been a bona fide Holder of a
Security or Securities for at least six months; or
(ii the Trustee shall cease to be eligible in accordance with the
provision of Section 6.9 and Section 3.10(a of the Trust Indenture Act of
1939 and shall fail to resign after written request therefor by the Issuer
or by any Securityholder; or
(iii the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent, or a receiver or liquidator of the Trustee or of
its property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, the Issuer may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors of the Issuer, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee, or,
subject to the provisions of Section 315(e of the Trust Indenture Act of 1939,
any Securityholder who has been a bona fide Holder of a Security or Securities
for at least six months may on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor trustee. Such court may thereupon,
after
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such notice, if any, as it may deem proper and described, remove the Trustee and
appoint a successor trustee.
(c The Holders of a majority in aggregate principal amount of the
Securities of all series at the time outstanding may at any time remove the
Trustee and appoint a successor trustee by delivering to the Trustee so removed,
to the successor trustee so appointed and to the Issuer the evidence provided
for in Section 7.1 of the action in that regard taken by the Securityholders.
(d Any resignation or removal of the Trustee and any appointment of a
successor trustee pursuant to any of the provisions of this Section 6.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 6.11.
SECTION 6.11 Acceptance of Appointment by Successor Trustee. Any successor
trustee appointed as provided in Section 6.10 shall execute and deliver to the
Issuer and to its predecessor trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become vested with all rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as trustee hereunder, but, nevertheless, on the written request of the
Issuer or of the successor trustee, upon payment of its charges then unpaid, the
trustee ceasing to act shall, subject to Section 10.4, pay over to the successor
trustee all moneys at the time held by it hereunder and shall execute and
deliver an instrument transferring to such successor trustee all such rights,
powers, duties and obligations. Upon request of any such successor trustee, the
Issuer shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim
upon all property or funds held or collected by such trustee to secure any
amounts then due it pursuant to the provisions of Section 6.6.
No successor trustee shall accept appointment as provided in this Section
6.11 unless at the time of such acceptance such successor trustee shall be
qualified under Section 310(b of the Trust Indenture Act of 1939 and eligible
under the provisions of Section 6.9.
Upon acceptance of appointment by any successor trustee as provided in this
Section 6.11, the Issuer shall give notice thereof (a if any Unregistered
Securities are then Outstanding, to the Holders thereof, by publication of such
notice at least once in an Authorized Newspaper in the Borough of Manhattan, the
City of New York and at least once in an Authorized Newspaper in London (and, if
required by Section 3.7, at least once in an Authorized Newspaper in
Luxembourg, (b if any Unregistered Securities are then Outstanding, to the
Holders thereof who have filed their names and addresses with the Trustee, by
mailing such notice to such Holders at such addresses as were so furnished to
the Trustee (and the Trustee shall make such information available to the Issuer
for such purpose and (c to the Holders of Registered Securities, by mailing
such notice to such Holders at their addresses as they shall appear on the
registry books. If the acceptance of appointment is substantially
contemporaneous with the registration, then the notice called for by the
preceding sentence may be combined with the notice called for by Section 6.10.
If the Issuer fails to give such
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notice within ten days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be given at the expense of the
Issuer.
SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of
Trustee. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided that such corporation shall be
qualified under Section 310(b of the Trust Indenture Act of 1939 and eligible
under the provisions of Section 6.9, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities of any series shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor Trustee and deliver
such Securities so authenticated; and, in case at that time any of the
Securities of any series shall not have been authenticated, any successor to the
Trustee may authenticate such Securities either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificate shall have the full force which it is anywhere in the Securities of
such series or in this Indenture provided that the certificate of the Trustee
shall have; provided, that the right to adopt the certificate of authentication
of any predecessor Trustee or to authenticate Securities of any series in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or consolidation.
SECTION 6.13 Preferential Collection of Claims Against the Issuer. The
Trustee is subject to the Trust Indenture Act of 1939 Section 311(a, excluding
any creditor relationship listed in the Trust Indenture Act of 1939 Section
311(b. A Trustee who has resigned or been removed shall be subject to the Trust
Indenture Act of 1939 Section 311(a to the extent indicated therein.
SECTION 6.14 Appointment of Authenticating Agent. As long as any Securities
of a series remain Outstanding, the Trustee may, by an instrument in writing,
appoint with the approval of the Issuer an authenticating agent (the
"Authenticating Agent" which shall be authorized to act on behalf of the
Trustee to authenticate Securities, including Securities issued upon exchange,
registration of transfer, partial redemption or pursuant to Section 2.9.
Securities of each such series authenticated by such Authenticating Agent shall
be entitled to the benefits of this Indenture and shall be valid and obligatory
for all purposes as if authenticated by the Trustee. Whenever reference is made
in this Indenture to the authentication and delivery of Securities of any series
by the Trustee or to the Trustee's Certificate of Authentication, such reference
shall be deemed to include authentication and delivery on behalf of the Trustee
by an Authenticating Agent for such series and a Certificate of Authentication
executed on behalf of the Trustee by such Authenticating Agent. Such
Authenticating Agent shall at all times be a corporation organized and doing
business under the laws of the United States of America or of any State,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $5,000,000 (determined as provided in Section
6.9 with respect to the Trustee and subject to supervision or examination by
Federal or State authority.
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Any corporation into which any Authenticating Agent may be merged or
converted, or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency business
of any Authenticating Agent, shall continue to be the Authenticating Agent with
respect to all series of Securities for which it served as Authenticating Agent
without the execution or filing of any paper or any further act on the part of
the Trustee or such Authenticating Agent. Any Authenticating Agent may at any
time, and if it shall cease to be eligible shall, resign by giving written
notice of resignation to the Trustee and to the Issuer.
Upon receiving such a notice of resignation or upon such a termination, or
in case at any time any Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section 6.14 with respect to one or more
series of Securities, the Trustee shall upon receipt of an Issuer Order
appoint a successor Authenticating Agent and the Issuer shall provide notice of
such appointment to all Holders of Securities of such series in the manner and
to the extent provided in Section 11.4. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all rights,
powers, duties and responsibilities of its predecessor hereunder, with like
effect as if originally named as Authenticating Agent. The Issuer agrees to pay
to the Authenticating Agent for such series from time to time reasonable
compensation. The Authenticating Agent for the Securities of any series shall
have no responsibility or liability for any action taken by it as such at the
direction of the Trustee.
Sections 6.2, 6.3, 6.4, 6.6, 6.9 and 7.3 shall be applicable to any
Authenticating Agent.
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
SECTION 7.1 Evidence of Action Taken by Securityholders. Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by a specified percentage in
principal amount of the Securityholders of any or all series may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
(either physically or by means of an electronic transmission by such specified
percentage of Securityholders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered (either physically
or by means of an electronic transmission to the Trustee. Proof of execution of
any instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Indenture and (subject to Sections 6.1 and 6.2 conclusive
in favor of the Trustee and the Issuer, if made in the manner provided in this
Article.
SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities.
Subject to Sections 6.1 and 6.2, the execution of any instrument by a
Securityholder or his agent or proxy may be proved in the following manner:
(a The fact and date of the execution by any Holder of any instrument may
be proved by the certificate of any notary public or other officer of any
jurisdiction authorized to take
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acknowledgments of deeds or administer oaths that the person executing such
instruments acknowledged to him the execution thereof, or by an affidavit of a
witness to such execution sworn to before any such notary or other such officer.
Where such execution is by or on behalf of any legal entity other than an
individual, such certificate or affidavit shall also constitute sufficient proof
of the authority of the person executing the same. The fact of the holding by
any Holder of an Unregistered Security of any series, and the identifying number
of such Security and the date of his holding the same, may be proved by the
production of such Security or by a certificate executed by any trust company,
bank, banker or recognized securities dealer wherever situated satisfactory to
the Trustee, if such certificate shall be deemed by the Trustee to be
satisfactory. Each such certificate shall be dated and shall state that on the
date thereof a Security of such series bearing a specified identifying number
was deposited with or exhibited to such trust company, bank, banker or
recognized securities dealer by the person named in such certificate. Any such
certificate may be issued in respect of one or more Unregistered Securities of
one or more series specified therein. The holding by the person named in any
such certificate of any Unregistered Securities of any series specified therein
shall be presumed to continue for a period of one year from the date of such
certificate unless at the time of any determination of such holding (1 another
certificate bearing a later date issued in respect of the same Securities shall
be produced, or (2 the Security of such series specified in such certificate
shall be produced by some other person, or (3 the Security of such series
specified in such certificate shall have ceased to be Outstanding. Subject to
Sections 6.1 and 6.2, the fact and date of the execution of any such instrument
and the amount and numbers of Securities of any series held by the person so
executing such instrument and the amount and numbers of any Security or
Securities for such series may also be proven in accordance with such reasonable
rules and regulations as may be prescribed by the Trustee for such series or in
any other manner which the Trustee for such series may deem sufficient.
(b In the case of Registered Securities, the ownership of such Securities
shall be proved by the Security register or by a certificate of the Security
register.
The Issuer may set a record date for purposes of determining the identity
of Holders of Registered Securities of any series entitled to vote or consent to
any action referred to in Section 7.1, which record date may be set at any time
or from time to time by notice to the Trustee, for any date or dates (in the
case of any adjournment or reconsideration not more than 60 days nor less than
five days prior to the proposed date of such vote or consent, and thereafter,
notwithstanding any other provisions hereof, with respect to Registered
Securities of any series, only Holders of Registered Securities of such series
of record on such record date shall be entitled to so vote or give such consent
or revoke such vote or consent.
SECTION 7.3 Holders to Be Treated as Owners. The Issuer, the Trustee and
any agent of the Issuer or the Trustee may deem and treat the person in whose
name any Security shall be registered upon the Security register for such series
as the absolute owner of such Security (whether or not such Security shall be
overdue and notwithstanding any notation of ownership or other writing thereon
for the purpose of receiving payment of or on account of the principal of and,
subject to the provisions of this Indenture, interest on such Security and for
all other purposes; and neither the Issuer nor the Trustee nor any agent of the
Issuer or the Trustee shall be affected by any notice to the contrary. The
Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Holder
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of any Unregistered Security and the Holder of any Coupon as the absolute owner
of such Unregistered Security or Coupon (whether or not such Unregistered
Security or Coupon shall be overdue for the purpose of receiving payment
thereof or on account thereof and for all other purposes and neither the Issuer,
the Trustee, nor any agent of the Issuer or the Trustee shall be affected by any
notice to the contrary. All such payments so made to any such person, or upon
his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for moneys payable upon any
such Security or Coupon.
SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding. In
determining whether the Holders of the requisite aggregate principal amount of
Outstanding Securities of any or all series have concurred in any direction,
consent or waiver under this Indenture, Securities which are owned by the Issuer
or any other obligor on the Securities with respect to which such determination
is being made or by any person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Issuer or any other
obligor on the Securities with respect to which such determination is being made
shall be disregarded and deemed not to be Outstanding for the purpose of any
such determination, except that for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, consent or waiver
only Securities which the Trustee knows are so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Issuer or any other obligor upon the Securities or any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the issuer or any other obligor on the Securities. In case
of a dispute as to such right, the advice of counsel shall be full protection in
respect of any decision made by the Trustee in accordance with such advice. Upon
request of the Trustee, the Issuer shall furnish to the Trustee promptly an
Officer's Certificate listing and identifying all Securities, if any, known by
the Issuer to be owned or held by or for the account of any of the
above-described persons; and, subject to Sections 6.1 and 6.2, the Trustee shall
be entitled to accept such Officer's Certificate as conclusive evidence of the
facts therein set forth and of the fact that all Securities not listed therein
are Outstanding for the purpose of any such determination.
SECTION 7.5 Right of Revocation of Action Taken. At any time prior to (but
not after the evidencing to the Trustee, as provided in Section 7.1, of the
taking of any action by the Holders of the percentage in aggregate principal
amount of the Securities of any or all series, as the case may be, specified in
this Indenture in connection with such action, any Holder of a Security the
serial number of which is shown by the evidence to be included among the serial
numbers of the Securities the Holders of which have consented to such action
may, by filing written notice at the Corporate Trust Office and upon proof of
holding as provided in this Article, revoke such action so far as concerns such
Security. Except as aforesaid any such action taken by the Holder of any
Security shall be conclusive and binding upon such Holder and upon all future
Holders and owners of such Security and of any Securities issued in exchange or
substitution therefor or on registration of transfer thereof, irrespective of
whether or not any notation in regard thereto is made upon any such Security.
Any action taken by the Holders of the percentage in aggregate principal amount
of the Securities of any or all series, as the case may be, specified in this
Indenture in connection with such action shall be conclusively binding upon the
Issuer, the Trustee and the Holders of all the Securities affected by such
action.
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ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without Consent of Securityholders. The
Issuer, when authorized by a resolution of its Board of Directors (which
resolution may provide general terms or parameters for such action and may
provide that the specific terms of such action may be determined in accordance
with or pursuant to an Issuer Order and the Trustee may from time to time and
at any time enter into an indenture or indentures supplemental hereto for one or
more of the following purposes:
(a to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Securities of one or more series any property or assets;
(b to evidence the succession of another corporation to the Issuer, or
successive successions, and the assumption by the successor corporation of the
covenants, agreements and obligations of the Issuer pursuant to Article Nine;
(c to add to the covenants of the Issuer such further covenants,
restrictions, conditions or provisions as the Issuer and the Trustee shall
consider to be for the protection of the Holders of Securities or Coupons, and
to make the occurrence, or the occurrence and continuance, of a default in any
such additional covenants, restrictions, conditions or provisions an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, that in respect of any
such additional covenant, restriction, condition or provision such supplemental
indenture may provide for a particular period of grace after default (which
period may be shorter or longer than that allowed in the case of other defaults
or may provide for an immediate enforcement upon such an Event of Default or may
limit the remedies available to the Trustee upon such an Event of Default or may
limit the right of the Holders of a majority in aggregate principal amount of
the Securities of such series to waive such an Event of Default;
(d to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make any other provisions as the Issuer may deem necessary or
desirable, provided that no such action shall adversely affect the interests of
the Holders of the Securities or Coupons;
(e to establish the forms or terms of Securities of any series or of the
Coupons appertaining to such Securities as permitted by Sections 2.1 and 2.3;
and
(f to evidence and provide for the acceptance of appointment hereunder by
a successor trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one trustee, pursuant to the requirements of Section 6.11.
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The Trustee is hereby authorized to join with the Issuer in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Trustee shall not be obligated to enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section may
be executed without the consent of the Holders of any of the Securities at the
time outstanding, notwithstanding any of the provisions of Section 8.2.
SECTION 8.2 Supplemental Indentures With Consent of Securityholders. With
the consent (evidenced as provided in Article Seven of the Holders of a
majority in aggregate principal amount of the Securities at the time Outstanding
of all series affected by such supplemental indenture (voting as one class, the
Issuer, when authorized by a resolution of its Board of Directors (which
resolution may provide general terms or parameters for such action and may
provide that the specific terms of such action may be determined in accordance
with or pursuant to an Issuer Order, and the Trustee may, from time to time and
at any time, enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Securities of each such
series or of the Coupons appertaining to such Securities; provided, that no such
supplemental indenture shall (a extend the final maturity of any Security, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any amount payable on redemption thereof,
of make the principal thereof (including any amount in respect of original issue
discount, or interest thereon, payable in any coin or currency other than that
provided in the Securities and Coupons or in accordance with the terms thereof,
or reduce the amount of the principal of an Original Issue Discount Security
that would be due and payable upon an acceleration of the maturity thereof
pursuant to Section 5.1 or the amount thereof provable in bankruptcy pursuant to
Section 5.2, or alter the provisions of Section 11.11 or 11.12 or impair or
affect the right of any Securityholder to institute suit for the payment thereof
or, if the Securities provide therefor, any right of repayment or repurchase at
the option of the Securityholder, in each case without the consent of the Holder
of each Security so affected, or (b reduce the aforesaid percentage of
Securities of any series, the consent of the Holders of which is required for
any such supplemental indenture, without the consent of the Holders of each
Security so affected.
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of Holders of Securities of such series, or of Coupons appertaining to
such Securities, with respect to such covenant or provision, shall be deemed not
to affect the rights under the Indenture of the Holders of Securities of any
other series or of the Coupons appertaining to such Securities.
Upon the request of the Issuer, accompanied by a copy of a resolution of
the Board of Directors (which resolution may provide general terms or parameters
for such action and may provide that the
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specific terms of such action may be determined in accordance with or pursuant
to an Issuer Order certified by the secretary or an assistant secretary of the
Issuer authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of the Holders of the
Securities as aforesaid and other documents, if any, required by Section 7.1,
the Trustee shall join with the Issuer in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under the Indenture or otherwise, in which case the Trustee
may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
It shall not be necessary for the consent of the Securityholders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such consent shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall give notice thereof (i to the Holders of then Outstanding Registered
Securities of each series affected thereby, by mailing a notice thereof by
first-class mail to such Holders at their addresses as they shall appear on the
Security register, (ii if any Unregistered Securities of a series affected
thereby are then Outstanding, to the Holders thereof who have filed their names
and addresses with the Trustee, by mailing a notice thereof by first-class mail
to such Holders at such addresses as were so furnished to the Trustee and (iii
if any Unregistered Securities of a series affected thereby are then
Outstanding, to all Holders thereof, by publication of a notice thereof at least
once in an Authorized Newspaper in the Borough of Manhattan, The City of New
York and at least once in an Authorized Newspaper in London (and, if required by
Section 3.7, at least once in an Authorized Newspaper in Luxembourg, and in
each case such notice shall set forth in general terms the substance of such
supplemental indenture. Any failure of the Issuer to give such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
SECTION 8.3 Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith and the
respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Issuer and the Holders of Securities of
each series affected thereby shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments,
and all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
SECTION 8.4 Documents to Be Given to Trustee. The Trustee, subject to the
provisions of Sections 6.1 and 6.2, may receive an Officer's Certificate and an
Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant to this Article Eight complies with the applicable provisions
of this Indenture.
SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article may bear a
notation in form approved by the Trustee for such series as to
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any matter provided for by such supplemental indenture or as to any action taken
by Securityholders. If the Issuer or the Trustee shall so determine, new
Securities of any series so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may be prepared by the Issuer,
authenticated by the Trustee and delivered in exchange for the Securities of
such series then Outstanding.
ARTICLE NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 9.1 Covenant Not to Merge, Consolidate, Sell or Convey Property
Except Under Certain Conditions. The Issuer covenants that it will not merge or
consolidate with any other Person or sell, lease or convey all or substantially
all of its assets to any other Person, unless (i either the Issuer shall be the
continuing corporation, or the successor corporation or the Person which
acquires by sale, lease or conveyance substantially all the assets of the Issuer
(if other than the Issuer shall be a corporation organized under the laws of
the United States of America or any State thereof or the District of Columbia
and shall expressly assume the due and punctual payment of the principal of and
interest on all the Securities and Coupons, if any, according to their tenor,
and the due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed or observed by the Issuer, by
supplemental indenture satisfactory to the Trustee, executed and delivered to
the Trustee by such corporation, and (ii the Issuer, such Person or such
successor corporation, as the case may be, shall not, immediately after such
merger or consolidation, or such sale, lease or conveyance, be in default in the
performance of any such covenant or condition.
SECTION 9.2 Successor Corporation Substituted. In case of any such
consolidation, merger, sale, lease or conveyance, and following such an
assumption by the successor corporation, such successor corporation shall
succeed to and be substituted for the Issuer, with the same effect as if it had
been named herein. Such successor corporation may cause to be signed, and may
issue either in its own name or in the name of the Issuer prior to such
succession any or all of the Securities issuable hereunder which together with
any Coupons appertaining thereto theretofore shall not have been signed by the
Issuer and delivered to the Trustee; and, upon the order of such successor
corporation, instead of the Issuer, and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities together with any Coupons appertaining thereto
which previously shall have been signed and delivered by the officers of the
Issuer to the Trustee for authentication, and any Securities which such
successor corporation thereafter shall cause to be signed and delivered to the
Trustee for that purpose. All of the Securities so issued together with any
Coupons appertaining thereto shall in all respects have the same legal rank and
benefit under this Indenture as the Securities theretofore or thereafter issued
in accordance with the terms of this Indenture as though all of such Securities
had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, lease or conveyance such
changes in phrasing and form (but not in substance may be made in the
Securities and Coupons thereafter to be issued as may be appropriate.
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In the event of any such sale or conveyance (other than a conveyance by way
of lease the Issuer or any successor corporation which shall theretofore have
become such in the manner described in this Article shall be discharged from all
obligations and covenants under the Indenture and the Securities and may be
liquidated and dissolved.
SECTION 9.3 Opinion of Counsel Delivered to Trustee. The Trustee, subject
to the provisions of Sections 6.1 and 6.2, may receive an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale, lease or
conveyance, and any such assumption, and any such liquidation or dissolution,
complies with the applicable provisions of this Indenture.
ARTICLE TEN
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS
SECTION 10.1 Satisfaction and Discharge of Indenture. (A If at any time
(a the Issuer shall have paid or caused to be paid the principal of and
interest on all the Securities of any series Outstanding hereunder and all
unmatured Coupons appertaining thereto (other than Securities of such series and
Coupons appertaining thereto which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.9 as and when the same
shall have become due and payable, or (b the Issuer shall have delivered to the
Trustee for cancellation all Securities of any series theretofore authenticated
and all unmatured Coupons appertaining thereto (other than Securities of such
series and Coupons appertaining thereto which shall have been destroyed, lost or
stolen and which shall have been replaced or paid as provided in Section 2.9 or
(c in the case of any series of Securities where the exact amount (including
the currency of payment of principal of and interest due on which can be
determined at the time of making the deposit referred to in clause (ii below,
(i all the Securities of such series and all unmatured Coupons appertaining
thereto not theretofore delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and (ii the
Issuer shall have irrevocably deposited or caused to be deposited with the
Trustee as trust funds the entire amount in cash (other than moneys repaid by
the Trustee or any paying agent to the Issuer in accordance with Section 10.4
or, in the case of any series of Securities the payments on which may only be
made in Dollars, obligations issued or guaranteed as to principal and interest
by the United States or by a Person controlled or supervised by and acting as an
instrumentality of the government of the United States pursuant to authority
granted by the Congress of the United States ("U.S. Government Obligations",
maturing as to principal and interest at such times and in such amounts as will
insure the availability of cash, or a combination thereof, sufficient in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
(A the principal and interest on all Securities of such series and Coupons
appertaining thereto on each date that such principal or interest is due and
payable and (B any mandatory sinking fund payments on the dates on which such
payments are due and payable in accordance with the terms of the Indenture and
the Securities of such series; and if, in any such case, the Issuer shall also
pay or cause to be paid all other sums payable hereunder by the Issuer, then
this Indenture shall cease to be of further effect (except as to (i rights of
registration of transfer and exchange of Securities of such series and of
Coupons appertaining thereto and the Issuer's right of
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optional redemption, if any, (ii substitution of mutilated, defaced, destroyed,
lost or stolen Securities or Coupons, (iii rights of holders of Securities and
Coupons appertaining thereto to receive payments of principal thereof and
interest thereon, upon the original stated due dates therefor or on the
specified redemption dates therefor (but not upon acceleration, and remaining
rights of the Holders to receive mandatory sinking fund payments, if any, (iv
the rights, obligations, duties and immunities of the Trustee hereunder, (v the
rights of the Holders of Securities of such series and Coupons appertaining
thereto as beneficiaries hereof with respect to the property so deposited with
the Trustee payable to all or any of them, and (vi the obligations of the
Issuer under Section 3.2 and the Trustee, on demand of the Issuer accompanied
by an Officer's Certificate and an Opinion of Counsel and at the cost and
expense of the Issuer, shall execute proper instruments acknowledging such
satisfaction of and discharging this Indenture; provided, that the rights of
Holders of the Securities and Coupons to receive amounts in respect of principal
of and interest on the Securities and Coupons held by them shall not be delayed
longer than required by then-applicable mandatory rules or policies of any
securities exchange upon which the Securities are listed.
(B The following provisions shall apply to the Securities of each series
unless specifically otherwise provided in a Board Resolution, Officer's
Certificate or indenture supplemental hereto provided pursuant to Section 2.3.
In addition to discharge of the Indenture pursuant to the next preceding
paragraph, in the case of any series of Securities the exact amounts (including
the currency of payment of principal of and interest due on which can be
determined at the time of making the deposit referred to in clause (a below,
the Issuer shall be deemed to have paid and discharged the entire indebtedness
on all the Securities of such a series and the Coupons appertaining thereto on
the 91st day after the date of the deposit referred to in subparagraph (a
below, and the provisions of this Indenture with respect to the Securities of
such series and Coupons appertaining thereto shall no longer be in effect
(except as to (i rights of registration of transfer and exchange of Securities
of such series and of Coupons appertaining thereto and the Issuer's right of
optional redemption, if any, (ii substitution of mutilated, defaced, destroyed,
lost or stolen Securities or Coupons, (iii rights of Holders of Securities and
Coupons appertaining thereto to receive payments of principal thereof and
interest thereon, upon the original stated due dates therefor or on the
specified redemption dates therefor (but not upon acceleration, and remaining
rights of the Holders to receive mandatory sinking fund payments, if any, (iv
the rights, obligations, duties and immunities of the Trustee hereunder, (v the
rights of the Holders of Securities of such series and Coupons appertaining
thereto as beneficiaries hereof with respect to the property so deposited with
the Trustee payable to all or any of them, and (vi the obligations of the
Issuer under Section 3.2 and the Trustee, at the expense of the Issuer, shall
at the Issuer's request, execute proper instruments acknowledging the same, if
(a with reference to this provision the Issuer has irrevocably
deposited or caused to be irrevocably deposited with the Trustee as trust
funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of the Securities of such series and Coupons
appertaining thereto (i cash in an amount, or (ii in the case of any
series of Securities the payments on which may only be made in Dollars,
U.S. Government Obligations, maturing as to principal and interest at such
times and in such amounts as will insure the availability of cash, or (iii
a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay (A the principal
and interest on all Securities of such series and Coupons
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appertaining thereto on each date that such principal or interest is due
and payable and (B any mandatory sinking fund payments on the dates on
which such payments are due and payable in accordance with the terms of the
Indenture and the Securities of such series;
(b the Issuer has delivered to the Trustee an Opinion of Counsel based
on the fact that (x the Issuer has received from, or there has been
published by, the Internal Revenue Service a ruling or (y since the date
hereof, there has been a change in the applicable Federal income tax law,
in either case to the effect that, and such opinion shall confirm that, the
Holders of the Securities of such series and Coupons appertaining thereto
will not recognize income, gain or loss for Federal income tax purposes as
a result of such deposit, defeasance and discharge and will be subject to
Federal income tax on the same amount and in the same manner and at the
same times, as would have been the case if such deposit, defeasance and
discharge had not occurred; and
(c the Issuer has delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel, each stating that all conditions precedent
provided for relating to the defeasance contemplated by this provision have
been complied with.
(C The Issuer shall be released from its obligations under Sections 3.6
and 9.1 with respect to the Securities of any Series, and any Coupons
appertaining thereto, Outstanding on and after the date the conditions set forth
below are satisfied (hereinafter, "covenant defeasance". For this purpose,
such covenant defeasance means that, with respect to the Outstanding Securities
of any Series, the Issuer may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in such Section, whether
directly or indirectly by reason of any reference elsewhere herein to such
Section or by reason of any reference in such Section to any other provision
herein or in any other document and such omission to comply shall not constitute
an Event of Default under Section 5.1, but the remainder of this Indenture and
such Securities and Coupons shall be unaffected thereby. The following shall be
the conditions to application of this subsection C of this Section 10.1:
(a The Issuer has irrevocably deposited or caused to be deposited with
the Trustee as trust funds in trust for the purpose of making the following
payments, specifically pledged as security for, and dedicated solely to,
the benefit of the holders of the Securities of such series and coupons
appertaining thereto, (i cash in an amount, or (ii in the case of any
series of Securities the payments on which may only be made in Dollars,
U.S. Government Obligations maturing as to principal and interest at such
times and in such amounts as will insure the availability of cash, or (iii
a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay (A the principal
and interest on all Securities of such series and Coupons appertaining
thereto and (B any mandatory sinking fund payments on the day on which
such payments are due and payable in accordance with the terms of the
Indenture and the Securities of such series.
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(b The Issuer shall have delivered to the Trustee an Officer's
Certificate stating that all conditions precedent provided for relating to
the covenant defeasance contemplated by this provision have been complied
with.
SECTION 10.2 Application by Trustee of Funds Deposited for Payment of
Securities. Subject to Section 10.4, all moneys or U.S. Government Obligations
deposited with the Trustee (or other trustee pursuant to Section 10.1 (and all
funds earned on such moneys or U.S. Government Obligations shall be held in
trust and applied by it to the payment, either directly or through any paying
agent (including the Issuer acting as its own paying agent, to the Holders of
the particular Securities of such series and of Coupons appertaining thereto for
the payment or redemption of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon for principal and interest;
but such money need not be segregated from other funds except to the extent
required by law. Subject to Section 10.1, the Trustee promptly shall pay to the
Issuer upon request any excess moneys held by it at any time.
SECTION 10.3 Repayment of Moneys Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to Securities of
any series, all moneys then held by any paying agent under the provisions of
this Indenture with respect to such series of Securities shall, upon demand of
the Issuer, be repaid to it or paid to the Trustee and thereupon such paying
agent shall be released from all further liability with respect to such moneys.
SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed
for Two Years. Any moneys deposited with or paid to the Trustee or any paying
agent for the payment of the principal of or interest on any Security of any
series or Coupons attached thereto and not applied but
remaining unclaimed for two years after the date upon which such principal or
interest shall have become due and payable, shall, upon the written request of
the Issuer and unless otherwise required by mandatory provisions of applicable
escheat or abandoned or unclaimed property law, be repaid to the Issuer by the
Trustee for such series or such paying agent, and the Holder of the Securities
of such series and of any Coupons appertaining thereto shall, unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property laws, thereafter look only to the Issuer for any payment which such
Holder may be entitled to collect, and all liability of the Trustee or any
paying agent with respect to such moneys shall thereupon cease; provided,
however, that the Trustee or such paying agent, before being required to make
any such repayment with respect to moneys deposited with it for any payment (a
in respect of Registered Securities of any series, shall at the expense of the
Issuer, mail by first-class mail to Holders of such Securities at their
addresses as they shall appear on the Security register, and (b in respect of
Unregistered Securities of any series, shall at the expense of the Issuer cause
to be published once, in an Authorized Newspaper in the Borough of Manhattan,
The City of New York and once in an Authorized Newspaper in London (and if
required by Section 3.7, once in an Authorized Newspaper in Luxembourg, notice,
that such moneys remain and that, after a date specified therein, which shall
not be less than thirty days from the date of such mailing or publication, any
unclaimed balance of such money then remaining will be repaid to the Issuer.
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ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
SECTION 11.1 Incorporators, Stockholders, Officers and Directors of Issuer
Exempt from Individual Liability. No recourse under or upon any obligation,
covenant or agreement contained in this Indenture, or in any Security, or
because of any indebtedness evidenced thereby, shall be had against any
incorporator, as such, or against any past, present or future stockholder,
officer or director, as such, of the Issuer or of any successor, either directly
or through the Issuer or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any legal
or equitable proceeding or otherwise, all such liability being expressly waived
and released by the acceptance of the Securities and the Coupons appertaining
thereto by the Holders thereof and as part of the consideration for the issue of
the Securities and the Coupons appertaining thereto.
SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and
Holders of Securities and Coupons. Nothing in this Indenture, in the Securities
or in the Coupons appertaining thereto, expressed or implied, shall give or be
construed to give to any person, firm or corporation, other than the parties
thereto and their successors and the Holders of the Securities or Coupons, if
any, any legal or equitable right, remedy or claim under this Indenture or under
any covenant or provision herein contained, all such covenants and provisions
being for the sole benefit of the parties hereto and their successors and of the
Holders of the Securities or Coupons, if any.
SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture. All the
covenants, stipulations, promises and agreements in this Indenture contained by
or in behalf of the Issuer shall bind its successors and assigns, whether so
expressed or not.
SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of
Securities and Coupons. Any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the Trustee or by
the Holders of Securities or Coupons to or on the Issuer may be given or served
by being deposited postage prepaid, first-class mail (except as otherwise
specifically provided herein addressed (until another address of the Issuer is
filed by the Issuer with the Trustee to TENNECO PACKAGING INC., 1900 West Field
Court, Lake Forest, Illinois 60045, Attention: Chief Financial Officer. Any
notice, direction, request or demand by the Issuer or any Holder of Securities
or Coupons to or upon the Trustee shall be deemed to have been sufficiently
given or served by being deposited postage prepaid, first-class mail (except as
otherwise specifically provided herein addressed (until another address of the
Trustee is filed by the Trustee with the Issuer to 450 West 33rd Street, 15th
Floor, New York, New York 10001-2697, Attention: Global Trust Services.
Where this Indenture provides for notice to Holders of Registered
Securities, such notice shall be sufficiently given (unless otherwise herein
expressly provided if in writing and mailed, first-class postage prepaid, to
each Holder entitled thereto, at his last address as it appears in the Security
register. In any case where notice to such Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Indenture provides for notice in any
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manner, such notice may be waived in writing by the person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case, by reason of the suspension of or irregularities in regular mail
service, it shall be impracticable to mail notice to the Issuer when such notice
is required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be reasonably satisfactory to the Trustee
shall be deemed to be a sufficient giving of such notice.
SECTION 11.5 Officer's Certificates and Opinions of Counsel; Statements to
Be Contained Therein. Upon any application or demand by the Issuer to the
Trustee to take any action under the provisions of this Indenture, the Issuer
shall furnish to the Trustee an Officer's Certificate stating that all
conditions precedent provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent have been complied with,
except that in the case of any such application or demand as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or demand, no additional
certificates or opinion need be furnished.
Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture shall include (a a statement that the person making such
certificate or opinion has read such covenant or condition, (b a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based, (c a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with and (d a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the Issuer may be
based insofar as it relates to legal matters, upon a certificate or opinion of
or representations by counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to factual matters, information with respect to which is in the possession of
the Issuer, upon the certificate, statement or opinion of or representations by
an officer or officers of the Issuer, unless such counsel knows that the
certificate, statement or opinion or representations with respect to the matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous.
Any certificate, statement or opinion of an officer of the Issuer or of
counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Issuer, unless such officer or counsel, as the
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case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public accountants
filed with and directed to the Trustee shall contain a statement that such firm
is independent. The firm of public accountants shall be selected or approved by
the Trustee.
SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays. If the date
of maturity of interest on or principal of the Securities of any series or any
Coupons appertaining thereto or the date fixed for redemption or repayment of
any such Security or Coupon shall not be a Business Day, then payment of
interest or principal need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the date of
maturity or the date fixed for redemption, and no interest shall accrue for the
period after such date.
SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture
Act of 1939. If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by, or with another provision (an
"incorporated provision" included in this Indenture by operation of, Sections
310 to 318, inclusive, of the Trust Indenture Act of 1939, such imposed duties
or incorporated provision shall control.
SECTION 11.8 New York Law to Govern. This Indenture and each Security and
Coupon shall be deemed to be a contract under the laws of the State of New York,
and for all purposes shall be construed in accordance with the laws of such
State, except as may otherwise be required by mandatory provisions of law.
SECTION 11.9 Counterparts. This Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
SECTION 11.10 Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
SECTION 11.11 Securities in a Foreign Currency or in EURO. Unless otherwise
specified in an Officer's Certificate delivered pursuant to Section 2.3 of this
Indenture with respect to a particular series of Securities, whenever for the
purposes of this Indenture any action may be taken by the Holders of a specified
percentage in aggregate principal amount of Securities of all series or all
series affected by a particular action at the time Outstanding and, at such
time, there are Outstanding Securities of any series which are denominated in a
coin or currency other than Dollars (including EUROs, then the principal amount
of Securities of such series which shall be deemed to be Outstanding for the
purpose of taking such action shall be that amount of Dollars that could be
obtained for such amount at the Market Exchange Rate. For purposes of this
Section 11.11, Market Exchange Rate shall mean the noon Dollar buying rate in
New York City for cable transfers of that currency as published by the Federal
Reserve Bank of New York; provided, however, in the case of EUROs, Market
Exchange Rate shall mean the rate of exchange determined by the Commission of
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the European Communities (or any successor thereto as published in the Official
Journal of the European Communities (such publication or any successor
publication, the "Journal". If such Market Exchange Rate is not available for
any reason with respect to such currency, the Trustee shall use, in its sole
discretion and without liability on its part, such quotation of the Federal
Reserve Bank of New York or, in the case of EUROs, the rate of exchange as
published in the Journal, as of the most recent available date, or quotations
or, in the case of EUROs, rates of exchange from one or more major banks in The
City of New York or in the country of issue of the currency in question, which
for purposes of the EURO shall be Brussels, Belgium, or such other quotations
or, in the case of EURO, rates of exchange as the Trustee shall deem
appropriate. The provisions of this paragraph shall apply in determining the
equivalent principal amount in respect of Securities of a series denominated in
a currency other than Dollars in connection with any action taken by Holders of
Securities pursuant to the terms of this Indenture.
All decisions and determinations of the Trustee regarding the Market
Exchange Rate or any alternative determination provided for in the preceding
paragraph shall be in its sole discretion and shall, in the absence of manifest
error, be conclusive to the extent permitted by law for all purposes and
irrevocably binding upon the Issuer and all Holders.
SECTION 11.12 Judgment Currency. The Issuer agrees, to the fullest extent
that it may effectively do so under applicable law, that (a if for the purpose
of obtaining judgment in any court it is necessary to convert the sum due in
respect of the principal of or interest on the Securities of any series (the
"Required Currency" into a currency in which a judgment will be rendered (the
"Judgment Currency", the rate of exchange used shall be the rate at which in
accordance with normal banking procedures the Trustee could purchase in The City
of New York the Required Currency with the Judgment Currency on the day on which
final unappealable judgment is entered, unless such day is not a New York
Banking Day, then, to the extent permitted by applicable law, the rate exchange
used shall be the rate at which in accordance with normal banking procedures the
Trustee could purchase in The City of New York the Required Currency with the
Judgement Currency on the New York Banking Day preceding the day on which final
unappealable judgment is entered and (b its obligations under this Indenture to
make payments in the Required Currency (i shall not be discharged or satisfied
by any tender, or any recovery pursuant to any judgment (whether or not entered
in accordance with subsection (a, in any currency other than the Required
Currency, except to the extent that such tender or recovery shall result in the
actual receipt, by the payee, of the full amount of the Required Currency
expressed to be payable in respect of such payments, (ii shall be enforceable
as an alternative or additional cause of action for the purpose of recovering in
the Required Currency the amount, if any, by which such actual receipt shall
fall short of the full amount of the Required Currency so expressed to be
payable and (iii shall not be affected by judgment being obtained for any other
sum due under this Indenture. For purposes of the foregoing, "New York Banking
Day" means any day except a Saturday, Sunday or a legal holiday in The City of
New York or a day on which banking institutions in The City of New York are
authorized or required by law or executive order to close.
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ARTICLE TWELVE
REDEMPTION OF SECURITIES AND SINKING FUNDS
SECTION 12.1 Applicability of Article. The provisions of this Article shall
be applicable to the Securities of any series which are redeemable before their
maturity or to any sinking fund for the retirement of Securities of a series
except as otherwise specified as contemplated by Section 2.3 for Securities of
such series.
SECTION 12.2 Notice of Redemption; Partial Redemptions. Notice of
redemption to the Holders of Registered Securities of any series to be redeemed
as a whole or in part at the option of the Issuer shall be given by mailing
notice of such redemption by first class mail, postage prepaid, at least 30 days
and not more than 60 days prior to the date fixed for redemption to such Holders
of Securities of such series at their last addresses as they shall appear upon
the registry books. Notice of redemption to the Holders of Unregistered
Securities to be redeemed as whole or in part, who have filed their names and
addresses with the Trustee, shall be given by mailing notice of such redemption,
by first class mail, postage prepaid, at least 30 days and not more than 60
prior to the date fixed for redemption, to such Holders at such addresses as
were so furnished to the Trustee (and, in the case of any such notice given by
the Issuer, the Trustee shall make such information available to the Issuer for
such purpose. Notice of redemption to all other Holders of Unregistered
Securities shall be published in an Authorized Newspaper in the Borough of
Manhattan, The City of New York and in an Authorized Newspaper in London (and,
if required by Section 3.7, in an Authorized Newspaper in Luxembourg, in each
case, once in each of three successive calendar weeks, the first publication to
be not less than 30 nor more than 60 days prior to the date fixed for
redemption. Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives the notice. Failure to give notice by mail, or any defect in the notice
to the Holder of any Security of a series designated for redemption as a whole
or in part shall not affect the validity of the proceedings for the redemption
of any other Security of such series.
The notice of redemption to each such Holder shall specify the principal
amount of each Security of such series held by such Holder to be redeemed, the
date fixed for redemption, the redemption price, the place or places of payment,
that payment will be made upon presentation and surrender of such Securities
and, in the case of Securities with Coupons attached thereto, of all Coupons
appertaining thereto maturing after the date fixed for redemption, that such
redemption is pursuant to the mandatory or optional sinking fund, or both, if
such be the case, that interest accrued to the date fixed for redemption will be
paid as specified in such notice and that on and after said date interest
thereon or on the portions thereof to be redeemed will cease to accrue. In case
any Security of a series is to be redeemed in part only the notice of redemption
shall state the portion of the principal amount thereof to be redeemed and shall
state that on and after the date fixed for redemption, upon surrender of such
Security, a new Security or Securities of such series in principal amount equal
to the unredeemed portion thereof will be issued.
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The notice of redemption of Securities of any series to be redeemed at the
option of the Issuer shall be given by the Issuer or, at the Issuer's request,
by the Trustee in the name and at the expense of the Issuer.
On or before the redemption date specified in the notice of redemption
given as provided in this Section, the Issuer will deposit with the Trustee or
with one or more paying agents (or, if the Issuer is acting as its own paying
agent, set aside, segregate and hold in trust as provided in Section 3.4 an
amount of money sufficient to redeem on the redemption date all the Securities
of such series so called for redemption at the appropriate redemption price,
together with accrued interest to the date fixed for redemption. The Issuer will
deliver to the Trustee at least 70 days prior to the date fixed for redemption
an Officer's Certificate stating the aggregate principal amount of Securities to
be redeemed. In case of a redemption at the election of the Issuer prior to the
expiration of any restriction on such redemption, the Issuer shall deliver to
the Trustee, prior to the giving of any notice of redemption to Holders pursuant
to this Section, an Officer's Certificate stating that such restriction has been
complied with.
If less than all the Securities of a series are to be redeemed, the Trustee
shall select, in such manner as it shall deem appropriate and fair, Securities
of such Series to be redeemed in whole or in part. Securities may be redeemed in
part in multiples equal to the minimum authorized denomination for Securities of
such series or any multiple thereof. The Trustee shall promptly notify the
Issuer in writing of the Securities of such series selected for redemption and,
in the case of any Securities of such series selected for partial redemption,
the principal amount thereof to be redeemed. For all purposes of this Indenture,
unless the context otherwise requires, all provisions relating to the redemption
of Securities of any series shall relate, in the case of any Security redeemed
or to be redeemed only in part, to the portion of the principal amount of such
Security which has been or is to be redeemed.
SECTION 12.3 Payment of Securities Called for Redemption. If notice of
redemption has been given as above provided, the Securities or portions of
Securities specified in such notice shall become due and payable on the date and
at the place stated in such notice at the applicable redemption price, together
with interest accrued to the date fixed for redemption, and on and after said
date (unless the Issuer shall default in the payment of such Securities at the
redemption price, together with interest accrued to said date interest on the
Securities or portions of Securities so called for redemption shall cease to
accrue, and the unmatured Coupons, if any, appertaining thereto shall be void,
and, except as provided in Sections 6.5 and 10.4, such Securities shall cease
from and after the date fixed for redemption to be entitled to any benefit or
security under this Indenture, and the Holders thereof shall have no right in
respect of such Securities except the right to receive the redemption price
thereof and unpaid interest to the date fixed for redemption. On presentation
and surrender of such Securities at a place of payment specified in said notice,
together with all Coupons, if any, appertaining thereto maturing after the date
fixed for redemption, said Securities or the specified portions thereof shall be
paid and redeemed by the Issuer at the applicable redemption price, together
with interest accrued thereon to the date fixed for redemption; provided that
payment of interest becoming due on or prior to the date fixed for redemption
shall be payable in the case of Securities with Coupons attached thereto, to the
Holders of the Coupons for such interest upon surrender thereof, and in the case
of
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Registered Securities, to the Holders of such Registered Securities registered
as such on the relevant record date subject to the terms and provisions of
Sections 2.3 and 2.7 hereof.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal shall, until paid or duly provided for,
bear interest from the date fixed for redemption at the rate of interest or
Yield to Maturity (in the case of an Original Issue Discount Security borne by
such Security.
If any Security with Coupons attached thereto is surrendered for redemption
and is not accompanied by all appurtenant Coupons maturing after the date fixed
for redemption, the surrender of such missing Coupon or Coupons may be waived by
the Issuer and the Trustee, if there be furnished to each of them such security
or indemnity as they may require to save each of them harmless.
Upon presentation of any Security redeemed in part only, the Issuer shall
execute and the Trustee shall authenticate and deliver to or on the order of the
Holder thereof, at the expense of the Issuer, a new Security or Securities of
such series, of authorized denominations, in principal amount equal to the
unredeemed portion of the Security so presented.
SECTION 12.4 Exclusion of Certain Securities from Eligibility for Selection
for Redemption. Securities shall be excluded from eligibility for selection for
redemption if they are identified by registration and certificate number in an
Officer's Certificate delivered to the Trustee at least 40 days prior to the
last date on which notice of redemption may be given as being owned of record
and beneficially by, and not pledged or hypothecated by either (a the Issuer or
(b an entity specifically identified in such written statement as directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Issuer.
SECTION 12.5 Mandatory and Optional Sinking Funds. The minimum amount of
any sinking fund payment provided for by the terms of the Securities of any
series is herein referred to as a "mandatory sinking fund payment," and any
payment in excess of such minimum amount provided for by the terms of the
Securities of any series is herein referred to as an "optional sinking fund
payment." The date on which a sinking fund payment is to be made is herein
referred to as the "sinking fund payment date."
In lieu of making all or any part of any mandatory sinking fund payment
with respect to any series of Securities in cash, the Issuer may at its option
(a deliver to the Trustee Securities of such series theretofore purchased or
otherwise acquired (except upon redemption pursuant to the mandatory sinking
fund by the Issuer or receive credit for Securities of such series (not
previously so credited theretofore purchased or otherwise acquired (except as
aforesaid by the Issuer and delivered to the Trustee for cancellation pursuant
to Section 2.10, (b receive credit for optional sinking fund payments (not
previously so credited made pursuant to this Section, or (c receive credit for
Securities of such series (not previously so credited redeemed by the Issuer
through any optional redemption provision contained in the terms of such series.
Securities so delivered or credited shall be received or credited by the Trustee
at the sinking fund redemption price specified in such Securities.
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<PAGE> 66
On or before the 60th day next preceding each sinking fund payment date for
any series, the Issuer will deliver to the Trustee an Officer's Certificate
(which need not contain the statements required by Section 11.5 (a specifying
the portion of the mandatory sinking fund payment to be satisfied by payment of
cash and the portion to be satisfied by credit of Securities of such series and
the basis for such credit, (b stating that none of the Securities of such
series has theretofore been so credited, (c stating that no defaults in the
payments of interest or Events of Default with respect to such series have
occurred (which have not been waived or cured and are continuing and (d
stating whether or not the Issuer intends to exercise its right to make an
optional sinking fund payment with respect to such series and, if so, specifying
the amount of such optional sinking fund payment which the Issuer intends to pay
on or before the next succeeding sinking fund payment date. Any Securities of
such series to be credited and required to be delivered to the Trustee in order
for the Issuer to be entitled to credit therefor as aforesaid which have not
theretofore been delivered to the Trustee shall be delivered for cancellation
pursuant to Section 2.10 to the Trustee with such Officer's Certificate (or
reasonably promptly thereafter if acceptable to the Trustee. Such Officer's
Certificate shall be irrevocable and upon its receipt by the Trustee the Issuer
shall become unconditionally obligated to make all the cash payments or payments
therein referred to, if any, on or before the next succeeding sinking fund
payment date. Failure of the Issuer, on or before any such 60th day, to deliver
such Officer's Certificate and Securities specified in this paragraph, if any,
shall not constitute a default but shall constitute, on and as of such date, the
irrevocable election of the Issuer (i that the mandatory sinking fund payment
for such series due on the next succeeding sinking fund payment date shall be
paid entirely in cash without the option to deliver or credit Securities of such
series in respect thereof and (ii that the Issuer will make no optional sinking
fund payment with respect to such series as provided in this Section.
If the sinking fund payment or payments (mandatory or optional or both to
be made in cash on the next succeeding sinking fund payment date plus any unused
balance of any preceding sinking fund payments made in cash shall exceed $50,000
(or the equivalent thereof in any Foreign Currency or EURO or a lesser sum in
Dollars (or the equivalent thereof in any Foreign Currency or EURO if the
Issuer shall so request with respect to the Securities of any particular series,
such cash shall be applied on the next succeeding sinking fund payment date to
the redemption of Securities of such series at the sinking fund redemption price
together with accrued interest to the date fixed for redemption. If such amount
shall be $50,000 (or the equivalent thereof in any Foreign Currency or EURO or
less and the Issuer makes no such request then it shall be carried over until a
sum in excess of $50,000 (or the equivalent thereof in any Foreign Currency or
EURO is available. The Trustee shall select, in the manner provided in Section
12.2, for redemption on such sinking fund payment date a sufficient principal
amount of Securities of such series to absorb said cash, as nearly as may be,
and shall (if requested in writing by the Issuer inform the Issuer of the
serial numbers of the Securities of such series (or portions thereof so
selected. Securities shall be excluded from eligibility for redemption under
this Section if they are identified by registration and certificate number in an
Officer's Certificate delivered to the Trustee at least 60 days prior to the
sinking fund payment date as being owned of record and beneficially by, and not
pledged or hypothecated by either (a the Issuer or (b an entity specifically
identified in such Officer's Certificate as directly or indirectly controlling
or controlled by or under direct or indirect common control with the Issuer. The
Trustee, in the
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<PAGE> 67
name and at the expense of the Issuer (or the Issuer, if it shall so request the
Trustee in writing shall cause notice of redemption of the Securities of such
series to be given in substantially the manner provided in Section 12.2 (and
with the effect provided in Section 12.3 for the redemption of Securities of
such series in part at the option of the Issuer. The amount of any sinking fund
payments not so applied or allocated to the redemption of Securities of such
series shall be added to the next cash sinking fund payment for such series and,
together with such payment, shall be applied in accordance with the provisions
of this Section. Any and all sinking fund moneys held on the stated maturity
date of the Securities of any particular series (or earlier, if such maturity is
accelerated, which are not held for the payment or redemption of particular
Securities of such series shall be applied, together with other moneys, if
necessary, sufficient for the purpose, to the payment of the principal of, and
interest on, the Securities of such series at maturity.
On or before each sinking fund payment date, the Issuer shall pay to the
Trustee in cash or shall otherwise provide for the payment of all interest
accrued to the date fixed for redemption on Securities to be redeemed on the
next following sinking payment date.
The Trustee shall not redeem or cause to be redeemed any Securities of a
series with sinking fund moneys or give any notice of redemption of Securities
for such series by operation of the sinking fund during the continuance of a
default in payment of interest on such Securities or of any Event of Default
except that, where the giving of notice of redemption of any Securities shall
theretofore have been made, the Trustee shall redeem or cause to be redeemed
such Securities, provided that it shall have received from the Issuer a sum
sufficient, for such redemption. Except as aforesaid, any moneys in the sinking
fund for such series at the time when any such default or Event of Default shall
occur, and any moneys thereafter paid into the sinking fund, shall, during the
continuance of such default or Event of Default, be deemed to have been
collected under Article Five and held for the payment of all such Securities. In
case such Event of Default shall have been waived as provided in Section 5.10 or
the default cured on or before the 60th day preceding the sinking fund payment
date in any year, such moneys shall thereafter be applied on the next succeeding
sinking fund payment date in accordance with this Section to the redemption of
such Securities.
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<PAGE> 68
IN WITNESS WHEREOF, the parties hereto to have cause this Indenture to be
duly executed all as of September 29, 1999.
Tenneco Packaging Inc.
By: /s/ RICHARD L. WAMBOLD
----------------------------------
Name: Richard L. Wambold
Title: President
Attest:
/s/ JAMES V. FAULKNER, JR.
- ----------------------------------
Assistant Secretary
The Chase Manhattan Bank, Trustee
By: /s/ RONALD J. HALLERAN
----------------------------------
Name: Ronald J. Halleran
Title: Assistant Vice President
Attest:
/s/ TRUST OFFICER
- ----------------------------------
Trust Officer
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<PAGE> 1
EXHIBIT 4.3
EXECUTION COPY
================================================================================
LONG TERM CREDIT AGREEMENT
Dated as of September 29, 1999
among
TENNECO PACKAGING INC.,
BANK OF AMERICA, N.A.,
as Administrative Agent,
CREDIT SUISSE FIRST BOSTON,
as Syndication Agent,
BANK ONE, NA
and
BANQUE NATIONALE DE PARIS,
as Co-Documentation Agents,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
BANC OF AMERICA SECURITIES LLC
Lead Arranger and Book Manager
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms......................................................................................2
1.2 Other Interpretive Provisions.............................................................................20
1.3 Accounting Principles.....................................................................................21
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Commitments..........................................................................22
2.2 Loan Accounts.............................................................................................22
2.3 Procedure for Committed Borrowing.........................................................................23
2.4 Conversion and Continuation Elections for Committed Borrowings............................................23
2.5 Bid Borrowings............................................................................................25
2.6 Procedure for Bid Borrowings..............................................................................25
2.7 Voluntary Termination or Reduction of Commitments.........................................................29
2.8 Optional Prepayments......................................................................................30
2.9 Repayment.................................................................................................30
2.10 Interest..................................................................................................30
2.11 Fees......................................................................................................31
(a Arrangement, Agency Fees............................................................................31
(b Facility Fees......................................................................................32
(c Utilization Fees...................................................................................32
2.12 Computation of Fees and Interest..........................................................................32
2.13 Payments by the Company...................................................................................33
2.14 Payments by the Lenders to the Administrative Agent.......................................................33
2.15 Sharing of Payments, Etc..................................................................................34
2.16 Swing Line Commitment.....................................................................................36
2.17 Borrowing Procedures for Swing Line Loans.................................................................36
2.18 Prepayment or Refunding of Swing Line Loans...............................................................36
2.19 Participations in Swing Line Loans........................................................................37
2.20 Participation Obligations Unconditional...................................................................38
2.21 Conditions to Swing Line Loans............................................................................38
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes.....................................................................................................39
3.2 Illegality................................................................................................40
3.3 Increased Costs and Reduction of Return...................................................................41
3.4 Funding Losses............................................................................................42
3.5 Inability to Determine Rates..............................................................................43
3.6 Certificates of Lenders...................................................................................43
3.7 Mitigation................................................................................................43
3.8 Substitution of Lenders...................................................................................43
3.9 Survival..................................................................................................44
</TABLE>
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<TABLE>
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ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions to Effectiveness...............................................................................44
(a Agreement and Notes............................................................................44
(b Resolutions; Incumbency........................................................................44
(c Organization Documents.........................................................................45
(d Payment of Fees and Expenses...................................................................45
(e Tax Ruling or Opinion..........................................................................45
(f Other Documents................................................................................45
4.2 Conditions to Initial Borrowing...........................................................................45
(a Effective Date.................................................................................45
(b Consummation of Spin-Off.......................................................................45
(c Consents and Approvals.........................................................................46
(d Payments of Fees and Expenses..................................................................46
(e Legal Opinions.................................................................................46
(f Certificate....................................................................................46
(g Other Documents................................................................................47
4.3 Conditions to All Borrowings..............................................................................47
(a Notice.........................................................................................47
(b Continuation of Representations and
Warranties.....................................................................................47
(c No Default.....................................................................................47
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Corporate Existence and Power.............................................................................47
5.2 Corporate Authorization; No Contravention.................................................................48
5.3 Governmental Authorization................................................................................48
5.4 Binding Effect............................................................................................48
5.5 Litigation................................................................................................49
5.6 No Default................................................................................................49
5.7 ERISA Compliance..........................................................................................49
5.8 Use of Proceeds; Margin Regulations.......................................................................50
5.9 Title to Properties.......................................................................................50
5.10 Taxes.....................................................................................................50
5.11 Financial Condition.......................................................................................50
5.12 Environmental Matters.....................................................................................51
5.13 Regulated Entities........................................................................................51
5.14 No Burdensome Restrictions................................................................................51
5.15 Copyrights, Patents, Trademarks and Licenses, etc. .......................................................51
5.16 Subsidiaries..............................................................................................52
5.17 Insurance.................................................................................................52
5.18 Year 2000 Problem.........................................................................................52
5.19 Full Disclosure...........................................................................................52
5.20 Solvency, etc.............................................................................................53
5.21 Labor Relations...........................................................................................53
</TABLE>
ii
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<TABLE>
<S> <C>
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1 Financial Statements......................................................................................53
6.2 Certificates; Other Information...........................................................................54
6.3 Notices...................................................................................................54
6.4 Preservation of Corporate Existence, Etc..................................................................56
6.5 Maintenance of Property...................................................................................56
6.6 Insurance.................................................................................................56
6.7 Payment of Obligations....................................................................................56
6.8 Compliance with Laws......................................................................................57
6.9 Compliance with ERISA.....................................................................................57
6.10 Inspection of Property and Books and Records..............................................................57
6.11 Environmental Laws........................................................................................57
6.12 Use of Proceeds...........................................................................................57
6.13 Change in Business........................................................................................58
ARTICLE VII
NEGATIVE COVENANTS
7.1 Financial Condition Covenants.............................................................................58
(a Minimum Interest Coverage Ratio.....................................................................58
(b Maximum Total Debt to EBITDA Ratio..................................................................58
7.2 Limitation on Liens.......................................................................................58
7.3 Restrictions on Subsidiaries..............................................................................60
7.4 Consolidation, Mergers and Sales of Assets................................................................61
7.5 Limitation on Subsidiary Indebtedness.....................................................................61
7.6 Transactions with Affiliates..............................................................................61
7.7 Use of Proceeds...........................................................................................61
7.8 ERISA.....................................................................................................62
7.9 Securitization Transactions...............................................................................62
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Event of Default..........................................................................................62
(a Non-Payment....................................................................................62
(b Representation or Warranty.....................................................................62
(c Specific Defaults..............................................................................62
(d Other Defaults.................................................................................63
(e Cross-Default..................................................................................63
(f Insolvency; Voluntary Proceedings..............................................................63
(g Involuntary Proceedings........................................................................63
(h ERISA..........................................................................................64
(i Monetary Judgments.............................................................................64
(j Non-Monetary Judgments.........................................................................64
(k Change of Control..............................................................................64
8.2 Remedies..................................................................................................64
8.3 Notice of Defaults........................................................................................65
8.4 Rights Not Exclusive......................................................................................65
</TABLE>
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<TABLE>
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ARTICLE IX
THE ADMINISTRATIVE AGENT
9.1 Appointment and Authorization; "Administrative Agent".....................................................66
9.2 Delegation of Duties......................................................................................66
9.3 Liability of Administrative Agent.........................................................................66
9.4 Reliance by Administrative Agent..........................................................................67
9.5 Notice of Default.........................................................................................68
9.6 Credit Decision...........................................................................................68
9.7 Indemnification of Administrative Agent...................................................................69
9.8 Administrative Agent in Individual Capacity...............................................................69
9.9 Successor Administrative Agent............................................................................69
9.10 Withholding Tax...........................................................................................70
9.11 Other Agents..............................................................................................72
ARTICLE X
MISCELLANEOUS
10.1 Amendments and Waivers....................................................................................72
10.2 Notices...................................................................................................73
10.3 No Waiver; Cumulative Remedies............................................................................74
10.4 Costs and Expenses........................................................................................75
10.5 Company Indemnification...................................................................................75
10.6 Payments Set Aside........................................................................................76
10.7 Successors and Assigns....................................................................................76
10.8 Assignments, Participations, etc..........................................................................76
10.9 Confidentiality...........................................................................................79
10.10 Set-off...................................................................................................80
10.11 Notification of Addresses, Lending Offices, Etc...........................................................80
10.12 Counterparts..............................................................................................80
10.13 Severability..............................................................................................80
10.14 No Third Parties Benefited................................................................................80
10.15 Governing Law and Jurisdiction............................................................................80
10.16 Waiver of Jury Trial......................................................................................81
10.17 Entire Agreement..........................................................................................81
</TABLE>
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<PAGE> 6
SCHEDULES
Schedule 1.1 Pricing Schedule
Schedule 2.1 Commitments and Pro Rata Shares
Schedule 5.12 Environmental Matters
Schedule 5.16 Subsidiaries and Minority Interests
Schedule 5.21 Labor Relations
Schedule 7.2 Permitted Liens
Schedule 10.2 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Committed Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Competitive Bid Request
Exhibit D Form of Invitation for Competitive Bid
Exhibit E Form of Competitive Bid
Exhibit F Form of Compliance Certificate
Exhibit G Form of Opinion of Counsel to the Company
Exhibit H Form of Assignment and Acceptance
Exhibit I Form of Promissory Note
Exhibit J Form of Notice of Swing Line Loan
v
<PAGE> 7
LONG TERM CREDIT AGREEMENT
This LONG TERM CREDIT AGREEMENT is entered into as of September 29, 1999,
among TENNECO PACKAGING INC., a Delaware corporation (the "Company", the
several financial institutions from time to time party to this Agreement
(collectively the "Lenders"; individually each a "Lender", BANK OF AMERICA,
N.A., as administrative agent for the Lenders, CREDIT SUISSE FIRST BOSTON, as
Syndication Agent, and BANK ONE, NA and BANQUE NATIONALE DE PARIS, as
Co-Documentation Agents.
INTRODUCTION
1. Pursuant to a Distribution Agreement (the "Distribution Agreement"
to be entered into between Tenneco Inc. ("Tenneco" and the Company, which is a
wholly-owned subsidiary of Tenneco, Tenneco will agree to separate and divide
its existing businesses so that (a the assets, liabilities and operations of
its packaging business and administrative services operations (collectively, the
"Packaging Business" will be owned directly and indirectly by the Company and
(b the assets, liabilities and operations of its automotive business will be
directly and indirectly owned by Tenneco. Tenneco will be renamed Tenneco
Automotive Inc. immediately following the distribution described in the
succeeding paragraph.
2. Following the separation and division described in paragraph 1,
Tenneco shall distribute, as a dividend to the holders of the shares of its
common stock, all of the capital stock of the Company (the transactions
described in paragraph 1 above and this paragraph 2, as more particularly
described in the Company's filing on Form 10 and Form S-4, the "Spin-Off".
3. The Company intends to sell the 43% of the common stock of Packaging
Corporation of America, a Delaware corporation ("PCA", owned by it to the
public in a registered public offering (the "PCA IPO". Such sale is not a
condition to the Spin-Off and may take place before or after the Spin-Off (and
may be at such time and price as is permitted by market conditions.
4. Pursuant to the Distribution Agreement and in connection with the
Spin-Off and any PCA IPO, certain pre-existing indebtedness of the Company,
Tenneco and their respective subsidiaries will be paid in full, canceled or
realigned through some combination of tender offers, exchange offers,
prepayments or other forms of debt retirement.
5. Tenneco has requested that the Lenders and the Administrative Agent
enter into this Agreement in order to make
<PAGE> 8
available to the Company a $750,000,000 credit facility on the terms and
conditions set forth herein.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
I.1 Certain Defined Terms. The following terms have the following meanings:
Absolute Rate - see subsection 2.6(c(ii(D.
Absolute Rate Auction means a solicitation of Competitive Bids setting
forth Absolute Rates pursuant to Section 2.6.
Absolute Rate Bid Loan means a Bid Loan that bears interest at a rate
determined with reference to the Absolute Rate.
Acquisition means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a the
acquisition of all or substantially all of the assets of a Person, or of
all or substantially all of any business or division of a Person, (b the
acquisition of in excess of 50% of the capital stock, partnership
interests, membership interests or equity of any Person, or otherwise
causing any Person to become a Subsidiary, or (c a merger or consolidation
or any other combination with another Person (other than a Person that is a
Subsidiary provided that the Company or the Subsidiary is the surviving
entity.
Adjusted Pro Rata Share means for any Lender at any time the
proportion (expressed as a decimal, rounded to the ninth decimal place
which such Lender's Commitment constitutes of the Combined Commitments (or,
after the Commitments have terminated, which (i the principal amount of
such Lender's Loans plus (without duplication the participation of such
Lender in (or, in the case of the Swing Line Lender, its unparticipated
portion of the principal amount of all Swing Line Loans constitutes of
(ii the aggregate principal amount of all Loans.
Administrative Agent means Bank of America in its capacity as agent
for the Lenders hereunder, and any successor agent arising under Section
9.9.
2
<PAGE> 9
Administrative Agent-Related Persons means Bank of America and any
successor agent arising under Section 9.9, together with their respective
Affiliates (including, in the case of Bank of America, BAS, and the
officers, directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
Administrative Agent's Payment Office means the address for payments
set forth on Schedule 10.2 or such other address as the Administrative
Agent may from time to time specify by notice to the Company and the
Lenders.
Affiliate means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct
or cause the direction of the management and policies of the other Person,
whether through the ownership of voting securities or membership interests,
by contract or otherwise; provided that none of PCA, Tenneco, Tenneco
Automotive Inc. or any Subsidiary of Tenneco Automotive Inc. (except for
any thereof that are part of the Tenneco Packaging Group shall be an
Affiliate of the Company for purposes of this Agreement.
Agreement means this Credit Agreement.
Applicable Margin - see Schedule 1.1.
Assignee - see subsection 10.8(a.
Assignment and Acceptance - see subsection 10.8(a.
Attorney Costs means and includes all reasonable fees and
disbursements of any law firm or other external counsel.
Bank of America means Bank of America, N.A., a national banking
association.
Bankruptcy Code means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101, et seq..
BAS means Bank of America Securities LLC, a Delaware limited liability
company.
Base Rate means, for any day, the higher of: (a 0.50% per annum above
the latest Federal Funds Rate; or (b the rate of interest in effect for
such day as publicly announced from time to time by Bank of America, as its
"prime", "reference" or equivalent rate. (The "prime",
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<PAGE> 10
"reference" or equivalent rate is a rate set by Bank of America based upon
various factors including Bank of America's costs and desired return,
general economic conditions and other factors, and is used as a reference
point for pricing some loans, which may be priced at, above or below such
announced rate. Any change in the reference rate announced by Bank of
America shall take effect at the opening of business on the day specified
in the public announcement of such change.
Base Rate Committed Loan means a Committed Loan that bears interest
based on the Base Rate.
Bid Borrowing means a Borrowing hereunder consisting of one or more
Bid Loans made to the Company on the same day by one or more Lenders.
Bid Loan means a Loan by a Lender to the Company under Section 2.6,
which may be a LIBOR Bid Loan or an Absolute Rate Bid Loan.
Borrowing means a borrowing hereunder consisting of Committed Loans of
the same Type, or Bid Loans, made to the Company on the same day by one or
more Lenders under Article II and, other than in the case of Base Rate
Committed Loans, having the same Interest Period. A Borrowing may be a Bid
Borrowing or a Committed Borrowing.
Borrowing Date means any date on which a Borrowing occurs under
Section 2.3 or 2.6 or a Swing Line Loan is made under Section 2.16.
Business Day means any day other than a Saturday, Sunday or other day
on which commercial banks in New York City or Charlotte, North Carolina are
authorized or required by law to close and, if the applicable Business Day
relates to any Offshore Rate Loan, means such a day on which dealings in
Dollars are carried on in the London interbank market.
Capital Adequacy Regulation means any guideline, request or directive
of any central bank or other Governmental Authority, or any other law, rule
or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a
bank.
Capital Lease means, with respect to any Person, any lease of (or
other agreement conveying the right to use any real or personal property
by such Person that, in conformity
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<PAGE> 11
with GAAP, is accounted for as a capital lease on the balance sheet of such
Person.
Change of Control means that (a any Person or group (within the
meaning of Rule 13d-5 of the SEC under the Exchange Act, other than
Tenneco prior to the date of the Spin-Off, shall have beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the SEC of 25% or more of
the Voting Stock of the Company or (b a majority of the members of the
Board of Directors of the Company shall cease to be Continuing Members.
Code means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
Combined Commitments means the amount of the combined Commitments of
all Lenders. As of the Effective Date, the amount of the Combined
Commitments is $750,000,000.
Combined Outstandings means the aggregate principal amount of all
outstanding Loans (whether Committed Loans, Bid Loans or Swing Line Loans.
Commitment - see Section 2.1.
Committed Borrowing means a Borrowing hereunder consisting of
Committed Loans made by the Lenders ratably according to their respective
Pro Rata Shares.
Committed Loan means a Loan by a Lender to the Company under Section
2.1, which may be a Base Rate Committed Loan or an Offshore Rate Committed
Loan (each a "Type" of Committed Loan.
Company - see the Preamble.
Competitive Bid means an offer by a Lender to make a Bid Loan in
accordance with subsection 2.6(c.
Competitive Bid Request - see subsection 2.6(a.
Compliance Certificate means a certificate substantially in the form
of Exhibit F.
Computation Period means any period of four consecutive fiscal
quarters ending on the last day of a fiscal quarter.
Consolidated EBITDA means, with respect to the Company and its
Subsidiaries for any period of computation thereof during such period, the
sum of, without duplication, (i Consolidated Net Income, plus (ii
Consolidated Interest
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<PAGE> 12
Expense during such period, plus (iii taxes on income during such period,
plus (iv amortization during such period, plus (v depreciation during
such period plus (vi minority interest expense.
Consolidated Interest Expense means, with respect to any period of
computation thereof, the interest expense (net of interest income of the
Company and its Subsidiaries, including (i the amortization of debt
discounts, (ii the amortization of all fees payable in connection with the
incurrence of Indebtedness to the extent included in interest expense, and
(iii the portion of any lease expense incurred in connection with Capital
Leases allocable to interest expense.
Consolidated Net Income means, for any period of computation thereof,
the net income (or loss of the Company and its Subsidiaries on a
consolidated basis for such period, but excluding (i all non-cash
non-recurring gains or losses, (ii for the fiscal year ending December 31,
1999, cash non-recurring charges in an amount not to exceed $50,000,000 and
(iii with respect to any discontinued operations, any gain (or loss
resulting therefrom. For purposes of this definition, and otherwise for
purposes of measuring covenant compliance under Section 7.1, calculations
for fiscal quarters within any Computation Period in which any
discontinuance of operations has occurred, but which ended prior to the
fiscal quarter in which such discontinuance occurred, shall not be restated
to reflect such discontinuance of operations.
Contingent Obligation means, as to any Person, any direct or indirect
liability of such Person, whether or not contingent, (a with respect to
any Indebtedness, lease, dividend, letter of credit or other obligation
(the "primary obligations" of another Person (the "primary obligor",
including any obligation of such Person (i to purchase, repurchase or
otherwise acquire such primary obligations or any security therefor, (ii
to advance or provide funds for the payment or discharge of any such
primary obligation, or to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, (iii to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation,
or (iv otherwise to assure or hold harmless the holder of any such primary
obligation against loss in respect thereof (each a "Guaranty Obligation";
(b with respect to any Surety Instrument issued for the account
6
<PAGE> 13
of such Person or as to which such Person is otherwise liable for
reimbursement of drawings or payments; or (c to purchase any materials,
supplies or other property from, or to obtain the services of, another
Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or
for such services, shall be made regardless of whether delivery of such
materials, supplies or other property is ever made or tendered, or such
services are ever performed or tendered. The amount of any Contingent
Obligation shall (a in the case of Guaranty Obligations, be deemed equal
to the stated or determinable amount of the primary obligation in respect
of which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect
thereof, and (b in the case of other Contingent Obligations, be equal to
the maximum reasonably anticipated liability in respect thereof.
Continuing Member means a member of the Board of Directors of the
Company who either (a was a member of the Company's Board of Directors on
the Effective Date and has been such continuously thereafter or (b became
a member of such Board of Directors after the Effective Date and whose
election or nomination for election was approved by a vote of the majority
of the Continuing Members then members of the Company's Board of Directors.
Contractual Obligation means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other document to which such Person
is a party or by which it or any of its property is bound.
Conversion/Continuation Date means any date on which, under Section
2.4, the Company (a converts Committed Loans of one Type to the other Type
or (b continues Offshore Rate Committed Loans for a new Interest Period.
Distribution Agreement - see paragraph 1 of the Introduction to this
Agreement.
Dollars, dollars and $ each mean lawful money of the United States.
Effective Date - see Section 4.1.
Eligible Assignee means (a a financial institution organized under
the laws of the United States, or any state thereof, and having a combined
capital and surplus of at least $100,000,000; (b a commercial bank
organized under the laws of any other country which is a member of the
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<PAGE> 14
Organization for Economic Cooperation and Development (the OECD, or a
political subdivision of any such country, and having a combined capital
and surplus of at least $100,000,000, provided that such bank is acting
through a branch or agency located in the United States; and (c a Person
that is primarily engaged in the business of commercial lending and that is
(i a Lender, (iia Subsidiary of a Lender, (iii a Subsidiary of a Person
of which a Lender is a Subsidiary, or (iv a Person of which a Lender is a
Subsidiary.
Environmental Claims means all written claims, however asserted, by
any Governmental Authority alleging potential liability or responsibility
for violation of any Environmental Law or for release to the environment.
Environmental Laws means all federal, state, local or municipal laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative or judicial orders, directed duties,
requests, licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental, health,
safety and land use matters.
ERISA means the Employee Retirement Income Security Act of 1974, and
the regulations promulgated thereunder.
ERISA Affiliate means any trade or business (whether or not
incorporated under common control with the Company within the meaning of
Section 414(b or (c of the Code (and Sections 414(m and (o of the Code
for purposes of provisions relating to Section 412 of the Code.
ERISA Event means (a a Reportable Event with respect to a Pension
Plan; (b a withdrawal by the Company or any ERISA Affiliate from a Pension
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a(2 of ERISA or a
substantial cessation of operations which is treated as such a withdrawal;
(c a complete or partial withdrawal by the Company or any ERISA Affiliate
from a Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d the filing of a notice of intent to terminate a Pension
Plan under Section 4041(c of ERISA, the termination of a Multiemployer
Plan under 4041A of ERISA, or the commencement of proceedings by the PBGC
to terminate a Pension Plan or Multiemployer Plan; (e an event or
condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer
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<PAGE> 15
Plan; or (f the imposition of any liability under Title IV of ERISA, other
than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
the Company or any ERISA Affiliate.
Event of Default means any of the events or circumstances specified in
Section 8.1; provided that any requirement of notice or lapse of time (or
both has been satisfied.
Exchange Act means the Securities and Exchange Act of 1934.
Facility Fee Rate - see Schedule 1.1.
Federal Funds Rate means, for any day, the rate per annum (rounded
upwards to the nearest 1/100 of 1% equal to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published
by the Federal Reserve Bank on the Business Day next succeeding such day;
provided that (a if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b
if no such rate is so published on such next succeeding Business Day, the
Federal Funds Rate for such day shall be the average rate charged to Bank
of America on such day on such transactions as determined by the
Administrative Agent.
Form 10 means the Company's Information Statement on Form 10 filed
with the SEC on July 15, 1999, as amended by Form 10 Amendment No. 1, filed
with the SEC on September 10, 1999.
FRB means the Board of Governors of the Federal Reserve System, and
any Governmental Authority succeeding to any of its principal functions.
Funding Date - see Section 4.2.
GAAP means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants
and statements and pronouncements of the Financial Accounting Standards
Board (or agencies with similar functions of comparable stature and
authority within the U.S. accounting profession, which are applicable to
the circumstances as of the date of determination.
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<PAGE> 16
Governmental Authority means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary
or regulatory authority thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
Guaranty Obligation has the meaning specified in the definition of
Contingent Obligation.
Indebtedness of any Person means, without duplication, (a all
indebtedness of such Person for borrowed money; (b all obligations of such
Person to pay the deferred purchase price of property or services, except
such obligations arising in the ordinary course of business and maturing
less than one year from the date of creation thereof; (c all
non-contingent reimbursement or payment obligations of such Person with
respect to Surety Instruments; (d all non-contingent obligations of such
Person evidenced by notes, bonds, debentures or similar instruments; (e
all obligations of such Person with respect to Capital Leases; (f all
indebtedness of any other Person of the types referred to in clauses (a
through (e above secured by (or for which the holder of such indebtedness
has an existing right, contingent or otherwise, to be secured by any Lien
upon or in property (including accounts and contracts rights owned by such
Person, even though such Person has not assumed or become liable for the
payment of such indebtedness; provided that the amount of any such
Indebtedness shall be deemed to be the lesser of the face principal amount
thereof and the fair market value of the property subject to such Lien; (g
all indebtedness of the types described in clauses (a through (e above of
any partnership in which such Person is a general partner unless expressly
non-recourse to such Person; and (h all Guaranty Obligations of such
Person in respect of Indebtedness of the types described above; provided
that Indebtedness shall not include (i obligations arising out of the
endorsement of instruments for deposit or collection in the ordinary course
of business or (ii the obligations of such Person under an operating
lease, a synthetic lease or other similar arrangement.
Indemnified Liabilities - see Section 10.5.
Indemnified Person - see Section 10.5.
Independent Auditor - see subsection 6.1(a.
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<PAGE> 17
Insolvency Proceeding means, with respect to any Person, (a any case,
action or proceeding with respect to such Person before any court or
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors or
(b any general assignment for the benefit of creditors, composition,
marshalling of assets for creditors, or other, similar arrangement in
respect of its creditors generally or any substantial portion of its
creditors; in each case undertaken under any U.S. Federal, state or foreign
law, including the Bankruptcy Code.
Interest Coverage Ratio means, for any Computation Period, the ratio
of (a Consolidated EDITDA for such Computation Period to (b Consolidated
Interest Expense for such Computation Period.
Interest Payment Date means, as to any Loan other than a Base Rate
Committed Loan or Swing Line Loan, the last day of each Interest Period
applicable to such Loan and, as to any Base Rate Committed Loan or Swing
Line Loan, the last Business Day of each calendar quarter, provided that if
any Interest Period for an Offshore Rate Committed Loan exceeds three
months, each three-month anniversary of the first day of such Interest
Period also shall be an Interest Payment Date.
Interest Period means, (a as to any Offshore Rate Loan, the period
commencing on the Borrowing Date of such Loan or on the date on which such
Loan is converted into or continued as an Offshore Rate Loan, and ending on
the date one, two, three or six months (or seven days in the case of any
LIBOR Bid Loan thereafter as selected by the Company in its Notice of
Committed Borrowing, Notice of Conversion/Continuation or Competitive Bid
Request, as the case may be; and (b as to any Absolute Rate Bid Loan, a
period not less than 7 days and not more than 180 days as selected by the
Company in the applicable Competitive Bid Request; provided that:
(i if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the
following Business Day unless, in the case of an Offshore Rate Loan,
the result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period shall
end on the preceding Business Day;
(ii any Interest Period for an Offshore Rate Loan that begins on
the last Business Day of a calendar
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<PAGE> 18
month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period shall end on
the last Business Day of the calendar month at the end of such
Interest Period; and
(iii no Interest Period for any Loan shall extend beyond the
scheduled Termination Date.
Invitation for Competitive Bids means a solicitation for Competitive
Bids, substantially in the form of Exhibit D.
IRS means the Internal Revenue Service, and any Governmental Authority
succeeding to any of its principal functions under the Code.
Knowledge of the Company means the actual knowledge of any Responsible
Officer.
Lender - see the Preamble. References to the "Lenders" shall include
Bank of America in its capacity as Swing Line Lender; for purposes of
clarification only, to the extent that the Swing Line Lender may have any
rights or obligations in addition to those of the other Lenders due to its
status as Swing Line Lender, its status as such will be specifically
referenced.
Lending Office means, as to any Lender, the office or offices of such
Lender specified as its "Lending Office" or "Domestic Lending Office" or
"Offshore Lending Office", as the case may be, on Schedule 10.2, or such
other office or offices as such Lender may from time to time notify the
Company and the Administrative Agent.
LIBOR - see the definition of Offshore Rate.
LIBOR Auction means a solicitation of Competitive Bids setting forth a
LIBOR Bid Margin pursuant to Section 2.6.
LIBOR Bid Loan means any Bid Loan that bears interest at a rate based
upon the Offshore Rate.
LIBOR Bid Margin - see subsection 2.6(c(ii(C.
Lien means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising
under or evidenced by any conditional sale or other title
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<PAGE> 19
retention agreement, the interest of a lessor under a Capital Lease, or any
financing lease having substantially the same economic effect as any of the
foregoing, but not including the interest of a lessor under an operating
lease.
Loan means an extension of credit by a Lender to the Company under
Article II in the form of a Committed Loan, Bid Loan or Swing Line Loan.
Loan Documents means this Agreement and any Notes.
Majority Lenders means Lenders holding Adjusted Pro Rata Shares
aggregating more than 50%.
Margin Stock means "margin stock" as such term is defined in
Regulation T, U or X of the FRB.
Material Adverse Effect means (aany event or circumstance that has
resulted in or would reasonably be expected to result in a material adverse
change in, or has had or would be reasonably expected to have a material
adverse effect upon, the operations, business, properties or condition
(financial or otherwise of the Company and its Subsidiaries taken as a
whole or (b any event or circumstance that would prevent the Spin-Off.
Material Financial Obligations means Indebtedness or Contingent
Obligations of the Company or any Subsidiary, or obligations of the Company
or any Subsidiary in respect of any Securitization Transaction, in an
aggregate amount (for all applicable Indebtedness, Contingent Obligations
and obligations in respect of Securitization Transactions, but without
duplication equal to $50,000,000 or more.
Material Subsidiary means, at any time, any Subsidiary having at such
time either (i total (gross revenues for any Computation Period in excess
of 5% of total (gross revenues for the Company and its Subsidiaries or
(ii total assets, as of the last day of the preceding fiscal quarter,
having a net book value in excess of 5% of the consolidated assets of the
Company and its Subsidiaries, in each case, based upon the Company's most
recent annual or quarterly financial statements delivered to the Lenders
and the Administrative Agent under Section 6.1.
Moody's means Moody's Investors Service, Inc., or any successor
thereto.
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<PAGE> 20
Moody's Rating means the actual rating level assigned by Moody's to
the Company's senior unsecured long-term public debt.
Multiemployer Plan means a "multiemployer plan", within the meaning of
Section 4001(a(3 of ERISA, with respect to which the Company or any ERISA
Affiliate may have any liability.
Note means a promissory note executed by the Company in favor of a
Lender pursuant to subsection 2.2(b, in substantially the form of Exhibit
I.
Notice of Committed Borrowing means a notice in substantially the form
of Exhibit A.
Notice of Conversion/Continuation means a notice in substantially the
form of Exhibit B.
Notice of Swing Line Loan means a notice substantially in the form of
Exhibit J.
Obligations means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the Company
to any Lender, the Administrative Agent or any other Indemnified Person,
whether direct or indirect (including those acquired by assignment,
absolute or contingent, due or to become due, or now existing or hereafter
arising.
Offshore Rate means, for any Interest Period, with respect to Offshore
Rate Committed Loans comprising part of the same Borrowing, the rate of
interest per annum (rounded upward to the next 1/100th of 1% determined by
the Administrative Agent as follows:
Offshore Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward, if necessary, to an integral multiple of
1/100th of 1% in effect on such day (whether or not applicable to any
Lender under regulations issued from time to time by the FRB for
determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement with respect to
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<PAGE> 21
Eurocurrency funding (currently referred to as "Eurocurrency
liabilities"; and
"LIBOR" means, for any Interest Period, the rate of interest per
annum determined by the Administrative Agent to be equal to the London
interbank offered rate for deposits in Dollars having a maturity equal
or comparable to such Interest Period as indicated on display
3750 of the Dow Jones Markets Screen as of 11:00 a.m. (London time
two Business Days prior to the commencement of such Interest Period.
If such rate does not appear on 3750 of the Dow Jones Markets
screen (or otherwise on such screen, "LIBOR" shall be determined by
reference to such other comparable publicly available service for
displaying such rates as may be selected by the Administrative Agent
or, in the absence of such availability, by reference to the rate at
which the Administrative Agent is offered deposits in Dollars having a
maturity equal or comparable to such Interest Period by major banks in
the interbank market at or about 11:00 a.m. (New York City time two
Business Days prior to the commencement of such Interest Period in the
approximate amount of the Loan to be made or continued as, or
converted into, an Offshore Rate Committed Loan by Bank of America
(or, in the case of a Borrowing of LIBOR Bid Loans in which Bank of
America is not participating, the largest such LIBOR Bid Loan.
The Offshore Rate shall be adjusted automatically as to all Offshore Rate
Committed Loans then outstanding as of the effective date of any change in
the Eurodollar Reserve Percentage.
Offshore Rate Committed Loan means a Committed Loan that bears
interest based on the Offshore Rate.
Offshore Rate Loan means any LIBOR Bid Loan or any Offshore Rate
Committed Loan.
Organization Documents means (i for any corporation, the certificate
or articles of incorporation, the bylaws, any certificate of determination
or instrument relating to the rights of preferred shareholders of such
corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof of such
corporation, (ii for any partnership or joint venture, the partnership or
joint venture agreement and any other organizational document of such
entity, (iii for any limited liability company, the certificate or
articles of organization, the operating agreement and any
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<PAGE> 22
other organizational document of such limited liability company, (iv for
any trust, the declaration of trust, the trust agreement and any other
organizational document of such trust and (v for any other entity, the
document or agreement pursuant to which such entity was formed and any
other organizational document of such entity.
Other Credit Agreement means the Short Term Credit Agreement dated as
of September 29, 1999 among the Company, certain financial institutions as
lenders and Bank of America as administrative agent.
Other Taxes means any present or future stamp, court or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery, performance, enforcement or registration of, or otherwise with
respect to, this Agreement or any other Loan Document.
Packaging Business - see paragraph 1 of the Introduction to this
Agreement.
Participant - see subsection 10.8(d.
Payment Sharing Notice means a written notice from the Company or any
Lender informing the Administrative Agent that an Event of Default has
occurred and is continuing and directing the Administrative Agent to
allocate payments received from the Company in accordance with subsection
2.15(b.
PBGC means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under
ERISA.
PCA - see paragraph 3 of the Introduction to this Agreement.
PCA IPO - see paragraph 3 of the Introduction to this Agreement.
Pension Plan means a pension plan (as defined in Section 3(2 of
ERISA subject to Title IV of ERISA, other than a Multiemployer Plan, with
respect to which the Company or any ERISA Affiliate may have any liability.
Permitted Liens - see Section 7.2.
Person means an individual, partnership, corporation, limited
liability company, business trust, joint stock
16
<PAGE> 23
company, trust, unincorporated association, joint venture or Governmental
Authority.
Plan means an employee benefit plan (as defined in Section 3(3 of
ERISA, other than a Multiemployer Plan, with respect to which the Company
or any ERISA Affiliate may have any liability, and includes any Pension
Plan.
Pro Rata Share means for any Lender at any time the proportion
(expressed as a decimal, rounded to the ninth decimal place which such
Lender's Commitment constitutes of the Combined Commitments (or, after the
Commitments have terminated, which (i the principal amount of such
Lender's Committed Loans plus (without duplication the participation of
such Lender in (or, in the case of the Swing Line Lender, the
unparticipated portion of the principal amount of all Swing Line Loans
constitutes of (ii the aggregate principal amount of all Committed Loans
and Swing Line Loans.
Reportable Event means, any of the events set forth in Section 4043(c
of ERISA or the regulations thereunder, other than any such event for which
the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
Requirement of Law means, as to any Person, any law (statutory or
common, treaty, rule or regulation or determination of a court, an
arbitrator or of a Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person or
any of its property is subject.
Responsible Officer means the chief executive officer or the president
of the Company, or any other officer having substantially the same
authority and responsibility; or, with respect to financial matters, the
chief financial officer or the treasurer of the Company, or any other
officer having substantially the same authority and responsibility; or,
with respect to litigation and Requirements of Law, the general counsel of
the Company.
S&P means Standard & Poor's Ratings Services, a Division of the
McGraw-Hill Companies, or any successor thereto.
S&P Rating means the actual rating level assigned by S&P to the
Company's senior unsecured long-term public debt.
SEC means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.
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<PAGE> 24
Securitization Transaction means any sale, assignment or other
transfer by the Company or any Subsidiary of accounts receivable, lease
receivables or other payment obligations owing to the Company or any
Subsidiary or any interest in any of the foregoing, together in each case
with any collections and other proceeds thereof, any collection or deposit
accounts related thereto, and any collateral, guaranties or other property
or claims in favor of the Company or such Subsidiary supporting or securing
payment by the obligor thereon of, or otherwise related to, any such
receivables.
Spin-Off - see paragraph 2 of the Introduction to this Agreement.
Subsidiary of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests or
other equity interests is owned or controlled directly or indirectly by
such Person, or one or more of the Subsidiaries of such Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the Company.
Surety Instruments means all letters of credit (including standby and
commercial, bankers' acceptances, bank guaranties, shipside bonds, surety
bonds and similar instruments.
Swing Line Commitment means the commitment of the Swing Line Lender to
make Swing Line Loans hereunder.
Swing Line Lender means Bank of America in its capacity as swing line
lender hereunder, together with any replacement swing line lender arising
under Section 9.9.
Swing Line Loan - see Section 2.16.
Taxes means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholdings or similar charges, and all
liabilities with respect thereto, excluding, in the case of each Lender and
the Administrative Agent, taxes imposed on or measured by its net income,
franchise taxes and similar taxes.
Tenneco - see paragraph 1 of the Introduction to this Agreement.
Tenneco Packaging Group means the Company, its Subsidiaries as of the
Effective Date, and the companies
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which are expected to become its Subsidiaries in connection with the
Spin-Off as of the Funding Date.
Termination Date means the earlier to occur of:
(a September 29, 2004; and
(b the date on which the Commitments terminate in accordance
with the provisions of this Agreement.
Total Debt means, at any time, the sum (determined on a consolidated
basis and without duplication of all Indebtedness of the Company and its
Subsidiaries.
Total Debt to EBITDA Ratio means at any time the ratio of (a Total
Debt at such time to (b Consolidated EBITDA for the Computation Period
ending on the last day of the most recent fiscal quarter for which the
Company has delivered financial statements pursuant to Section 6.1(a or
6.1(b.
Total Outstandings means the sum of (a the Combined Outstandings plus
(b the aggregate principal amount of all outstanding "Loans" (as defined
in the Other Credit Agreement.
Type has the meaning specified in the definition of "Committed Loan."
Unfunded Pension Liability means the excess of a Pension Plan's
benefit liabilities under Section 4001(a(16 of ERISA, over the current
value of such Plan's assets, determined in accordance with the assumptions
used for funding such Pension Plan pursuant to Section 412 of the Code for
the applicable plan year.
United States and U.S. each means the United States of America.
Unmatured Event of Default means any event or circumstance which, with
the giving of notice, the lapse of time or both, will (if not cured or
otherwise remedied during such time constitute an Event of Default.
Utilization Fee Rate - see Schedule 1.1.
Voting Stock means, with respect to any Person, any shares of stock or
other equity interests of any class or classes of such Person whose holders
are entitled under ordinary circumstances (irrespective of whether at the
time
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stock or other equity interests of any other class or classes shall have or
might have voting power by reason of the happening of any contingency to
vote for the election of a majority of the directors, managers, trustees or
other governing body of such Person.
Wholly-Owned Subsidiary means any Subsidiary in which (other than
directors' qualifying shares required by law 100% of the capital stock,
membership interests or other equity interests of each class having
ordinary voting power, and 100% of the capital stock, membership interests
or other equity interests of every other class, in each case, at the time
as of which any determination is being made, is owned, beneficially and of
record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
I.2 Other Interpretive Provisions.
(a The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b The words "hereof", "herein", "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c (i The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii The term "including" is not limiting and means "including
without limitation."
(iii In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including"; the words
"to" and "until" each mean "to but excluding", and the word "through" means "to
and including."
(d Unless otherwise expressly provided herein, (i references to
agreements (including this Agreement and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
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(e The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(f This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.
(g This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Administrative
Agent, the Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the
Administrative Agent merely because of the Administrative Agent's or Lenders'
involvement in their preparation.
I.3 Accounting Principles.
(a Unless the context otherwise requires, all accounting terms not
expressly defined herein shall be construed, and all financial computations
required under this Agreement shall be made, in accordance with GAAP,
consistently applied (except for changes agreed to by the Company's independent
public accountants; provided that if the Company notifies the Administrative
Agent that the Company wishes to amend any covenant in Article VII to eliminate
the effect of any change in GAAP that became effective during the preceding
one-year period on the operation of such covenant (or if the Administrative
Agent notifies the Company that the Required Lenders wish to amend Article VII
for such purpose, then the Company's compliance with such covenant shall be
determined on the basis of GAAP in effect immediately before the relevant change
in GAAP became effective, until either such notice is withdrawn or such covenant
is amended in a manner satisfactory to the Company and the Required Lenders.
(b All financial computations required under this Agreement for any
period prior to the Spin-Off shall be made on a pro forma basis and in a manner
consistent with the Form 10.
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(c References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
ARTICLE II
THE CREDITS
II.1 Amounts and Terms of Commitments. Each Lender severally agrees, on the
terms and conditions set forth herein, to make Committed Loans to the Company
from time to time on any Business Day during the period from the Effective Date
to the Termination Date, in an aggregate amount at any time outstanding up to
the amount set forth on Schedule 2.1 (such amount, as reduced pursuant to
Section 2.7, or changed by one or more assignments under Section 10.8, such
Lender's "Commitment"; provided that, after giving effect to any Committed
Borrowing, the Combined Outstandings shall not exceed the Combined Commitments;
and provided, further, that the aggregate principal amount of the Committed
Loans of any Lender plus the participation of such Lender in the principal
amount of all outstanding Swing Line Loans shall not at any time exceed such
Lender's Commitment. Within the limits of each Lender's Commitment, and subject
to the other terms and conditions hereof, the Company may borrow under this
Section 2.1, prepay under Section 2.8 and reborrow under this Section 2.1.
II.2 Loan Accounts. (a The Loans made by each Lender shall be evidenced by
one or more accounts or records maintained by such Lender in the ordinary course
of business. The accounts or records maintained by the Administrative Agent and
each Lender shall be rebuttable presumptive evidence of the amount of the Loans
made by the Lenders to the Company, and the interest and payments thereon. Any
failure so to record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Company hereunder to pay any greater or
lesser amount owing with respect to the Loans.
(b Upon the request of any Lender made through the Administrative
Agent, the Loans made by such Lender may be evidenced by one or more Notes,
instead of or in addition to loan accounts. Each such Lender shall endorse on
the schedules annexed to its Note(s the date, amount and maturity of each Loan
evidenced thereby and the amount of each payment of principal made by the
Company with respect thereto. Each such Lender is irrevocably authorized by the
Company to endorse its Note(s and each Lender's record shall be rebuttable
presumptive evidence of the amount of the Loans evidenced thereby, and the
interest and payments thereon; provided that the failure of a Lender to make, or
an error in making, a notation thereon with respect to any Loan shall not limit
or otherwise affect the obligations of the
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Company hereunder to pay any greater or lesser amount owing under any such Note
to such Lender.
II.3 Procedure for Committed Borrowing. (a Each Committed Borrowing shall
be made upon the Company's irrevocable written notice delivered to the
Administrative Agent in the form of a Notice of Committed Borrowing, which
notice must be received by the Administrative Agent prior to (i 11:30 a.m. (New
York time three Business Days prior to the requested Borrowing Date, in the
case of Offshore Rate Committed Loans, and (ii 11:30 a.m. (New York time on
the requested Borrowing Date, in the case of Base Rate Committed Loans,
specifying:
(A the amount of the Committed Borrowing, which shall be in an
aggregate amount of $5,000,000 or a higher multiple of $1,000,000;
(B the requested Borrowing Date, which shall be a Business Day;
(C the Type of Loans comprising such Committed Borrowing; and
(D in the case of Offshore Rate Committed Loans, the duration of
the initial Interest Period applicable to such Loans.
(b The Administrative Agent will promptly notify each Lender of its
receipt of any Notice of Committed Borrowing and of the amount of such Lender's
Pro Rata Share of such Borrowing.
(c Each Lender will make the amount of its Pro Rata Share of each
Committed Borrowing available to the Administrative Agent for the account of the
Company at the Administrative Agent's Payment Office by 1:00 p.m. (New York
time on the Borrowing Date requested by the Company in funds immediately
available to the Administrative Agent. The proceeds of all such Loans will then
promptly be made available to the Company by the Administrative Agent by wire
transfer in accordance with written instructions provided to the Administrative
Agent by the Company of like funds as received by the Administrative Agent.
(d After giving effect to any Committed Borrowing, unless the
Administrative Agent otherwise consents, the number of Interest Periods in
effect hereunder shall not exceed 15.
II.4 Conversion and Continuation Elections for Committed Borrowings. (a
The Company may, upon irrevocable written notice to the Administrative Agent in
accordance with subsection 2.4(b:
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(i elect, as of any Business Day, in the case of Base Rate
Committed Loans, or as of the last day of the applicable Interest Period,
in the case of Offshore Rate Committed Loans, to convert such Loans (or any
part thereof in an aggregate amount of $5,000,000 or a higher integral
multiple of $1,000,000 into Committed Loans of the other Type; or
(ii elect, as of the last day of the applicable Interest Period,
to continue any Offshore Rate Committed Loans having Interest Periods
expiring on such day (or any part thereof in an aggregate amount of
$5,000,000 or a higher integral multiple of $1,000,000 for another
Interest Period;
provided that if at any time the aggregate amount of Offshore Rate Committed
Loans in respect of any Borrowing is reduced, by payment, prepayment, or
conversion of any part thereof, to be less than $1,000,000, such Offshore Rate
Committed Loans shall automatically convert into Base Rate Committed Loans.
(b The Company shall deliver a Notice of Conversion/Continuation to be
received by the Administrative Agent not later than 11:30 a.m. (New York time
(i three Business Days in advance of the Conversion/Continuation Date, if the
Committed Loans are to be converted into or continued as Offshore Rate Committed
Loans; and (ii on the Conversion/Continuation Date, if the Committed Loans are
to be converted into Base Rate Committed Loans, specifying:
(A the proposed Conversion/Continuation Date;
(B the aggregate amount of Committed Loans to be converted or
continued;
(C the Type of Committed Loans resulting from the proposed
conversion or continuation; and
(D in the case of conversion into or continuation of Offshore
Rate Committed Loans, the duration of the requested Interest Period.
(c If upon the expiration of any Interest Period applicable to
Offshore Rate Committed Loans, the Company has failed to select timely a new
Interest Period to be applicable to such Offshore Rate Committed Loans (or any
Event of Default or Unmatured Event of Default exists and the Majority Lenders
have not given the consent referred to in subsection (e below, such Offshore
Rate Committed Loans shall automatically convert into
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Base Rate Committed Loans effective as of the expiration date of such Interest
Period.
(d The Administrative Agent will promptly notify each Lender of its
receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by the Company, the Administrative Agent will promptly notify each
Lender of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Committed Loans with respect to which the notice was
given held by each Lender.
(e Unless the Majority Lenders otherwise consent, the Company may not
elect to have a Loan converted into or continued as an Offshore Rate Committed
Loan during the existence of an Event of Default or Unmatured Event of Default.
(f After giving effect to any conversion or continuation of Loans,
unless the Administrative Agent shall otherwise consent, the number of Interest
Periods in effect hereunder shall not exceed 15.
II.5 Bid Borrowings. In addition to Committed Borrowings pursuant to Section
2.3, each Lender severally agrees that the Company may, as set forth in Section
2.6, from time to time request the Lenders prior to the Termination Date to
submit offers to make Bid Loans to the Company; provided that the Lenders may,
but shall have no obligation to, submit such offers and the Company may, but
shall have no obligation to, accept any such offers; and provided, further, that
after giving effect to any Bid Borrowing, (a the Combined Outstandings shall
not exceed the Combined Commitments and (b the number of Interest Periods in
effect hereunder shall not exceed five.
II.6 Procedure for Bid Borrowings.
(a When the Company wishes to request the Lenders to submit offers to
make Bid Loans hereunder, it shall transmit to the Administrative Agent by
telephone call followed promptly by facsimile transmission a notice in
substantially the form of Exhibit C (a "Competitive Bid Request" so as to be
received no later than 11:30 a.m. New York time (x four Business Days prior to
the date of a proposed Bid Borrowing in the case of a LIBOR Auction or (y one
Business Day prior to the date of a proposed Bid Borrowing in the case of an
Absolute Rate Auction, specifying:
(i the date of such Bid Borrowing, which shall be a Business Day;
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(ii the aggregate amount of such Bid Borrowing, which shall be
$5,000,000 or a higher integral multiple of $1,000,000;
(iii whether the Competitive Bids requested are to be for LIBOR
Bid Loans or Absolute Rate Bid Loans or both; and
(iv the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of "Interest Period" herein.
Subject to subsection 2.6(c, the Company may not request Competitive Bids for
more than three Interest Periods in a single Competitive Bid Request and may not
request Competitive Bids more than once in any period of three consecutive
Business Days.
(b Upon receipt of a Competitive Bid Request, the Administrative Agent
will promptly send to the Lenders by facsimile transmission an Invitation for
Competitive Bids, which shall constitute an invitation by the Company to each
Lender to submit Competitive Bids offering to make the Bid Loans to which such
Competitive Bid Request relates in accordance with this Section 2.6.
(c (i Each Lender may at its discretion submit a Competitive Bid
containing an offer or offers to make Bid Loans in response to any Invitation
for Competitive Bids. Each Competitive Bid must comply with the requirements of
this subsection 2.6(c and must be submitted to the Administrative Agent by
facsimile transmission at the Administrative Agent's office for notices not
later than (1 9:30 a.m. (New York time three Business Days prior to the
proposed date of Borrowing, in the case of a LIBOR Auction, or (2 9:30 a.m.
(New York time on the proposed date of Borrowing, in the case of an Absolute
Rate Auction; provided that Competitive Bids submitted by the Administrative
Agent (or any Affiliate of the Administrative Agent in the capacity of a Lender
may be submitted, and may only be submitted, if the Administrative Agent or such
Affiliate notifies the Company in writing of the terms of the offer or offers
contained therein not later than (A 9:15 a.m. (New York time three Business
Days prior to the proposed date of Borrowing, in the case of a LIBOR Auction, or
(B 9:15 a.m. (New York time on the proposed date of Borrowing, in the case of
an Absolute Rate Auction.
(ii Each Competitive Bid shall be in substantially the form of
Exhibit E, specifying therein:
(A the proposed date of Borrowing;
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(B the principal amount of each Bid Loan for which such
Competitive Bid is being made, which principal amount (x may be equal
to, greater than or less than the Commitment of the quoting Lender, (y
must be $5,000,000 or a higher integral multiple of $1,000,000 and (z
may not exceed the principal amount of Bid Loans for which Competitive
Bids were requested;
(C if the Company elects a LIBOR Auction, the margin above or
below the Offshore Rate (the "LIBOR Bid Margin" offered for each such
Bid Loan, expressed as a percentage (rounded to the nearest 1/100th of
1% to be added to or subtracted from the applicable Offshore Rate, and
the Interest Period applicable thereto;
(D if the Company elects an Absolute Rate Auction, the rate
of interest per annum (which shall be an integral multiple of
1/10,000th of 1% (the "Absolute Rate" offered for each such Bid Loan;
and
(E the identity of the quoting Lender.
A Competitive Bid may contain up to three separate offers by the quoting
Lender with respect to each Interest Period specified in the related
Invitation for Competitive Bids.
(iii Any Competitive Bid shall be disregarded if it:
(A is not substantially in conformity with Exhibit E or does
not specify all of the information required by subsection (c(ii of
this Section;
(B contains qualifying, conditional or similar language;
(C proposes terms other than or in addition to those set
forth in the applicable Invitation for Competitive Bids; or
(D arrives after the time set forth in subsection (c(i of
this Section.
(d Promptly on receipt and not later than 10:00 a.m. (New York time
three Business Days prior to the proposed date of Borrowing in the case of a
LIBOR Auction, or 10:00 a.m. (New York time on the proposed date of Borrowing,
in the case of an Absolute Rate Auction, the Administrative Agent will notify
the Company of the terms (i of any Competitive Bid submitted by a
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Lender that is in accordance with subsection 2.6(c and (ii of any Competitive
Bid that amends, modifies or is otherwise inconsistent with a previous
Competitive Bid submitted by such Lender with respect to the same Competitive
Bid Request. Any such subsequent Competitive Bid shall be disregarded by the
Administrative Agent unless such subsequent Competitive Bid is submitted solely
to correct a manifest error in such former Competitive Bid and only if received
within the times set forth in subsection 2.6(c. The Administrative Agent's
notice to the Company shall specify (1 the aggregate principal amount of Bid
Loans for which offers have been received for each Interest Period specified in
the related Competitive Bid request; and (2 the respective principal amounts
and LIBOR Bid Margins or Absolute Rates, as the case may be, so offered. Subject
only to the provisions of Sections 3.2 and 3.5 and Article IV hereof and the
provisions of this subsection (d, any Competitive Bid shall be irrevocable
except with the written consent of the Administrative Agent given on the written
instructions of the Company.
(e Not later than 10:30 a.m. (New York time three Business Days prior
to the proposed date of Borrowing, in the case of a LIBOR Auction, or 10:30 a.m.
(New York time on the proposed date of Borrowing, in the case of an Absolute
Rate Auction, the Company shall notify the Administrative Agent of its
acceptance or non-acceptance of the offers so notified to it pursuant to
subsection 2.6(d. The Company shall be under no obligation to accept any offer
and may choose to reject all offers. In the case of acceptance, such notice
shall specify the aggregate principal amount of offers for each Interest Period
that is accepted. The Company may accept any Competitive Bid in whole or in
part; provided that:
(i the aggregate principal amount of each Bid Borrowing may
not exceed the applicable amount set forth in the related Competitive
Bid Request;
(ii the principal amount of each Bid Borrowing must be
$5,000,000 or a higher integral multiple of $1,000,000;
(iii acceptance of offers may only be made on the basis of
ascending LIBOR Bid Margins or Absolute Rates, as the case may be,
within each Interest Period; and
(iv the Company may not accept any offer that is described in
subsection 2.6(c(iii or that otherwise fails to comply with the
requirements of this Agreement.
(f If offers are made by two or more Lenders with the same LIBOR Bid
Margins or Absolute Rates, as the case may be, for
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a greater aggregate principal amount than the amount in respect of which such
offers are accepted for the related Interest Period, the principal amount of Bid
Loans in respect of which such offers are accepted shall be allocated by the
Administrative Agent among such Lenders as nearly as possible (in such
multiples, not less than $1,000,000, as the Administrative Agent may deem
appropriate in proportion to the aggregate principal amounts of such offers.
Determination by the Administrative Agent of the amount of Bid Loans shall be
conclusive in the absence of manifest error.
(g (i The Administrative Agent will promptly notify each Lender
having submitted a Competitive Bid if its offer has been accepted and, if its
offer has been accepted, of the amount of the Bid Loan to be made by it on the
date of the applicable Bid Borrowing.
(ii Each Lender which has received notice pursuant to subsection
2.6(g(i that its Competitive Bid has been accepted shall make the
amounts of such Bid Loans available to the Administrative Agent for the
account of the Company at the Administrative Agent's Payment Office by
1:00 p.m. New York time on such date of Bid Borrowing, in immediately
available funds.
(iii Promptly following each Bid Borrowing, the Administrative
Agent shall notify each Lender of the ranges of bids submitted and the
highest and lowest Bids accepted for each Interest Period requested by
the Company and the aggregate amount borrowed pursuant to such Bid
Borrowing.
(iv From time to time, the Company and the Lenders shall furnish
such information to the Administrative Agent as the Administrative
Agent may request relating to the making of Bid Loans, including the
amounts, interest rates, dates of borrowings and maturities thereof,
for purposes of the allocation of amounts received from the Company for
payment of all amounts owing hereunder.
(h If, on the proposed date of Borrowing, the Commitments have not
been terminated and all applicable conditions to funding referenced in Sections
3.2 and 3.5 and Article IV hereof are satisfied, the Lender or Lenders whose
offers the Company has accepted will fund each Bid Loan so accepted.
II.7 Voluntary Termination or Reduction of Commitments. The Company may,
upon not less than three Business Days' prior notice to the Administrative
Agent, terminate the Commitments, or permanently reduce the Combined Commitments
to an amount not less than the Combined Outstandings. Any such reduction shall
be in a
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minimum amount of $5,000,000 or a higher integral multiple of $1,000,000. Once
reduced in accordance with this Section, the Commitments may not be increased.
Any reduction of the Commitments shall be applied to reduce the Commitment of
each Lender according to its Pro Rata Share. If the Company terminates the
Commitments or reduces the Commitments to zero, the Company shall pay all
accrued and unpaid interest, fees and other amounts payable hereunder on the
date of such termination or reduction.
II.8 Optional Prepayments. (a Subject to the proviso to subsection
2.4(a,the Company may, from time to time, upon irrevocable notice to the
Administrative Agent, which notice must be received by the Administrative Agent
prior to 11:30 a.m. New York time (i three Business Days prior to the date of
prepayment, in the case of Offshore Rate Committed Loans, and (ii on the date
of prepayment, in the case of Base Rate Committed Loans, ratably prepay
Committed Loans in whole or in part, in an aggregate amount of $5,000,000 or a
higher integral multiple of $1,000,000. Such notice of prepayment shall specify
the date and amount of such prepayment and the Committed Loans to be prepaid.
The Administrative Agent will promptly notify each Lender of its receipt of any
such notice and of such Lender's Pro Rata Share of such prepayment. If such
notice is given by the Company, the Company shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein, together with, in the case of Offshore Rate Committed Loans,
accrued interest to such date on the amount prepaid and any amounts required
pursuant to Section 3.4.
(b No Bid Loan may be voluntarily prepaid without the written consent
of the applicable Lender.
(c There shall be no premium or penalty imposed upon or incurred by
the Company in connection with the reduction of a Commitment, voluntary
termination, or prepayment under Section 2.7 or 2.8(a(but any prepayment shall
be subject to Section 3.4.
II.9 Repayment. The Company shall repay each Bid Loan on the last day of
the Interest Period therefor. The Company shall repay all Loans (including any
outstanding Bid Loans and Swing Line Loans on the Termination Date.
II.10 Interest. (a Each Committed Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to (i the Offshore Rate plus the Applicable Margin or (ii
the Base Rate, as the case may be (and subject to the Company's right to convert
to the other Type of Committed Loan under Section 2.4. Each Swing Line Loan
shall bear interest on the outstanding principal
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amount thereof from the applicable Borrowing Date at a rate per annum equal to
the Base Rate or such other rate as may be agreed to from time to time by the
Company and the Swing Line Lender; provided that after any purchase by the
Lenders of a participation in a Swing Line Loan, the rate of interest on such
Swing Line Loan shall not be less than the Base Rate. Each Bid Loan shall bear
interest on the outstanding principal amount thereof from the relevant Borrowing
Date at the applicable Absolute Rate or at LIBOR for the applicable Interest
Period plus or minus the LIBOR Bid Margin.
(b Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest also shall be paid on the date of any conversion of
Offshore Rate Committed Loans under Section 2.4 and prepayment of Offshore Rate
Committed Loans under Section 2.8, in each case for the portion of the Loans so
converted or prepaid.
(c Notwithstanding the foregoing provisions of this Section, upon
notice to the Company from the Administrative Agent (acting at the request or
with the consent of the Majority Lenders during the existence of any Event of
Default, and for so long as such Event of Default continues, the Company shall
pay interest (after as well as before entry of judgment thereon to the extent
permitted by law on the principal amount of all outstanding Loans and, to the
extent permitted by applicable law, on any other amount payable hereunder or
under any other Loan Document, at a rate per annum which is determined by adding
2% per annum to the rate otherwise applicable thereto pursuant to the terms
hereof or such other Loan Document (or, if no such rate is specified, the Base
Rate. All such interest shall be payable on demand.
(d Anything herein to the contrary notwithstanding, the obligations
of the Company to any Lender hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent that contracting for
or receiving such payment by such Lender would be contrary to the provisions of
any law applicable to such Lender limiting the highest rate of interest that may
be lawfully contracted for, charged or received by such Lender, and in such
event the Company shall pay such Lender interest at the highest rate permitted
by applicable law.
II.11 Fees. (a Arrangement, Agency Fees. The Company agrees to pay to the
Administrative Agent and BAS such fees at such times and in such amounts as are
mutually agreed to from time to time by the Company, the Administrative Agent
and BAS.
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(b Facility Fees. The Company shall pay to the Administrative Agent
for the account of each Lender a facility fee computed at the Facility Fee Rate
per annum on the amount of such Lender's Commitment as in effect from time to
time (whether used or unused or, if the Commitments have terminated, on the sum
(without duplication of (i the principal amount of such Lender's Committed
Loans plus (ii the participation of such Lender in (or in the case of the Swing
Line Lender, its unparticipated portion of the principal amount of all Swing
Line Loans. Such facility fee shall accrue from the Effective Date to the
Termination Date, and thereafter until all Committed Loans are paid in full, and
shall be due and payable quarterly in arrears on the last Business Day of each
calendar quarter, with the final payment to be made on the Termination Date (or,
if later, on the date all Committed Loans are paid in full.
(c Utilization Fees. For any day on which the amount of the Total
Outstandings exceeds 33% of the sum of Combined Commitments plus the "Combined
Commitments" under and as defined in the Other Credit Agreement, the Company
shall pay to the Administrative Agent for the account of each Lender a
utilization fee for such day computed at a rate per annum equal to the
Utilization Fee Rate on the sum (without duplication of (i the principal
amount of such Lender's Committed Loans plus (ii the participation of such
Lender in (or in the case of the Swing Line Lender, its unparticipated portion
of the principal amount of all Swing Line Loans. Such utilization fee shall
accrue (for any day on which applicable from the Effective Date to the
Termination Date, and thereafter until all Committed Loans are paid in full, and
shall be due and payable quarterly in arrears on the last Business Day of each
calendar quarter, with the final payment to be made on the Termination Date (or,
if later, on the date all Committed Loans are paid in full.
II.12 Computation of Fees and Interest. (a All computations of interest
for Base Rate Committed Loans (and Swing Line Loans bearing interest at the Base
Rate when the Base Rate is determined by Bank of America's "reference rate",
shall be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All other computations of interest and fees shall be made
on the basis of a 360-day year and actual days elapsed. Interest and fees shall
accrue during each period during which such interest or such fees are computed
from the first day thereof to the last day thereof.
(b Each determination of an interest rate by the Administrative
Agent shall be conclusive and binding on the Company and the Lenders in the
absence of manifest error. The Administrative Agent will, at the request of the
Company or any Lender, deliver to the Company or such Lender, as the case may
be, a statement showing the quotations used by the Administrative
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Agent in determining any interest rate and the resulting interest rate.
II.13 Payments by the Company. (a All payments to be made by the Company
shall be made without set-off, recoupment or counterclaim. Except as otherwise
expressly provided herein, all payments by the Company shall be made to the
Administrative Agent for the account of the Lenders at the Administrative
Agent's Payment Office, and shall be made in Dollars and in immediately
available funds, no later than 2:00 p.m. (New York time on the date specified
herein. The Administrative Agent will promptly distribute to each Lender its Pro
Rata Share (or other applicable share as expressly provided herein of such
payment in like funds as received. Any payment received by the Administrative
Agent later than 2:00 p.m. (New York time shall be deemed to have been received
on the following Business Day and any applicable interest or fee shall continue
to accrue.
(b Whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day (unless, in the case of
a payment with respect to an Offshore Rate Loan, the following Business Day is
in another calendar month, in which case such payment shall be made on the
preceding Business Day, and such extension or reduction of time shall in such
case be included in the computation of interest or fees, as the case may be.
(c Unless the Administrative Agent receives notice from the Company
prior to the date on which any payment is due to the Lenders that the Company
will not make such payment in full as and when required, the Administrative
Agent may assume that the Company has made such payment in full to the
Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required, in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Company has not made such
payment in full to the Administrative Agent, each Lender shall repay to the
Administrative Agent on demand such amount distributed to such Lender, together
with interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Lender until the date repaid.
II.14 Payments by the Lenders to the Administrative Agent. (a Unless the
Administrative Agent receives notice from a Lender at least one Business Day
prior to the date of a Borrowing of Offshore Rate Committed Loans or by 12:30
p.m. (New York time on the day of any Borrowing of Base Rate Committed Loans,
that such Lender will not make available as and when required hereunder to the
Administrative Agent for the account of the Company the amount of such Lender's
Pro Rata Share of such
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Committed Borrowing, the Administrative Agent may assume that such Lender has
made such amount available to the Administrative Agent in immediately available
funds on the Borrowing Date and the Administrative Agent may (but shall not be
so required, in reliance upon such assumption, make available to the Company on
such date a corresponding amount. If and to the extent any Lender shall not have
made its full amount available to the Administrative Agent in immediately
available funds and the Administrative Agent in such circumstances has made
available to the Company such amount, such Lender shall on the Business Day
following such Borrowing Date make such amount available to the Administrative
Agent, together with interest at the Federal Funds Rate. A notice of the
Administrative Agent submitted to any Lender with respect to amounts owing under
this subsection (a shall be conclusive, absent manifest error. If such amount
is so made available, such payment to the Administrative Agent shall constitute
such Lender's Committed Loan on the date of Borrowing for all purposes of this
Agreement. If such amount is not made available to the Administrative Agent on
the Business Day following the Borrowing Date, the Administrative Agent will
notify the Company of such failure to fund and, upon demand by the
Administrative Agent, the Company shall pay such amount to the Administrative
Agent for the Administrative Agent's account, together with interest thereon for
each day elapsed since the date of such Borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Committed Loans comprising such
Committed Borrowing.
(b The failure of any Lender to make any Loan on any Borrowing Date
shall not relieve any other Lender of any obligation hereunder to make a Loan on
such Borrowing Date, but no Lender shall be responsible for the failure of any
other Lender to make the Loan to be made by such other Lender on any Borrowing
Date.
II.15 Sharing of Payments, Etc. (a Except as otherwise expressly provided
herein, whenever any payment received by the Administrative Agent to be
distributed to the Lenders is insufficient to pay in full the amounts then due
and payable to the Lenders, and the Administrative Agent has not received a
Payment Sharing Notice, such payment shall be distributed to the Lenders (and
for purposes of this Agreement shall be deemed to have been applied by the
Lenders, notwithstanding the fact that any Lender may have made a different
application in its books and records in the following order: first, to the
payment of the principal amount of the Loans which is then due and payable,
ratably among the Lenders in accordance with the aggregate principal amount owed
to each Lender; second, to the payment of interest then due and payable on the
Loans, ratably among the Lenders in accordance with the aggregate amount of
interest owed to each Lender; third, to the payment of the facility fees and
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utilization fees payable under subsections 2.11(b and (c, ratably among the
Lenders in accordance with the amount of such fees owed to each Lender; and
fourth, to the payment of any other amount payable under this Agreement, ratably
among the Lenders in accordance with the aggregate amount owed to each Lender.
(b After the Administrative Agent has received a Payment Sharing
Notice, and for so long thereafter as any Event of Default exists, all payments
received by the Administrative Agent to be distributed to the Lenders shall be
distributed to the Lenders (and for purposes of this Agreement shall be deemed
to have been applied by the Lenders, notwithstanding the fact that any Lender
may have made a different application in its books and records in the following
order: first, to the payment of amounts payable under Sections 10.4 and 10.5,
ratably among the Lenders in accordance with the aggregate amount owed to each
Lender; second, to the payment of facility fees and utilization fees payable
under subsections 2.11(b and (c, ratably among the Lenders in accordance with
the amount of such fees owed to each Lender; third, to the payment of the
interest accrued on and the principal amount of all of the Loans regardless of
whether any such amount is then due and payable, ratably among the Lenders in
accordance with the aggregate accrued interest plus the aggregate principal
amount owed to each Lender; and fourth, to the payment of any other amount
payable under this Agreement, ratably among the Lenders in accordance with the
aggregate amount owed to each Lender.
(c If, other than as expressly provided elsewhere herein, any Lender
shall obtain any payment or other recovery (whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise on account of
principal of or interest on any Loan, or any other amount payable hereunder, in
excess of the share of payments and other recoveries such Lender would have
received if such payment or other recovery had been distributed pursuant to the
provisions of subsection 2.15(a or (b (whichever is applicable at the time of
such payment or other recovery, such Lender shall immediately (i notify the
Administrative Agent of such fact and (ii purchase from the other Lenders such
participations in the Loans made by (or other Obligations owed to them as shall
be necessary to cause such purchasing Lender to share the excess payment or
other recovery pro rata with each of them in accordance with the order of
payments set forth in subsection 2.15(a or (b, as the case may be; provided
that if all or any portion of such excess payment or other recovery is
thereafter recovered from the purchasing Lender, such purchase shall to that
extent be rescinded and each other Lender shall repay to the purchasing Lender
the purchase price paid therefor, together with an amount equal to such paying
Lender's ratable share (according to the proportion of (i the amount of such
paying Lender's required repayment to (ii the
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total amount so recovered from the purchasing Lender of any interest or other
amount paid or payable by the purchasing Lender in respect of the total amount
so recovered. The Company agrees that any Lender so purchasing a participation
from another Lender may, to the fullest extent permitted by law, exercise all
its rights of payment (including the right of set-off, but subject to Section
10.10 with respect to such participation as fully as if such Lender were the
direct creditor of the Company in the amount of such participation. The
Administrative Agent will keep records (which shall be conclusive and binding in
the absence of manifest error of participations purchased under this Section
and will in each case notify the Lenders following any such purchases or
repayments.
II.16 Swing Line Commitment. Subject to the terms and conditions of this
Agreement, the Swing Line Lender agrees to make loans to the Company on a
revolving basis (each such loan, a "Swing Line Loan" from time to time on any
Business Day during the period from the Effective Date to the Termination Date
in an aggregate principal amount at any one time outstanding not to exceed
$50,000,000; provided that after giving effect to any proposed Swing Line Loan,
the Combined Outstandings shall not exceed the Combined Commitments.
II.17 Borrowing Procedures for Swing Line Loans. The Company shall provide
a Notice of Swing Line Loan or telephonic notice (followed by a confirming
Notice of Swing Line Loan of a proposed Swing Line Loan to the Administrative
Agent and the Swing Line Lender not later than 1:00 p.m.(New York time on the
proposed Borrowing Date. Each such notice shall be effective upon receipt by the
Administrative Agent and the Swing Line Lender and shall specify the date and
the principal amount of such Swing Line Loan. Unless the Swing Line Lender has
received written notice prior to 1:00 p.m. (New York time on the proposed
Borrowing Date from the Administrative Agent or any Lender that one or more of
the conditions precedent set forth in Article IV with respect to such Swing Line
Loan is not then satisfied, the Swing Line Lender shall pay over the requested
principal amount to the Company on the requested Borrowing Date in immediately
available funds. Each Swing Line Loan shall be made on a Business Day and shall
be in the amount of $500,000 or a higher integral multiple of $100,000. The
Swing Line Lender will promptly notify the Administrative Agent of the making
and amount of each Swing Line Loan.
II.18 Prepayment or Refunding of Swing Line Loans. (a The Company may, at
any time and from time to time, prepay any Swing Line Loan in whole or in part,
in an amount equal to $500,000 or a higher integral multiple of $100,000. The
Company shall deliver a notice of prepayment in accordance with Section 10.2 to
be received by the Administrative Agent and the Swing Line Lender
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not later than 12:00 noon (New York time on the Business Day of such
prepayment, specifying the date and amount of such prepayment. If such notice is
given by the Company, the payment amount specified in such notice shall be due
and payable on the date specified therein.
(b The Swing Line Lender may, at any time in its sole and absolute
discretion, on behalf of the Company (which hereby irrevocably directs the Swing
Line Lender to act on its behalf, request each Lender to make a Committed Loan
in an amount equal to such Lender's Pro Rata Share of the principal amount of
the Swing Line Loans outstanding on the date such notice is given. Unless any of
the events described in subsection 8.1(f or (g shall have occurred (in which
event the procedures of Section 2.19 shall apply, and regardless of whether the
conditions precedent set forth in this Agreement to the making of Committed
Loans are then satisfied or the aggregate amount of such Committed Loans is not
in the minimum or integral amount otherwise required hereunder, each Lender
shall make the proceeds of its Committed Loan available to the Administrative
Agent for the account of the Swing Line Lender at the Administrative Agent's
Payment Office prior to 1:00 p.m. (New York time in immediately available funds
on the Business Day next succeeding the date such notice is given. The proceeds
of such Committed Loans shall be immediately applied to repay the outstanding
Swing Line Loans. All Committed Loans made pursuant to this Section 2.18 shall
be Base Rate Committed Loans (but, subject to the other provisions of this
Agreement, may be converted to Offshore Rate Loans.
II.19 Participations in Swing Line Loans. (a If an event described in
subsection 8.1(f or (g exists (or for any reason the Lenders may not make
Committed Loans pursuant to Section 2.18, each Lender will, upon notice from
the Administrative Agent, purchase from the Swing Line Lender (and the Swing
Line Lender will sell to each Lender an undivided participation interest in all
outstanding Swing Line Loans in an amount equal to its Pro Rata Share of the
outstanding principal amount of the Swing Line Loans (and each Lender will
immediately transfer to the Administrative Agent, for the account of the Swing
Line Lender, in immediately available funds, the amount of its participation.
(b Whenever, at any time after the Swing Line Lender has received
payment for any Lender's participation interest in the Swing Line Loans pursuant
to subsection 2.19(a, the Swing Line Lender receives any payment on account
thereof, the Swing Line Lender will distribute to the Administrative Agent for
the account of such Lender its participation interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender's
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participation interest was outstanding and funded in like funds as received;
provided, however, that in the event that such payment received by the Swing
Line Lender is required to be returned, such Lender will return to the
Administrative Agent for the account of the Swing Line Lender any portion
thereof previously distributed by the Swing Line Lender to it in like funds as
such payment is required to be returned by the Swing Line Lender.
II.20 Participation Obligations Unconditional. (a Each Lender's obligation
to make Committed Loans pursuant to Section 2.18 and/or to purchase
participation interests in Swing Line Loans pursuant to Section 2.19 shall be
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including (i any set-off, counterclaim, recoupment, defense or
other right which such Lender may have against the Swing Line Lender, the
Company or any other Person for any reason whatsoever; (ii the occurrence or
continuance of an Event of Default or Unmatured Event of Default; (iii any
adverse change in the condition (financial or otherwise of the Company or any
other Person; (iv any breach of this Agreement or any other Loan Document by
the Company or any other Person; (v any inability of the Company to satisfy the
conditions precedent to borrowing set forth in this Agreement on the date upon
which any such Loan is to be made or any participation interest therein is to be
purchased; or (vi any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
(b Notwithstanding the provisions of subsection 2.20(a, no Lender
shall be required to make any Committed Loan to the Company to refund a Swing
Line Loan pursuant to Section 2.18 or to purchase a participation interest in a
Swing Line Loan pursuant to Section 2.19 if, prior to the making by the Swing
Line Lender of such Swing Line Loan, the Swing Line Lender received written
notice from any Lender specifying that such Lender believed in good faith that
one or more of the conditions precedent to the making of such Swing Line Loan
were not satisfied and, in fact, such conditions precedent were not satisfied at
the time of the making of such Swing Line Loan; provided that the obligation of
such Lender to make such Committed Loans and to purchase such participation
interests shall be reinstated upon the earlier to occur of (i the date on which
such Lender notifies the Swing Line Lender that its prior notice has been
withdrawn and (ii the date on which all conditions precedent to the making of
such Swing Line Loan have been satisfied (or waived by the Majority Lenders or
all Lenders, as applicable.
II.21 Conditions to Swing Line Loans. Notwithstanding any other provision
of this Agreement, the Swing Line Lender shall not be obligated to make any
Swing Line Loan if an Event of
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Default or Unmatured Event of Default exists or would result therefrom.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
III.1 Taxes. (a Any and all payments by the Company to each Lender or the
Administrative Agent under this Agreement and any other Loan Document shall be
made free and clear of, and without deduction or withholding for, any Taxes. In
addition, the Company shall pay all Other Taxes.
(b If the Company shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Lender or the Administrative Agent, then:
(i the sum payable shall be increased as necessary so that,
after making all required deductions and withholdings (including deductions
and withholdings applicable to additional sums payable under this Section,
such Lender or the Administrative Agent, as the case may be, receives and
retains an amount equal to the sum it would have received and retained had
no such deductions or withholdings been made;
(ii the Company shall make such deductions and withholdings; and
(iii the Company shall pay the full amount deducted or withheld
to the relevant taxing authority or other authority in accordance with
applicable law.
(c The Company agrees to indemnify and hold harmless each Lender and
the Administrative Agent for the full amount of Taxes and Other Taxes in the
amount that such Lender specifies as necessary to preserve the after-tax yield
such Lender would have received if such Taxes or Other Taxes had not been
imposed, and any liability (including penalties, interest, additions to tax and
expenses arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date such Lender or the
Administrative Agent makes written demand therefor.
(d Within 30 days after the date of any payment by the Company of
any Taxes or Other Taxes, the Company shall furnish each applicable Lender and
the Administrative Agent the original or a certified copy of a receipt
evidencing payment
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thereof, or other evidence of payment satisfactory to such Lender and the
Administrative Agent.
(e Notwithstanding the foregoing provisions of this Section 3.1, (i
if any Lender fails to notify the Company of any event or circumstance which
will entitle such Lender to compensation pursuant to this Section 3.1 within 90
days after such Lender obtains knowledge of such event or circumstance, then
such Lender shall not be entitled to compensation from the Company for any
amount arising prior to the date which is 90 days before the date on which such
Lender notifies the Company of such event or circumstance; and (ii the Company
shall not be required to pay an additional amount to, or to indemnify, any
Lender pursuant to this Section 3.1 to the extent that (x the obligation to
withhold or pay such amount existed on the Initial Date (as defined below or
(y the obligation to withhold or pay such amount would not have arisen but for
the failure of such Lender to comply with the provisions of Section 9.10 of this
Agreement. For purposes of clause (ii of the foregoing sentence "Initial Date"
means (A in the case of any Lender that is a signatory hereto, the date of this
Agreement, (B in the case of any Person which subsequently becomes a Lender
hereunder, the date of the applicable Assignment and Acceptance, and (C in the
case of any Participant, the date on which it becomes a Participant.
III.2 Illegality. (a If any Lender reasonably determines that the
introduction of any Requirement of Law, or any change in any Requirement of Law,
or in the interpretation by a Governmental Authority or the administration of
any Requirement of Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for such Lender or its
applicable Lending Office to make Offshore Rate Committed Loans, then, on notice
thereof by such Lender to the Company through the Administrative Agent, any
obligation of such Lender to make Offshore Rate Committed Loans shall be
suspended until such Lender notifies the Administrative Agent and the Company
that the circumstances giving rise to such determination no longer exist.
(b If a Lender reasonably determines that it is unlawful to maintain
any Offshore Rate Committed Loan, the Company shall, upon its receipt of notice
of such fact and demand from such Lender (with a copy to the Administrative
Agent, prepay in full such Offshore Rate Committed Loan of such Lender together
with interest accrued thereon and amounts required under Section 3.4, either on
the last day of the Interest Period thereof, if such Lender may lawfully
continue to maintain such Offshore Rate Committed Loan to such day, or
immediately, if such Lender may not lawfully continue to maintain such Offshore
Rate Committed Loan. If the Company is required to so prepay any
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Offshore Rate Committed Loan, then concurrently with such prepayment, the
Company shall borrow from the affected Lender, in the amount of such repayment,
a Base Rate Committed Loan.
(c If the obligation of any Lender to make or maintain Offshore Rate
Committed Loans has been so terminated or suspended, all Loans which would
otherwise be made by such Lender as Offshore Rate Committed Loans shall be
instead Base Rate Committed Loans.
III.3 Increased Costs and Reduction of Return. (a If any Lender reasonably
determines that, due to either (i the introduction of or any change (other than
any change by way of imposition of or increase in reserve requirements included
in the calculation of the Offshore Rate after the date hereof in or in the
interpretation of any law or regulation by a Governmental Authority or (ii
compliance by such Lender with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law adopted,
issued or delivered after the date hereof, there shall be any increase in the
cost to such Lender (excluding any Taxes, Other Taxes or taxes imposed on or
measured by the net income of such Lender, and franchise taxes and similar
taxes of agreeing to make or making, funding or maintaining any Offshore Rate
Committed Loan, then the Company shall be liable for, and shall from time to
time, within 15 days after demand (with a copy of such demand to be sent to the
Administrative Agent, pay to the Administrative Agent for the account of such
Lender, additional amounts as are sufficient to compensate such Lender for such
increased cost.
(b If any Lender shall have reasonably determined that (i the
introduction after the date hereof of any Capital Adequacy Regulation, (ii any
change after the date hereof in any Capital Adequacy Regulation, (iii any
change after the date hereof in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv compliance by
such Lender (or its Lending Office or any corporation controlling such Lender
with any Capital Adequacy Regulation (excluding any Capital Adequacy Regulation
as in effect on the date hereof affects or would affect the amount of capital
required or expected to be maintained by such Lender or any corporation
controlling such Lender and (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy and such Lender's
desired return on capital reasonably determines that the amount of such capital
is increased as a consequence of its Commitment, Loans or obligations under this
Agreement, then, upon demand of such Lender to the Company through the
Administrative Agent, the Company shall pay to such Lender, from time to time as
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specified by such Lender, additional amounts sufficient to compensate such
Lender for such increase.
(c Notwithstanding the foregoing provisions of this Section 3.3, if
any Lender fails to notify the Company in writing of any event or circumstance
which will entitle such Lender to compensation pursuant to this Section 3.3
within 90 days after such Lender obtains knowledge of such event or
circumstance, then such Lender shall not be entitled to compensation from the
Company for any amount arising prior to the date which is 90 days before the
date on which such Lender notifies the Company of such event or circumstance.
III.4 Funding Losses. The Company shall reimburse each Lender and hold each
Lender harmless from any loss or expense which the Lender may sustain or incur
as a consequence of:
(a the failure of the Company to borrow, continue or convert a Loan
after the Company has given (or is deemed to have given a Notice of Committed
Borrowing or a Notice of Conversion/Continuation or has accepted a Competitive
Bid for such Loan;
(b the failure of the Company to make any prepayment in accordance
with any notice delivered under Section 2.8;
(c the prepayment (including after acceleration thereof of an
Offshore Rate Committed Loan or a Bid Loan on a day that is not the last day of
the relevant Interest Period; or
(d the automatic conversion under subsection 2.4(a of any Offshore
Rate Committed Loan to a Base Rate Committed Loan on a day that is not the last
day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or Bid Loans or from
fees payable to terminate the deposits from which such funds were obtained (but
excluding any loss of margin or profit arising from any action or inaction of
the nature described in paragraphs (a through (d of this Section 3.4. For
purposes of calculating amounts payable by the Company to the Lenders under this
Section and under subsection 3.3(a, each Offshore Rate Committed Loan made by a
Lender (and each related reserve, special deposit or similar requirement shall
be conclusively deemed to have been funded at the LIBOR used in determining the
Offshore Rate for such Offshore Rate Committed Loan by a matching deposit or
other borrowing in the interbank eurodollar market for a comparable amount and
for a comparable period, whether or not such Offshore Rate Committed Loan is in
fact so funded.
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III.5 Inability to Determine Rates. If (a the Administrative Agent
determines that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period with respect to
a proposed Offshore Rate Committed Loan, or (b the Majority Lenders determine
that the Offshore Rate applicable pursuant to subsection 2.10(a for any
requested Interest Period with respect to a proposed Offshore Rate Committed
Loan does not adequately and fairly reflect the cost to such Lenders of funding
such Loan, the Administrative Agent will promptly so notify the Company and each
Lender. Thereafter, the obligation of the Lenders to make or maintain Offshore
Rate Committed Loans hereunder shall be suspended until the Administrative Agent
(upon the instruction of the Majority Lenders in the case of clause (b revokes
such notice in writing. Upon receipt of such notice, the Company may revoke any
Notice of Committed Borrowing or Notice of Conversion/Continuation then
submitted by it. If the Company does not revoke such Notice, the Lenders shall
make, convert or continue the Loans, as proposed by the Company, in the amount
specified in the applicable notice submitted by the Company, but such Loans
shall be made, converted or continued as Base Rate Committed Loans instead of
Offshore Rate Committed Loans.
III.6 Certificates of Lenders. Any Lender claiming reimbursement or
compensation under this Article III shall deliver to the Company (with a copy to
the Administrative Agent a certificate setting forth in reasonable detail the
amount payable to such Lender hereunder and the manner in which such amount has
been calculated, and such certificate shall be conclusive and binding on the
Company in the absence of manifest error.
III.7 Mitigation. Each Lender shall promptly notify the Company and the
Administrative Agent of any event of which it has knowledge which will result
in, and will use reasonable commercial efforts available to it (and not, in such
Lender's good faith judgment, otherwise disadvantageous to such Lender to
mitigate or avoid, (i any obligation of the Company to pay any amount pursuant
to Section 3.1 or 3.3 or (ii the occurrence of any circumstance of the nature
described in Section 3.2 or 3.5. Without limiting the foregoing, each Lender
will designate a different Lending Office if such designation will avoid (or
reduce the cost to the Company of any event described in clause (i or (ii of
the preceding sentence and such designation will not, in such Lender's good
faith judgment, be otherwise disadvantageous to such Lender.
III.8 Substitution of Lenders. Upon the receipt by the Company from any
Lender of a claim for compensation under Section 3.1 or 3.3 or a notice of the
type described in Section 3.2, the Company may: (i designate a replacement bank
or financial
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institution satisfactory to the Company (a "Replacement Lender" to acquire and
assume all or a ratable part of all of such affected Lender's Loans and
Commitment; and/or (ii request one or more of the other Lenders to acquire and
assume all or a ratable part of all of such affected Lender's Loans and
Commitment (it being understood that no Lender shall be obligated to comply with
any such request. Any designation of a Replacement Lender under clause (i
shall be subject to the prior written consent of the Administrative Agent (which
consent shall not be unreasonably withheld.
III.9 Survival. The agreements and obligations of the Company in this
Article III shall survive the termination of this Agreement and the payment of
all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
IV.1 Conditions to Effectiveness. This Agreement shall become effective on
the date (the "Effective Date" on which the Administrative Agent shall have
received (i evidence satisfactory to the Administrative Agent that the Company
has paid all fees and other amounts then payable under subsection 2.11(a and
(ii all of the following, in form and substance satisfactory to the
Administrative Agent and each Lender, and (except for the Notes in sufficient
copies for each Lender:
(a Agreement and Notes. This Agreement and the Notes executed by
each party hereto and thereto.
(b Resolutions; Incumbency.
(i Copies of the resolutions of the board of directors of the
Company authorizing the execution and delivery of the Loan Documents
and the consummation of the transactions contemplated hereby,
certified as of the Effective Date by the Secretary or an Assistant
Secretary of such Person; and
(ii a certificate of the Secretary or Assistant Secretary of the
Company certifying the names and true signatures of the officers,
employees or authorized agents of the Company authorized to execute
and deliver the Loan Documents and to deliver Notices of Borrowing,
Notices of Conversion/Continuation, Competitive Bid Requests, Notices
of Swing Line Loans, Compliance Certificates and similar documents.
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(c Organization Documents. The articles or certificate of
incorporation and the bylaws of the Company as in effect on the Effective Date,
certified by the Secretary or Assistant Secretary of the Company as of the
Effective Date.
(d Payment of Fees and Expenses. Evidence of payment by the Company
of all accrued and unpaid fees, costs and expenses to the extent then due and
payable hereunder on the Effective Date, together with Attorney Costs of Bank of
America to the extent invoiced prior to the Effective Date, plus such additional
amounts of Attorney Costs as shall constitute Bank of America's reasonable
estimate of Attorney Costs incurred or to be incurred by it through the closing
proceedings (provided that such estimate shall not thereafter preclude final
settling of accounts between the Company and Bank of America, which shall be
made based upon actual Attorney Costs, including any such costs, fees, costs
and expenses arising under or referenced in Sections 2.11 and 10.4.
(e Tax Ruling or Opinion. A tax ruling from the IRS or an opinion of
counsel to the effect that the Spin-Off will be free of federal income taxes
payable by the Company.
(f Other Documents. Such other approvals, opinions, documents or
materials as the Administrative Agent or any Lender may reasonably request.
The Administrative Agent shall determine when the Effective Date has
occurred and will so promptly notify the Company and the Lenders thereof in
writing.
IV.2 Conditions to Initial Borrowing. The obligation of each Lender to make
the Loan to be made by it (including the obligation of the Swing Line Lender to
make any Swing Line Loan on the initial Borrowing Date (the "Funding Date" is
subject to the satisfaction of the following conditions precedent on the Funding
Date, which shall not be later than November 30, 1999:
(a Effective Date. The Effective Date shall have occurred.
(b Consummation of Spin-Off. The Administrative Agent shall have
received a certificate signed by a Responsible Officer of the Company, dated as
of the Funding Date, stating that, to the best of such officer's knowledge after
due inquiry, the Spin-Off has been consummated (or shall be consummated
substantially concurrently with the initial Borrowing on substantially the
terms set forth in the Form 10 and the Company's filing on Form S-4, without
giving effect to any material amendment thereto (other than any amendment prior
to the Effective Date or any amendment which does not affect any member
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of the Tenneco Packaging Group, unless approved in writing by the Required
Lenders, which approval shall not be unreasonably withheld or delayed.
(c Consents and Approvals. All approvals, consents, exemptions,
authorizations and actions by, or notices to, or filings with, any Governmental
Authority or other third party that are necessary or required prior to and in
connection with the Spin-Off or the execution, delivery and performance by, or
enforcement against, the Company of the Agreement or any other Loan Document,
shall have been obtained or made, as the case may be, and are in full force and
effect, and all applicable waiting periods shall have expired without any action
being taken or threatened by any competent authority that would restrain,
prevent or otherwise impose adverse conditions on the Spin-Off or the financing
thereof or the other transactions contemplated by the Agreement and the Loan
Documents.
(d Payments of Fees and Expenses. The Administrative Agent shall have
received evidence of payment by the Company of all accrued and unpaid fees,
costs and expenses to the extent then due and payable hereunder on the Funding
Date, together with Attorney Costs of Bank of America to the extent invoiced
prior to the Funding Date, plus such additional amounts of Attorney Costs as
shall constitute Bank of America's reasonable estimate of Attorney Costs
incurred or to be incurred by it through the Funding Date proceedings (provided
that such estimate shall not thereafter preclude final settling of accounts
between the Company and Bank of America, which shall be made based upon actual
Attorney Costs, including any such, fees, costs and expenses arising under or
referenced in Sections 2.11 and 10.4.
(e Legal Opinions. An opinion of Jenner & Block, counsel to the
Company, substantially in the form of Exhibit G.
(f Certificate. A certificate signed by a Responsible Officer, dated
as of the Funding Date, stating that to the best of his knowledge after due
inquiry:
(i the representations and warranties contained in Article V are
true and correct on and as of such date, as though made on and as of
such date;
(ii no Event of Default or Unmatured Event of Default exists or
would result from the initial borrowing on the Funding Date; and
(iii since June 30, 1999, no event or circumstance has occurred
that has resulted or could reasonably be expected to result in a
Material Adverse Effect.
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(g Other Documents. Such other approvals, documents or materials as
the Administrative Agent or any Lender may reasonably request.
IV.3 Conditions to All Borrowings. The obligation of each Lender to make
any Loan to be made by it (including the obligation of the Swing Line Lender to
make any Swing Line Loan is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date:
(a Notice. The Administrative Agent shall have received a Notice of
Committed Borrowing or notice of the acceptance by the Company of one or more
Competitive Bids or the Swing Line Lender and the Administrative Agent shall
have received a Notice of Swing Line Loan.
(b Continuation of Representations and Warranties. The
representations and warranties in Article V (excluding subsection 5.11(b shall
be true and correct in all material respects on and as of such Borrowing Date
with the same effect as if made on and as of such Borrowing Date (except to the
extent such representations and warranties expressly refer to an earlier date,
in which case they shall be true and correct in all material respects as of such
earlier date.
(c No Default. No Event of Default or Unmatured Event of Default
shall exist or shall result from such Borrowing or Swing Line Loan.
Each Notice of Committed Borrowing, notice of acceptance of a Competitive Bid
and Notice of Swing Line Loan, submitted by the Company hereunder shall
constitute a representation and warranty by the Company that, as of the date of
each such notice and as of the relevant Borrowing Date, the conditions in this
Section 4.3 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants (it being understood that
representations and warranties made with respect to the Company and its
Subsidiaries shall apply to the Tenneco Packaging Group prior to the Funding
Date to the Administrative Agent and each Lender that:
V.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
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(a is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization;
(b has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, to carry on its
business and to execute, deliver and perform its obligations under the Loan
Documents to which it is a party;
(c is duly qualified to do business in each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification; and
(d is in compliance with all Requirements of Law;
except, in each case referred to in clause (c or clause (d, to the extent that
the failure to do so could not reasonably be expected to have a Material Adverse
Effect.
V.2 Corporate Authorization; No Contravention. The execution, delivery and
performance by the Company of each Loan Document to which the Company is party
have been duly authorized by all necessary corporate action, and do not and will
not:
(a contravene the terms of any of the Company's Organization
Documents;
(b conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any material Contractual
Obligation to which the Company or any of its Subsidiaries is a party or any
order, injunction, writ or decree of any Governmental Authority to which the
Company or any of its Subsidiaries or any of its property is subject; or
(c violate any Requirement of Law applicable to the Company or any
Subsidiary.
V.3 Governmental Authorization. Except those required in connection with
the Spin-Off, no approval, consent, exemption, authorization or other action by,
or notice to, or filing with, any Governmental Authority (other than any of the
foregoing which has been obtained or made and is in full force and effect is
necessary or required in connection with the execution, delivery or performance
by the Company of the Agreement or any other Loan Document.
V.4 Binding Effect. This Agreement and each other Loan Document constitute
the legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as enforceability may
be limited
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by applicable bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability.
V.5 Litigation. Except as disclosed in a memorandum delivered to the
Lenders prior to the Effective Date, there are no actions, suits, proceedings,
claims, disputes pending or, to the Knowledge of the Company, threatened, at
law, in equity, in arbitration or before any Governmental Authority, against the
Company or any Subsidiary or any of their respective properties which: (a
purport to affect or pertain to this Agreement or any other Loan Document, or
any of the transactions contemplated hereby or thereby; or (b if determined
adversely to the Company or its Subsidiaries, could in the reasonable judgment
of the Company be expected to have a Material Adverse Effect. No injunction,
writ, temporary restraining order or other order of any nature has been issued
by any court or other Governmental Authority purporting to enjoin or restrain
the execution, delivery or performance of this Agreement or any other Loan
Document, or directing that the transactions provided for herein or therein not
be consummated as herein or therein provided.
V.6 No Default. No Event of Default or Unmatured Event of Default exists or
would result from the incurring of any Obligations by the Company. As of the
Effective Date, neither the Company nor any Subsidiary is in default under or
with respect to any Contractual Obligation in any respect which, individually or
together with all such defaults, could reasonably be expected to have a Material
Adverse Effect.
V.7 ERISA Compliance. (a Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law. Each Plan which is intended to qualify under Section 401(a of the
Code has received a favorable determination letter from the IRS, and to the best
knowledge of the Company, nothing has occurred which would cause the loss of
such qualification. The Company and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
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(c (i No ERISA Event has occurred or is reasonably expected to occur;
(ii no contribution failure has occurred with respect to a Pension Plan
sufficient to give rise to a Lien under Section 302(f of ERISA; (iii no
Pension Plan has any material Unfunded Pension Liability; (iv neither the
Company nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any material liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA; (v
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any material liability (and no event has occurred which, with the
giving of notice under Section 4219 of ERISA, would result in such liability
under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and
(vi neither the Company nor any ERISA Affiliate has engaged in a transaction
that could be subject to Section 4069 or 4212(c of ERISA.
V.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans will be
used solely for the purposes set forth in and permitted by Section 6.12 and
Section 7.7. Neither the Company nor any Subsidiary is generally engaged in the
business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
V.9 Title to Properties. The Company and each Subsidiary (other than
foreign Subsidiaries have (or, in the case of property that will be transferred
to the Tenneco Packaging Group in connection with the Spin-Off, after such
transfer will have good record title in fee simple to all real property (other
than leasehold property necessary to conduct their respective businesses in the
ordinary course, except for (i Permitted Liens, and (ii such defects in title
as could not, individually or in the aggregate, have a Material Adverse Effect.
As of the Effective Date, the property of the Company and its Subsidiaries is
subject to no Liens, other than Permitted Liens.
V.10 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports which are required to be filed, and have
paid all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those which are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
the Company or any Subsidiary that would, if made, have a Material Adverse
Effect.
V.11 Financial Condition. (a(1 The combined financial statements of the
Company and its Subsidiaries dated as of December 31, 1998, and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for the
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fiscal year ended on that date reported on by Arthur Andersen LLP and set forth
in the Form 10 and the Company's filings on Form S- 4 (as referenced in the
definition of Spin-Off, and (2 the interim combined financial statements of
the Company and its Subsidiaries dated June 30, 1999, and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for the fiscal quarter ended on that date reported on by Arthur Andersen
LLP and set forth in the Form 10 and the Company's filings on Form S-4 (as
referenced in the definition of Spin-Off:
(i were prepared in accordance with GAAP consistently applied for
the periods covered thereby, except as otherwise expressly noted
therein (subject, in the case of the unaudited interim statements, to
ordinary, good faith year-end audit adjustments; and
(ii fairly present (subject, in the case of the unaudited interim
statements, to ordinary, good faith year-end audit adjustments the
financial condition of the Company and its Subsidiaries as of the
dates thereof and the results of operations for the periods covered
thereby.
(b Since June 30, 1999, there has been no Material Adverse Effect.
V.12 Environmental Matters. The Company conducts in the ordinary course of
business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that, except as specifically
disclosed in Schedule 5.12, such Environmental Laws and Environmental Claims are
unlikely to have, individually or in the aggregate, a Material Adverse Effect.
V.13 Regulated Entities. None of the Company, any Person controlling the
Company, or any Subsidiary is an "Investment Company" within the meaning of the
Investment Company Act of 1940. The Company is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, any state
public utilities code, or any other Federal or state statute or regulation
limiting its ability to incur Indebtedness.
V.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary is
bound by, or subject to any restriction in, any Organization Document or
Requirement of Law, which could reasonably be expected to have a Material
Adverse Effect.
V.15 Copyrights, Patents, Trademarks and Licenses, etc. The Company or its
Subsidiaries own or are licensed or otherwise have the right to use all of the
material patents, trademarks,
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service marks, trade names, copyrights, contractual franchises, authorizations
and other rights that are reasonably necessary for the operation of their
respective businesses, without conflict with the rights of any other Person,
except to the extent failure to own, license or otherwise have the right to use
any such item, or any such conflict, could not reasonably be expected to have a
Material Adverse Effect. The Company has not received any written notice that
any slogan or other advertising device, product, process, method, substance,
part or other material now employed, or now contemplated to be employed, by the
Company or any Subsidiary, and which is material to the business or operations
of the Company and its Subsidiaries, infringes upon any rights held by any other
Person (excluding infringements which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
V.16 Subsidiaries. As of the Effective Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a of Schedule
5.16 and has no equity investments in any other corporation or entity other than
those specifically disclosed in part (b of Schedule 5.16. As of the Funding
Date, the additional Subsidiaries disclosed on part (c of Schedule 5.16 also
will become Subsidiaries of the Company in connection with the Spin-Off, and
therefore are part of the Tenneco Packaging Group.
V.17 Insurance. The properties of the Company and its Subsidiaries are
insured with financially sound and reputable insurance companies (or pursuant to
a self-insurance program in such amounts, with such deductibles and covering
such risks as are customarily carried by companies engaged in similar businesses
and owning similar properties in localities where the Company or such Subsidiary
operates.
V.18 Year 2000 Problem. The Company and its Subsidiaries have reviewed the
areas within their business and operations which could be adversely affected by,
and have developed programs to address on a timely basis, the "Year 2000
Problem" (that is, the risk that computer applications used by the Company may
be unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999. Based on such
review and programs, the Company reasonably believes that the "Year 2000
Problem" will not result in a Material Adverse Effect.
V.19 Full Disclosure. The representations and warranties made by the
Company and its Subsidiaries in the Loan Documents as of the date such
representations and warranties are made or deemed made, and the statements
contained in any exhibit, report, statement or certificate furnished in writing
by or on behalf of the Company or any Subsidiary in connection with the Loan
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Documents, taken as a whole, do not contain any untrue statement of a material
fact or omit any material fact required to be stated therein or necessary to
make the statements made therein, taken as a whole and in light of the
circumstances under which they are made, not misleading in any material respect
as of the time when made or delivered.
V.20 Solvency, etc. On the Funding Date, and immediately prior to and after
giving effect to each Borrowing hereunder and the use of the proceeds thereof,
(a the Company's assets will exceed its liabilities and (b the Company will be
solvent, will be able to pay its debts as they mature, will own property with
fair saleable value greater than the amount required to pay its debts and will
have capital sufficient to carry on its business as then constituted.
V.21 Labor Relations. Except as disclosed in Schedule 5.21, there are no
strikes, lockouts or other work stops against the Company or any of its
Subsidiaries, or, to the Knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries, and no significant unfair
labor practice complaint is pending against the Company or any of its
Subsidiaries or, to the best knowledge of the Company, threatened against any of
them before any Governmental Authority that, in each case, is likely to have a
Material Adverse Effect.
ARTICLE VI
AFFIRMATIVE COVENANTS
Beginning on the Funding Date and continuing so long as any Lender shall
have any Commitment hereunder, or any Loan or other Obligation shall remain
unpaid or unsatisfied, unless the Majority Lenders waive compliance in writing:
VI.1 Financial Statements. The Company shall deliver to each Lender and the
Administrative Agent, in form and detail satisfactory to the Lenders and the
Administrative Agent (it being understood that for purposes hereof, the form and
detail required by the SEC for annual and quarterly reports filed pursuant to
the Exchange Act shall be deemed satisfactory:
(a as soon as available, but not later than 90 days after the end of
each fiscal year, a copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of Arthur Andersen
LLC or another nationally-recognized
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independent public accounting firm ("Independent Auditor", which opinion (i
shall state that such consolidated financial statements present fairly the
Company's consolidated financial position for the periods indicated in
conformity with GAAP and (ii shall not be qualified or limited because of a
restricted or limited examination by the Independent Auditor of any material
portion of the Company's or any Subsidiary's records; and
(b as soon as available, but not later than 50 days after the end of
each of the first three fiscal quarters of each fiscal year (commencing with the
fiscal quarter ending September 30, 1999, a copy of the unaudited consolidated
balance sheet of the Company and its Subsidiaries as of the end of such quarter
and the related consolidated statements of income, shareholders' equity and cash
flows for the period commencing on the first day and ending on the last day of
such quarter, and certified by a Responsible Officer as fairly presenting, in
accordance with GAAP (subject to ordinary, good faith year-end audit
adjustments, the financial position and the results of operations of the
Company and its Subsidiaries as of such date and for such period.
VI.2 Certificates; Other Information. The Company shall furnish to each
Lender and the Administrative Agent:
(a concurrently with the delivery of the financial statements
referred to in subsections 6.1(a and (b, a Compliance Certificate executed by
a Responsible Officer;
(b promptly after their becoming available, copies of all financial
statements and reports that the Company sends to its shareholders, and copies of
all financial statements and regular, periodic or special reports (including
Forms 10K, 10Q and 8K that the Company or any Subsidiary may make to, or file
with, the SEC;
(c promptly after their becoming available, any management letter
issued by the Company's Independent Auditor regarding the "Year 2000" exposure
or programs of the Company and its Subsidiaries; and
(d promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the
Administrative Agent, at the request of any Lender, may from time to time
reasonably request.
VI.3 Notices. The Company shall promptly (or, in the case of any event
described in clause (c(ii below, not less than 10 days prior to the occurrence
of such event notify the Administrative Agent and each Lender:
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(a of the occurrence of any Event of Default or Unmatured Event of
Default known to the Company;
(b of any of the following matters that has resulted or is reasonably
expected to result in a Material Adverse Effect: (i breach or non-performance
of, or any default under, a Contractual Obligation of the Company or any
Subsidiary; (ii any dispute, litigation, investigation, proceeding or
suspension between the Company or any Subsidiary and any Governmental Authority;
or (iii the commencement of, or any material ruling, order or judgment in, any
litigation or proceeding affecting the Company or any Subsidiary is a party,
including pursuant to any applicable Environmental Laws;
(c of the occurrence of any of the following events known to the
Company which affect the Company or any ERISA Affiliate, and deliver to the
Administrative Agent and each Lender a copy of any notice with respect to such
event that is filed with a Governmental Authority and any notice delivered by a
Governmental Authority to the Company or any ERISA Affiliate with respect to
such event:
(i an ERISA Event;
(ii a contribution failure with respect to a Pension Plan
sufficient to give rise to a Lien under Section 302(f of ERISA;
(iii the adoption of, or the commencement of contributions to,
any Pension Plan by the Company or any ERISA Affiliate that, in either
case, requires material contributions; or
(iv the adoption of any amendment to a Pension Plan if such
amendment results in a material increase in contributions or Unfunded
Pension Liability;
(d of any material change in accounting policies or financial
reporting practices by the Company and its consolidated Subsidiaries; and
(e of any change in the Moody's Rating or the S&P Rating.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto.
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VI.4 Preservation of Corporate Existence, Etc. The Company shall, and shall
cause each Subsidiary to (provided that nothing in this Section 6.4 shall
prevent the voluntary liquidation, dissolution or winding up, not under any
bankruptcy or insolvency law, of any Subsidiary so long as no Event of Default
exists and no Event of Default or Unmatured Event of Default will result
therefrom:
(a preserve and maintain in full force and effect its existence and
good standing under the laws of its jurisdiction of organization;
(b preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
in the normal conduct of its business (except in connection with transactions
and sales of assets permitted by Section 7.4; and
(c preserve or renew all of its registered patents, trademarks, trade
names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect; provided, however, that the Company
shall have the right to assign to an Affiliate of Tenneco, or not preserve or
renew, certain trademarks of Tenneco that are currently owned by the Company or
any Subsidiary, but which are not used by the Company or such Subsidiary.
VI.5 Maintenance of Property. The Company shall, and shall cause each
Subsidiary to, maintain and preserve all its property which is used or useful in
its business in good working order and condition, ordinary wear and tear
excepted, except to the extent that failure to do so would not reasonably be
expected to have a Material Adverse Effect.
VI.6 Insurance. The Company shall, and shall cause each Subsidiary to,
maintain, with financially sound and reputable independent insurers (or pursuant
to a self-insurance program, insurance with respect to its properties and
business in such amounts, with such deductibles, and covering such risks as are
customarily carried under similar circumstances by such other Persons.
VI.7 Payment of Obligations. The Company shall, and shall cause each
Subsidiary to, pay and discharge, as the same become due and payable: (a all
material tax liabilities, assessments and governmental charges or levies upon it
or its properties or assets and (b all material claims which, if unpaid, would
by law become a Lien upon its property, unless, in each case, the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary.
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VI.8 Compliance with Laws. The Company shall, and shall cause each
Subsidiary to, comply with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act the non-compliance with which might have a Material Adverse
Effect.
VI.9 Compliance with ERISA. The Company shall, and shall cause each of its
ERISA Affiliates to: (a maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b cause each Plan which is qualified under Section 401(a of the
Code to maintain such qualification; and (c make all required contributions to
any Plan subject to Section 412 of the Code.
VI.10 Inspection of Property and Books and Records. The Company shall, and
shall cause each Subsidiary to, maintain proper books of record and account, in
which full, true and correct entries (sufficient to permit the preparation of
consolidated financial statements in conformity with GAAP shall be made of all
financial transactions and matters involving the assets and business of the
Company and such Subsidiary. The Company shall permit, and shall cause each
Subsidiary to permit, the Administrative Agent, any Lender or their respective
representatives, subject to such limitations as the Company may reasonably
impose to ensure compliance with any applicable legal or contractual
restrictions, to visit and inspect the properties of the Company or any
Subsidiary, to examine their respective corporate, financial and operating
records, and make copies thereof or abstracts therefrom, and to discuss the
affairs, finances and accounts of the Company or any Subsidiary with their
respective officers at such reasonable times during normal business hours as may
be reasonably desired, upon reasonable advance notice to the Company; provided
that when an Event of Default exists the Administrative Agent or any Lender may
do any of the foregoing at any time during normal business hours and without
advance notice.
VI.11 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws, except to the extent any failure to be
compliance would not, individually or in the aggregate with all other such
failures, reasonably be expected to result in a Material Adverse Effect.
VI.12 Use of Proceeds. The Company shall use the proceeds of the Loans for
refinancing existing indebtedness of Tenneco or its Subsidiaries (including the
Company and for working capital and other general corporate purposes (including
the payment of dividends concurrently with the Spin-Off as set forth in the Form
10 not in contravention of any Requirement of Law or of any Loan Document;
provided that the Company shall not use the proceeds of
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any Loan to make any Acquisition if the Board of Directors of the Person to be
acquired has not approved such Acquisition.
VI.13 Change in Business. The Company and its Subsidiaries taken as a whole
shall continue the primary businesses in which they are engaged on the Funding
Date and lines of business reasonably related thereto.
ARTICLE VII
NEGATIVE COVENANTS
Beginning on the Funding Date and continuing so long as any Lender shall
have any Commitment hereunder, or any Loan or other Obligation shall remain
unpaid or unsatisfied, unless the Majority Lenders waive compliance in writing:
VII.1 Financial Condition Covenants.
(a Minimum Interest Coverage Ratio. The Company shall not permit, as
of the last day of any fiscal quarter (beginning with the first fiscal quarter
ending after the Funding Date, its Interest Coverage Ratio to be less than (i
for each Computation Period ending prior to October 1, 2000, 3.0 to 1 and (ii
for each Computation Period ending thereafter, 3.5 to 1.
(b Maximum Total Debt to EBITDA Ratio. The Company shall not permit
the Total Debt to EBITDA Ratio to be greater than (i 3.85 at any time prior to
the earlier of (A April 1, 2000 and (B the consummation of the PCA IPO, and
(ii 3.5 to 1 at any time thereafter.
VII.2 Limitation on Liens. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
Liens":
(a any Lien existing on the Effective Date and set forth in Schedule
7.2, and any extension, renewal or replacement of any such Lien so long as the
principal amount secured thereby is not increased (other than an increase
resulting solely from a change in applicable rates of exchange between U.S.
Dollars, on the one hand, and any other currency in which such principal amount
is denominated, on the other hand and the scope of the property subject to such
Lien is not extended;
(b Liens imposed by law for taxes, assessments or charges of any
Governmental Authority for claims not yet due, or
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to the extent that non-payment thereof is permitted by Section 6.7, provided
that no notice of Lien has been filed or recorded under the Code;
(c statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other Liens imposed by law or created in the ordinary
course of business which are not delinquent or remain payable without penalty or
which are being contested in good faith by appropriate proceedings;
(d Liens (other than any Lien imposed by ERISA consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(e Liens on the property of the Company or any Subsidiary securing
(i the non-delinquent performance of bids, trade contracts (other than for
borrowed money, leases, statutory obligations, (ii surety bonds (excluding
appeal bonds and other bonds posted in connection with court proceedings or
judgments and (iii other non-delinquent obligations of a like nature in each
case incurred in the ordinary course of business, provided all such Liens in the
aggregate would not (even if enforced cause a Material Adverse Effect;
(f Liens consisting of judgment or judicial attachment liens and
liens securing contingent obligations on appeal bonds and other bonds posted in
connection with court proceedings or judgments, provided that (i in the case of
judgment and judicial attachment liens, the enforcement of such Liens is
effectively stayed and (ii all such liens in the aggregate at any time
outstanding for the Company and its Subsidiaries do not exceed $20,000,000;
(g easements, rights-of-way, covenants, conditions, restrictions and
other similar encumbrances incurred in the ordinary course of business which,
individually or in the aggregate, do not materially interfere with the ordinary
conduct of the respective businesses of the Company and its Subsidiaries;
(h Liens securing obligations in respect of Capital Leases or
operating leases on assets subject to such leases, provided that, in the case of
Capital Leases, such Capital Leases are otherwise permitted hereunder;
(i Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i such deposit account is not a
dedicated cash
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collateral account and is not subject to restrictions against access by the
Company in excess of those set forth by regulations promulgated by the FRB, and
(ii such deposit account is not intended by the Company or any Subsidiary to
provide collateral to the depository institution;
(j any Lien on property existing at the time of acquisition of such
property by the Company or a Subsidiary, or Liens to secure the payment of all
or part of the purchase price of property upon the acquisition of property by
the Company or a Subsidiary or to secure any Indebtedness incurred or guaranteed
prior to, at the time of, or within one hundred eighty (180 days after, the
later of the date of acquisition of such property and the date such property is
placed in service, for the purpose of financing all or any part of the purchase
price thereof, or Liens to secure any Indebtedness incurred or guaranteed for
the purpose of financing the cost to the Company or a Subsidiary or improvements
to such acquired property;
(k other Liens, in addition to those permitted by clauses (a
through (j, securing Indebtedness or arising in connection with Securitization
Transactions; provided that(i the sum (without duplication of all such
Indebtedness (excluding Indebtedness arising in connection with Securitization
Transactions shall not at any time exceed in the aggregate $100,000,000; and
(ii the aggregate investment or claim held at any time by all purchasers,
assignees or other transferees of (or of interests in receivables and other
rights to payment in all such Securitization Transactions, shall not at any time
exceed in the aggregate $200,000,000; and
(l rights of first refusal, rights of Governmental Authorities to
approve transfers and other similar restrictions on transfer of any ownership
interest of the Company or any of its Subsidiaries in any joint venture or
similar investment in an entity (other than a Subsidiary operating primarily
outside of the United States.
VII.3 Restrictions on Subsidiaries. The Company (a will not enter into any
agreement or understanding pursuant to which any claim it may have against any
Subsidiary would be subordinate in any manner to the payment of any other
obligation of such Subsidiary and (b will not, and will not permit any
Subsidiary to, enter into any agreement or understanding which by its terms
limits or restricts the ability of such Subsidiary to make funds available to
the Company (whether by way of a dividend or other distribution, by repayment of
any inter-company advance or otherwise if, in any such case referred to in (a
or (b above, there is, at the time any such agreement is entered into, a
reasonable likelihood that all such agreements and understandings referred to in
(a or (b above, considered together, would
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materially and adversely affect the ability of the Company to meet its
obligations as they become due.
VII.4 Consolidation, Mergers and Sales of Assets. The Company will not
merge or consolidate with any other Person or sell, lease, transfer or otherwise
dispose of its property and assets as, or substantially as, an entirety to any
Person, unless (a either the Company shall be the continuing or surviving
corporation, or the successor or acquiring corporation shall be a solvent
corporation organized under the laws of any State of the United States of
America and shall expressly assume in writing all of the obligations of the
Company under this Agreement and the Notes, including all covenants herein and
therein contained, and such successor or acquiring corporation shall succeed to
and be substituted for the Company with the same effect as if it had been named
herein as a party hereto, provided that no such sale shall release the Company
from any of its obligations and liabilities under this Agreement or the Notes
unless such sale is followed by the complete liquidation of the Company and
substantially all the assets of the Company immediately following such sale are
distributed in such liquidation, and (b the Company as the continuing or
surviving corporation or the successor or acquiring corporation, as the case may
be, shall not, immediately after such merger or consolidation, or such sale or
other disposition, be in default under any such obligations.
VII.5 Limitation on Subsidiary Indebtedness. The Company shall not permit
its Subsidiaries to create, incur, assume or suffer to exist, or otherwise
become or remain directly or indirectly liable with respect to, any Indebtedness
(excluding obligations in respect of Securitization Transactions at any time
outstanding in an aggregate amount in excess of the greater of (a $100,000,000
and (b 12.5% of Total Debt.
VII.6 Transactions with Affiliates. The Company shall not, and shall not
permit any Subsidiary to, enter into any transaction with any Affiliate of the
Company (other than the Company or a Subsidiary, except upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person not an Affiliate
of the Company or such Subsidiary.
VII.7 Use of Proceeds. The Company shall not, and shall not permit any
Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, to
(i engage principally, or as one of its important activities, in the business
of extending credit for the purposes of purchasing or carrying any Margin Stock
or (ii use the proceeds of any Loan, directly or indirectly, whether immediate,
incidental or ultimate, (a to purchase or carry, within the meaning of
Regulation U, any Margin Stock or to extend credit to others for the purpose of
purchasing
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or carrying any Margin Stock, unless done in strict compliance with Regulation U
and other applicable law and the Company shall have executed and delivered to
each Lender prior to such use a Form U-1 statement evidencing compliance with
Regulation U and such other documents relating thereto as any Lender shall
reasonably request, or (b in a manner which would violate, or result in a
violation of, Regulation U.
VII.8 ERISA. The Company shall not, and shall not permit any of its ERISA
Affiliates to: (a engage in a prohibited transaction or material violation of
the fiduciary responsibility rules with respect to any Plan which has resulted
or could reasonably be expected to result in liability of the Company in an
aggregate amount in excess of $5,000,000; or (b engage in a transaction that
could be subject to Section 4069 or 4212(c of ERISA.
VII.9 Securitization Transactions. The Company shall not, and shall not
permit its Subsidiaries to enter into any Securitization Transaction to the
extent that the aggregate investment or claims held at any time by all
purchasers, assignees, transferees of (or of interests in receivables and other
rights to payment in all Securitization Transactions would at any time exceed
$200,000,000.
ARTICLE VIII
EVENTS OF DEFAULT
VIII.1 Event of Default. Any of the following shall constitute an "Event of
Default":
(a Non-Payment. The Company fails to pay, (i when and as required
to be paid herein, any amount of principal of any Loan or (ii within five days
after the same becomes due, any interest, fee or any other amount payable
hereunder or under any other Loan Document.
(b Representation or Warranty. Any representation or warranty by
the Company or any Subsidiary made or deemed made herein or in any other Loan
Document, or which is contained in any certificate, document or financial or
other written statement by the Company, any Subsidiary or any Responsible
Officer furnished at any time under this Agreement or under any other Loan
Document, is incorrect in any material respect on or as of the date made or
deemed made.
(c Specific Defaults. The Company fails to perform or observe any
term, covenant or agreement contained in Article VII.
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(d Other Defaults. The Company fails to perform or observe any
other term or covenant contained in this Agreement or any other Loan Document
(any such failure being referred to in this Section 8.1(d as a "default" and
such default shall continue unremedied for a period of 30 days after (i the
date upon which written notice of such default is given to the Company by the
Administrative Agent or (ii if the Company fails to promptly notify the
Administrative Agent and the Lenders of the occurrence of any default in
accordance with Section 6.3, the date on which the Company has actual knowledge
of such default.
(e Cross-Default. The Company or any Subsidiary (i fails to make
any payment of Material Financial Obligations when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise, but after
giving effect to any applicable grace or cure period; or (ii fails to perform
or observe any other condition or covenant, or any other event shall occur or
condition exist, under one or more agreements or instruments relating to
Material Financial Obligations, if the effect of such failure, event or
condition is to cause (or require, or to permit the holder or holders of such
Material Financial Obligations (or the beneficiary or beneficiaries of such
Material Financial Obligations (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries to cause (or require, such
Material Financial Obligations to become due and payable (or to be purchased,
repurchased, defeased or cash collateralized prior to the stated maturity
thereof.
(f Insolvency; Voluntary Proceedings. The Company or any Material
Subsidiary (i generally fails to pay, or admits in writing its inability to
pay, its debts as they become due, subject to applicable grace periods, if any,
whether at stated maturity or otherwise; (ii voluntarily ceases to conduct its
business in the ordinary course; (iii commences any Insolvency Proceeding with
respect to itself; or (iv takes any action to effectuate or authorize any of
the foregoing; provided that the foregoing shall not apply to the voluntary
liquidation, dissolution or winding up of a Subsidiary permitted by Section 6.4.
(g Involuntary Proceedings. (i Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Material Subsidiary,
or any writ, judgment, warrant of attachment, execution or similar process is
issued or levied against a substantial part of the Company's or any such
Subsidiary's properties, and such proceeding or petition shall not be dismissed,
or such writ, judgment, warrant of attachment, execution or similar process
shall not be released, vacated or fully bonded, within 60 days after
commencement, filing or levy; (ii the Company or any Material Subsidiary admits
the material
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allegations of a petition against it in any Insolvency Proceeding, or an order
for relief (or similar order under non-U.S. law is ordered in any Insolvency
Proceeding with respect to the Company or such Subsidiary; or (iii the Company
or any Material Subsidiary acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent therefor,
or other similar Person for itself or a substantial portion of its property or
business.
(h ERISA. (i An ERISA Event shall occur with respect to a Pension
Plan or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $20,000,000;
(ii a contribution failure shall occur with respect to a Pension Plan
sufficient to give rise to a Lien under Section 302(f of ERISA; or (iii the
Company or any ERISA Affiliate shall fail to pay when due, after the expiration
of any applicable grace period (or any period during which (x the Company is
permitted to contest its obligation to make such payment without incurring any
liability (other than interest or penalty and (y the Company is contesting
such obligation in good faith and by appropriate proceedings, any installment
payment with respect to its withdrawal liability under Section 4201 of ERISA or
any contribution obligation under Section 4243 of ERISA, in each case under a
Multiemployer Plan in an aggregate amount in excess of $30,000,000.
(i Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Company or any Subsidiary involving in the aggregate a liability (to the extent
not covered by insurance as to which the insurer does not dispute coverage as
to any single or related series of transactions, incidents or conditions of
$50,000,000 or more, and the same shall remain unvacated and unstayed pending
appeal for a period of 30 days after the entry thereof.
(j Non-Monetary Judgments. Any non-monetary judgment, order or
decree is entered against the Company or any Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect.
(k Change of Control. Any Change of Control occurs.
VIII.2 Remedies. If any Event of Default occurs, the Administrative Agent
shall, at the request of, or may, with the consent of, the Majority Lenders,
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(a declare the commitment of each Lender to make Loans (including
the commitment of the Swing Line Lender to make Swing Line Loans to be
terminated, whereupon such commitments shall be terminated;
(b declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company; and
(c exercise on behalf of itself and the Lenders all other rights
and remedies available to it and the Lenders under the Loan Documents or
applicable law;
provided that upon the occurrence of any event specified in subsection (f or
(g of Section 8.1 (in the case of clause (i of subsection (g, upon the
expiration of the 60-day period mentioned therein, the obligation of each
Lender to make Loans shall automatically terminate and the unpaid principal
amount of all outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable without further act of the
Administrative Agent or any other Lender. The Administrative Agent shall
promptly notify the Company of any declaration described in clause (a or (b of
the preceding sentence, but failure to give any such notice shall not impair any
such declaration or result in any liability to the Administrative Agent.
VIII.3 Notice of Defaults. The Administrative Agent shall give notice to
the Company under subsection 8.1(d(i promptly upon being requested to do so by
any Lender and shall thereupon notify all the Lenders thereof.
VIII.4 Rights Not Exclusive. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
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ARTICLE IX
THE ADMINISTRATIVE AGENT
IX.1 Appointment and Authorization; "Administrative Agent". (a Each Lender
hereby irrevocably (subject to Section 9.9 appoints, designates and authorizes
the Administrative Agent to take such action on its behalf under the provisions
of this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Administrative Agent have or be deemed
to have any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Administrative Agent. Without limiting the generality of the foregoing sentence,
the use of the term "agent" in this Agreement with reference to the
Administrative Agent is not intended to connote any fiduciary or other implied
(or express obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
(b The Swing Line Lender shall have all of the benefits and
immunities (i provided to the Administrative Agent in this Article IX with
respect to any acts taken or omissions suffered by the Swing Line Lender in
connection with Swing Line Loans made or proposed to be made by it as fully as
if the term "Administrative Agent", as used in this Article IX, included the
Swing Line Lender with respect to such acts or omissions and (ii as
additionally provided in this Agreement with respect to the Swing Line Lender.
IX.2 Delegation of Duties. The Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
IX.3 Liability of Administrative Agent. None of the Administrative
Agent-Related Persons shall (i be liable to any Lender for any action taken or
omitted to be taken by any of them under or in connection with this Agreement or
any other Loan Document or the transactions contemplated hereby (except for its
own gross negligence or willful misconduct, or (ii be responsible in any
manner to any of the Lenders for any recital,
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statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Administrative Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of the Company or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Administrative Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books or records of the
Company or any of the Company's Subsidiaries or Affiliates.
IX.4 Reliance by Administrative Agent. (a The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to the Company, independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Majority Lenders as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Document in accordance with a request or
consent of the Majority Lenders and such request and any action taken or failure
to act pursuant thereto shall be binding upon all of the Lenders.
(b For purposes of determining compliance with the conditions
specified in Section 4.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Administrative Agent to such Lender
for consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lender.
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IX.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Event of Default or Unmatured
Event of Default, except with respect to defaults in the payment of principal,
interest and fees required to be paid to the Administrative Agent for the
account of the Lenders, unless the Administrative Agent shall have received
written notice from a Lender or the Company referring to this Agreement,
describing such Event of Default or Unmatured Event of Default and stating that
such notice is a "notice of default". If the Administrative Agent receives such
a notice, the Administrative Agent will notify the Lenders of its receipt of
such notice. The Administrative Agent shall take such action with respect to
such Event of Default or Unmatured Event of Default as may be requested by the
Majority Lenders in accordance with this Article IX; provided, however, that
unless and until the Administrative Agent has received any such request, the
Administrative Agent may (but shall not be obligated to take such action, or
refrain from taking such action, with respect to such Event of Default or
Unmatured Event of Default as it shall deem advisable or in the best interest of
the Lenders.
IX.6 Credit Decision. Each Lender acknowledges that none of the
Administrative Agent-Related Persons has made any representation or warranty to
it, and that no act by the Administrative Agent hereinafter taken, including any
review of the affairs of the Company and its Subsidiaries, shall be deemed to
constitute any representation or warranty by any Administrative Agent-Related
Person to any Lender. Each Lender represents to the Administrative Agent that it
has, independently and without reliance upon any Administrative Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder. Each Lender also
represents that it will, independently and without reliance upon any
Administrative Agent-Related Person and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under this
Agreement and the other Loan Documents, and to make such investigations as it
deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company.
Except for notices, reports and other documents expressly herein required to be
furnished to the Lenders by the Administrative Agent, the Administrative Agent
shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the business, prospects, operations,
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property, financial and other condition or creditworthiness of the Company which
may come into the possession of any Administrative Agent-Related Person.
IX.7 Indemnification of Administrative Agent. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Administrative Agent-Related Persons (to the extent not
reimbursed by or on behalf of the Company and without limiting the obligation of
the Company to do so, pro rata, from and against any and all Indemnified
Liabilities; provided, however, that no Lender shall be liable for the payment
to any Administrative Agent-Related Person of any portion of the Indemnified
Liabilities resulting from such Person's gross negligence or willful misconduct.
Without limitation of the foregoing, each Lender shall reimburse the
Administrative Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs incurred by the Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Administrative
Agent is not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive the termination of this Agreement, the
payment of all Obligations and the resignation or replacement of the
Administrative Agent.
IX.8 Administrative Agent in Individual Capacity. Bank of America and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with the
Company and its Subsidiaries and Affiliates as though Bank of America were not
the Administrative Agent or the Swing Line Lender hereunder and without notice
to or consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, Bank of America or its Affiliates may receive information regarding
the Company or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such Subsidiary and
acknowledge that the Administrative Agent shall be under no obligation to
provide such information to them. With respect to its Loans, Bank of America
shall have the same rights and powers under this Agreement as any other Lender
and may exercise the same as though it were not the Administrative Agent or the
Swing Line Lender.
IX.9 Successor Administrative Agent. The Administrative Agent may, and at
the request of the Majority Lenders shall, resign as Administrative Agent upon
30 days' notice to the
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Lenders. If the Administrative Agent resigns under this Agreement, the Majority
Lenders (with, so long as no Event of Default exists, the consent of the
Company, which shall not be unreasonably withheld or delayed shall appoint from
among the Lenders a successor administrative agent for the Lenders. If no
successor administrative agent is appointed prior to the effective date of the
resignation of the Administrative Agent, the Administrative Agent may appoint,
after consulting with the Lenders and the Company, a successor administrative
agent from among the Lenders. Upon the acceptance of its appointment as
successor administrative agent hereunder, such successor administrative agent
shall succeed to all the rights, powers and duties of the retiring
Administrative Agent and the term "Administrative Agent" shall mean such
successor administrative agent and the retiring Administrative Agent's
appointment, powers and duties as Administrative Agent shall be terminated.
After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article IX and Sections 10.4 and
10.5 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement. If no successor
administrative agent has accepted appointment as Administrative Agent by the
date which is 30 days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
the Administrative Agent hereunder until such time, if any, as the Majority
Lenders appoint a successor administrative agent as provided for above.
Notwithstanding the foregoing, however, Bank of America may not be removed as
the Administrative Agent at the request of the Majority Lenders unless Bank of
America and any applicable Affiliate thereof shall also simultaneously be
replaced as "Swing Line Lender" hereunder pursuant to documentation in form and
substance reasonably satisfactory to Bank of America.
IX.10 Withholding Tax. (a If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Lender agrees with and in favor of the Administrative
Agent and the Company, to deliver to the Administrative Agent (with a copy to
the Company:
(i if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed IRS
Forms 1001 and W-8 (or any successor form before the payment of any
interest in the first calendar year and before the payment of any interest
in each third succeeding calendar year during which interest may be paid
under this Agreement;
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(ii if such Lender claims that interest paid under this Agreement
is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two
properly completed and executed copies of IRS Form 4224 before the payment
of any interest is due in the first taxable year of such Lender and in each
succeeding taxable year of such Lender during which interest may be paid
under this Agreement, and IRS Form W-9 (or any successor form; and
(iii such other form or forms as may be required under the Code
or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Each such Lender agrees to promptly notify the Administrative Agent and the
Company of any change in circumstances which would modify or render invalid any
claimed exemption or reduction.
(b If any Lender claiming exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 (or
any successor form sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations owed to such Lender, such Lender agrees
to notify the Administrative Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Company to such Lender. To the
extent of such percentage amount, the Administrative Agent will treat such
Lender's IRS Form 1001 (or any successor form as no longer valid.
(c If any Lender claiming exemption from United States withholding
tax by filing IRS Form 4224 (or any successor form with the Administrative
Agent grants a participation in all or part of the Obligations owed to such
Lender, such Lender agrees to undertake sole responsibility for complying with
the withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d If any Lender is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest payment
to such Lender an amount equivalent to the applicable withholding tax after
taking into account such reduction. If the forms or other documentation required
by subsection (a of this Section are not delivered to the Administrative Agent,
then the Administrative Agent may withhold from any interest payment to such
Lender not providing such forms or other documentation an amount equivalent to
the applicable withholding tax.
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<PAGE> 78
(e If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Administrative Agent or
the Company did not properly withhold tax from amounts paid to or for the
account of any Lender because such Lender failed to notify the Administrative
Agent or the Company of a change in circumstances which rendered the exemption
from, or reduction of, withholding tax ineffective such Lender shall indemnify
the Administrative Agent and the Company fully for all amounts paid, directly or
indirectly, by the Administrative Agent or the Company as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Administrative Agent or the Company
under this Section, together with all costs and expenses (including Attorney
Costs. The obligation of the Lenders under this subsection shall survive the
payment of all Obligations and the resignation or replacement of the
Administrative Agent.
IX.11 Other Agents. None of the Lenders identified on the facing or
signature s of this Agreement or any related document as a "Documentation
Agent," "Syndication Agent," "Managing Agent" or "Co-Agent" shall have any
right, power, obligation, liability, responsibility or duty under this Agreement
other than those applicable to all Lenders as such. Without limiting the
foregoing, none of the Lenders so identified as a "Documentation Agent" or
"Syndication Agent" shall have or be deemed to have any fiduciary relationship
with any Lender. Each Lender acknowledges that it has not relied, and will not
rely, on any of the Lenders so identified in deciding to enter into this
Agreement or in taking or not taking action hereunder.
ARTICLE X
MISCELLANEOUS
X.1 Amendments and Waivers. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent with respect to any
departure by the Company or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Majority Lenders
and the Company and acknowledged by the Administrative Agent, and then any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided that no such waiver, amendment or
consent shall, unless in writing and signed by all Lenders and the Company and
acknowledged by the Administrative Agent, do any of the following:
(a increase or extend the Commitment of any Lender (or reinstate any
Commitment terminated pursuant to Section 8.2;
72
<PAGE> 79
(b postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to the Lenders (or any of them hereunder or under any other Loan Document;
(c reduce the principal of, or the rate of interest specified herein
on, any Loan, or reduce any fees (other than the fees referred to in subsection
2.11(a, or other amounts payable hereunder or under any other Loan Document;
(d change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which is required for the Lenders or any of them
to take any action hereunder; or
(e amend this Section, or Section 2.15, or any provision herein
providing for consent or other action by all Lenders;
and provided, further, that (i no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent in addition to the Majority
Lenders or all Lenders, as the case may be, affect the rights or duties of the
Administrative Agent under this Agreement or any other Loan Document and (ii no
amendment, waiver or consent shall, unless in writing and signed by the Swing
Line Lender in addition to the Majority Lenders or all Lenders, as the case may
be, affect the rights or duties of the Swing Line Lender under this Agreement or
any other Loan Document.
X.2 Notices. (a All notices, requests, consents, approvals, waivers and
other communications shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission, provided that any
matter transmitted by the Company by facsimile (i shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 10.2, and (ii shall be followed promptly by delivery of a hard copy
original thereof and mailed, faxed or delivered, to the address or facsimile
number specified for notices on Schedule 10.2 or (x in the case of the Company
or the Administrative Agent, to such other address as shall be designated by
such party in a written notice to the other parties and (y in the case of any
other party, at such other address as shall be designated by such party in a
written notice to the Company and the Administrative Agent.
(b All such notices, requests, consents, approvals, waivers and
communications shall, when transmitted by overnight delivery, or faxed, be
effective when delivered for overnight (next-day delivery, or transmitted in
legible form by facsimile machine, respectively, or if mailed, upon the third
Business Day
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after the date deposited into the U.S. mail, certified or registered mail,
return receipt requested or if delivered, upon delivery; except that notices
pursuant to Article II or IX to the Administrative Agent or the Swing Line
Lender, as the case may be, shall not be effective until actually received by
the Administrative Agent or the Swing Line Lender, as the case may be.
(c Any agreement of the Administrative Agent and the Lenders herein to
receive certain notices by telephone or facsimile is solely for the convenience
and at the request of the Company. The Administrative Agent and the Lenders
shall be entitled to rely on the authority of any Person purporting to be a
Person authorized by the Company to give such notice and the Administrative
Agent and the Lenders shall not have any liability to the Company or any other
Person on account of any action taken or not taken by the Administrative Agent
or the Lenders in reliance upon such telephonic or facsimile notice. The
obligation of the Company to repay the Loans shall not be affected in any way or
to any extent by any failure by the Administrative Agent and the Lenders to
receive written confirmation of any telephonic or facsimile notice or the
receipt by the Administrative Agent and the Lenders of a confirmation which is
at variance with the terms understood by the Administrative Agent and the
Lenders to be contained in the telephonic or facsimile notice.
X.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
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<PAGE> 81
X.4 Costs and Expenses. The Company shall:
(a whether or not the transactions contemplated hereby are
consummated, pay or reimburse Bank of America (including in its capacity as
Administrative Agent and Swing Line Lender and BAS within five Business Days
after demand (subject to subsection 4.1(e for all reasonable costs and
expenses incurred by Bank of America (including in its capacity as
Administrative Agent and Swing Line Lender and BAS in connection with the
negotiation, preparation, delivery, documentation and execution of, and any
amendment, supplement, waiver or modification to (in each case, whether or not
consummated, this Agreement, any other Loan Document and any other document
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including Attorney Costs incurred
by Bank of America (including in its capacity as Administrative Agent and Swing
Line Lender and BAS with respect thereto; and
(b pay or reimburse the Administrative Agent, BAS and each Lender
within five Business Days after demand for all reasonable costs and expenses
(including Attorney Costs incurred by them in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies under this
Agreement or any other Loan Document (including in connection with any "workout"
or restructuring regarding the Loans, and including in any Insolvency Proceeding
or appellate proceeding.
X.5 Company Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Company shall indemnify, defend and hold the
Administrative Agent-Related Persons and each Lender and each of their
respective officers, directors, employees, counsel, agents and attorneys-in-fact
(each an "Indemnified Person" harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses and disbursements (including Attorney Costs of any
kind or nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Administrative Agent or replacement of any Lender be imposed on, incurred by or
asserted against any such Person in any way relating to or arising out of this
Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding related to or arising out of this Agreement
or the Loans or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"; provided that the
75
<PAGE> 82
Company shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities resulting solely from the gross negligence or
willful misconduct of such Indemnified Person. The agreements in this Section
shall survive the termination of this Agreement and the payment of all other
Obligations.
X.6 Payments Set Aside. To the extent that the Company makes a payment to
the Administrative Agent or the Lenders, or the Administrative Agent or any
Lender exercises its right of set-off, and such payment or the proceeds of such
set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Lender in its
discretion to be repaid to a trustee, a receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred and (b each Lender
severally agrees to pay to the Administrative Agent upon demand its pro rata
share of any amount so recovered from or repaid by the Administrative Agent.
X.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent and each Lender.
X.8 Assignments, Participations, etc. (a Any Lender may, with the written
consent of the Company (which consent shall not be required during the existence
of an Event of Default, and the Administrative Agent (such consents not to be
unreasonably withheld or delayed, at any time assign and delegate to one or
more Eligible Assignees (provided that no written consent of the Company or the
Administrative Agent shall be required in connection with any assignment and
delegation by a Lender to an Eligible Assignee that is an Affiliate of such
Lender (each an "Assignee" all, or any ratable part of all, of the Committed
Loans, the Commitments and the other rights and obligations of such Lender
hereunder, in a minimum amount of $5,000,000 (or, if less, the amount of such
Lender's Commitment; provided, however, that the Company and the Administrative
Agent may continue to deal solely and directly with such Lender in connection
with the interest so assigned to an Assignee until (i written notice of such
assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company
and the Administrative Agent by such Lender and the Assignee; (ii such Lender
and its Assignee shall
76
<PAGE> 83
have delivered to the Company and the Administrative Agent an Assignment and
Acceptance in the form of Exhibit J ("Assignment and Acceptance" together with
any Note or Notes subject to such assignment and (iii such Lender or the
Assignee has paid to the Administrative Agent a processing fee in the amount of
$3,500.
(b From and after the date that the Administrative Agent notifies the
assignor Lender that it has received and provided its consent (and, to the
extent required, received the consent of the Company with respect to an
executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Lender under the Loan Documents, and (ii the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Loan Documents.
(c As soon as practicable after the effectiveness of any Assignment
and Acceptance pursuant to subsection 10.8(a, the Company shall, upon request,
execute and deliver to the Administrative Agent a new Note evidencing the
applicable Assignee's assigned Loans and Commitment. Immediately upon the
effectiveness of any Assignment and Acceptance, this Agreement shall be deemed
to be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and/or the resulting adjustment of the Commitments
arising therefrom.
(d Any Lender may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Company (a "Participant" participating
interests in any Loans, the Commitment of such Lender and the other interests of
such Lender (the "originating Lender" hereunder and under the other Loan
Documents; provided, however, that (i the originating Lender's obligations
under this Agreement shall remain unchanged, (ii the originating Lender shall
remain solely responsible for the performance of such obligations, (iii the
Company, the Swing Line Lender and the Administrative Agent shall continue to
deal solely and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement and the other
Loan Documents, and (iv no Lender shall transfer or grant any participating
interest under which a Participant has rights to approve any amendment to, or
any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment, consent or waiver would require
unanimous consent of the Lenders as described in the first proviso to Section
10.1. In the case of any such participation, the Participant shall be entitled
to the
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<PAGE> 84
benefit of Sections 3.1, 3.3, 3.4 and 10.5 as though it were also a Lender
hereunder (provided that no Participant shall be entitled to any greater amount
pursuant to such Sections than the originating Lender would have been entitled
to receive if no such participation had been sold, and if amounts outstanding
under this Agreement are due and unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement.
(e Any Lender (a "Granting Lender" may grant to a special purpose
funding vehicle (an "SPC", identified as such in writing from time to time by
such Granting Lender to the Administrative Agent and the Company, the option to
provide all or any part of any Committed Loan that such Granting Lender would
otherwise be obligated to make to the Company pursuant to this Agreement;
provided that (i nothing herein shall constitute a commitment by any SPC to
make any Committed Loan and (ii if an SPC elects not to exercise such option or
otherwise fails to provide all or any part of any Committed Loan, the Granting
Lender shall be obligated to make such Committed Loan pursuant to the terms
hereof. The making of a Committed Loan by an SPC hereunder shall utilize the
Commitment of the Granting Lender to the same extent, and as if, such Committed
Loan were made by such Granting Lender. Each party hereto hereby agrees that no
SPC shall be liable for any indemnity or similar payment obligation under this
Agreement (all liability for which shall remain with the Granting Lender. In
furtherance of the foregoing, each party hereto hereby agrees (which agreement
shall survive the termination of this Agreement that, prior to the date that is
one year and one day after the payment in full of all outstanding commercial
paper or other senior indebtedness of any SPC, it will not institute, or join
any other Person in instituting, against such SPC any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding under the laws
of the United States or any State thereof with respect to any claim arising out
of this Agreement. In addition, notwithstanding anything to the contrary
contained in this subsection 10.8(e, any SPC may (i withnotice to, but without
the prior written consent of, the Company and the Administrative Agent and
without paying any processing fee therefor, assign all or a portion of its
interests in any Committed Loans to the Granting Lender or to any financial
institution providing liquidity and/or credit support to or for the account of
such SPC to support the funding or maintenance of Committed Loans and (ii
disclose on a confidential basis any non-public information relating to its
Committed Loans to any rating agency, commercial paper dealer or provider of any
surety, guarantee or credit or liquidity enhancement to such SPC.
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<PAGE> 85
(f Notwithstanding any other provision in this Agreement, any Lender
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement and any Note held by it in favor
of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
X.9 Confidentiality. Each Lender agrees to take, and to cause its
Affiliates to take, normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Administrative Agent on the Company's or such Subsidiary's behalf, under
this Agreement or any other Loan Document (including any information provided
pursuant to Section 6.2, 6.3 or 6.10, and neither such Lender nor any of its
Affiliates shall use any such information other than in connection with or in
enforcement of this Agreement and the other Loan Documents or in connection with
other business now or hereafter existing or contemplated with the Company or any
Subsidiary; except to the extent such information (i was or becomes generally
available to the public other than as a result of disclosure by such Lender, or
(ii was or becomes available on a non-confidential basis from a source other
than the Company, provided that such source is not bound by a confidentiality
agreement with the Company or any Subsidiary known to such Lender; provided,
however, that any Lender may disclose such information (A at the request or
pursuant to any requirement of any Governmental Authority to which such Lender
is subject or in connection with an examination of such Lender by any such
authority; (B pursuant to subpoena or other court process; (C when required to
do so in accordance with the provisions of any applicable Requirement of Law;
(D to the extent reasonably required in connection with any litigation or
proceeding to which the Administrative Agent or any Lender or any of their
respective Affiliates may be party; (E to the extent reasonably required in
connection with the exercise of any remedy hereunder or under any other Loan
Document; (F to such Lender's independent auditors and other professional
advisors; (G to any Participant or Assignee, actual or potential, provided that
such Person agrees in writing to keep such information confidential to the same
extent required of the Lenders hereunder; (H as to any Lender or any of its
Affiliates, as expressly permitted under the terms of any other document or
agreement regarding confidentiality to which the Company or any Subsidiary is
party or is deemed party with such Lender or such Affiliate; and (I to its
Affiliates.
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<PAGE> 86
X.10 Set-off. In addition to any rights and remedies of the Lenders
provided by law, if any Event of Default exists, each Lender is authorized at
any time and from time to time, without prior notice to the Company, any such
notice being expressly waived by the Company to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final at any time held by, and other indebtedness at any
time owing by, such Lender to or for the credit or the account of the Company
against any and all Obligations owing to such Lender, now or hereafter existing,
irrespective of whether or not the Administrative Agent or such Lender shall
have made demand under this Agreement or any other Loan Document and although
such Obligations may be contingent or unmatured. Each Lender agrees promptly to
notify the Company and the Administrative Agent after any such set-off and
application made by such Lender; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.
X.11 Notification of Addresses, Lending Offices, Etc. Each Lender shall
notify the Administrative Agent in writing of any change in the address to which
notices to such Lender should be directed, of addresses of any Lending Office,
of payment instructions in respect of all payments to be made to it hereunder
and of such other administrative information as the Administrative Agent shall
reasonably request.
X.12 Counterparts. This Agreement may be executed in any number of separate
counterparts, each of which, when so executed, shall be deemed an original, and
all of which taken together shall be deemed to constitute but one and the same
instrument.
X.13 Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
X.14 No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Company, the Lenders, the
Administrative Agent and the Administrative Agent-Related Persons and the
Indemnified Persons, and their permitted successors and assigns, and no other
Person shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with, this Agreement or any of
the other Loan Documents.
X.15 Governing Law and Jurisdiction. (a THIS AGREEMENT AND THE NOTES SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
ILLINOIS; PROVIDED THAT THE
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<PAGE> 87
ADMINISTRATIVE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
(b ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR
OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE ADMINISTRATIVE AGENT AND
THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF SUCH COURTS. EACH OF THE COMPANY, THE
ADMINISTRATIVE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. THE COMPANY, THE ADMINISTRATIVE AGENT AND THE LENDERS EACH WAIVE
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW.
X.16 Waiver of Jury Trial. THE COMPANY, THE LENDERS AND THE
ADMINISTRATIVE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY ADMINISTRATIVE AGENT-RELATED
PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE COMPANY, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENT, RENEWAL, SUPPLEMENT OR MODIFICATION TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
X.17 Entire Agreement. This Agreement, together with the other Loan
Documents (and any agreement relating to fees referred in subsection 2.11(a,
embodies the entire agreement and understanding among the Company, the Lenders
and the Administrative Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
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<PAGE> 88
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
TENNECO PACKAGING INC.
By:
---------------------------------
BANK OF AMERICA, N.A.,
as Administrative Agent
By:
---------------------------------
Title:
------------------------------
BANK OF AMERICA, N.A., as Swing Line
Lender and as a Lender
By:
---------------------------------
Title:
------------------------------
S-1
<PAGE> 89
CREDIT SUISSE FIRST BOSTON, as
Syndication Agent and as a Lender
By:
-------------------------------------
Title:
----------------------------------
By:
-------------------------------------
Title:
----------------------------------
S-2
<PAGE> 90
BANK ONE, NA
(Main Office Chicago,
as Co-Documentation Agent and as a
Lender
By:
-------------------------------------
Title:
----------------------------------
S-3
<PAGE> 91
BANQUE NATIONALE DE PARIS, as Co-
Documentation Agent and as a Lender
By:
-------------------------------------
Title:
----------------------------------
S-4
<PAGE> 92
THE BANK OF NEW YORK, as a Lender
By:
-------------------------------------
Title:
----------------------------------
S-5
<PAGE> 93
THE CHASE MANHATTAN BANK, as a Lender
By:
-------------------------------------
Title:
----------------------------------
S-6
<PAGE> 94
CITICORP USA, INC., as a Lender
By:
-------------------------------------
Title:
----------------------------------
S-7
<PAGE> 95
COMMERZBANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES, as a Lender
By:
-------------------------------------
Title:
----------------------------------
By:
-------------------------------------
Title:
----------------------------------
S-8
<PAGE> 96
FIRST UNION NATIONAL BANK, as a
Lender
By:
-------------------------------------
Title:
----------------------------------
S-9
<PAGE> 97
BARCLAYS BANK PLC, as a Lender
By:
-------------------------------------
Title:
----------------------------------
S-10
<PAGE> 98
WACHOVIA BANK, N.A
By:
-------------------------------------
Title:
----------------------------------
S-11
<PAGE> 99
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, as a Lender
By:
-------------------------------------
Title:
----------------------------------
S-12
<PAGE> 100
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH, as a Lender
By:
-------------------------------------
Title:
----------------------------------
S-13
<PAGE> 101
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as a Lender
By:
-------------------------------------
Title:
----------------------------------
S-14
<PAGE> 102
THE SUMITOMO BANK, LIMITED, as a
Lender
By:
-------------------------------------
Title:
----------------------------------
S-15
<PAGE> 103
SUNTRUST BANK, ATLANTA, as a Lender
By:
-------------------------------------
Title:
----------------------------------
S-16
<PAGE> 104
BANK HAPOALIM B.M., as a Lender
By:
-------------------------------------
Title:
----------------------------------
By:
-------------------------------------
Title:
----------------------------------
S-17
<PAGE> 105
BAYERISCHE LANDESBANK GIROZENTRALE,
CAYMAN ISLANDS BRANCH, as a Lender
By:
-------------------------------------
Title:
----------------------------------
By:
-------------------------------------
Title:
----------------------------------
S-18
<PAGE> 106
BANCA COMMERCIALE ITALIANA, CHICAGO
BRANCH, as a Lender
By:
-------------------------------------
Title:
----------------------------------
By:
-------------------------------------
Title:
----------------------------------
S-19
<PAGE> 107
THE DAI-ICHI KANGYO BANK, LTD., as a
Lender
By:
-------------------------------------
Title:
----------------------------------
S-20
<PAGE> 108
SOCIETE GENERALE, as a Lender
By:
-------------------------------------
Title:
----------------------------------
S-21
<PAGE> 109
BBL INTERNATIONAL (U.K. LIMITED, as
a Lender
By:
-------------------------------------
Title:
----------------------------------
S-22
<PAGE> 110
SCHEDULE 1.1
PRICING SCHEDULE
The Applicable Margin, the Facility Fee Rate and the Utilization Fee
Rate, respectively, shall be determined in accordance with the table below and
the other provisions of this Schedule 1.1.
<TABLE>
<CAPTION>
========================================================================================
LEVEL LEVEL LEVEL LEVEL LEVEL
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
I II III IV V
Applicable Margin 0.400% 0.625% 0.700% 0.800% 1.00%
- ----------------------------------------------------------------------------------------
Facility Fee Rate 0.100% 0.125% 0.175% 0.200% 0.250%
- ----------------------------------------------------------------------------------------
Utilization Fee Rate 0.100% 0.125% 0.125% 0.175% 0.250%
===== ===== ===== ===== =====
========================================================================================
</TABLE>
Level I applies when either the S&P Rating is A- or higher or the
Moody's Rating is A3 or higher;
Level II applies when either the S&P Rating is BBB+ or higher or the
Moody's Rating is Baa1 or higher;
Level III applies when either the S&P Rating is BBB or higher or the
Moody's Rating is Baa2 or higher;
Level IV applies when either the S&P Rating is BBB- or higher or the
Moody's Rating is Baa3 or higher; and
Level V applies when the S&P Rating is lower than BBB- and the Moody's
Rating is lower than Baa3;
provided that at any time the S&P Rating and Moody's Rating are more than one
rating level apart, the Applicable Margin, the Facility Fee Rate and the
Utilization Fee Rate shall be based on the level immediately below the higher of
such levels. If at any time there exists neither a Moody's Rating nor an S&P
Rating, the Applicable Margin, the Facility Fee Rate and the Utilization Fee
Rate during such time shall be determined as set forth above for Level V. Any
change in the Applicable Margin, the Facility Fee Rate and the Utilization Fee
Rate as a result of a change in either the S&P Rating and/or the Moody's Rating
shall be effective as of the day immediately following such change.
<PAGE> 111
SCHEDULE 2.1
COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Lender Commitment Pro Rata Share
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Bank of America, N.A. $ 57,750,000.00 7.700000000%
- --------------------------------------------------------------------------------------
Credit Suisse First Boston 54,000,000.00 7.200000000%
- --------------------------------------------------------------------------------------
Bank One, NA 54,000,000.00 7.200000000%
- --------------------------------------------------------------------------------------
Banque Nationale de Paris 54,000,000.00 7.200000000%
- --------------------------------------------------------------------------------------
The Bank of New York 42,750,000.00 5.700000000%
- --------------------------------------------------------------------------------------
The Chase Manhattan Bank 42,750,000.00 5.700000000%
- --------------------------------------------------------------------------------------
Citicorp USA, Inc. 42,750,000.00 5.700000000%
- --------------------------------------------------------------------------------------
Commerzbank AG, New York and Grand 42,750,000.00 5.700000000%
Cayman Branches
- --------------------------------------------------------------------------------------
First Union National Bank 42,750,000.00 5.700000000%
- --------------------------------------------------------------------------------------
Barclays Bank PLC 42,750,000.00 5.700000000%
- --------------------------------------------------------------------------------------
Wachovia Bank, N.A. 33,750,000.00 4.500000000%
- --------------------------------------------------------------------------------------
The Industrial Bank of Japan, Limited 26,250,000.00 3.500000000%
- --------------------------------------------------------------------------------------
The Bank of Tokyo-Mitsubishi, Ltd., 26,250,000.00 3.500000000%
Chicago Branch
- --------------------------------------------------------------------------------------
Morgan Guaranty Trust Company of New 26,250,000.00 3.500000000%
York
- --------------------------------------------------------------------------------------
The Sumitomo Bank, Limited 26,250,000.00 3.500000000%
- --------------------------------------------------------------------------------------
Suntrust Bank, Atlanta 26,250,000.00 3.500000000%
- --------------------------------------------------------------------------------------
Bank Hapoalim B.M. 22,500,000.00 3.000000000%
- --------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, 18,750,000.00 2.500000000%
Cayman Islands Branch
- --------------------------------------------------------------------------------------
Banca Commerciale Italiana, Chicago 18,750,000.00 2.500000000%
Branch
- --------------------------------------------------------------------------------------
The Dai-Ichi Kangyo Bank, Ltd. 18,750,000.00 2.500000000%
- --------------------------------------------------------------------------------------
Societe Generale 18,750,000.00 2.500000000%
- --------------------------------------------------------------------------------------
BBL International (U.K. Limited 11,250,000.00 1.500000000%
================ ===========
TOTAL $ 750,000,000.00 100.00%
- --------------------------------------------------------------------------------------
</TABLE>
1
<PAGE> 112
Schedule 5.5
Litigation
<PAGE> 113
Schedule 5.12
Environmental Matters
<PAGE> 114
Schedule 5.16
Subsidiaries and Minority Interests
<PAGE> 115
Schedule 7.2
Permitted Liens
<PAGE> 116
SCHEDULE 10.2
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
<PAGE> 1
EXHIBIT 4.4
EXECUTION COPY
===============================================================================
SHORT TERM CREDIT AGREEMENT
Dated as of September 29, 1999
among
TENNECO PACKAGING INC.,
BANK OF AMERICA, N.A.,
as Administrative Agent,
CREDIT SUISSE FIRST BOSTON,
as Syndication Agent,
BANK ONE, NA
and
BANQUE NATIONALE DE PARIS,
as Co-Documentation Agents,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
BANC OF AMERICA SECURITIES LLC
Lead Arranger and Book Manager
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms..................................................2
1.2 Other Interpretive Provisions.........................................18
1.3 Accounting Principles.................................................19
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Commitments......................................19
2.2 Loan Accounts.........................................................20
2.3 Procedure for Borrowing...............................................20
2.4 Conversion and Continuation Elections for Borrowings..................21
2.5 Voluntary Termination or Reduction of Commitments.....................23
2.6 Optional Prepayments..................................................23
2.7 Repayment.............................................................23
2.8 Interest..............................................................23
2.9 Fees..................................................................24
(a Arrangement, Agency Fees.....................................24
(b Facility Fees................................................24
(c Utilization Fees.............................................25
2.10 Computation of Fees and Interest......................................25
2.11 Payments by the Company...............................................25
2.12 Payments by the Lenders to the Administrative Agent...................26
2.13 Sharing of Payments, Etc..............................................27
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes.................................................................28
3.2 Illegality............................................................29
3.3 Increased Costs and Reduction of Return...............................30
3.4 Funding Losses........................................................31
3.5 Inability to Determine Rates..........................................31
3.6 Certificates of Lenders...............................................32
3.7 Mitigation............................................................32
3.8 Substitution of Lenders...............................................32
3.9 Survival..............................................................33
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions to Effectiveness...........................................33
(a Agreement and Notes..........................................33
(b Resolutions; Incumbency......................................33
(c Organization Documents.......................................33
(d Payment of Fees and Expenses.................................33
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
(e Tax Ruling or Opinion........................................34
(f Other Documents..............................................34
4.2 Conditions to Initial Borrowing.......................................34
(a Effective Date...............................................34
(b Consummation of Spin-Off.....................................34
(c Consents and Approvals.......................................34
(d Payments of Fees and Expenses................................35
(e Legal Opinions...............................................35
(f Certificate..................................................35
(g Other Documents..............................................35
4.3 Conditions to All Borrowings..........................................35
(a Notice.......................................................36
(b Continuation of Representations and Warranties...............36
(c No Default...................................................36
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Corporate Existence and Power.........................................36
5.2 Corporate Authorization; No Contravention.............................37
5.3 Governmental Authorization............................................37
5.4 Binding Effect........................................................37
5.5 Litigation............................................................37
5.6 No Default............................................................38
5.7 ERISA Compliance......................................................38
5.8 Use of Proceeds; Margin Regulations...................................39
5.9 Title to Properties...................................................39
5.10 Taxes.................................................................39
5.11 Financial Condition...................................................39
5.12 Environmental Matters.................................................40
5.13 Regulated Entities....................................................40
5.14 No Burdensome Restrictions............................................40
5.15 Copyrights, Patents, Trademarks and Licenses, etc. ...................40
5.16 Subsidiaries..........................................................41
5.17 Insurance.............................................................41
5.18 Year 2000 Problem.....................................................41
5.19 Full Disclosure.......................................................41
5.20 Solvency, etc.........................................................41
5.21 Labor Relations.......................................................42
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1 Financial Statements..................................................42
6.2 Certificates; Other Information.......................................43
6.3 Notices...............................................................43
6.4 Preservation of Corporate Existence, Etc..............................44
6.5 Maintenance of Property...............................................45
6.6 Insurance.............................................................45
6.7 Payment of Obligations................................................45
6.8 Compliance with Laws..................................................45
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
6.9 Compliance with ERISA.................................................45
6.10 Inspection of Property and Books and Records..........................46
6.11 Environmental Laws....................................................46
6.12 Use of Proceeds.......................................................46
6.13 Change in Business....................................................46
ARTICLE VII
NEGATIVE COVENANTS
7.1 Financial Condition Covenants.........................................47
(a Minimum Interest Coverage Ratio..............................47
(b Maximum Total Debt to EBITDA Ratio...........................47
7.2 Limitation on Liens...................................................47
7.3 Restrictions on Subsidiaries..........................................49
7.4 Consolidation, Mergers and Sales of Assets............................49
7.5 Limitation on Subsidiary Indebtedness.................................50
7.6 Transactions with Affiliates..........................................50
7.7 Use of Proceeds.......................................................50
7.8 ERISA.................................................................50
7.9 Securitization Transactions...........................................51
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Event of Default......................................................51
(a Non-Payment..................................................51
(b Representation or Warranty...................................51
(c Specific Defaults............................................51
(d Other Defaults...............................................51
(e Cross-Default................................................52
(f Insolvency; Voluntary Proceedings............................52
(g Involuntary Proceedings......................................52
(h ERISA........................................................52
(i Monetary Judgments...........................................53
(j Non-Monetary Judgments.......................................53
(k Change of Control............................................53
8.2 Remedies..............................................................53
8.3 Notice of Defaults....................................................54
8.4 Rights Not Exclusive..................................................54
ARTICLE IX
THE ADMINISTRATIVE AGENT
<C> <C>
9.1 Appointment and Authorization; "Administrative Agent".................55
9.2 Delegation of Duties..................................................55
9.3 Liability of Administrative Agent.....................................55
9.4 Reliance by Administrative Agent......................................55
9.5 Notice of Default.....................................................56
9.6 Credit Decision.......................................................56
9.7 Indemnification of Administrative Agent...............................57
9.8 Administrative Agent in Individual Capacity...........................58
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
9.9 Successor Administrative Agent........................................58
9.10 Withholding Tax.......................................................59
9.11 Other Agents..........................................................61
ARTICLE X
MISCELLANEOUS
10.1 Amendments and Waivers................................................61
10.2 Notices...............................................................62
10.3 No Waiver; Cumulative Remedies........................................63
10.4 Costs and Expenses....................................................63
10.5 Company Indemnification...............................................63
10.6 Payments Set Aside....................................................64
10.7 Successors and Assigns................................................64
10.8 Assignments, Participations, etc......................................64
10.9 Confidentiality.......................................................67
10.10 Set-off...............................................................68
10.11 Notification of Addresses, Lending Offices, Etc.......................68
10.12 Counterparts..........................................................68
10.13 Severability..........................................................68
10.14 No Third Parties Benefited............................................69
10.15 Governing Law and Jurisdiction........................................69
10.16 Waiver of Jury Trial..................................................69
10.17 Entire Agreement......................................................70
</TABLE>
iv
<PAGE> 6
SCHEDULES
Schedule 1.1 Pricing Schedule
Schedule 2.1 Commitments and Pro Rata Shares
Schedule 5.12 Environmental Matters
Schedule 5.16 Subsidiaries and Minority Interests
Schedule 5.21 Labor Relations
Schedule 7.2 Permitted Liens
Schedule 10.2 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Opinion of Counsel to the Company
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
v
<PAGE> 7
SHORT TERM CREDIT AGREEMENT
This SHORT TERM CREDIT AGREEMENT is entered into as of September 29,
1999, among TENNECO PACKAGING INC., a Delaware corporation (the "Company", the
several financial institutions from time to time party to this Agreement
(collectively the "Lenders"; individually each a "Lender", BANK OF AMERICA,
N.A., as administrative agent for the Lenders, CREDIT SUISSE FIRST BOSTON, as
Syndication Agent, and BANK ONE, NA and BANQUE NATIONALE DE PARIS, as
Co-Documentation Agents.
INTRODUCTION
1. Pursuant to a Distribution Agreement (the "Distribution Agreement"
to be entered into between Tenneco Inc. ("Tenneco" and the Company, which is a
wholly-owned subsidiary of Tenneco, Tenneco will agree to separate and divide
its existing businesses so that (a the assets, liabilities and operations of
its packaging business and administrative services operations (collectively,
the "Packaging Business" will be owned directly and indirectly by the Company
and (b the assets, liabilities and operations of its automotive business will
be directly and indirectly owned by Tenneco. Tenneco will be renamed Tenneco
Automotive Inc. immediately following the distribution described in the
succeeding paragraph.
2. Following the separation and division described in paragraph 1,
Tenneco shall distribute, as a dividend to the holders of the shares of its
common stock, all of the capital stock of the Company (the transactions
described in paragraph 1 above and this paragraph 2, as more particularly
described in the Company's filing on Form 10 and Form S-4, the "Spin-Off".
3. The Company intends to sell the 43% of the common stock of
Packaging Corporation of America, a Delaware corporation ("PCA", owned by it
to the public in a registered public offering (the "PCA IPO". Such sale is not
a condition to the Spin-Off and may take place before or after the Spin-Off
(and may be at such time and price as is permitted by market conditions.
4. Pursuant to the Distribution Agreement and in connection with the
Spin-Off and any PCA IPO, certain pre-existing indebtedness of the Company,
Tenneco and their respective subsidiaries will be paid in full, canceled or
realigned through some combination of tender offers, exchange offers,
prepayments or other forms of debt retirement.
5. Tenneco has requested that the Lenders and the Administrative Agent
enter into this Agreement in order to make
<PAGE> 8
available to the Company a $250,000,000 credit facility on the terms and
conditions set forth herein.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
I.1 Certain Defined Terms. The following terms have the following
meanings:
Acquisition means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a the
acquisition of all or substantially all of the assets of a Person, or of
all or substantially all of any business or division of a Person, (b the
acquisition of in excess of 50% of the capital stock, partnership
interests, membership interests or equity of any Person, or otherwise
causing any Person to become a Subsidiary, or (c a merger or
consolidation or any other combination with another Person (other than a
Person that is a Subsidiary provided that the Company or the Subsidiary
is the surviving entity.
Administrative Agent means Bank of America in its capacity as agent
for the Lenders hereunder, and any successor agent arising under Section
9.9.
Administrative Agent-Related Persons means Bank of America and any
successor agent arising under Section 9.9, together with their respective
Affiliates (including, in the case of Bank of America, BAS, and the
officers, directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
Administrative Agent's Payment Office means the address for payments
set forth on Schedule 10.2 or such other address as the Administrative
Agent may from time to time specify by notice to the Company and the
Lenders.
Affiliate means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with such Person. A Person shall be deemed to control another Person if
the controlling Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the other
Person, whether through the ownership of voting securities or membership
interests, by contract or
2
<PAGE> 9
otherwise; provided that none of PCA, Tenneco, Tenneco Automotive Inc. or
any Subsidiary of Tenneco Automotive Inc. (except for any thereof that are
part of the Tenneco Packaging Group shall be an Affiliate of the Company
for purposes of this Agreement.
Agreement means this Credit Agreement.
Applicable Margin - see Schedule 1.1.
Assignee - see subsection 10.8(a.
Assignment and Acceptance - see subsection 10.8(a.
Attorney Costs means and includes all reasonable fees and
disbursements of any law firm or other external counsel.
Bank of America means Bank of America, N.A., a national banking
association.
Bankruptcy Code means the Federal Bankruptcy Reform Act of 1978
(11 U.S.C. Section 101, et seq..
BAS means Bank of America Securities LLC, a Delaware limited liability
company.
Base Rate means, for any day, the higher of: (a 0.50% per annum above
the latest Federal Funds Rate; or (b the rate of interest in effect for
such day as publicly announced from time to time by Bank of America, as
its "prime", "reference" or equivalent rate. (The "prime", "reference" or
equivalent rate is a rate set by Bank of America based upon various
factors including Bank of America's costs and desired return, general
economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above or below such
announced rate. Any change in the reference rate announced by Bank of
America shall take effect at the opening of business on the day specified
in the public announcement of such change.
Base Rate Loan means a Loan that bears interest based on the Base
Rate.
Borrowing means a borrowing hereunder consisting of Loans of the same
Type made to the Company on the same day by the Lenders according to their
respective Pro Rata Shares and, other than in the case of Base Rate Loans,
having the same Interest Period.
3
<PAGE> 10
Borrowing Date means any date on which a Borrowing occurs under
Section 2.3.
Business Day means any day other than a Saturday, Sunday or other day
on which commercial banks in New York City or Charlotte, North Carolina
are authorized or required by law to close and, if the applicable Business
Day relates to any Offshore Rate Loan, means such a day on which dealings
in Dollars are carried on in the London interbank market.
Capital Adequacy Regulation means any guideline, request or directive
of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a
bank.
Capital Lease means, with respect to any Person, any lease of (or
other agreement conveying the right to use any real or personal property
by such Person that, in conformity with GAAP, is accounted for as a
capital lease on the balance sheet of such Person.
Change of Control means that (a any Person or group (within the
meaning of Rule 13d-5 of the SEC under the Exchange Act, other than
Tenneco prior to the date of the Spin-Off, shall have beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the SEC of 25% or more
of the Voting Stock of the Company or (b a majority of the members of the
Board of Directors of the Company shall cease to be Continuing Members.
Code means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
Combined Commitments means the amount of the combined Commitments of
all Lenders. As of the Effective Date, the amount of the Combined
Commitments is $250,000,000.
Combined Outstandings means the aggregate principal amount of all
outstanding Loans.
Commitment - see Section 2.1.
Company - see the Preamble.
Compliance Certificate means a certificate substantially in the form
of Exhibit C.
4
<PAGE> 11
Computation Period means any period of four consecutive fiscal
quarters ending on the last day of a fiscal quarter.
Consolidated EBITDA means, with respect to the Company and its
Subsidiaries for any period of computation thereof during such period, the
sum of, without duplication, (i Consolidated Net Income, plus (ii
Consolidated Interest Expense during such period, plus (iii taxes on
income during such period, plus (iv amortization during such period, plus
(v depreciation during such period plus (vi minority interest expense.
Consolidated Interest Expense means, with respect to any period of
computation thereof, the interest expense (net of interest income of the
Company and its Subsidiaries, including (i the amortization of debt
discounts, (ii the amortization of all fees payable in connection with
the incurrence of Indebtedness to the extent included in interest expense,
and (iii the portion of any lease expense incurred in connection with
Capital Leases allocable to interest expense.
Consolidated Net Income means, for any period of computation thereof,
the net income (or loss of the Company and its Subsidiaries on a
consolidated basis for such period, but excluding (i all non-cash
non-recurring gains or losses, (ii for the fiscal year ending December
31, 1999, cash non-recurring charges in an amount not to exceed
$50,000,000 and (iii with respect to any discontinued operations, any
gain (or loss resulting therefrom. For purposes of this definition, and
otherwise for purposes of measuring covenant compliance under Section 7.1,
calculations for fiscal quarters within any Computation Period in which
any discontinuance of operations has occurred, but which ended prior to
the fiscal quarter in which such discontinuance occurred, shall not be
restated to reflect such discontinuance of operations.
Contingent Obligation means, as to any Person, any direct or indirect
liability of such Person, whether or not contingent, (a with respect to
any Indebtedness, lease, dividend, letter of credit or other obligation
(the "primary obligations" of another Person (the "primary obligor",
including any obligation of such Person (i to purchase, repurchase or
otherwise acquire such primary obligations or any security therefor, (ii
to advance or provide funds for the payment or discharge of any such
primary obligation, or to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency or
any balance sheet item, level of income or financial condition of the
primary obligor, (iii to purchase
5
<PAGE> 12
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv otherwise to assure or
hold harmless the holder of any such primary obligation against loss in
respect thereof (each a "Guaranty Obligation"; (b with respect to any
Surety Instrument issued for the account of such Person or as to which
such Person is otherwise liable for reimbursement of drawings or payments;
or (c to purchase any materials, supplies or other property from, or to
obtain the services of, another Person if the relevant contract or other
related document or obligation requires that payment for such materials,
supplies or other property, or for such services, shall be made regardless
of whether delivery of such materials, supplies or other property is ever
made or tendered, or such services are ever performed or tendered. The
amount of any Contingent Obligation shall (a in the case of Guaranty
Obligations, be deemed equal to the stated or determinable amount of the
primary obligation in respect of which such Guaranty Obligation is made
or, if not stated or if indeterminable, the maximum reasonably anticipated
liability in respect thereof, and (b in the case of other Contingent
Obligations, be equal to the maximum reasonably anticipated liability in
respect thereof.
Continuing Member means a member of the Board of Directors of the
Company who either (a was a member of the Company's Board of Directors on
the Effective Date and has been such continuously thereafter or (b became
a member of such Board of Directors after the Effective Date and whose
election or nomination for election was approved by a vote of the majority
of the Continuing Members then members of the Company's Board of
Directors.
Contractual Obligation means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other document to which such Person
is a party or by which it or any of its property is bound.
Conversion/Continuation Date means any date on which, under Section
2.4, the Company (a converts Loans of one Type to the other Type or (b
continues Offshore Rate Loans for a new Interest Period.
Distribution Agreement - see paragraph 1 of the Introduction to this
Agreement.
Dollars, dollars and $ each mean lawful money of the United States.
6
<PAGE> 13
Effective Date - see Section 4.1.
Eligible Assignee means (a a financial institution organized under
the laws of the United States, or any state thereof, and having a combined
capital and surplus of at least $100,000,000; (b a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the OECD, or a
political subdivision of any such country, and having a combined capital
and surplus of at least $100,000,000, provided that such bank is acting
through a branch or agency located in the United States; and (c a Person
that is primarily engaged in the business of commercial lending and that
is (i a Lender, (iia Subsidiary of a Lender, (iii a Subsidiary of a
Person of which a Lender is a Subsidiary, or (iv a Person of which a
Lender is a Subsidiary.
Environmental Claims means all written claims, however asserted, by
any Governmental Authority alleging potential liability or responsibility
for violation of any Environmental Law or for release to the environment.
Environmental Laws means all federal, state, local or municipal laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative or judicial orders, directed duties,
requests, licenses, authorizations and permits of, and agreements with,
any Governmental Authorities, in each case relating to environmental,
health, safety and land use matters.
ERISA means the Employee Retirement Income Security Act of 1974, and
the regulations promulgated thereunder.
ERISA Affiliate means any trade or business (whether or not
incorporated under common control with the Company within the meaning of
Section 414(b or (c of the Code (and Sections 414(m and (o of the Code
for purposes of provisions relating to Section 412 of the Code.
ERISA Event means (a a Reportable Event with respect to a Pension
Plan; (b a withdrawal by the Company or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which
it was a substantial employer (as defined in Section 4001(a(2 of ERISA
or a substantial cessation of operations which is treated as such a
withdrawal; (c a complete or partial withdrawal by the Company or any
ERISA Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d the filing of a notice of
intent to terminate a Pension
7
<PAGE> 14
Plan under Section 4041(c of ERISA, the termination of a Multiemployer
Plan under 4041A of ERISA, or the commencement of proceedings by the PBGC
to terminate a Pension Plan or Multiemployer Plan; (e an event or
condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f the
imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the
Company or any ERISA Affiliate.
Event of Default means any of the events or circumstances specified in
Section 8.1; provided that any requirement of notice or lapse of time (or
both has been satisfied.
Exchange Act means the Securities and Exchange Act of 1934.
Facility Fee Rate - see Schedule 1.1.
Federal Funds Rate means, for any day, the rate per annum (rounded
upwards to the nearest 1/100 of 1% equal to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published
by the Federal Reserve Bank on the Business Day next succeeding such day;
provided that (a if such day is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business
Day, and (b if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average
rate charged to Bank of America on such day on such transactions as
determined by the Administrative Agent.
Form 10 means the Company's Information Statement on Form 10 filed
with the SEC on July 15, 1999, as amended by Form 10 Amendment No. 1,
filed with the SEC on September 10, 1999.
FRB means the Board of Governors of the Federal Reserve System, and
any Governmental Authority succeeding to any of its principal functions.
Funding Date - see Section 4.2.
GAAP means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements
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<PAGE> 15
of the Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting profession,
which are applicable to the circumstances as of the date of determination.
Governmental Authority means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary
or regulatory authority thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
Guaranty Obligation has the meaning specified in the definition of
Contingent Obligation.
Indebtedness of any Person means, without duplication, (a all
indebtedness of such Person for borrowed money; (b all obligations of
such Person to pay the deferred purchase price of property or services,
except such obligations arising in the ordinary course of business and
maturing less than one year from the date of creation thereof; (c all
non-contingent reimbursement or payment obligations of such Person with
respect to Surety Instruments; (d all non- contingent obligations of such
Person evidenced by notes, bonds, debentures or similar instruments; (e
all obligations of such Person with respect to Capital Leases; (f all
indebtedness of any other Person of the types referred to in clauses (a
through (e above secured by (or for which the holder of such indebtedness
has an existing right, contingent or otherwise, to be secured by any Lien
upon or in property (including accounts and contracts rights owned by
such Person, even though such Person has not assumed or become liable for
the payment of such indebtedness; provided that the amount of any such
Indebtedness shall be deemed to be the lesser of the face principal amount
thereof and the fair market value of the property subject to such Lien;
(g all indebtedness of the types described in clauses (a through (e
above of any partnership in which such Person is a general partner unless
expressly non-recourse to such Person; and (h all Guaranty Obligations of
such Person in respect of Indebtedness of the types described above;
provided that Indebtedness shall not include (i obligations arising out
of the endorsement of instruments for deposit or collection in the
ordinary course of business or (ii the obligations of such Person under
an
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operating lease, a synthetic lease or other similar arrangement.
Indemnified Liabilities - see Section 10.5.
Indemnified Person - see Section 10.5.
Independent Auditor - see subsection 6.1(a.
Insolvency Proceeding means, with respect to any Person, (a any case,
action or proceeding with respect to such Person before any court or
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors or
(b any general assignment for the benefit of creditors, composition,
marshalling of assets for creditors, or other, similar arrangement in
respect of its creditors generally or any substantial portion of its
creditors; in each case undertaken under any U.S. Federal, state or
foreign law, including the Bankruptcy Code.
Interest Coverage Ratio means, for any Computation Period, the ratio
of (a Consolidated EDITDA for such Computation Period to (b Consolidated
Interest Expense for such Computation Period.
Interest Payment Date means, as to any Offshore Rate Loan, the last
day of each Interest Period applicable to such Loan and, as to any Base
Rate Loan, the last Business Day of each calendar quarter, provided that
if any Interest Period for an Offshore Rate Loan exceeds three months,
each three-month anniversary of the first day of such Interest Period also
shall be an Interest Payment Date.
Interest Period means, as to any Offshore Rate Loan, the period
commencing on the Borrowing Date of such Loan or on the date on which such
Loan is converted into or continued as an Offshore Rate Loan, and ending
on the date one, two, three or six months thereafter as selected by the
Company in its Notice of Borrowing or Notice of Conversion/ Continuation,
as the case may be; provided that:
(i if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
following Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day;
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(ii any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period shall end on the last Business Day of the calendar month at
the end of such Interest Period; and
(iii no Interest Period for any Loan shall extend beyond the
scheduled Termination Date.
IRS means the Internal Revenue Service, and any Governmental Authority
succeeding to any of its principal functions under the Code.
Knowledge of the Company means the actual knowledge of any Responsible
Officer.
Lender - see the Preamble.
Lending Office means, as to any Lender, the office or offices of such
Lender specified as its "Lending Office" or "Domestic Lending Office" or
"Offshore Lending Office", as the case may be, on Schedule 10.2, or such
other office or offices as such Lender may from time to time notify the
Company and the Administrative Agent.
LIBOR - see the definition of Offshore Rate.
Lien means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance,
lien (statutory or other or preferential arrangement of any kind or
nature whatsoever in respect of any property (including those created by,
arising under or evidenced by any conditional sale or other title
retention agreement, the interest of a lessor under a Capital Lease, or
any financing lease having substantially the same economic effect as any
of the foregoing, but not including the interest of a lessor under an
operating lease.
Loan means an extension of credit by a Lender to the Company under
Section 2.1, which may be a Base Rate Loan or an Offshore Rate Loan (each
a "Type" of Loan.
Loan Documents means this Agreement and any Notes.
Majority Lenders means Lenders holding Pro Rata Shares aggregating
more than 50%.
Margin Stock means "margin stock" as such term is defined in
Regulation T, U or X of the FRB.
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Material Adverse Effect means (aany event or circumstance that has
resulted in or would reasonably be expected to result in a material
adverse change in, or has had or would be reasonably expected to have a
material adverse effect upon, the operations, business, properties or
condition (financial or otherwise of the Company and its Subsidiaries
taken as a whole or (b any event or circumstance that would prevent the
Spin-Off.
Material Financial Obligations means Indebtedness or Contingent
Obligations of the Company or any Subsidiary, or obligations of the
Company or any Subsidiary in respect of any Securitization Transaction, in
an aggregate amount (for all applicable Indebtedness, Contingent
Obligations and obligations in respect of Securitization Transactions, but
without duplication equal to $50,000,000 or more.
Material Subsidiary means, at any time, any Subsidiary having at such
time either (i total (gross revenues for any Computation Period in
excess of 5% of total (gross revenues for the Company and its
Subsidiaries or (ii total assets, as of the last day of the preceding
fiscal quarter, having a net book value in excess of 5% of the
consolidated assets of the Company and its Subsidiaries, in each case,
based upon the Company's most recent annual or quarterly financial
statements delivered to the Lenders and the Administrative Agent under
Section 6.1.
Moody's means Moody's Investors Service, Inc., or any successor
thereto.
Moody's Rating means the actual rating level assigned by Moody's to
the Company's senior unsecured long-term public debt.
Multiemployer Plan means a "multiemployer plan", within the meaning of
Section 4001(a(3 of ERISA, with respect to which the Company or any
ERISA Affiliate may have any liability.
Note means a promissory note executed by the Company in favor of a
Lender pursuant to subsection 2.2(b, in substantially the form of Exhibit
F.
Notice of Borrowing means a notice in substantially the form of
Exhibit A.
Notice of Conversion/Continuation means a notice in substantially the
form of Exhibit B.
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Obligations means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the Company
to any Lender, the Administrative Agent or any other Indemnified Person,
whether direct or indirect (including those acquired by assignment,
absolute or contingent, due or to become due, or now existing or hereafter
arising.
Offshore Rate means, for any Interest Period, with respect to Offshore
Rate Loans comprising part of the same Borrowing, the rate of interest per
annum (rounded upward to the next 1/100th of 1% determined by the
Administrative Agent as follows:
Offshore Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward, if necessary, to an integral multiple of
1/100th of 1% in effect on such day (whether or not applicable to any
Lender under regulations issued from time to time by the FRB for
determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement with respect to
Eurocurrency funding (currently referred to as "Eurocurrency
liabilities"; and
"LIBOR" means, for any Interest Period, the rate of interest
per annum determined by the Administrative Agent to be equal to the
London interbank offered rate for deposits in Dollars having a
maturity equal or comparable to such Interest Period as indicated on
display 3750 of the Dow Jones Markets Screen as of 11:00 a.m.
(London time two Business Days prior to the commencement of such
Interest Period. If such rate does not appear on 3750 of the Dow
Jones Markets screen (or otherwise on such screen, "LIBOR" shall be
determined by reference to such other comparable publicly available
service for displaying such rates as may be selected by the
Administrative Agent or, in the absence of such availability, by
reference to the rate at which the Administrative Agent is offered
deposits in Dollars having a maturity equal or comparable to such
Interest Period by major banks in the interbank market at or about
11:00 a.m. (New York City time two Business Days prior to the
commencement of such Interest Period in the approximate amount of the
Loan
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<PAGE> 20
to be made or continued as, or converted into, an Offshore Rate Loan
by Bank of America.
The Offshore Rate shall be adjusted automatically as to all Offshore Rate
Loans then outstanding as of the effective date of any change in the
Eurodollar Reserve Percentage.
Offshore Rate Loan means a Loan that bears interest based on the
Offshore Rate.
Organization Documents means (i for any corporation, the certificate
or articles of incorporation, the bylaws, any certificate of determination
or instrument relating to the rights of preferred shareholders of such
corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof of such
corporation, (ii for any partnership or joint venture, the partnership or
joint venture agreement and any other organizational document of such
entity, (iii for any limited liability company, the certificate or
articles of organization, the operating agreement and any other
organizational document of such limited liability company, (iv for any
trust, the declaration of trust, the trust agreement and any other
organizational document of such trust and (v for any other entity, the
document or agreement pursuant to which such entity was formed and any
other organizational document of such entity.
Other Credit Agreement means the Long Term Credit Agreement dated as
of September 29, 1999 among the Company, certain financial institutions as
lenders and Bank of America as administrative agent.
Other Taxes means any present or future stamp, court or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery, performance, enforcement or registration of, or otherwise with
respect to, this Agreement or any other Loan Document.
Packaging Business - see paragraph 1 of the Introduction to this
Agreement.
Participant - see subsection 10.8(d.
PBGC means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under
ERISA.
PCA - see paragraph 3 of the Introduction to this Agreement.
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<PAGE> 21
PCA IPO - see paragraph 3 of the Introduction to this Agreement.
Pension Plan means a pension plan (as defined in Section 3(2 of
ERISA subject to Title IV of ERISA, other than a Multiemployer Plan, with
respect to which the Company or any ERISA Affiliate may have any
liability.
Permitted Liens - see Section 7.2.
Person means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
Plan means an employee benefit plan (as defined in Section 3(3 of
ERISA, other than a Multiemployer Plan, with respect to which the Company
or any ERISA Affiliate may have any liability, and includes any Pension
Plan.
Pro Rata Share means for any Lender at any time the proportion
(expressed as a decimal, rounded to the ninth decimal place which such
Lender's Commitment constitutes of the Combined Commitments (or, after the
Commitments have terminated, which (i the principal amount of such
Lender's Loans constitutes of (ii the aggregate principal amount of all
Loans.
Reportable Event means, any of the events set forth in Section 4043(c
of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
Requirement of Law means, as to any Person, any law (statutory or
common, treaty, rule or regulation or determination of a court, an
arbitrator or of a Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person or
any of its property is subject.
Responsible Officer means the chief executive officer or the president
of the Company, or any other officer having substantially the same
authority and responsibility; or, with respect to financial matters, the
chief financial officer or the treasurer of the Company, or any other
officer having substantially the same authority and responsibility; or,
with respect to litigation and Requirements of Law, the general counsel of
the Company.
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<PAGE> 22
S&P means Standard & Poor's Ratings Services, a Division of the
McGraw-Hill Companies, or any successor thereto.
S&P Rating means the actual rating level assigned by S&P to the
Company's senior unsecured long-term public debt.
SEC means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.
Securitization Transaction means any sale, assignment or other
transfer by the Company or any Subsidiary of accounts receivable, lease
receivables or other payment obligations owing to the Company or any
Subsidiary or any interest in any of the foregoing, together in each case
with any collections and other proceeds thereof, any collection or deposit
accounts related thereto, and any collateral, guaranties or other property
or claims in favor of the Company or such Subsidiary supporting or
securing payment by the obligor thereon of, or otherwise related to, any
such receivables.
Spin-Off - see paragraph 2 of the Introduction to this Agreement.
Subsidiary of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests or
other equity interests is owned or controlled directly or indirectly by
such Person, or one or more of the Subsidiaries of such Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the Company.
Surety Instruments means all letters of credit (including standby and
commercial, bankers' acceptances, bank guaranties, shipside bonds, surety
bonds and similar instruments.
Taxes means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholdings or similar charges, and
all liabilities with respect thereto, excluding, in the case of each
Lender and the Administrative Agent, taxes imposed on or measured by its
net income, franchise taxes and similar taxes.
Tenneco - see paragraph 1 of the Introduction to this Agreement.
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Tenneco Packaging Group means the Company, its Subsidiaries as of the
Effective Date, and the companies which are expected to become its
Subsidiaries in connection with the Spin-Off as of the Funding Date.
Termination Date means the earlier to occur of:
(a September 27, 2000; and
(b the date on which the Commitments terminate in accordance
with the provisions of this Agreement.
Total Debt means, at any time, the sum (determined on a consolidated
basis and without duplication of all Indebtedness of the Company and its
Subsidiaries.
Total Debt to EBITDA Ratio means at any time the ratio of (a Total
Debt at such time to (b Consolidated EBITDA for the Computation Period
ending on the last day of the most recent fiscal quarter for which the
Company has delivered financial statements pursuant to Section 6.1(a or
6.1(b.
Total Outstandings means the sum of (a the Combined Outstandings plus
(b the aggregate principal amount of all outstanding "Loans" (as defined
in the Other Credit Agreement.
Type has the meaning specified in the definition of "Loan."
Unfunded Pension Liability means the excess of a Pension Plan's
benefit liabilities under Section 4001(a(16 of ERISA, over the current
value of such Plan's assets, determined in accordance with the assumptions
used for funding such Pension Plan pursuant to Section 412 of the Code for
the applicable plan year.
United States and U.S. each means the United States of America.
Unmatured Event of Default means any event or circumstance which, with
the giving of notice, the lapse of time or both, will (if not cured or
otherwise remedied during such time constitute an Event of Default.
Utilization Fee Rate - see Schedule 1.1.
Voting Stock means, with respect to any Person, any shares of stock or
other equity interests of any class or classes of such Person whose
holders are entitled under
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<PAGE> 24
ordinary circumstances (irrespective of whether at the time stock or other
equity interests of any other class or classes shall have or might have
voting power by reason of the happening of any contingency to vote for
the election of a majority of the directors, managers, trustees or other
governing body of such Person.
Wholly-Owned Subsidiary means any Subsidiary in which (other than
directors' qualifying shares required by law 100% of the capital stock,
membership interests or other equity interests of each class having
ordinary voting power, and 100% of the capital stock, membership interests
or other equity interests of every other class, in each case, at the time
as of which any determination is being made, is owned, beneficially and of
record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
I.2 Other Interpretive Provisions.
(a The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b The words "hereof", "herein", "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c (i The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii The term "including" is not limiting and means "including
without limitation."
(iii In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word "through"
means "to and including."
(d Unless otherwise expressly provided herein, (i references to
agreements (including this Agreement and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii references to any
statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
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<PAGE> 25
(e The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(f This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.
(g This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Administrative
Agent, the Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the
Administrative Agent merely because of the Administrative Agent's or Lenders'
involvement in their preparation.
I.3 Accounting Principles.
(a Unless the context otherwise requires, all accounting terms not
expressly defined herein shall be construed, and all financial computations
required under this Agreement shall be made, in accordance with GAAP,
consistently applied (except for changes agreed to by the Company's independent
public accountants; provided that if the Company notifies the Administrative
Agent that the Company wishes to amend any covenant in Article VII to eliminate
the effect of any change in GAAP that became effective during the preceding
one-year period on the operation of such covenant (or if the Administrative
Agent notifies the Company that the Required Lenders wish to amend Article VII
for such purpose, then the Company's compliance with such covenant shall be
determined on the basis of GAAP in effect immediately before the relevant
change in GAAP became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Company and the Required
Lenders.
(b All financial computations required under this Agreement for any
period prior to the Spin-Off shall be made on a pro forma basis and in a manner
consistent with the Form 10.
(c References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
ARTICLE II
THE CREDITS
II.1 Amounts and Terms of Commitments. Each Lender severally agrees, on
the terms and conditions set forth herein,
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to make Loans to the Company from time to time on any Business Day during the
period from the Effective Date to the Termination Date, in an aggregate amount
at any time outstanding up to the amount set forth on Schedule 2.1 (such
amount, as reduced pursuant to Section 2.5, or changed by one or more
assignments under Section 10.8, such Lender's "Commitment"; provided that,
after giving effect to any Borrowing, the Combined Outstandings shall not
exceed the Combined Commitments; and provided, further, that the aggregate
principal amount of the Loans of any Lender shall not at any time exceed such
Lender's Commitment. Within the limits of each Lender's Commitment, and subject
to the other terms and conditions hereof, the Company may borrow under this
Section 2.1, prepay under Section 2.6 and reborrow under this Section 2.1.
II.2 Loan Accounts. (a The Loans made by each Lender shall be evidenced
by one or more accounts or records maintained by such Lender in the ordinary
course of business. The accounts or records maintained by the Administrative
Agent and each Lender shall be rebuttable presumptive evidence of the amount of
the Loans made by the Lenders to the Company, and the interest and payments
thereon. Any failure so to record or any error in doing so shall not, however,
limit or otherwise affect the obligation of the Company hereunder to pay any
greater or lesser amount owing with respect to the Loans.
(b Upon the request of any Lender made through the Administrative
Agent, the Loans made by such Lender may be evidenced by one or more Notes,
instead of or in addition to loan accounts. Each such Lender shall endorse on
the schedules annexed to its Note(s the date, amount and maturity of each Loan
evidenced thereby and the amount of each payment of principal made by the
Company with respect thereto. Each such Lender is irrevocably authorized by the
Company to endorse its Note(s and each Lender's record shall be rebuttable
presumptive evidence of the amount of the Loans evidenced thereby, and the
interest and payments thereon; provided that the failure of a Lender to make,
or an error in making, a notation thereon with respect to any Loan shall not
limit or otherwise affect the obligations of the Company hereunder to pay any
greater or lesser amount owing under any such Note to such Lender.
II.3 Procedure for Borrowing. (a Each Borrowing shall be made upon the
Company's irrevocable written notice delivered to the Administrative Agent in
the form of a Notice of Borrowing, which notice must be received by the
Administrative Agent prior to (i 11:30 a.m. (New York time three Business
Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans,
and (ii 11:30 a.m. (New York time on the requested Borrowing Date, in the
case of Base Rate Loans, specifying:
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(A the amount of the Borrowing, which shall be in an
aggregate amount of $5,000,000 or a higher multiple of $1,000,000;
(B the requested Borrowing Date, which shall be a
Business Day;
(C the Type of Loans comprising such Borrowing; and
(D in the case of Offshore Rate Loans, the duration of
the initial Interest Period applicable to such Loans.
(b The Administrative Agent will promptly notify each Lender
of its receipt of any Notice of Borrowing and of the amount of such Lender's
Pro Rata Share of such Borrowing.
(c Each Lender will make the amount of its Pro Rata Share of each
Borrowing available to the Administrative Agent for the account of the Company
at the Administrative Agent's Payment Office by 1:00 p.m. (New York time on
the Borrowing Date requested by the Company in funds immediately available to
the Administrative Agent. The proceeds of all such Loans will then promptly be
made available to the Company by the Administrative Agent by wire transfer in
accordance with written instructions provided to the Administrative Agent by
the Company of like funds as received by the Administrative Agent.
(d After giving effect to any Borrowing, unless the Administrative
Agent otherwise consents, the number of Interest Periods in effect hereunder
shall not exceed 15.
II.4 Conversion and Continuation Elections for Borrowings. (a The
Company may, upon irrevocable written notice to the Administrative Agent in
accordance with subsection 2.4(b:
(i elect, as of any Business Day, in the case of Base Rate
Loans, or as of the last day of the applicable Interest Period,
in the case of Offshore Rate Loans, to convert such Loans (or any part
thereof in an aggregate amount of $5,000,000 or a higher integral multiple
of $1,000,000 into Loans of the other Type; or
(ii elect, as of the last day of the applicable Interest
Period, to continue any Offshore Rate Loans having Interest Periods
expiring on such day (or any part thereof in an aggregate amount of
$5,000,000 or a higher integral multiple of $1,000,000 for another
Interest Period;
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provided that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
any part thereof, to be less than $1,000,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans.
(b The Company shall deliver a Notice of Conversion/Continuation to
be received by the Administrative Agent not later than 11:30 a.m. (New York
time (i three Business Days in advance of the Conversion/Continuation Date,
if the Loans are to be converted into or continued as Offshore Rate Loans; and
(ii on the Conversion/Continuation Date, if the Loans are to be converted into
Base Rate Loans, specifying:
(A the proposed Conversion/Continuation Date;
(B the aggregate amount of Loans to be converted or
continued;
(C the Type of Loans resulting from the proposed
conversion or continuation; and
(D in the case of conversion into or continuation of
Offshore Rate Loans, the duration of the requested Interest Period.
(c If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Offshore Rate Loans (or any Event of Default or
Unmatured Event of Default exists and the Majority Lenders have not given the
consent referred to in subsection (e below, such Offshore Rate Loans shall
automatically convert into Base Rate Loans effective as of the expiration date
of such Interest Period.
(d The Administrative Agent will promptly notify each Lender of its
receipt of a Notice of Conversion/Continuation, or, if no timely notice
is provided by the Company, the Administrative Agent will promptly notify each
Lender of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Loans with respect to which the notice was given held
by each Lender.
(e Unless the Majority Lenders otherwise consent, the Company may
not elect to have a Loan converted into or continued as an Offshore
Rate Loan during the existence of an Event of Default or Unmatured Event of
Default.
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(f After giving effect to any conversion or continuation of
Loans, unless the Administrative Agent shall otherwise consent, the number of
Interest Periods in effect hereunder shall not exceed 15.
II.5 Voluntary Termination or Reduction of Commitments. The Company
may, upon not less than three Business Days' prior notice to the Administrative
Agent, terminate the Commitments, or permanently reduce the Combined
Commitments to an amount not less than the Combined Outstandings. Any such
reduction shall be in a minimum amount of $5,000,000 or a higher integral
multiple of $1,000,000. Once reduced in accordance with this Section, the
Commitments may not be increased. Any reduction of the Commitments shall be
applied to reduce the Commitment of each Lender according to its Pro Rata
Share. If the Company terminates the Commitments or reduces the Commitments to
zero, the Company shall pay all accrued and unpaid interest, fees and other
amounts payable hereunder on the date of such termination or reduction.
II.6 Optional Prepayments. (a Subject to the proviso to subsection
2.4(a,the Company may, from time to time, upon irrevocable notice to the
Administrative Agent, which notice must be received by the Administrative Agent
prior to 11:30 a.m. New York time (i three Business Days prior to the date of
prepayment, in the case of Offshore Rate Loans, and (ii on the date of
prepayment, in the case of Base Rate Loans, ratably prepay Loans in whole or in
part, in an aggregate amount of $5,000,000 or a higher integral multiple of
$1,000,000. Such notice of prepayment shall specify the date and amount of such
prepayment and the Loans to be prepaid. The Administrative Agent will promptly
notify each Lender of its receipt of any such notice and of such Lender's Pro
Rata Share of such prepayment. If such notice is given by the Company, the
Company shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein, together with,
in the case of Offshore Rate Loans, accrued interest to such date on the amount
prepaid and any amounts required pursuant to Section 3.4.
(b There shall be no premium or penalty imposed upon or incurred by
the Company in connection with the reduction of a Commitment, voluntary
termination, or prepayment under Section 2.5 or 2.6(a(but any prepayment shall
be subject to Section 3.4.
II.7 Repayment. The Company shall repay all Loans on the Termination
Date.
II.8 Interest. (a Each Loan shall bear interest on the outstanding
principal amount thereof from the applicable
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Borrowing Date at a rate per annum equal to (i the Offshore Rate plus the
Applicable Margin or (ii the Base Rate, as the case may be (and subject to the
Company's right to convert to the other Type of Loan under Section 2.4.
(b Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest also shall be paid on the date of any conversion of
Offshore Rate Loans under Section 2.4 and prepayment of Offshore Rate Loans
under Section 2.6, in each case for the portion of the Loans so converted or
prepaid.
(c Notwithstanding the foregoing provisions of this Section, upon
notice to the Company from the Administrative Agent (acting at the request or
with the consent of the Majority Lenders during the existence of any Event of
Default, and for so long as such Event of Default continues, the Company shall
pay interest (after as well as before entry of judgment thereon to the extent
permitted by law on the principal amount of all outstanding Loans and, to the
extent permitted by applicable law, on any other amount payable hereunder or
under any other Loan Document, at a rate per annum which is determined by
adding 2% per annum to the rate otherwise applicable thereto pursuant to the
terms hereof or such other Loan Document (or, if no such rate is specified, the
Base Rate. All such interest shall be payable on demand.
(d Anything herein to the contrary notwithstanding, the obligations
of the Company to any Lender hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent that contracting for
or receiving such payment by such Lender would be contrary to the provisions of
any law applicable to such Lender limiting the highest rate of interest that
may be lawfully contracted for, charged or received by such Lender, and in such
event the Company shall pay such Lender interest at the highest rate permitted
by applicable law.
II.9 Fees. (a Arrangement, Agency Fees. The Company agrees to pay to
the Administrative Agent and BAS such fees at such times and in such amounts as
are mutually agreed to from time to time by the Company, the Administrative
Agent and BAS.
(b Facility Fees. The Company shall pay to the Administrative Agent
for the account of each Lender a facility fee computed at the Facility Fee Rate
per annum on the amount of such Lender's Commitment as in effect from time to
time (whether used or unused or, if the Commitments have terminated, on the
principal amount of such Lender's Loans. Such facility fee shall accrue from
the Effective Date to the Termination Date, and thereafter until all Loans are
paid in full, and shall be due and
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payable quarterly in arrears on the last Business Day of each calendar quarter,
with the final payment to be made on the Termination Date (or, if later, on the
date all Loans are paid in full.
(c Utilization Fees. For any day on which the amount of the Total
Outstandings exceeds 33% of the sum of Combined Commitments plus the "Combined
Commitments" under and as defined in the Other Credit Agreement, the Company
shall pay to the Administrative Agent for the account of each Lender a
utilization fee for such day computed at a rate per annum equal to the
Utilization Fee Rate on the principal amount of such Lender's Loans. Such
utilization fee shall accrue (for any day on which applicable from the
Effective Date to the Termination Date, and thereafter until all Loans are paid
in full, and shall be due and payable quarterly in arrears on the last Business
Day of each calendar quarter, with the final payment to be made on the
Termination Date (or, if later, on the date all Loans are paid in full.
II.10 Computation of Fees and Interest. (a All computations of
interest for Base Rate Loans when the Base Rate is determined by Bank of
America's "reference rate", shall be made on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed. All other computations of
interest and fees shall be made on the basis of a 360-day year and actual days
elapsed. Interest and fees shall accrue during each period during which such
interest or such fees are computed from the first day thereof to the last day
thereof.
(b Each determination of an interest rate by the Administrative Agent
shall be conclusive and binding on the Company and the Lenders in the absence
of manifest error. The Administrative Agent will, at the request of the Company
or any Lender, deliver to the Company or such Lender, as the case may be, a
statement showing the quotations used by the Administrative Agent in
determining any interest rate and the resulting interest rate.
II.11 Payments by the Company. (a All payments to be made by the Company
shall be made without set-off, recoupment or counterclaim. Except as otherwise
expressly provided herein, all payments by the Company shall be made to the
Administrative Agent for the account of the Lenders at the Administrative
Agent's Payment Office, and shall be made in Dollars and in immediately
available funds, no later than 2:00 p.m. (New York time on the date specified
herein. The Administrative Agent will promptly distribute to each Lender its
Pro Rata Share (or other applicable share as expressly provided herein of such
payment in like funds as received. Any payment received by the Administrative
Agent later than 2:00 p.m. (New York time shall be deemed to have been
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received on the following Business Day and any applicable interest or fee shall
continue to accrue.
(b Whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day (unless, in the case
of a payment with respect to an Offshore Rate Loan, the following Business Day
is in another calendar month, in which case such payment shall be made on the
preceding Business Day, and such extension or reduction of time shall in such
case be included in the computation of interest or fees, as the case may be.
(c Unless the Administrative Agent receives notice from the Company
prior to the date on which any payment is due to the Lenders that the Company
will not make such payment in full as and when required, the Administrative
Agent may assume that the Company has made such payment in full to the
Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required, in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Company has not made such
payment in full to the Administrative Agent, each Lender shall repay to the
Administrative Agent on demand such amount distributed to such Lender, together
with interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Lender until the date repaid.
II.12 Payments by the Lenders to the Administrative Agent. (a Unless
the Administrative Agent receives notice from a Lender at least one Business
Day prior to the date of a Borrowing of Offshore Rate Loans or by 12:30 p.m.
(New York time on the day of any Borrowing of Base Rate Loans, that such
Lender will not make available as and when required hereunder to the
Administrative Agent for the account of the Company the amount of such Lender's
Pro Rata Share of such Borrowing, the Administrative Agent may assume that such
Lender has made such amount available to the Administrative Agent in
immediately available funds on the Borrowing Date and the Administrative Agent
may (but shall not be so required, in reliance upon such assumption, make
available to the Company on such date a corresponding amount. If and to the
extent any Lender shall not have made its full amount available to the
Administrative Agent in immediately available funds and the Administrative
Agent in such circumstances has made available to the Company such amount, such
Lender shall on the Business Day following such Borrowing Date make such amount
available to the Administrative Agent, together with interest at the Federal
Funds Rate. A notice of the Administrative Agent submitted to any Lender with
respect to amounts owing under this subsection (a shall be conclusive, absent
manifest error. If such amount is so made available, such
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payment to the Administrative Agent shall constitute such Lender's Loan on the
date of Borrowing for all purposes of this Agreement. If such amount is not
made available to the Administrative Agent on the Business Day following the
Borrowing Date, the Administrative Agent will notify the Company of such
failure to fund and, upon demand by the Administrative Agent, the Company shall
pay such amount to the Administrative Agent for the Administrative Agent's
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the interest rate applicable at
the time to the Loans comprising such Borrowing.
(b The failure of any Lender to make any Loan on any Borrowing Date
shall not relieve any other Lender of any obligation hereunder to make a Loan
on such Borrowing Date, but no Lender shall be responsible for the failure of
any other Lender to make the Loan to be made by such other Lender on any
Borrowing Date.
II.13 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Lender shall obtain any payment or other recovery
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise on account of principal of or interest on any Loan, or any other
amount payable hereunder, in excess of its Pro Rata Share of payments and other
recoveries received by all Lenders, such Lender shall immediately (i notify
the Administrative Agent of such fact and (ii purchase from the other Lenders
such participations in the Loans made by (or other Obligations owed to them as
shall be necessary to cause such purchasing Lender to share the excess payment
or other recovery pro rata with each of them so that each Lender has received
its Pro Rata Share of all such payments and other recoveries; provided that if
all or any portion of such excess payment or other recovery is thereafter
recovered from the purchasing Lender, such purchase shall to that extent be
rescinded and each other Lender shall repay to the purchasing Lender the
purchase price paid therefor, together with an amount equal to such paying
Lender's ratable share (according to the proportion of (i the amount of such
paying Lender's required repayment to (ii the total amount so recovered from
the purchasing Lender of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Company
agrees that any Lender so purchasing a participation from another Lender may,
to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 10.10 with respect to
such participation as fully as if such Lender were the direct creditor of the
Company in the amount of such participation. The Administrative Agent will keep
records (which shall be conclusive and binding in the absence of manifest
error of participations
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purchased under this Section and will in each case notify the Lenders following
any such purchases or repayments.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
III.1 Taxes. (a Any and all payments by the Company to each Lender or
the Administrative Agent under this Agreement and any other Loan Document shall
be made free and clear of, and without deduction or withholding for, any Taxes.
In addition, the Company shall pay all Other Taxes.
(b If the Company shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Lender or the Administrative Agent, then:
(i the sum payable shall be increased as necessary
so that, after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums
payable under this Section, such Lender or the Administrative Agent,
as the case may be, receives and retains an amount equal to the sum it
would have received and retained had no such deductions or
withholdings been made;
(ii the Company shall make such deductions and
withholdings; and
(iii the Company shall pay the full amount deducted
or withheld to the relevant taxing authority or other authority in
accordance with applicable law.
(c The Company agrees to indemnify and hold harmless each Lender and
the Administrative Agent for the full amount of Taxes and Other Taxes in the
amount that such Lender specifies as necessary to preserve the after-tax yield
such Lender would have received if such Taxes or Other Taxes had not been
imposed, and any liability (including penalties, interest, additions to tax and
expenses arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date such Lender or the
Administrative Agent makes written demand therefor.
(d Within 30 days after the date of any payment by the Company of any
Taxes or Other Taxes, the Company shall furnish each applicable Lender and the
Administrative Agent the original or a certified copy of a receipt evidencing
payment
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thereof, or other evidence of payment satisfactory to such Lender and the
Administrative Agent.
(e Notwithstanding the foregoing provisions of this Section 3.1, (i
if any Lender fails to notify the Company of any event or circumstance which
will entitle such Lender to compensation pursuant to this Section 3.1 within 90
days after such Lender obtains knowledge of such event or circumstance, then
such Lender shall not be entitled to compensation from the Company for any
amount arising prior to the date which is 90 days before the date on which such
Lender notifies the Company of such event or circumstance; and (ii the Company
shall not be required to pay an additional amount to, or to indemnify, any
Lender pursuant to this Section 3.1 to the extent that (x the obligation to
withhold or pay such amount existed on the Initial Date (as defined below or
(y the obligation to withhold or pay such amount would not have arisen but for
the failure of such Lender to comply with the provisions of Section 9.10 of
this Agreement. For purposes of clause (ii of the foregoing sentence "Initial
Date" means (A in the case of any Lender that is a signatory hereto, the date
of this Agreement, (B in the case of any Person which subsequently becomes a
Lender hereunder, the date of the applicable Assignment and Acceptance, and (C
in the case of any Participant, the date on which it becomes a Participant.
III.2 Illegality. (a If any Lender reasonably determines that the
introduction of any Requirement of Law, or any change in any Requirement of
Law, or in the interpretation by a Governmental Authority or the administration
of any Requirement of Law, has made it unlawful, or that any central bank or
other Governmental Authority has asserted that it is unlawful, for such Lender
or its applicable Lending Office to make Offshore Rate Loans, then, on notice
thereof by such Lender to the Company through the Administrative Agent, any
obligation of such Lender to make Offshore Rate Loans shall be suspended until
such Lender notifies the Administrative Agent and the Company that the
circumstances giving rise to such determination no longer exist.
(b If a Lender reasonably determines that it is unlawful to maintain
any Offshore Rate Loan, the Company shall, upon its receipt of notice of such
fact and demand from such Lender (with a copy to the Administrative Agent,
prepay in full such Offshore Rate Loan of such Lender together with interest
accrued thereon and amounts required under Section 3.4, either on the last day
of the Interest Period thereof, if such Lender may lawfully continue to
maintain such Offshore Rate Loan to such day, or immediately, if such Lender
may not lawfully continue to maintain such Offshore Rate Loan. If the Company
is required to so prepay any Offshore Rate Loan, then concurrently with such
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prepayment, the Company shall borrow from the affected Lender, in the amount of
such repayment, a Base Rate Loan.
(c If the obligation of any Lender to make or maintain Offshore Rate
Loans has been so terminated or suspended, all Loans which would otherwise be
made by such Lender as Offshore Rate Loans shall be instead Base Rate Loans.
III.3 Increased Costs and Reduction of Return. (a If any Lender
reasonably determines that, due to either (i the introduction of or any change
(other than any change by way of imposition of or increase in reserve
requirements included in the calculation of the Offshore Rate after the date
hereof in or in the interpretation of any law or regulation by a Governmental
Authority or (ii compliance by such Lender with any guideline or request from
any central bank or other Governmental Authority (whether or not having the
force of law adopted, issued or delivered after the date hereof, there shall
be any increase in the cost to such Lender (excluding any Taxes, Other Taxes or
taxes imposed on or measured by the net income of such Lender, and franchise
taxes and similar taxes of agreeing to make or making, funding or maintaining
any Offshore Rate Loan, then the Company shall be liable for, and shall from
time to time, within 15 days after demand (with a copy of such demand to be
sent to the Administrative Agent, pay to the Administrative Agent for the
account of such Lender, additional amounts as are sufficient to compensate such
Lender for such increased cost.
(b If any Lender shall have reasonably determined that (i the
introduction after the date hereof of any Capital Adequacy Regulation, (ii any
change after the date hereof in any Capital Adequacy Regulation, (iii any
change after the date hereof in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv compliance
by such Lender (or its Lending Office or any corporation controlling such
Lender with any Capital Adequacy Regulation (excluding any Capital Adequacy
Regulation as in effect on the date hereof affects or would affect the amount
of capital required or expected to be maintained by such Lender or any
corporation controlling such Lender and (taking into consideration such
Lender's or such corporation's policies with respect to capital adequacy and
such Lender's desired return on capital reasonably determines that the amount
of such capital is increased as a consequence of its Commitment, Loans or
obligations under this Agreement, then, upon demand of such Lender to the
Company through the Administrative Agent, the Company shall pay to such Lender,
from time to time as specified by such Lender, additional amounts sufficient to
compensate such Lender for such increase.
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(c Notwithstanding the foregoing provisions of this Section 3.3, if
any Lender fails to notify the Company in writing of any event or circumstance
which will entitle such Lender to compensation pursuant to this Section 3.3
within 90 days after such Lender obtains knowledge of such event or
circumstance, then such Lender shall not be entitled to compensation from the
Company for any amount arising prior to the date which is 90 days before the
date on which such Lender notifies the Company of such event or circumstance.
III.4 Funding Losses. The Company shall reimburse each Lender and hold
each Lender harmless from any loss or expense which the Lender may sustain or
incur as a consequence of:
(a the failure of the Company to borrow, continue or convert a Loan
after the Company has given (or is deemed to have given a Notice of Borrowing
or a Notice of Conversion/Continuation;
(b the failure of the Company to make any prepayment in accordance
with any notice delivered under Section 2.6;
(c the prepayment (including after acceleration thereof of an
Offshore Rate Loan on a day that is not the last day of the relevant Interest
Period; or
(d the automatic conversion under subsection 2.4(a of any Offshore
Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees
payable to terminate the deposits from which such funds were obtained (but
excluding any loss of margin or profit arising from any action or inaction of
the nature described in paragraphs (a through (d of this Section 3.4. For
purposes of calculating amounts payable by the Company to the Lenders under
this Section and under subsection 3.3(a, each Offshore Rate Loan made by a
Lender (and each related reserve, special deposit or similar requirement shall
be conclusively deemed to have been funded at the LIBOR used in determining the
Offshore Rate for such Offshore Rate Loan by a matching deposit or other
borrowing in the interbank eurodollar market for a comparable amount and for a
comparable period, whether or not such Offshore Rate Loan is in fact so funded.
III.5 Inability to Determine Rates. If (a the Administrative Agent
determines that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period with respect to
a proposed Offshore Rate Loan, or (b the Majority Lenders determine that
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the Offshore Rate applicable pursuant to subsection 2.8(a for any requested
Interest Period with respect to a proposed Offshore Rate Loan does not
adequately and fairly reflect the cost to such Lenders of funding such Loan,
the Administrative Agent will promptly so notify the Company and each Lender.
Thereafter, the obligation of the Lenders to make or maintain Offshore Rate
Loans hereunder shall be suspended until the Administrative Agent (upon the
instruction of the Majority Lenders in the case of clause (b revokes such
notice in writing. Upon receipt of such notice, the Company may revoke any
Notice of Borrowing or Notice of Conversion/Continuation then submitted by it.
If the Company does not revoke such Notice, the Lenders shall make, convert or
continue the Loans, as proposed by the Company, in the amount specified in the
applicable notice submitted by the Company, but such Loans shall be made,
converted or continued as Base Rate Loans instead of Offshore Rate Loans.
III.6 Certificates of Lenders. Any Lender claiming reimbursement or
compensation under this Article III shall deliver to the Company (with a copy
to the Administrative Agent a certificate setting forth in reasonable detail
the amount payable to such Lender hereunder and the manner in which such amount
has been calculated, and such certificate shall be conclusive and binding on
the Company in the absence of manifest error.
III.7 Mitigation. Each Lender shall promptly notify the Company and the
Administrative Agent of any event of which it has knowledge which will result
in, and will use reasonable commercial efforts available to it (and not, in
such Lender's good faith judgment, otherwise disadvantageous to such Lender to
mitigate or avoid, (i any obligation of the Company to pay any amount pursuant
to Section 3.1 or 3.3 or (ii the occurrence of any circumstance of the nature
described in Section 3.2 or 3.5. Without limiting the foregoing, each Lender
will designate a different Lending Office if such designation will avoid (or
reduce the cost to the Company of any event described in clause (i or (ii of
the preceding sentence and such designation will not, in such Lender's good
faith judgment, be otherwise disadvantageous to such Lender.
III.8 Substitution of Lenders. Upon the receipt by the Company from any
Lender of a claim for compensation under Section 3.1 or 3.3 or a notice of the
type described in Section 3.2, the Company may: (i designate a replacement
bank or financial institution satisfactory to the Company (a "Replacement
Lender" to acquire and assume all or a ratable part of all of such affected
Lender's Loans and Commitment; and/or (ii request one or more of the other
Lenders to acquire and assume all or a ratable part of all of such affected
Lender's Loans and Commitment (it being understood that no Lender shall be
obligated
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to comply with any such request. Any designation of a Replacement Lender under
clause (i shall be subject to the prior written consent of the Administrative
Agent (which consent shall not be unreasonably withheld.
III.9 Survival. The agreements and obligations of the Company in this
Article III shall survive the termination of this Agreement and the payment of
all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
IV.1 Conditions to Effectiveness. This Agreement shall become effective
on the date (the "Effective Date" on which the Administrative Agent shall have
received (i evidence satisfactory to the Administrative Agent that the Company
has paid all fees and other amounts then payable under subsection 2.9(a and
(ii all of the following, in form and substance satisfactory to the
Administrative Agent and each Lender, and (except for the Notes in sufficient
copies for each Lender:
(a Agreement and Notes. This Agreement and the Notes executed by each
party hereto and thereto.
(b Resolutions; Incumbency.
(i Copies of the resolutions of the board of directors of
the Company authorizing the execution and delivery of the Loan
Documents and the consummation of the transactions contemplated
hereby, certified as of the Effective Date by the Secretary or an
Assistant Secretary of such Person; and
(ii a certificate of the Secretary or Assistant Secretary of
the Company certifying the names and true signatures of the officers,
employees or authorized agents of the Company authorized to execute
and deliver the Loan Documents and to deliver Notices of Borrowing,
Notices of Conversion/Continuation, Compliance Certificates and
similar documents.
(c Organization Documents. The articles or certificate of
incorporation and the bylaws of the Company as in effect on the Effective Date,
certified by the Secretary or Assistant Secretary of the Company as of the
Effective Date.
(d Payment of Fees and Expenses. Evidence of payment by the Company
of all accrued and unpaid fees, costs and expenses to the extent then due and
payable hereunder on the Effective
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Date, together with Attorney Costs of Bank of America to the extent invoiced
prior to the Effective Date, plus such additional amounts of Attorney Costs as
shall constitute Bank of America's reasonable estimate of Attorney Costs
incurred or to be incurred by it through the closing proceedings (provided that
such estimate shall not thereafter preclude final settling of accounts between
the Company and Bank of America, which shall be made based upon actual Attorney
Costs, including any such costs, fees, costs and expenses arising under or
referenced in Sections 2.9 and 10.4.
(e Tax Ruling or Opinion. A tax ruling from the IRS or an opinion of
counsel to the effect that the Spin-Off will be free of federal income taxes
payable by the Company.
(f Other Documents. Such other approvals, opinions, documents or
materials as the Administrative Agent or any Lender may reasonably request.
The Administrative Agent shall determine when the Effective Date has
occurred and will so promptly notify the Company and the Lenders thereof in
writing.
IV.2 Conditions to Initial Borrowing. The obligation of each Lender to
make the Loan to be made by it on the initial Borrowing Date (the "Funding
Date" is subject to the satisfaction of the following conditions precedent on
the Funding Date, which shall not be later than November 30, 1999:
(a Effective Date. The Effective Date shall have occurred.
(b Consummation of Spin-Off. The Administrative Agent shall have
received a certificate signed by a Responsible Officer of the Company, dated as
of the Funding Date, stating that, to the best of such officer's knowledge
after due inquiry, the Spin-Off has been consummated (or shall be consummated
substantially concurrently with the initial Borrowing on substantially the
terms set forth in the Form 10 and the Company's filing on Form S-4, without
giving effect to any material amendment thereto (other than any amendment prior
to the Effective Date or any amendment which does not affect any member of the
Tenneco Packaging Group, unless approved in writing by the Required Lenders,
which approval shall not be unreasonably withheld or delayed.
(c Consents and Approvals. All approvals, consents, exemptions,
authorizations and actions by, or notices to, or filings with, any Governmental
Authority or other third party that are necessary or required prior to and in
connection with the Spin-Off or the execution, delivery and performance by, or
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enforcement against, the Company of the Agreement or any other Loan Document,
shall have been obtained or made, as the case may be, and are in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would
restrain, prevent or otherwise impose adverse conditions on the Spin-Off or the
financing thereof or the other transactions contemplated by the Agreement and
the Loan Documents.
(d Payments of Fees and Expenses. The Administrative Agent shall have
received evidence of payment by the Company of all accrued and unpaid fees,
costs and expenses to the extent then due and payable hereunder on the Funding
Date, together with Attorney Costs of Bank of America to the extent invoiced
prior to the Funding Date, plus such additional amounts of Attorney Costs as
shall constitute Bank of America's reasonable estimate of Attorney Costs
incurred or to be incurred by it through the Funding Date proceedings (provided
that such estimate shall not thereafter preclude final settling of accounts
between the Company and Bank of America, which shall be made based upon actual
Attorney Costs, including any such, fees, costs and expenses arising under or
referenced in Sections 2.9 and 10.4.
(e Legal Opinions. An opinion of Jenner & Block, counsel to the
Company, substantially in the form of Exhibit D.
(f Certificate. A certificate signed by a Responsible Officer, dated
as of the Funding Date, stating that to the best of his knowledge after due
inquiry:
(i the representations and warranties contained in Article V
are true and correct on and as of such date, as though made on and as
of such date;
(ii no Event of Default or Unmatured Event of Default exists
or would result from the initial borrowing on the Funding Date; and
(iii since June 30, 1999, no event or circumstance has
occurred that has resulted or could reasonably be expected to result
in a Material Adverse Effect.
(g Other Documents. Such other approvals, documents or materials as
the Administrative Agent or any Lender may reasonably request.
IV.3 Conditions to All Borrowings. The obligation of each Lender to
make any Loan to be made by it is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date:
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(a Notice. The Administrative Agent shall have received a Notice of
Borrowing.
(b Continuation of Representations and Warranties. The
representations and warranties in Article V (excluding subsection 5.11(b
shall be true and correct in all material respects on and as of such Borrowing
Date with the same effect as if made on and as of such Borrowing Date (except
to the extent such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct in all material respects as
of such earlier date.
(c No Default. No Event of Default or Unmatured Event of Default
shall exist or shall result from such Borrowing.
Each Notice of Borrowing submitted by the Company hereunder shall constitute a
representation and warranty by the Company that, as of the date of each such
notice and as of the relevant Borrowing Date, the conditions in this Section
4.3 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants (it being understood that
representations and warranties made with respect to the Company and its
Subsidiaries shall apply to the Tenneco Packaging Group prior to the Funding
Date to the Administrative Agent and each Lender that:
V.1 Corporate Existence and Power. The Company and each of
its Subsidiaries:
(a is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization;
(b has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, to carry on its
business and to execute, deliver and perform its obligations under the Loan
Documents to which it is a party;
(c is duly qualified to do business in each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification; and
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(d is in compliance with all Requirements of Law;
except, in each case referred to in clause (c or clause (d, to the extent
that the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
V.2 Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company of each Loan Document to which the Company is
party have been duly authorized by all necessary corporate action, and do not
and will not:
(a contravene the terms of any of the Company's Organization
Documents;
(b conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any material Contractual
Obligation to which the Company or any of its Subsidiaries is a party or any
order, injunction, writ or decree of any Governmental Authority to which the
Company or any of its Subsidiaries or any of its property is subject; or
(c violate any Requirement of Law applicable to the Company or any
Subsidiary.
V.3 Governmental Authorization. Except those required in connection
with the Spin-Off, no approval, consent, exemption, authorization or other
action by, or notice to, or filing with, any Governmental Authority (other than
any of the foregoing which has been obtained or made and is in full force and
effect is necessary or required in connection with the execution, delivery or
performance by the Company of the Agreement or any other Loan Document.
V.4 Binding Effect. This Agreement and each other Loan Document
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
V.5 Litigation. Except as disclosed in a memorandum delivered to the
Lenders prior to the Effective Date, there are no actions, suits, proceedings,
claims, disputes pending or, to the Knowledge of the Company, threatened, at
law, in equity, in arbitration or before any Governmental Authority, against
the Company or any Subsidiary or any of their respective properties which: (a
purport to affect or pertain to this Agreement or any other Loan Document, or
any of the transactions contemplated hereby or thereby; or (b if determined
adversely to the Company
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or its Subsidiaries, could in the reasonable judgment of the Company be
expected to have a Material Adverse Effect. No injunction, writ, temporary
restraining order or other order of any nature has been issued by any court or
other Governmental Authority purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any other Loan Document, or
directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
V.6 No Default. No Event of Default or Unmatured Event of Default exists
or would result from the incurring of any Obligations by the Company. As
of the Effective Date, neither the Company nor any Subsidiary is in default
under or with respect to any Contractual Obligation in any respect which,
individually or together with all such defaults, could reasonably be expected
to have a Material Adverse Effect.
V.7 ERISA Compliance. (a Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law. Each Plan which is intended to qualify under Section 401(a of the
Code has received a favorable determination letter from the IRS, and to the
best knowledge of the Company, nothing has occurred which would cause the loss
of such qualification. The Company and each ERISA Affiliate has made all
required contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(c (i No ERISA Event has occurred or is reasonably expected to
occur; (ii no contribution failure has occurred with respect to a Pension Plan
sufficient to give rise to a Lien under Section 302(f of ERISA; (iii no
Pension Plan has any material Unfunded Pension Liability; (iv neither the
Company nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any material liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA; (v
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any material liability (and no event has occurred which, with the
giving of notice under Section 4219 of ERISA, would result in such liability
under Section 4201 or 4243 of ERISA with respect
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to a Multiemployer Plan; and (vi neither the Company nor any ERISA Affiliate
has engaged in a transaction that could be subject to Section 4069 or 4212(c
of ERISA.
V.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans will
be used solely for the purposes set forth in and permitted by Section 6.12
and Section 7.7. Neither the Company nor any Subsidiary is generally engaged in
the business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
V.9 Title to Properties. The Company and each Subsidiary (other than
foreign Subsidiaries have (or, in the case of property that will be
transferred to the Tenneco Packaging Group in connection with the Spin-Off,
after such transfer will have good record title in fee simple to all real
property (other than leasehold property necessary to conduct their respective
businesses in the ordinary course, except for (i Permitted Liens, and (ii
such defects in title as could not, individually or in the aggregate, have a
Material Adverse Effect. As of the Effective Date, the property of the Company
and its Subsidiaries is subject to no Liens, other than Permitted Liens.
V.10 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports which are required to be filed, and
have paid all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
the Company or any Subsidiary that would, if made, have a Material Adverse
Effect.
V.11 Financial Condition. (a(1 The combined financial statements of
the Company and its Subsidiaries dated as of December 31, 1998, and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for the fiscal year ended on that date reported on by Arthur Andersen LLP
and set forth in the Form 10 and the Company's filings on Form S- 4 (as
referenced in the definition of Spin-Off, and (2 the interim combined
financial statements of the Company and its Subsidiaries dated June 30, 1999,
and the related consolidated statements of income or operations, shareholders'
equity and cash flows for the fiscal quarter ended on that date reported on by
Arthur Andersen LLP and set forth in the Form 10 and the Company's filings on
Form S-4 (as referenced in the definition of Spin-Off:
(i were prepared in accordance with GAAP consistently
applied for the periods covered thereby, except
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as otherwise expressly noted therein (subject, in the case of the
unaudited interim statements, to ordinary, good faith year-end audit
adjustments; and
(ii fairly present (subject, in the case of the unaudited
interim statements, to ordinary, good faith year-end audit
adjustments the financial condition of the Company and its
Subsidiaries as of the dates thereof and the results of operations for
the periods covered thereby.
(b Since June 30, 1999, there has been no Material Adverse Effect.
V.12 Environmental Matters. The Company conducts in the ordinary course
of business a review of the effect of existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, and
as a result thereof the Company has reasonably concluded that, except as
specifically disclosed in Schedule 5.12, such Environmental Laws and
Environmental Claims are unlikely to have, individually or in the aggregate, a
Material Adverse Effect.
V.13 Regulated Entities. None of the Company, any Person controlling the
Company, or any Subsidiary is an "Investment Company" within the meaning of
the Investment Company Act of 1940. The Company is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act,
any state public utilities code, or any other Federal or state statute or
regulation limiting its ability to incur Indebtedness.
V.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary
is bound by, or subject to any restriction in, any Organization Document or
Requirement of Law, which could reasonably be expected to have a Material
Adverse Effect.
V.15 Copyrights, Patents, Trademarks and Licenses, etc. The Company or
its Subsidiaries own or are licensed or otherwise have the right to use all of
the material patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of their respective businesses, without conflict
with the rights of any other Person, except to the extent failure to own,
license or otherwise have the right to use any such item, or any such conflict,
could not reasonably be expected to have a Material Adverse Effect. The Company
has not received any written notice that any slogan or other advertising
device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by the Company or any Subsidiary,
and which is material to the business or operations of the Company and its
Subsidiaries, infringes upon any rights held by any other Person (excluding
infringements
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which could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
V.16 Subsidiaries. As of the Effective Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a of Schedule
5.16 and has no equity investments in any other corporation or entity other
than those specifically disclosed in part (b of Schedule 5.16. As of the
Funding Date, the additional Subsidiaries disclosed on part (c of Schedule
5.16 also will become Subsidiaries of the Company in connection with the
Spin-Off, and therefore are part of the Tenneco Packaging Group.
V.17 Insurance. The properties of the Company and its Subsidiaries are
insured with financially sound and reputable insurance companies (or pursuant
to a self-insurance program in such amounts, with such deductibles and
covering such risks as are customarily carried by companies engaged in similar
businesses and owning similar properties in localities where the Company or
such Subsidiary operates.
V.18 Year 2000 Problem. The Company and its Subsidiaries have reviewed
the areas within their business and operations which could be adversely
affected by, and have developed programs to address on a timely basis, the
"Year 2000 Problem" (that is, the risk that computer applications used by the
Company may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999. Based on such review and programs, the Company reasonably believes that
the "Year 2000 Problem" will not result in a Material Adverse Effect.
V.19 Full Disclosure. The representations and warranties made by the
Company and its Subsidiaries in the Loan Documents as of the date such
representations and warranties are made or deemed made, and the statements
contained in any exhibit, report, statement or certificate furnished in writing
by or on behalf of the Company or any Subsidiary in connection with the Loan
Documents, taken as a whole, do not contain any untrue statement of a material
fact or omit any material fact required to be stated therein or necessary to
make the statements made therein, taken as a whole and in light of the
circumstances under which they are made, not misleading in any material respect
as of the time when made or delivered.
V.20 Solvency, etc. On the Funding Date, and immediately prior to and
after giving effect to each Borrowing hereunder and the use of the proceeds
thereof, (a the Company's assets will exceed its liabilities and (b the
Company will be solvent, will be able to pay its debts as they mature, will own
property with fair saleable value greater than the amount required to pay its
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debts and will have capital sufficient to carry on its business as then
constituted.
V.21 Labor Relations. Except as disclosed in Schedule 5.21, there are no
strikes, lockouts or other work stops against the Company or any of its
Subsidiaries, or, to the Knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries, and no significant unfair
labor practice complaint is pending against the Company or any of its
Subsidiaries or, to the best knowledge of the Company, threatened against any
of them before any Governmental Authority that, in each case, is likely to have
a Material Adverse Effect.
ARTICLE VI
AFFIRMATIVE COVENANTS
Beginning on the Funding Date and continuing so long as any Lender
shall have any Commitment hereunder, or any Loan or other Obligation shall
remain unpaid or unsatisfied, unless the Majority Lenders waive compliance in
writing:
VI.1 Financial Statements. The Company shall deliver to each Lender and
the Administrative Agent, in form and detail satisfactory to the Lenders and
the Administrative Agent (it being understood that for purposes hereof, the
form and detail required by the SEC for annual and quarterly reports filed
pursuant to the Exchange Act shall be deemed satisfactory:
(a as soon as available, but not later than 90 days after the end of
each fiscal year, a copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of Arthur Andersen
LLC or another nationally-recognized independent public accounting firm
("Independent Auditor", which opinion (i shall state that such consolidated
financial statements present fairly the Company's consolidated financial
position for the periods indicated in conformity with GAAP and (ii shall not
be qualified or limited because of a restricted or limited examination by the
Independent Auditor of any material portion of the Company's or any
Subsidiary's records; and
(b as soon as available, but not later than 50 days after the end of
each of the first three fiscal quarters of each fiscal year (commencing with
the fiscal quarter ending September 30, 1999, a copy of the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such quarter
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and the related consolidated statements of income, shareholders' equity and
cash flows for the period commencing on the first day and ending on the last
day of such quarter, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to ordinary, good faith year-end
audit adjustments, the financial position and the results of operations of the
Company and its Subsidiaries as of such date and for such period.
VI.2 Certificates; Other Information. The Company shall furnish to each
Lender and the Administrative Agent:
(a concurrently with the delivery of the financial statements
referred to in subsections 6.1(a and (b, a Compliance Certificate executed by
a Responsible Officer;
(b promptly after their becoming available, copies of all financial
statements and reports that the Company sends to its shareholders, and copies
of all financial statements and regular, periodic or special reports (including
Forms 10K, 10Q and 8K that the Company or any Subsidiary may make to, or file
with, the SEC;
(c promptly after their becoming available, any management letter
issued by the Company's Independent Auditor regarding the "Year 2000" exposure
or programs of the Company and its Subsidiaries; and
(d promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the
Administrative Agent, at the request of any Lender, may from time to time
reasonably request.
VI.3 Notices. The Company shall promptly (or, in the case of any event
described in clause (c(ii below, not less than 10 days prior to the
occurrence of such event notify the Administrative Agent and each Lender:
(a of the occurrence of any Event of Default or Unmatured Event of
Default known to the Company;
(b of any of the following matters that has resulted or is reasonably
expected to result in a Material Adverse Effect: (i breach or non-performance
of, or any default under, a Contractual Obligation of the Company or any
Subsidiary; (ii any dispute, litigation, investigation, proceeding or
suspension between the Company or any Subsidiary and any Governmental
Authority; or (iii the commencement of, or any material ruling, order or
judgment in, any litigation or proceeding affecting the Company or any
Subsidiary is a party, including pursuant to any applicable Environmental Laws;
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(c of the occurrence of any of the following events known to the
Company which affect the Company or any ERISA Affiliate, and deliver to the
Administrative Agent and each Lender a copy of any notice with respect to such
event that is filed with a Governmental Authority and any notice delivered by a
Governmental Authority to the Company or any ERISA Affiliate with respect to
such event:
(i an ERISA Event;
(ii a contribution failure with respect to a Pension Plan
sufficient to give rise to a Lien under Section 302(f of ERISA;
(iii the adoption of, or the commencement of contributions
to, any Pension Plan by the Company or any ERISA Affiliate that, in
either case, requires material contributions; or
(iv the adoption of any amendment to a Pension Plan if such
amendment results in a material increase in contributions or Unfunded
Pension Liability;
(d of any material change in accounting policies or financial
reporting practices by the Company and its consolidated Subsidiaries; and
(e of any change in the Moody's Rating or the S&P Rating.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto.
VI.4 Preservation of Corporate Existence, Etc. The Company shall, and
shall cause each Subsidiary to (provided that nothing in this Section 6.4 shall
prevent the voluntary liquidation, dissolution or winding up, not under any
bankruptcy or insolvency law, of any Subsidiary so long as no Event of Default
exists and no Event of Default or Unmatured Event of Default will result
therefrom:
(a preserve and maintain in full force and effect its existence and
good standing under the laws of its jurisdiction of organization;
(b preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
in the normal conduct of its
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business (except in connection with transactions and sales of assets permitted
by Section 7.4; and
(c preserve or renew all of its registered patents, trademarks, trade
names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect; provided, however, that the Company
shall have the right to assign to an Affiliate of Tenneco, or not preserve or
renew, certain trademarks of Tenneco that are currently owned by the Company or
any Subsidiary, but which are not used by the Company or such Subsidiary.
VI.5 Maintenance of Property. The Company shall, and shall cause each
Subsidiary to, maintain and preserve all its property which is used or useful
in its business in good working order and condition, ordinary wear and tear
excepted, except to the extent that failure to do so would not reasonably be
expected to have a Material Adverse Effect.
VI.6 Insurance. The Company shall, and shall cause each Subsidiary to,
maintain, with financially sound and reputable independent insurers (or
pursuant to a self-insurance program, insurance with respect to its properties
and business in such amounts, with such deductibles, and covering such risks as
are customarily carried under similar circumstances by such other Persons.
VI.7 Payment of Obligations. The Company shall, and shall cause each
Subsidiary to, pay and discharge, as the same become due and payable: (a all
material tax liabilities, assessments and governmental charges or levies upon
it or its properties or assets and (b all material claims which, if unpaid,
would by law become a Lien upon its property, unless, in each case, the same
are being contested in good faith by appropriate proceedings and adequate
reserves in accordance with GAAP are being maintained by the Company or such
Subsidiary.
VI.8 Compliance with Laws. The Company shall, and shall cause each
Subsidiary to, comply with all Requirements of Law of any Governmental
Authority having jurisdiction over it or its business (including the Federal
Fair Labor Standards Act the non-compliance with which might have a Material
Adverse Effect.
VI.9 Compliance with ERISA. The Company shall, and shall cause each of
its ERISA Affiliates to: (a maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b cause each Plan which is qualified under Section 401(a of the
Code to maintain such qualification; and (c make all required contributions to
any Plan subject to Section 412 of the Code.
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VI.10 Inspection of Property and Books and Records. The Company shall,
and shall cause each Subsidiary to, maintain proper books of record and
account, in which full, true and correct entries (sufficient to permit the
preparation of consolidated financial statements in conformity with GAAP shall
be made of all financial transactions and matters involving the assets and
business of the Company and such Subsidiary. The Company shall permit, and
shall cause each Subsidiary to permit, the Administrative Agent, any Lender or
their respective representatives, subject to such limitations as the Company
may reasonably impose to ensure compliance with any applicable legal or
contractual restrictions, to visit and inspect the properties of the Company or
any Subsidiary, to examine their respective corporate, financial and operating
records, and make copies thereof or abstracts therefrom, and to discuss the
affairs, finances and accounts of the Company or any Subsidiary with their
respective officers at such reasonable times during normal business hours as
may be reasonably desired, upon reasonable advance notice to the Company;
provided that when an Event of Default exists the Administrative Agent or any
Lender may do any of the foregoing at any time during normal business hours and
without advance notice.
VI.11 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws, except to the extent any failure to be
compliance would not, individually or in the aggregate with all other such
failures, reasonably be expected to result in a Material Adverse Effect.
VI.12 Use of Proceeds. The Company shall use the proceeds of the Loans
for refinancing existing indebtedness of Tenneco or its Subsidiaries (including
the Company and for working capital and other general corporate purposes
(including the payment of dividends concurrently with the Spin-Off as set forth
in the Form 10 not in contravention of any Requirement of Law or of any Loan
Document; provided that the Company shall not use the proceeds of any Loan to
make any Acquisition if the Board of Directors of the Person to be acquired has
not approved such Acquisition.
VI.13 Change in Business. The Company and its Subsidiaries taken as a
whole shall continue the primary businesses in which they are engaged on the
Funding Date and lines of business reasonably related thereto.
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ARTICLE VII
NEGATIVE COVENANTS
Beginning on the Funding Date and continuing so long as any Lender
shall have any Commitment hereunder, or any Loan or other Obligation shall
remain unpaid or unsatisfied, unless the Majority Lenders waive compliance in
writing:
VII.1 Financial Condition Covenants.
(a Minimum Interest Coverage Ratio. The Company shall not permit, as
of the last day of any fiscal quarter (beginning with the first fiscal quarter
ending after the Funding Date, its Interest Coverage Ratio to be less than (i
for each Computation Period ending prior to October 1, 2000, 3.0 to 1 and (ii
for each Computation Period ending thereafter, 3.5 to 1.
(b Maximum Total Debt to EBITDA Ratio. The Company shall not permit
the Total Debt to EBITDA Ratio to be greater than (i 3.85 at any time prior to
the earlier of (A April 1, 2000 and (B the consummation of the PCA IPO, and
(ii 3.5 to 1 at any time thereafter.
VII.2 Limitation on Liens. The Company shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, make, create, incur,
assume or suffer to exist any Lien upon or with respect to any part of its
property, whether now owned or hereafter acquired, other than the following
("Permitted Liens":
(a any Lien existing on the Effective Date and set forth in Schedule
7.2, and any extension, renewal or replacement of any such Lien so long as the
principal amount secured thereby is not increased (other than an increase
resulting solely from a change in applicable rates of exchange between U.S.
Dollars, on the one hand, and any other currency in which such principal amount
is denominated, on the other hand and the scope of the property subject to
such Lien is not extended;
(b Liens imposed by law for taxes, assessments or charges of any
Governmental Authority for claims not yet due, or to the extent that
non-payment thereof is permitted by Section 6.7, provided that no notice of
Lien has been filed or recorded under the Code;
(c statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other Liens imposed by law or created in the
ordinary course of business which are not delinquent or remain payable without
penalty or
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which are being contested in good faith by appropriate proceedings;
(d Liens (other than any Lien imposed by ERISA consisting of pledges
or deposits required in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other social security
legislation;
(e Liens on the property of the Company or any Subsidiary securing
(i the non-delinquent performance of bids, trade contracts (other than for
borrowed money, leases, statutory obligations, (ii surety bonds (excluding
appeal bonds and other bonds posted in connection with court proceedings or
judgments and (iii other non-delinquent obligations of a like nature in each
case incurred in the ordinary course of business, provided all such Liens in
the aggregate would not (even if enforced cause a Material Adverse Effect;
(f Liens consisting of judgment or judicial attachment liens and
liens securing contingent obligations on appeal bonds and other bonds posted in
connection with court proceedings or judgments, provided that (i in the case
of judgment and judicial attachment liens, the enforcement of such Liens is
effectively stayed and (ii all such liens in the aggregate at any time
outstanding for the Company and its Subsidiaries do not exceed $20,000,000;
(g easements, rights-of-way, covenants, conditions, restrictions and
other similar encumbrances incurred in the ordinary course of business which,
individually or in the aggregate, do not materially interfere with the ordinary
conduct of the respective businesses of the Company and its Subsidiaries;
(h Liens securing obligations in respect of Capital Leases or
operating leases on assets subject to such leases, provided that, in the case
of Capital Leases, such Capital Leases are otherwise permitted hereunder;
(i Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated
by the FRB, and (ii such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution;
(j any Lien on property existing at the time of acquisition of such
property by the Company or a Subsidiary, or Liens to secure the payment of all
or part of the purchase price
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of property upon the acquisition of property by the Company or a Subsidiary or
to secure any Indebtedness incurred or guaranteed prior to, at the time of, or
within one hundred eighty (180 days after, the later of the date of
acquisition of such property and the date such property is placed in service,
for the purpose of financing all or any part of the purchase price thereof, or
Liens to secure any Indebtedness incurred or guaranteed for the purpose of
financing the cost to the Company or a Subsidiary or improvements to such
acquired property;
(k other Liens, in addition to those permitted by clauses (a through
(j, securing Indebtedness or arising in connection with Securitization
Transactions; provided that(i the sum (without duplication of all such
Indebtedness (excluding Indebtedness arising in connection with Securitization
Transactions shall not at any time exceed in the aggregate $100,000,000; and
(ii the aggregate investment or claim held at any time by all purchasers,
assignees or other transferees of (or of interests in receivables and other
rights to payment in all such Securitization Transactions, shall not at any
time exceed in the aggregate $200,000,000; and
(l rights of first refusal, rights of Governmental Authorities to
approve transfers and other similar restrictions on transfer of any ownership
interest of the Company or any of its Subsidiaries in any joint venture or
similar investment in an entity (other than a Subsidiary operating primarily
outside of the United States.
VII.3 Restrictions on Subsidiaries. The Company (a will not enter into
any agreement or understanding pursuant to which any claim it may have against
any Subsidiary would be subordinate in any manner to the payment of any other
obligation of such Subsidiary and (b will not, and will not permit any
Subsidiary to, enter into any agreement or understanding which by its terms
limits or restricts the ability of such Subsidiary to make funds available to
the Company (whether by way of a dividend or other distribution, by repayment
of any inter-company advance or otherwise if, in any such case referred to in
(a or (b above, there is, at the time any such agreement is entered into, a
reasonable likelihood that all such agreements and understandings referred to
in (a or (b above, considered together, would materially and adversely affect
the ability of the Company to meet its obligations as they become due.
VII.4 Consolidation, Mergers and Sales of Assets. The Company will not
merge or consolidate with any other Person or sell, lease, transfer or
otherwise dispose of its property and assets as, or substantially as, an
entirety to any Person, unless (a either the Company shall be the continuing
or surviving corporation, or the successor or acquiring corporation shall be a
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solvent corporation organized under the laws of any State of the United States
of America and shall expressly assume in writing all of the obligations of the
Company under this Agreement and the Notes, including all covenants herein and
therein contained, and such successor or acquiring corporation shall succeed to
and be substituted for the Company with the same effect as if it had been named
herein as a party hereto, provided that no such sale shall release the Company
from any of its obligations and liabilities under this Agreement or the Notes
unless such sale is followed by the complete liquidation of the Company and
substantially all the assets of the Company immediately following such sale are
distributed in such liquidation, and (b the Company as the continuing or
surviving corporation or the successor or acquiring corporation, as the case
may be, shall not, immediately after such merger or consolidation, or such sale
or other disposition, be in default under any such obligations.
VII.5 Limitation on Subsidiary Indebtedness. The Company shall not permit
its Subsidiaries to create, incur, assume or suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness (excluding obligations in respect of Securitization Transactions
at any time outstanding in an aggregate amount in excess of the greater of (a
$100,000,000 and (b 12.5% of Total Debt.
VII.6 Transactions with Affiliates. The Company shall not, and shall not
permit any Subsidiary to, enter into any transaction with any Affiliate of the
Company (other than the Company or a Subsidiary, except upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person not an Affiliate
of the Company or such Subsidiary.
VII.7 Use of Proceeds. The Company shall not, and shall not permit any
Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, to
(i engage principally, or as one of its important activities, in the business
of extending credit for the purposes of purchasing or carrying any Margin Stock
or (ii use the proceeds of any Loan, directly or indirectly, whether
immediate, incidental or ultimate, (a to purchase or carry, within the meaning
of Regulation U, any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying any Margin Stock, unless done in strict compliance
with Regulation U and other applicable law and the Company shall have executed
and delivered to each Lender prior to such use a Form U-1 statement evidencing
compliance with Regulation U and such other documents relating thereto as any
Lender shall reasonably request, or (b in a manner which would violate, or
result in a violation of, Regulation U.
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VII.8 ERISA. The Company shall not, and shall not permit any of its ERISA
Affiliates to: (a engage in a prohibited transaction or material
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in liability of the
Company in an aggregate amount in excess of $5,000,000; or (b engage in a
transaction that could be subject to Section 4069 or 4212(c of ERISA.
VII.9 Securitization Transactions. The Company shall not, and shall not
permit its Subsidiaries to enter into any Securitization Transaction to the
extent that the aggregate investment or claims held at any time by all
purchasers, assignees, transferees of (or of interests in receivables and
other rights to payment in all Securitization Transactions would at any time
exceed $200,000,000.
ARTICLE VIII
EVENTS OF DEFAULT
VIII.1 Event of Default. Any of the following shall constitute an "Event
of Default":
(a Non-Payment. The Company fails to pay, (i when and as required to
be paid herein, any amount of principal of any Loan or (ii within five days
after the same becomes due, any interest, fee or any other amount payable
hereunder or under any other Loan Document.
(b Representation or Warranty. Any representation or warranty by the
Company or any Subsidiary made or deemed made herein or in any other Loan
Document, or which is contained in any certificate, document or financial or
other written statement by the Company, any Subsidiary or any Responsible
Officer furnished at any time under this Agreement or under any other Loan
Document, is incorrect in any material respect on or as of the date made or
deemed made.
(c Specific Defaults. The Company fails to perform or observe any
term, covenant or agreement contained in Article VII.
(d Other Defaults. The Company fails to perform or observe any other
term or covenant contained in this Agreement or any other Loan Document (any
such failure being referred to in this Section 8.1(d as a "default" and such
default shall continue unremedied for a period of 30 days after (i the date
upon which written notice of such default is given to the Company by the
Administrative Agent or (ii if the Company fails to
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promptly notify the Administrative Agent and the Lenders of the occurrence of
any default in accordance with Section 6.3, the date on which the Company has
actual knowledge of such default.
(e Cross-Default. The Company or any Subsidiary (i fails to make any
payment of Material Financial Obligations when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise, but after
giving effect to any applicable grace or cure period; or (ii fails to perform
or observe any other condition or covenant, or any other event shall occur or
condition exist, under one or more agreements or instruments relating to
Material Financial Obligations, if the effect of such failure, event or
condition is to cause (or require, or to permit the holder or holders of such
Material Financial Obligations (or the beneficiary or beneficiaries of such
Material Financial Obligations (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries to cause (or require, such
Material Financial Obligations to become due and payable (or to be purchased,
repurchased, defeased or cash collateralized prior to the stated maturity
thereof.
(f Insolvency; Voluntary Proceedings. The Company or any Material
Subsidiary (i generally fails to pay, or admits in writing its inability to
pay, its debts as they become due, subject to applicable grace periods, if any,
whether at stated maturity or otherwise; (ii voluntarily ceases to conduct its
business in the ordinary course; (iii commences any Insolvency Proceeding with
respect to itself; or (iv takes any action to effectuate or authorize any of
the foregoing; provided that the foregoing shall not apply to the voluntary
liquidation, dissolution or winding up of a Subsidiary permitted by Section
6.4.
(g Involuntary Proceedings. (i Any involuntary Insolvency Proceeding
is commenced or filed against the Company or any Material Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process is issued
or levied against a substantial part of the Company's or any such Subsidiary's
properties, and such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar process shall not
be released, vacated or fully bonded, within 60 days after commencement, filing
or levy; (ii the Company or any Material Subsidiary admits the material
allegations of a petition against it in any Insolvency Proceeding, or an order
for relief (or similar order under non- U.S. law is ordered in any Insolvency
Proceeding with respect to the Company or such Subsidiary; or (iii the Company
or any Material Subsidiary acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, mortgagee in possession (or agent
therefor, or other similar Person for itself or a substantial portion of its
property or business.
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(h ERISA. (i An ERISA Event shall occur with respect to a Pension
Plan or Multiemployer Plan which has resulted or could reasonably be expected
to result in liability of the Company under Title IV of ERISA to the Pension
Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$20,000,000; (ii a contribution failure shall occur with respect to a Pension
Plan sufficient to give rise to a Lien under Section 302(f of ERISA; or (iii
the Company or any ERISA Affiliate shall fail to pay when due, after the
expiration of any applicable grace period (or any period during which (x the
Company is permitted to contest its obligation to make such payment without
incurring any liability (other than interest or penalty and (y the Company is
contesting such obligation in good faith and by appropriate proceedings, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA or any contribution obligation under Section 4243 of ERISA, in each
case under a Multiemployer Plan in an aggregate amount in excess of
$30,000,000.
(i Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Company or any Subsidiary involving in the aggregate a liability (to the extent
not covered by insurance as to which the insurer does not dispute coverage as
to any single or related series of transactions, incidents or conditions of
$50,000,000 or more, and the same shall remain unvacated and unstayed pending
appeal for a period of 30 days after the entry thereof.
(j Non-Monetary Judgments. Any non-monetary judgment, order or decree
is entered against the Company or any Subsidiary which does or would reasonably
be expected to have a Material Adverse Effect, and there shall be any period of
30 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect.
(k Change of Control. Any Change of Control occurs.
VIII.2 Remedies. If any Event of Default occurs, the Administrative
Agent shall, at the request of, or may, with the consent of, the Majority
Lenders,
(a declare the commitment of each Lender to make Loans to be
terminated, whereupon such commitments shall be terminated;
(b declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other
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Loan Document to be immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived
by the Company; and
(c exercise on behalf of itself and the Lenders all other rights and
remedies available to it and the Lenders under the Loan Documents or applicable
law;
provided that upon the occurrence of any event specified in subsection (f or
(g of Section 8.1 (in the case of clause (i of subsection (g, upon the
expiration of the 60-day period mentioned therein, the obligation of each
Lender to make Loans shall automatically terminate and the unpaid principal
amount of all outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable without further act of the
Administrative Agent or any other Lender. The Administrative Agent shall
promptly notify the Company of any declaration described in clause (a or (b
of the preceding sentence, but failure to give any such notice shall not impair
any such declaration or result in any liability to the Administrative Agent.
VIII.3 Notice of Defaults. The Administrative Agent shall give notice
to the Company under subsection 8.1(d(i promptly upon being requested to do
so by any Lender and shall thereupon notify all the Lenders thereof.
VIII.4 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE IX
THE ADMINISTRATIVE AGENT
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IX.1 Appointment and Authorization; "Administrative Agent". Each
Lender hereby irrevocably (subject to Section 9.9 appoints, designates and
authorizes the Administrative Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the
Administrative Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall the Administrative Agent have or be
deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise exist
against the Administrative Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Administrative Agent is not intended to connote any fiduciary
or other implied (or express obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative relationship
between independent contracting parties.
IX.2 Delegation of Duties. The Administrative Agent may execute any of
its duties under this Agreement or any other Loan Document by or through
agents, employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
IX.3 Liability of Administrative Agent. None of the Administrative
Agent-Related Persons shall (i be liable to any Lender for any action taken or
omitted to be taken by any of them under or in connection with this Agreement
or any other Loan Document or the transactions contemplated hereby (except for
its own gross negligence or willful misconduct, or (ii be responsible in any
manner to any of the Lenders for any recital, statement, representation or
warranty made by the Company or any Subsidiary or Affiliate of the Company, or
any officer thereof, contained in this Agreement or in any other Loan Document,
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Administrative Agent under or in connection
with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party
to any Loan Document to perform its obligations hereunder or thereunder. No
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Administrative Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Company or any
of the Company's Subsidiaries or Affiliates.
IX.4 Reliance by Administrative Agent. (a The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to the Company, independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Majority Lenders as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Document in accordance with a request or
consent of the Majority Lenders and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the Lenders.
(b For purposes of determining compliance with the conditions
specified in Section 4.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Administrative Agent to such Lender
for consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lender.
IX.5 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Event of Default or
Unmatured Event of Default, except with respect to defaults in the payment of
principal, interest and fees required to be paid to the Administrative Agent
for the account of the Lenders, unless the Administrative Agent shall have
received written notice from a Lender or the Company referring to this
Agreement, describing such Event of Default or Unmatured Event of Default and
stating that such notice is a "notice of default". If the Administrative Agent
receives such a notice, the Administrative Agent will notify the Lenders of its
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receipt of such notice. The Administrative Agent shall take such action with
respect to such Event of Default or Unmatured Event of Default as may be
requested by the Majority Lenders in accordance with this Article IX; provided,
however, that unless and until the Administrative Agent has received any such
request, the Administrative Agent may (but shall not be obligated to take such
action, or refrain from taking such action, with respect to such Event of
Default or Unmatured Event of Default as it shall deem advisable or in the best
interest of the Lenders.
IX.6 Credit Decision. Each Lender acknowledges that none of the
Administrative Agent-Related Persons has made any representation or warranty to
it, and that no act by the Administrative Agent hereinafter taken, including
any review of the affairs of the Company and its Subsidiaries, shall be deemed
to constitute any representation or warranty by any Administrative
Agent-Related Person to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon any
Administrative Agent-Related Person and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, prospects, operations, property, financial and other condition
and creditworthiness of the Company and its Subsidiaries, and all applicable
bank regulatory laws relating to the transactions contemplated hereby, and made
its own decision to enter into this Agreement and to extend credit to the
Company hereunder. Each Lender also represents that it will, independently and
without reliance upon any Administrative Agent- Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to
make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other
documents expressly herein required to be furnished to the Lenders by the
Administrative Agent, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Company which may come into the possession
of any Administrative Agent-Related Person.
IX.7 Indemnification of Administrative Agent. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Administrative Agent-Related Persons (to the extent not
reimbursed by or on behalf of the Company and without limiting the obligation
of the Company to do so, pro rata, from and against any and all Indemnified
Liabilities; provided, however, that no Lender shall
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be liable for the payment to any Administrative Agent-Related Person of any
portion of the Indemnified Liabilities resulting from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender shall reimburse the Administrative Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including Attorney Costs
incurred by the Administrative Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise of, or legal
advice in respect of rights or responsibilities under, this Agreement, any
other Loan Document, or any document contemplated by or referred to herein, to
the extent that the Administrative Agent is not reimbursed for such expenses by
or on behalf of the Company. The undertaking in this Section shall survive the
termination of this Agreement, the payment of all Obligations and the
resignation or replacement of the Administrative Agent.
IX.8 Administrative Agent in Individual Capacity. Bank of America and
its Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally engage in any
kind of banking, trust, financial advisory, underwriting or other business with
the Company and its Subsidiaries and Affiliates as though Bank of America were
not the Administrative Agent hereunder and without notice to or consent of the
Lenders. The Lenders acknowledge that, pursuant to such activities, Bank of
America or its Affiliates may receive information regarding the Company or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of the Company or such Subsidiary and acknowledge that
the Administrative Agent shall be under no obligation to provide such
information to them. With respect to its Loans, Bank of America shall have the
same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Administrative Agent.
IX.9 Successor Administrative Agent. The Administrative Agent may, and
at the request of the Majority Lenders shall, resign as Administrative Agent
upon 30 days' notice to the Lenders. If the Administrative Agent resigns under
this Agreement, the Majority Lenders (with, so long as no Event of Default
exists, the consent of the Company, which shall not be unreasonably withheld or
delayed shall appoint from among the Lenders a successor administrative agent
for the Lenders. If no successor administrative agent is appointed prior to the
effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Lenders and the
Company, a successor administrative agent from among the Lenders. Upon the
acceptance of its appointment as successor administrative agent hereunder, such
successor administrative agent shall succeed to all the rights, powers and
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duties of the retiring Administrative Agent and the term "Administrative Agent"
shall mean such successor administrative agent and the retiring Administrative
Agent's appointment, powers and duties as Administrative Agent shall be
terminated. After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article IX and Sections 10.4 and
10.5 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement. If no successor
administrative agent has accepted appointment as Administrative Agent by the
date which is 30 days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
the Administrative Agent hereunder until such time, if any, as the Majority
Lenders appoint a successor administrative agent as provided for above.
IX.10 Withholding Tax. (a If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Lender agrees with and in favor of the Administrative
Agent and the Company, to deliver to the Administrative Agent (with a copy to
the Company:
(i if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 (or any successor form before the
payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement;
(ii if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Lender and in each succeeding taxable year of such Lender during
which interest may be paid under this Agreement, and IRS Form W-9 (or
any successor form; and
(iii such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
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Each such Lender agrees to promptly notify the Administrative Agent and the
Company of any change in circumstances which would modify or render invalid any
claimed exemption or reduction.
(b If any Lender claiming exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 (or
any successor form sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations owed to such Lender, such Lender
agrees to notify the Administrative Agent of the percentage amount in which it
is no longer the beneficial owner of Obligations of the Company to such Lender.
To the extent of such percentage amount, the Administrative Agent will treat
such Lender's IRS Form 1001 (or any successor form as no longer valid.
(c If any Lender claiming exemption from United States withholding
tax by filing IRS Form 4224 (or any successor form with the Administrative
Agent grants a participation in all or part of the Obligations owed to such
Lender, such Lender agrees to undertake sole responsibility for complying with
the withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d If any Lender is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest
payment to such Lender an amount equivalent to the applicable withholding tax
after taking into account such reduction. If the forms or other documentation
required by subsection (a of this Section are not delivered to the
Administrative Agent, then the Administrative Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(e If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Administrative Agent or
the Company did not properly withhold tax from amounts paid to or for the
account of any Lender because such Lender failed to notify the Administrative
Agent or the Company of a change in circumstances which rendered the exemption
from, or reduction of, withholding tax ineffective such Lender shall indemnify
the Administrative Agent and the Company fully for all amounts paid, directly
or indirectly, by the Administrative Agent or the Company as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Administrative Agent or the Company
under this Section, together with all costs and expenses (including Attorney
Costs. The obligation of the Lenders under this subsection shall survive the
payment of all Obligations and the resignation or replacement of the
Administrative Agent.
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IX.11 Other Agents. None of the Lenders identified on the facing
or signature s of this Agreement or any related document as a
"Documentation Agent," "Syndication Agent," "Managing Agent" or "Co-Agent"
shall have any right, power, obligation, liability, responsibility or duty
under this Agreement other than those applicable to all Lenders as such.
Without limiting the foregoing, none of the Lenders so identified as a
"Documentation Agent" or "Syndication Agent" shall have or be deemed to have
any fiduciary relationship with any Lender. Each Lender acknowledges that it
has not relied, and will not rely, on any of the Lenders so identified in
deciding to enter into this Agreement or in taking or not taking action
hereunder.
ARTICLE X
MISCELLANEOUS
X.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Majority
Lenders and the Company and acknowledged by the Administrative Agent, and then
any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided that no such waiver,
amendment or consent shall, unless in writing and signed by all Lenders and the
Company and acknowledged by the Administrative Agent, do any of the following:
(a increase or extend the Commitment of any Lender (or reinstate any
Commitment terminated pursuant to Section 8.2;
(b postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to the Lenders (or any of them hereunder or under any other Loan Document;
(c reduce the principal of, or the rate of interest specified herein
on, any Loan, or reduce any fees (other than the fees referred to in subsection
2.9(a or other amounts payable hereunder or under any other Loan Document;
(d change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans which is required for the Lenders or any
of them to take any action hereunder; or
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(e amend this Section, or Section 2.13, or any provision herein
providing for consent or other action by all Lenders;
and provided, further, that no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent in addition to the Majority
Lenders or all Lenders, as the case may be, affect the rights or duties of the
Administrative Agent under this Agreement or any other Loan Document.
X.2 Notices. (a All notices, requests, consents, approvals, waivers
and other communications shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission, provided that any
matter transmitted by the Company by facsimile (i shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 10.2, and (ii shall be followed promptly by delivery of a hard copy
original thereof and mailed, faxed or delivered, to the address or facsimile
number specified for notices on Schedule 10.2 or (x in the case of the Company
or the Administrative Agent, to such other address as shall be designated by
such party in a written notice to the other parties and (y in the case of any
other party, at such other address as shall be designated by such party in a
written notice to the Company and the Administrative Agent.
(b All such notices, requests, consents, approvals, waivers and
communications shall, when transmitted by overnight delivery, or faxed, be
effective when delivered for overnight (next-day delivery, or transmitted in
legible form by facsimile machine, respectively, or if mailed, upon the third
Business Day after the date deposited into the U.S. mail, certified or
registered mail, return receipt requested or if delivered, upon delivery;
except that notices pursuant to Article II or IX to the Administrative Agent
shall not be effective until actually received by the Administrative Agent.
(c Any agreement of the Administrative Agent and the Lenders herein
to receive certain notices by telephone or facsimile is solely for the
convenience and at the request of the Company. The Administrative Agent and the
Lenders shall be entitled to rely on the authority of any Person purporting to
be a Person authorized by the Company to give such notice and the
Administrative Agent and the Lenders shall not have any liability to the
Company or any other Person on account of any action taken or not taken by the
Administrative Agent or the Lenders in reliance upon such telephonic or
facsimile notice. The obligation of the Company to repay the Loans shall not be
affected in any way or to any extent by any failure by the Administrative Agent
and the Lenders to receive written confirmation of any telephonic or facsimile
notice or the receipt
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by the Administrative Agent and the Lenders of a confirmation which is at
variance with the terms understood by the Administrative Agent and the Lenders
to be contained in the telephonic or facsimile notice.
X.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.
X.4 Costs and Expenses. The Company shall:
(a whether or not the transactions contemplated hereby are
consummated, pay or reimburse Bank of America (including in its capacity as
Administrative Agent and BAS within five Business Days after demand (subject
to subsection 4.1(e for all reasonable costs and expenses incurred by Bank of
America (including in its capacity as Administrative Agent and BAS in
connection with the negotiation, preparation, delivery, documentation and
execution of, and any amendment, supplement, waiver or modification to (in each
case, whether or not consummated, this Agreement, any other Loan Document and
any other document prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including
Attorney Costs incurred by Bank of America (including in its capacity as
Administrative Agent and BAS with respect thereto; and
(b pay or reimburse the Administrative Agent, BAS and each Lender
within five Business Days after demand for all reasonable costs and expenses
(including Attorney Costs incurred by them in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies under this
Agreement or any other Loan Document (including in connection with any
"workout" or restructuring regarding the Loans, and including in any Insolvency
Proceeding or appellate proceeding.
X.5 Company Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify, defend and
hold the Administrative Agent-Related Persons and each Lender and each of their
respective officers, directors, employees, counsel, agents and
attorneys-in-fact (each an "Indemnified Person" harmless from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements (including
Attorney Costs of any kind or nature whatsoever which may at any time
(including at any time following repayment of the
63
<PAGE> 70
Loans and the termination, resignation or replacement of the Administrative
Agent or replacement of any Lender be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding related to or arising out of this Agreement or the Loans
or the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities";
provided that the Company shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities resulting solely from the gross
negligence or willful misconduct of such Indemnified Person. The agreements in
this Section shall survive the termination of this Agreement and the payment of
all other Obligations.
X.6 Payments Set Aside. To the extent that the Company makes a payment
to the Administrative Agent or the Lenders, or the Administrative Agent or any
Lender exercises its right of set-off, and such payment or the proceeds of such
set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Lender in its
discretion to be repaid to a trustee, a receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred and (b each Lender
severally agrees to pay to the Administrative Agent upon demand its pro rata
share of any amount so recovered from or repaid by the Administrative Agent.
X.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Administrative Agent and each Lender.
X.8 Assignments, Participations, etc. (a Any Lender may, with the
written consent of the Company (which consent shall not be required during the
existence of an Event of Default, and the Administrative Agent (such consents
not to be unreasonably withheld or delayed, at any time assign and delegate to
one or more Eligible Assignees (provided that no written consent of the Company
or the Administrative Agent shall be required in
64
<PAGE> 71
connection with any assignment and delegation by a Lender to an Eligible
Assignee that is an Affiliate of such Lender (each an "Assignee" all, or any
ratable part of all, of the Loans, the Commitments and the other rights and
obligations of such Lender hereunder, in a minimum amount of $5,000,000 (or, if
less, the amount of such Lender's Commitment; provided, however, that the
Company and the Administrative Agent may continue to deal solely and directly
with such Lender in connection with the interest so assigned to an Assignee
until (i written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to the Company and the Administrative Agent by such
Lender and the Assignee; (ii such Lender and its Assignee shall have delivered
to the Company and the Administrative Agent an Assignment and Acceptance in the
form of Exhibit E ("Assignment and Acceptance" together with any Note or Notes
subject to such assignment and (iii such Lender or the Assignee has paid to
the Administrative Agent a processing fee in the amount of $3,500.
(b From and after the date that the Administrative Agent notifies the
assignor Lender that it has received and provided its consent (and, to the
extent required, received the consent of the Company with respect to an
executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Lender under the Loan Documents, and (ii the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Loan Documents.
(c As soon as practicable after the effectiveness of any Assignment
and Acceptance pursuant to subsection 10.8(a, the Company shall, upon
request, execute and deliver to the Administrative Agent a new Note evidencing
the applicable Assignee's assigned Loans and Commitment. Immediately upon the
effectiveness of any Assignment and Acceptance, this Agreement shall be deemed
to be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and/or the resulting adjustment of the Commitments
arising therefrom.
(d Any Lender may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Company (a "Participant" participating
interests in any Loans, the Commitment of such Lender and the other interests
of such Lender (the "originating Lender" hereunder and under the other Loan
Documents; provided, however, that (i the originating Lender's obligations
under this Agreement shall remain unchanged, (ii the
65
<PAGE> 72
originating Lender shall remain solely responsible for the performance of such
obligations, (iii the Company and the Administrative Agent shall continue to
deal solely and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement and the other
Loan Documents, and (iv no Lender shall transfer or grant any participating
interest under which a Participant has rights to approve any amendment to, or
any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment, consent or waiver would require
unanimous consent of the Lenders as described in the first proviso to Section
10.1. In the case of any such participation, the Participant shall be entitled
to the benefit of Sections 3.1, 3.3, 3.4 and 10.5 as though it were also a
Lender hereunder (provided that no Participant shall be entitled to any greater
amount pursuant to such Sections than the originating Lender would have been
entitled to receive if no such participation had been sold, and if amounts
outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement.
(e Any Lender (a "Granting Lender" may grant to a special purpose
funding vehicle (an "SPC", identified as such in writing from time to time by
such Granting Lender to the Administrative Agent and the Company, the option to
provide all or any part of any Loan that such Granting Lender would otherwise
be obligated to make to the Company pursuant to this Agreement; provided that
(i nothing herein shall constitute a commitment by any SPC to make any Loan
and (ii if an SPC elects not to exercise such option or otherwise fails to
provide all or any part of any Loan, the Granting Lender shall be obligated to
make such Loan pursuant to the terms hereof. The making of a Loan by an SPC
hereunder shall utilize the Commitment of the Granting Lender to the same
extent, and as if, such Loan were made by such Granting Lender. Each party
hereto hereby agrees that no SPC shall be liable for any indemnity or similar
payment obligation under this Agreement (all liability for which shall remain
with the Granting Lender. In furtherance of the foregoing, each party hereto
hereby agrees (which agreement shall survive the termination of this Agreement
that, prior to the date that is one year and one day after the payment in full
of all outstanding commercial paper or other senior indebtedness of any SPC, it
will not institute, or join any other Person in instituting, against such SPC
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding under the laws of the United States or any State thereof with
respect to any claim arising out of this
66
<PAGE> 73
Agreement. In addition, notwithstanding anything to the contrary contained in
this subsection 10.8(e, any SPC may (i with notice to, but without the prior
written consent of, the Company and the Administrative Agent and without paying
any processing fee therefor, assign all or a portion of its interests in any
Loans to the Granting Lender or to any financial institution providing
liquidity and/or credit support to or for the account of such SPC to support
the funding or maintenance of Loans and (ii disclose on a confidential basis
any non-public information relating to its Loans to any rating agency,
commercial paper dealer or provider of any surety, guarantee or credit or
liquidity enhancement to such SPC.
(f Notwithstanding any other provision in this Agreement, any Lender
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement and any Note held by it in
favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or
U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
X.9 Confidentiality. Each Lender agrees to take, and to cause its
Affiliates to take, normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Administrative Agent on the Company's or such Subsidiary's behalf, under
this Agreement or any other Loan Document (including any information provided
pursuant to Section 6.2, 6.3 or 6.10, and neither such Lender nor any of its
Affiliates shall use any such information other than in connection with or in
enforcement of this Agreement and the other Loan Documents or in connection
with other business now or hereafter existing or contemplated with the Company
or any Subsidiary; except to the extent such information (i was or becomes
generally available to the public other than as a result of disclosure by such
Lender, or (ii was or becomes available on a non-confidential basis from a
source other than the Company, provided that such source is not bound by a
confidentiality agreement with the Company or any Subsidiary known to such
Lender; provided, however, that any Lender may disclose such information (A at
the request or pursuant to any requirement of any Governmental Authority to
which such Lender is subject or in connection with an examination of such
Lender by any such authority; (B pursuant to subpoena or other court process;
(C when required to do so in accordance with the provisions of any applicable
Requirement of Law; (D to the extent reasonably required in connection with
any litigation or proceeding to which the Administrative Agent or any Lender or
any of their respective Affiliates may be party; (E to the
67
<PAGE> 74
extent reasonably required in connection with the exercise of any remedy
hereunder or under any other Loan Document; (F to such Lender's independent
auditors and other professional advisors; (G to any Participant or Assignee,
actual or potential, provided that such Person agrees in writing to keep such
information confidential to the same extent required of the Lenders hereunder;
(H as to any Lender or any of its Affiliates, as expressly permitted under the
terms of any other document or agreement regarding confidentiality to which the
Company or any Subsidiary is party or is deemed party with such Lender or such
Affiliate; and (I to its Affiliates.
X.10 Set-off. In addition to any rights and remedies of the Lenders
provided by law, if any Event of Default exists, each Lender is authorized at
any time and from time to time, without prior notice to the Company, any such
notice being expressly waived by the Company to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final at any time held by, and other indebtedness at
any time owing by, such Lender to or for the credit or the account of the
Company against any and all Obligations owing to such Lender, now or hereafter
existing, irrespective of whether or not the Administrative Agent or such
Lender shall have made demand under this Agreement or any other Loan Document
and although such Obligations may be contingent or unmatured. Each Lender
agrees promptly to notify the Company and the Administrative Agent after any
such set-off and application made by such Lender; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application.
X.11 Notification of Addresses, Lending Offices, Etc. Each Lender shall
notify the Administrative Agent in writing of any change in the address to
which notices to such Lender should be directed, of addresses of any Lending
Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Administrative
Agent shall reasonably request.
X.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of which taken together shall be deemed to constitute but one
and the same instrument.
X.13 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not
in any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
68
<PAGE> 75
X.14 No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Company, the Lenders, the
Administrative Agent and the Administrative Agent-Related Persons and the
Indemnified Persons, and their permitted successors and assigns, and no other
Person shall be a direct or indirect legal beneficiary of, or have any direct
or indirect cause of action or claim in connection with, this Agreement or any
of the other Loan Documents.
X.15 Governing Law and Jurisdiction. (a THIS AGREEMENT AND THE NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
ILLINOIS; PROVIDED THAT THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL RETAIN
ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS
OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE ADMINISTRATIVE AGENT
AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF SUCH COURTS. EACH OF THE COMPANY, THE
ADMINISTRATIVE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY
DOCUMENT RELATED HERETO. THE COMPANY, THE ADMINISTRATIVE AGENT AND THE LENDERS
EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH
MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW.
X.16 Waiver of Jury Trial. THE COMPANY, THE LENDERS AND THE ADMINISTRATIVE
AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY ADMINISTRATIVE AGENT-RELATED PERSON, PARTICIPANT
OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE COMPANY, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH AGREE THAT ANY SUCH
CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENT,
69
<PAGE> 76
RENEWAL, SUPPLEMENT OR MODIFICATION TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
X.17 Entire Agreement. This Agreement, together with the other Loan
Documents (and any agreement relating to fees referred in subsection 2.9(a,
embodies the entire agreement and understanding among the Company, the Lenders
and the Administrative Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
70
<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
TENNECO PACKAGING INC.
By:
------------------------------
BANK OF AMERICA, N.A.,
as Administrative Agent
By:
------------------------------
Title:
---------------------------
BANK OF AMERICA, N.A., as a Lender
By:
------------------------------
Title:
---------------------------
S-1
<PAGE> 78
CREDIT SUISSE FIRST BOSTON, as
Syndication Agent and as a Lender
By:
------------------------------
Title:
---------------------------
By:
------------------------------
Title:
---------------------------
S-2
<PAGE> 79
BANK ONE, NA
(Main Office Chicago,
as Co-Documentation Agent and as a
Lender
By:
------------------------------
Title:
---------------------------
S-3
<PAGE> 80
BANQUE NATIONALE DE PARIS, as Co-
Documentation Agent and as a Lender
By:
------------------------------
Title:
---------------------------
S-4
<PAGE> 81
THE BANK OF NEW YORK, as a Lender
By:
------------------------------
Title:
---------------------------
S-5
<PAGE> 82
THE CHASE MANHATTAN BANK, as a
Lender
By:
------------------------------
Title:
---------------------------
S-6
<PAGE> 83
CITICORP USA, INC., as a Lender
By:
------------------------------
Title:
---------------------------
S-7
<PAGE> 84
COMMERZBANK AG, NEW YORK and GRAND
CAYMAN BRANCHES, as a Lender
By:
------------------------------
Title:
---------------------------
S-8
<PAGE> 85
FIRST UNION NATIONAL BANK, as a
Lender
By:
------------------------------
Title:
---------------------------
S-9
<PAGE> 86
BARCLAYS BANK PLC, as a Lender
By:
------------------------------
Title:
---------------------------
S-10
<PAGE> 87
WACHOVIA BANK, N.A
By:
------------------------------
Title:
---------------------------
S-11
<PAGE> 88
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, as a Lender
By:
------------------------------
Title:
---------------------------
S-12
<PAGE> 89
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH, as a Lender
By:
------------------------------
Title:
---------------------------
S-13
<PAGE> 90
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as a Lender
By:
------------------------------
Title:
---------------------------
S-14
<PAGE> 91
THE SUMITOMO BANK, LIMITED, as a
Lender
By:
------------------------------
Title:
---------------------------
S-15
<PAGE> 92
SUNTRUST BANK, ATLANTA, as a
Lender
By:
------------------------------
Title:
---------------------------
S-16
<PAGE> 93
BANK HAPOALIM B.M., as a Lender
By:
------------------------------
Title:
---------------------------
By:
------------------------------
Title:
---------------------------
S-17
<PAGE> 94
BAYERISCHE LANDESBANK GIROZENTRALE,
CAYMAN ISLANDS BRANCH, as a Lender
By:
------------------------------
Title:
---------------------------
S-18
<PAGE> 95
BANCA COMMERCIALE ITALIANA, CHICAGO
BRANCH, as a Lender
By:
------------------------------
Title:
---------------------------
By:
------------------------------
Title:
---------------------------
S-19
<PAGE> 96
THE DAI-ICHI KANGYO BANK, LTD., as a
Lender
By:
------------------------------
Title:
---------------------------
S-20
<PAGE> 97
SOCIETE GENERALE, as a Lender
By:
------------------------------
Title:
---------------------------
S-21
<PAGE> 98
BBL INTERNATIONAL (U.K. LIMITED, as
a Lender
By:
------------------------------
Title:
---------------------------
S-22
<PAGE> 99
SCHEDULE 1.1
PRICING SCHEDULE
The Applicable Margin, the Facility Fee Rate and the Utilization Fee
Rate, respectively, shall be determined in accordance with the table below and
the other provisions of this Schedule 1.1.
<TABLE>
<CAPTION>
===========================================================================================================================
LEVEL Level Level Level Level
I II III IV V
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Applicable Margin 0.420% 0.650% 0.750% 0.850% 1.050%
- ---------------------------------------------------------------------------------------------------------------------------
Facility Fee Rate 0.080% 0.100% 0.125% 0.150% 0.200%
- ---------------------------------------------------------------------------------------------------------------------------
Utilization Fee Rate 0.100% 0.125% 0.125% 0.175% 0.250%
===========================================================================================================================
</TABLE>
Level I applies when either the S&P Rating is A- or higher or the
Moody's Rating is A3 or higher;
Level II applies when either the S&P Rating is BBB+ or higher or the
Moody's Rating is Baa1 or higher;
Level III applies when either the S&P Rating is BBB or higher or the
Moody's Rating is Baa2 or higher;
Level IV applies when either the S&P Rating is BBB- or higher or the
Moody's Rating is Baa3 or higher; and
Level V applies when the S&P Rating is lower than BBB- and the Moody's
Rating is lower than Baa3;
provided that at any time the S&P Rating and Moody's Rating are more than one
rating level apart, the Applicable Margin, the Facility Fee Rate and the
Utilization Fee Rate shall be based on the level immediately below the higher
of such levels. If at any time there exists neither a Moody's Rating nor an S&P
Rating, the Applicable Margin, the Facility Fee Rate and the Utilization Fee
Rate during such time shall be determined as set forth above for Level V. Any
change in the Applicable Margin, the Facility Fee Rate and the Utilization Fee
Rate as a result of a change in either the S&P Rating and/or the Moody's Rating
shall be effective as of the day immediately following such change.
<PAGE> 100
SCHEDULE 2.1
COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Lender Commitment Pro Rata Share
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Bank of America, N.A. $ 19,250,000.00 7.700000000%
- -----------------------------------------------------------------------------------------------
Credit Suisse First Boston 18,000,000.00 7.200000000%
- -----------------------------------------------------------------------------------------------
Bank One, NA 18,000,000.00 7.200000000%
- -----------------------------------------------------------------------------------------------
Banque Nationale de Paris 18,000,000.00 7.200000000%
- -----------------------------------------------------------------------------------------------
The Bank of New York 14,250,000.00 5.700000000%
- -----------------------------------------------------------------------------------------------
The Chase Manhattan Bank 14,250,000.00 5.700000000%
- -----------------------------------------------------------------------------------------------
Citicorp USA, Inc. 14,250,000.00 5.700000000%
- -----------------------------------------------------------------------------------------------
Commerzbank AG, New York and Grand 14,250,000.00 5.700000000%
Cayman Branches
- -----------------------------------------------------------------------------------------------
First Union National Bank 14,250,000.00 5.700000000%
- -----------------------------------------------------------------------------------------------
Barclays Bank PLC 14,250,000.00 5.700000000%
- -----------------------------------------------------------------------------------------------
Wachovia Bank, N.A. 11,250,000.00 4.500000000%
- -----------------------------------------------------------------------------------------------
The Industrial Bank of Japan, Limited 8,750,000.00 3.500000000%
- -----------------------------------------------------------------------------------------------
The Bank of Tokyo-Mitsubishi, Ltd., 8,750,000.00 3.500000000%
Chicago Branch
- -----------------------------------------------------------------------------------------------
Morgan Guaranty Trust Company of New 8,750,000.00 3.500000000%
York
- -----------------------------------------------------------------------------------------------
The Sumitomo Bank, Limited 8,750,000.00 3.500000000%
- -----------------------------------------------------------------------------------------------
Suntrust Bank, Atlanta 8,750,000.00 3.500000000%
- -----------------------------------------------------------------------------------------------
Bank Hapoalim B.M. 7,500,000.00 3.000000000%
- -----------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, 6,250,000.00 2.500000000%
Cayman Islands Branch
- -----------------------------------------------------------------------------------------------
Banca Commerciale Italiana, Chicago 6,250,000.00 2.500000000%
Branch
- -----------------------------------------------------------------------------------------------
The Dai-Ichi Kangyo Bank, Ltd. 6,250,000.00 2.500000000%
- -----------------------------------------------------------------------------------------------
Societe Generale 6,250,000.00 2.500000000%
- -----------------------------------------------------------------------------------------------
BBL International (U.K. Limited 3,750,000.00 1.500000000%
================= ================
TOTAL $ 250,000,000.00 100.00%
- -----------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE> 101
Schedule 5.5
Litigation
<PAGE> 102
Schedule 5.12
Environmental Matters
<PAGE> 103
Schedule 5.16
Subsidiaries and Minority Interests
<PAGE> 104
Schedule 7.2
Permitted Liens
<PAGE> 105
SCHEDULE 10.2
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
<PAGE> 1
EXHIBIT 5
[FORM OF LEGAL OPINION]
___________, 1999
Tenneco Packaging Inc.
500 West Field Court
Lake Forest, Illinois 60045
Ladies and Gentlemen:
We have acted as counsel to Tenneco Packaging Inc. (the "Company" in
connection with the Registration Statement on Form S-4 (Reg. No. 333-82923
filed with the Securities and Exchange Commission (the "Registration
Statement", for the purpose of registering under the Securities Act of 1933,
as amended (the "Act", up to $1,300,000,000 aggregate principal amount of the
Company's notes and debentures (the "New Securities". The New Securities are
to be issued pursuant to an Indenture dated as of September 29, 1999 (the
"Indenture" between the Company and The Chase Manhattan Bank, as trustee (the
"Trustee", as proposed to be supplemented.
We are familiar with the Registration Statement and the exhibits thereto. We, or
attorneys under our supervision, have also examined originals or copies,
certified or otherwise, of such other documents, evidence of corporate action
and instruments, including the Indenture and the form of the New Securities, as
we have deemed necessary or advisable for the purpose of rendering this opinion.
As to questions of fact relevant to this opinion, we have relied upon
certificates or written statements from officers and other appropriate
representatives of the Company and its subsidiaries and affiliates or public
officials. In all such examinations we have assumed the genuineness of all
signatures, the authority to sign, and the authenticity of all documents
submitted to us as originals. We have also assumed the conformity with the
originals of all documents submitted to us as copies.
Based on and subject to the foregoing, we are of the opinion that the Indenture
and the New Securities have been duly authorized by the Company. We are also
of the opinion that, assuming: (i the Indenture is duly executed by the
Trustee; (ii the Registration Statement has become effective under the Act;
(iii the New Securities are duly authorized, executed and authenticated in
accordance with the Indenture; and (iv delivery of the New Securities to the
purchasers thereof in exchange for certain debt securities of Tenneco Inc. in
the manner described in the Registration Statement, the New Securities will be
valid and binding obligations of the Company.
<PAGE> 2
Tenneco Packaging Inc.
_______, 1999
2
The opinions expressed above are limited to the federal laws of the United
States, the laws of the State of Illinois and, to the extent relevant thereto,
the General Corporation Law of the State of Delaware as currently in effect.
For purposes of this opinion, we have assumed that the laws of the State of New
York are identical to the laws of the State of Illinois. We assume no
obligation to supplement this opinion if any applicable laws change after the
date hereof or if we become aware of any facts that might change the opinions
expressed herein after the date hereof.
We hereby consent to the use of our name under the caption "Legal Matters" in
the Prospectus forming a part of the Registration Statement and to the filing,
as an exhibit to the Registration Statement, of this opinion. In giving this
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations of
the Securities and Exchange Commission.
Very truly yours,
JENNER & BLOCK
-2-
<PAGE> 1
EXHIBIT 8
[FORM OF TAX OPINION]
___________________, 1999
Tenneco Inc.
Tenneco Packaging Inc.
1275 King Street
Greenwich, Connecticut 06831
Re: Federal Income Tax Consequences of the Exchange Offers
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the exchange of up to [$ ] aggregate principal amount
of newly issued notes and debentures (the "New Securities" of Tenneco
Packaging Inc., a Delaware corporation ("Tenneco Packaging", for any and all
of the [$ ] aggregate principal amount of certain outstanding notes
and debentures (the "Original Securities" issued by Tenneco Inc., a Delaware
corporation ("Tenneco" (the "Exchange Offers", as described in the
Registration Statement on Form S-4 (Reg. No. 333-82923, filed by Tenneco
Packaging with the Securities and Exchange Commission (the "Registration
Statement".
In rendering our opinion, we have examined and relied upon the
accuracy and completeness of the facts, information, covenants and
representations contained in originals or copies, certified or otherwise
identified to our satisfaction, of the Prospectus and Consent Solicitation
filed as part of the Registration Statement (the "Prospectus", and such other
documents and representations of representatives of Tenneco and Tenneco
Packaging as we have deemed necessary or appropriate. In our examination we
have assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such documents.
We have also assumed the transactions related to the Exchange Offers will be
consummated as described in the Prospectus.
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Tenneco Inc.
Tenneco Packaging Inc.
________, 1999
Two
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended, proposed, temporary and final
Treasury Regulations promulgated thereunder, pertinent judicial authorities,
interpretive rulings of the Internal Revenue Service and other authorities as
we have considered relevant. We caution that statutes, regulations, judicial
decisions and administrative interpretations are subject to change at any time
and, in some circumstances, with retroactive effect. A change in the
authorities upon which our opinion is based could affect the conclusions stated
herein.
Based on the foregoing, we are of the opinion that the statements and
legal conclusions contained in the Prospectus under the caption "U.S. FEDERAL
INCOME TAX CONSEQUENCES", to the extent that they constitute matters of law or
legal conclusions, are correct in all material respects. In addition, we
consent to the reference to Jenner & Block in the Prospectus under the caption
"Legal Matters" and "U.S. FEDERAL INCOME TAX CONSEQUENCES" and to the filing
of this opinion as an exhibit to the Registration Statement. In giving this
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission.
Except as expressly set forth in the Prospectus, we express no opinion to
any party as to the tax consequences, whether federal, state, local or foreign,
of the Exchange Offers or of any transaction related to the Exchange Offers.
This opinion is solely for your benefit and is not to be used, circulated,
quoted or otherwise referred to for any purpose without our express prior
written permission.
Very truly yours,
JENNER & BLOCK
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EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated July 2, 1999 included in this registration statement and to the
incorporation by reference in this registration statement of our report dated
February 17, 1999 (except with respect to the matters discussed in Note 2, as to
which the date is August 20, 1999) included in the Tenneco Inc. Current Report
on Form 8-K dated August 20, 1999, and to all references to our Firm included in
this registration statement.
ARTHUR ANDERSEN LLP
Houston, Texas
October 4, 1999
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EXHIBIT 99.1
This Letter of Consent/Transmittal is being used with respect to the following
series of outstanding debt securities (the "Original Securities") of Tenneco
Inc., a Delaware corporation ("Tenneco"). Check only one*.
<TABLE>
<CAPTION>
CUSIP NO. TITLE OF SECURITY
--------- -----------------
<S> <C> <C>
</TABLE>
[ ]
[ ]
LETTER OF CONSENT/TRANSMITTAL
OF
TENNECO INC.
TO TENDER FOR EXCHANGE AND GIVE CONSENT
PURSUANT TO THE PROSPECTUS AND CONSENT SOLICITATION OF TENNECO AND
TENNECO PACKAGING INC. (TO BE RENAMED)
DATED ____________, 1999
EACH OF THE EXCHANGE OFFERS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS EXTENDED (THE "EXPIRATION TIME") OR
EARLIER TERMINATED. THE CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1999, UNLESS EXTENDED (THE "EARLY
EXCHANGE TIME") OR EARLIER TERMINATED. HOLDERS MUST TENDER BEFORE THE EARLY
EXCHANGE TIME TO BE ELIGIBLE TO RECEIVE $1,000 PRINCIPAL AMOUNT OF APPLICABLE
NEW SECURITIES FOR EACH $1,000 PRINCIPAL AMOUNT OF ORIGINAL SECURITIES, AS
DESCRIBED BELOW. HOLDERS WHO TENDER AFTER THE EARLY EXCHANGE TIME BUT BEFORE THE
APPLICABLE EXPIRATION TIME WILL BE ELIGIBLE TO RECEIVE ONLY [$ ]
PRINCIPAL AMOUNT OF APPLICABLE NEW SECURITIES FOR EACH $1,000 PRINCIPAL AMOUNT
OF ORIGINAL SECURITIES, AS DESCRIBED BELOW.
TENDERED SECURITIES MAY BE WITHDRAWN AND CONSENTS MAY BE REVOKED AT ANY TIME
BEFORE THE EARLIER OF (1) THE EARLY EXCHANGE TIME AND (2) 5:00 P.M., NEW YORK
CITY TIME, ON THE DATE THAT TENNECO PUBLICLY ANNOUNCES IT HAS RECEIVED THE
REQUIRED CONSENTS, AS DESCRIBED BELOW ("THE WITHDRAWAL TIME").
If you desire to accept any of the Exchange Offers (as defined below), this
Letter of Consent/ Transmittal should be completed, signed, and submitted
to the Exchange Agent (as defined below):
THE CHASE MANHATTAN BANK
<TABLE>
<CAPTION>
By Registered Mail
By Hand: or Overnight Delivery: By Facsimile:
<S> <C> <C>
Corporate Trust Securities The Chase Manhattan Bank (212) 638-7380 or
Window Money Market Operations (212) 638-7381
55 Water Street 55 Water Street
Room 234 Room 234 Confirm by Telephone:
North Building North Building (212) 638-0828
New York, NY 10041 New York, NY 10041
Attn: Carlos Esteves Attn: Carlos Esteves
</TABLE>
DELIVERY OF THIS LETTER OF CONSENT/TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION
VIA FACSIMILE TO A TELEPHONE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
- ---------------
* If more than one series of Original Securities is being tendered, it is
necessary to return a separate form in respect of each series. Please check
the appropriate box at the top of this page to indicate the series of Original
Securities to which this Letter of Consent/Transmittal relates.
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For any questions regarding this Letter of Consent/Transmittal or for any
additional information, you may contact the Information Agent:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 State Street, 10th Floor
New York, NY 10004
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
This Letter of Consent/Transmittal (the "Letter of Transmittal") is to be
used to accept an Exchange Offer pursuant to the Prospectus and Consent
Solicitation of Tenneco and Tenneco Packaging Inc. (to be renamed), a Delaware
corporation ("Packaging"), dated , 1999 (the "Prospectus"). This
Letter of Transmittal must be used to accept an Exchange Offer if certificates
representing Original Securities are to be physically delivered to The Chase
Manhattan Bank, as exchange agent (the "Exchange Agent"). This Letter of
Transmittal may be used to accept an Exchange Offer if Original Securities are
to be tendered by effecting a book-entry transfer into the Exchange Agent's
account at The Depository Trust Company ("DTC") and instructions are not being
transmitted through DTC's Automated Tender Offer Program ("ATOP").
Holders of Original Securities that are tendering by book-entry transfer to
the Exchange Agent's account at DTC can execute the tender through ATOP, for
which the Exchange Offers will be eligible. DTC participants that are accepting
the Exchange Offers may transmit their acceptance to DTC, which will verify the
acceptance and execute a book-entry delivery to the Exchange Agent's account at
DTC. DTC will then send an "agent's message" (as described in the Prospectus) to
the Exchange Agent for its acceptance. Delivery of the agent's message by DTC
will satisfy the terms of the Exchange Offers as to execution and delivery of a
Letter of Transmittal by the participant identified in the agent's message.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
HOLDERS WHO DESIRE TO TENDER THEIR ORIGINAL SECURITIES PURSUANT TO AN
EXCHANGE OFFER ARE REQUIRED TO DELIVER THEIR CONSENT (AS DEFINED BELOW) TO
AMENDMENTS TO THE INDENTURE UNDER WHICH TENNECO ISSUED THE ORIGINAL SECURITIES.
THESE AMENDMENTS WOULD ELIMINATE THE RESTRICTIONS ON TENNECO'S OPERATIONS
CURRENTLY CONTAINED IN THAT INDENTURE. THE COMPLETION, EXECUTION AND DELIVERY OF
THIS LETTER OF TRANSMITTAL CONSTITUTES THE DELIVERY OF A CONSENT WITH RESPECT TO
THE ORIGINAL SECURITIES TENDERED. HOLDERS MAY NOT DELIVER CONSENTS WITHOUT
TENDERING ORIGINAL SECURITIES.
ANY NEW SECURITIES (AS DEFINED BELOW) ISSUED IN EXCHANGE FOR ORIGINAL
SECURITIES WILL BE ISSUED ONLY IN BOOK-ENTRY FORM THROUGH DTC, WHICH MEANS THAT
NO EXCHANGING HOLDER WILL RECEIVE CERTIFICATES EVIDENCING ANY NEW SECURITIES.
Subject to the terms and conditions of each Exchange Offer and the Consent
Solicitation and applicable law, Tenneco will make payment for the Original
Securities accepted for exchange by depositing with the Exchange Agent: (1) New
Securities (in book-entry form); (2) cash for any fractional interest in New
Securities, as described in the Prospectus; and (3) cash for the payment of any
applicable accrued but unpaid interest on Original Securities. This will occur
on the first New York Stock Exchange trading day after Tenneco accepts the
related Original Securities for exchange. The Exchange Agent will act as agent
for the tendering holders for the purpose of receiving payments and/or New
Securities (in book-entry form) from Tenneco and then delivering payments and/or
New Securities (in book-entry form) to or at the direction of those holders. The
Exchange Agent will make this delivery on the same day Tenneco deposits payment
for the Original Securities, or as soon thereafter as practicable.
The undersigned should complete, execute and deliver this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offers and Consent Solicitation (as defined below).
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TENDER OF ORIGINAL SECURITIES
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF ORIGINAL SECURITIES ARE BEING DELIVERED WITH THIS LETTER OF
TRANSMITTAL.
[ ] CHECK HERE IF ORIGINAL SECURITIES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH
DTC AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN DTC MAY DELIVER
ORIGINAL SECURITIES BY BOOK-ENTRY TRANSFER):
NAME OF TENDERING INSTITUTION:
ACCOUNT NUMBER:
TRANSACTION CODE NUMBER:
Holders who wish to tender their Original Securities and deliver a Consent
must, at a minimum, complete columns (1) through (4) in the table below entitled
"Description of Original Securities Tendered and in Respect of Which Consent is
Given" and sign in the appropriate box below. IF ONLY THOSE COLUMNS ARE
COMPLETED, THE HOLDER WILL BE DEEMED TO HAVE DELIVERED A CONSENT IN RESPECT OF,
AND TO HAVE TENDERED, ALL ORIGINAL SECURITIES LISTED IN THE TABLE. If a holder
wishes to tender less than all of such Original Securities, column (5) must be
completed in full. See Instruction 2.
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List below the Original Securities to which this Letter of Transmittal
relates. If the space provided is inadequate, list the certificate number and
principal amounts on a separately executed schedule and affix the schedule to
this Letter of Transmittal. Tenders of Original Securities will be accepted only
in principal amounts of $1,000 or integral multiples of $1,000.
<TABLE>
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DESCRIPTION OF ORIGINAL SECURITIES TENDERED
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AND IN RESPECT OF WHICH CONSENT IS GIVEN
AGGREGATE PRINCIPAL
AMOUNT TENDERED AND IN
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S), AGGREGATE PRINCIPAL RESPECT OF WHICH
OR NAME OF DTC PARTICIPANT AND PARTICIPANT'S SERIES OF AMOUNT REPRESENTED CONSENT IS GIVEN (IF
DTC ACCOUNT NUMBER IN WHICH ORIGINAL SECURITIES ORIGINAL CERTIFICATE BY LESS
- ----------------------------------------------------------------------------------------------------------------------------------
ARE HELD (PLEASE FILL IN IF BLANK) SECURITIES* NUMBER(S)** CERTIFICATE(S) THAN ALL)***
(1) (2) (3) (4) (5)
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<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL PRINCIPAL AMOUNT TENDERED
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* Indicate applicable series of Original Securities: , , .
** Need not be completed by persons tendering by book-entry transfer.
*** Unless otherwise indicated in this column, it will be assumed that the entire aggregate principal amount represented by the
Original Securities identified above is being tendered. A tendering holder is required to deliver a Consent with respect to
all Original Securities tendered by that holder. Completion of column (4) will constitute a Consent in respect of such
Original Securities, unless less than all such Original Securities are to be tendered as specified in column (5), in which
case Consents only with respect to such lesser amount of such Original Securities tendered shall be given. See Instruction
2.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the Original Securities
tendered hereby. The series and the principal amount of Original Securities that
the undersigned wishes to tender should be indicated in the appropriate boxes.
4
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NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby consents (the "Consent") to the proposed amendments
(the "Proposed Amendments") to the indenture dated as of November 1, 1996 (as
amended prior to the date hereof, the "Original Indenture") between Tenneco
(formerly known as New Tenneco Inc.) and The Chase Manhattan Bank, as trustee
(the "Trustee"), as described in the Prospectus, with respect to, and hereby
tenders to Tenneco, the principal amount of Original Securities indicated in the
table above entitled "Description of Original Securities Tendered and in Respect
of Which Consent is Given," upon the terms and subject to the conditions set
forth in the Prospectus (receipt of which is hereby acknowledged) and in this
Letter of Transmittal. These terms and conditions together constitute (1)
Tenneco's offers to exchange (the "Exchange Offers") newly issued debt
securities of Packaging (the "New Securities") for the applicable series of
Original Securities, as described in the Prospectus, properly tendered and
accepted for exchange, and (2) Tenneco's solicitation of Consents to the
Proposed Amendments (the "Consent Solicitation"). The Proposed Amendments will
be effected through the execution and delivery by Tenneco and the Trustee of a
supplemental indenture, as described in the Prospectus (the "Supplemental
Indenture").
The undersigned hereby agrees and acknowledges that, by the execution and
delivery hereof, the undersigned delivers the written Consent to the Proposed
Amendments with respect to the principal amount of Original Securities indicated
in the table above entitled "Description of Original Securities Tendered and in
Respect of Which Consent is Given." The undersigned understands that the Consent
delivered hereby shall remain in full force and effect unless and until such
Consent is revoked in accordance with the procedures set forth in the Prospectus
and this Letter of Transmittal. The undersigned understands that after the
Withdrawal Time, no Consents may be revoked. To amend the Original Indenture,
Tenneco must receive Consents from the registered holders of at least a majority
in aggregate principal amount of all outstanding debt securities issued under
the Original Indenture, voting as a single class (the "Required Consents"). The
undersigned understands that the Proposed Amendments will not become operative
unless and until Tenneco accepts for exchange or purchase debt securities issued
under the Original Indenture that represent at least the Required Consents,
whether tendered in the Exchange Offers or Tenneco's concurrent cash tender
offers. The undersigned acknowledges that a limited waiver of some provisions of
the Original Indenture will apply between the time Tenneco executes the
Supplemental Indenture and the time it closes on the Exchange Offers and
concurrent cash tender offers. This waiver will terminate if the Proposed
Amendments do not take effect.
Tenneco's obligation to accept for payment, and to pay for, Original
Securities validly tendered pursuant to the Exchange Offers is conditioned upon,
among other things, satisfaction or Tenneco's waiver of the following
conditions: (1) receipt by Tenneco of the Required Consents; (2) any and all
conditions to Tenneco's concurrent cash tender offers (as described in the
Prospectus); (3) material conditions to Tenneco's planned spin-off of Packaging
to its public stockholders (as described in the Prospectus); and (4) any and all
other conditions to Tenneco's pre-spin-off debt realignment (of which the
exchange offers are one component, as described in the Prospectus).
Subject to, and effective upon, the acceptance for payment of, and payment
for, the principal amount of Original Securities tendered herewith in accordance
with the terms and subject to the conditions of the Exchange Offers, the
undersigned hereby sells, assigns and transfers to, or upon the order of,
Tenneco, all right, title and interest in and to all of the Original Securities
tendered hereby and also consents to the Proposed Amendments with respect to
such Original Securities. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent the true and lawful agent and attorney-in-fact of
the undersigned (with full knowledge that the Exchange Agent also acts as the
agent of Tenneco) with respect to such Original Securities, with full powers of
substitution and revocation (such power of attorney being deemed to be an
irrevocable power coupled with an interest) to: (i) present such Original
Securities and all evidences of transfer and authenticity to, or transfer
ownership of, such Original Securities on the account books maintained by DTC
to, or upon the order of, Tenneco; (ii) present such Original Securities for
transfer of
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ownership on the books of Tenneco; (iii) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Original Securities; and
(iv) deliver to Tenneco and the Trustee this Letter of Transmittal as evidence
of the undersigned's Consent to the Proposed Amendments and as certification
that the Required Consents to the Proposed Amendments (duly executed by holders)
have been received, all in accordance with the terms and conditions of the
Exchange Offers and the Consent Solicitation as described in the Prospectus.
If the undersigned is not the registered holder of the Original Securities
listed in the box above labeled "Description of Original Securities Tendered and
in Respect of Which Consent is Given," or such holder's legal representative or
attorney-in-fact, then in order to validly consent, the undersigned will have to
obtain a properly completed irrevocable proxy that authorizes the undersigned
(or the undersigned's legal representative or attorney-in-fact) to deliver
Consents in respect of such Original Securities on behalf of the holder thereof,
and such proxy will have to be delivered with this Letter of Transmittal.
The undersigned understands that tenders of Original Securities may be
withdrawn, and Consents may be revoked, at any time prior to the Withdrawal
Time. A valid withdrawal of tendered Original Securities prior to the Withdrawal
Time will constitute the concurrent valid revocation of such holder's related
Consents in respect of such Original Securities. In order for a holder to revoke
a Consent, such holder must withdraw the related tendered Original Securities.
In the event of a termination of the Exchange Offers, the Original Securities
tendered pursuant to the Exchange Offers will be returned to the tendering
holders promptly (or in the case of Original Securities tendered by book-entry
transfer, such Original Securities will be credited to the account maintained at
DTC from which such Original Securities were delivered). If Tenneco makes a
material change in the terms of the Exchange Offers or the Consent Solicitation
or the information concerning the Exchange Offers or the Consent Solicitation,
Tenneco will disseminate additional offer and solicitation materials and extend
the Exchange Offers or, if applicable, the Consent Solicitation, if and to the
extent required by law.
The undersigned understands that tenders of Original Securities pursuant to
any of the procedures described in the Prospectus and in the instructions hereto
and acceptance of such Original Securities by Tenneco will constitute a binding
agreement between the undersigned and Tenneco upon the terms and subject to the
conditions of the Exchange Offers and Consent Solicitation. For purposes of the
Exchange Offers, the undersigned understands that validly tendered Original
Securities (or defectively tendered Original Securities with respect to which
Tenneco has, or has caused to be, waived such defect) will be deemed to have
been accepted by Tenneco if, as and when Tenneco gives written or oral (followed
by written) notice thereof to the Exchange Agent. For purposes of the Consent
Solicitation, the undersigned understands that Consents received by the Exchange
Agent will be deemed to have been accepted when (1) Tenneco and the Trustee
under the Original Indenture execute the Supplemental Indenture containing the
Proposed Amendments, which is expected to occur promptly after the Withdrawal
Time, and (2) Tenneco has accepted the tendered Original Securities underlying
those Consents for exchange in the Exchange Offers.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Original
Securities tendered hereby and to deliver the Consent contained herein, and that
when such tendered Original Securities are accepted for purchase and payment by
Tenneco, Tenneco will acquire good title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim or
right. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or by Tenneco to be necessary or
desirable to complete the sale, assignment and transfer of the Original
Securities tendered hereby, to perfect the undersigned's Consent to the Proposed
Amendments or to complete the execution of the Supplemental Indenture.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the heirs, executors, administrators, trustees in bankruptcy,
personal and legal representatives, successors and assigns of the undersigned.
The undersigned understands that the delivery and surrender of any Original
Securities is not effective, and the risk of loss of the Original Securities
does not pass to the Exchange Agent, until receipt by the Exchange Agent of this
Letter of Transmittal (or a manually signed facsimile hereof), properly
completed and
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<PAGE> 7
duly executed, together with all accompanying evidences of authority and any
other required documents in form satisfactory to Tenneco. All questions as to
the form of all documents and the validity (including time of receipt) and
acceptance of tenders and withdrawals of Original Securities and deliveries of
related Consents will be determined by Tenneco, in its sole discretion, which
determination shall be final and binding.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the check for any fractional interest in New Securities and/or accrued
interest (as described in the Prospectus) for any Original Securities purchased,
and any certificates for Original Securities not tendered or not purchased, in
the name(s) of the undersigned (and, in the case of Original Securities tendered
by book-entry transfer, by credit to the DTC account specified above).
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for any fractional interest in New Securities and/or any
accrued interest for any Original Securities purchased, and any certificates for
Original Securities not tendered or not purchased (and accompanying documents,
as appropriate), to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue a check for any
applicable Original Securities purchased in the name(s) of, and forward any
certificates for Original Securities not tendered or not purchased to, the
person(s) so indicated. The undersigned recognizes that Tenneco has no
obligation under the "Special Issuance Instructions" or the "Special Delivery
Instructions" provision of this Letter of Transmittal to effect the transfer of
any Original Securities from the name of the holder(s) thereof if Tenneco does
not accept for payment any of the principal amount of such Original Securities
so tendered.
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4 AND 5)
To be completed ONLY if certificates for Original Securities in a principal
amount not tendered or not accepted for purchase are to be issued in the name
of, or checks for any fractional interest in New Securities and/or accrued
interest are to be issued to the order of, someone other than the person or
persons whose signature(s) appears within this Letter of Transmittal.
Issue: [ ] Original Securities [ ] Checks
(check as applicable)
Name:
- -----------------------------------------------
(Please Print)
Address:
- ---------------------------------------------
- -------------------------------------------------------
(Zip Code)
- -------------------------------------------------------
(Taxpayer Identification or Social Security Number)
(See Substitute Form W-9 herein)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4 AND 5)
To be completed ONLY if certificates for Original Securities in a principal
amount not tendered or not accepted for purchase or checks for any fractional
interest in New Securities and/or accrued interest are to be sent to someone
other than the person or persons whose signature(s) appears within this Letter
of Transmittal or issued to an address different from that shown in the box
titled "Description of Original Securities Tendered and in Respect of Which
Consent is Given" within this Letter of Transmittal.
Issue: [ ] Original Securities [ ] Checks
(check as applicable)
Name:
- -----------------------------------------------
(Please Print)
Address:
- ---------------------------------------------
- -------------------------------------------------------
(Zip Code)
7
<PAGE> 8
DTC PARTICIPANT INFORMATION
(SEE INSTRUCTION 1)
TO BE COMPLETED BY ALL HOLDERS DELIVERING ORIGINAL SECURITIES. NEW SECURITIES
WILL BE DELIVERED ONLY IN BOOK-ENTRY FORM.
Name of DTC Participant:
- --------------------------------------------------------------------------------
DTC Participant Number:
- --------------------------------------------------------------------------------
Contact at DTC Participant:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
Telephone No.:
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<PAGE> 9
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING AND CONSENTING HOLDERS OF ORIGINAL SECURITIES
REGARDLESS OF WHETHER ORIGINAL SECURITIES ARE BEING PHYSICALLY DELIVERED
HEREWITH)
By completing, executing and delivering this Letter of Transmittal, the
undersigned hereby consents to the Proposed Amendments with respect to the
principal amount of the Original Securities listed in the box above labeled
"Description of Original Securities Tendered and in Respect of Which Consent is
Given."
This Letter of Transmittal must be signed by the registered holder(s)
exactly as the name of such holder appears on certificate(s) for Original
Securities or, if tendered by a participant in DTC, exactly as such
participant's name appears on a security position listing as owner of Original
Securities, or by person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If the signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or another acting in a fiduciary or representative capacity, please
set forth the signatory's full title. See Instruction 3.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY
(See guarantee requirement below)
Dated
- --------------------------------------------- , 1999
Name(s)
- --------------------------------------------------------------------------------
(Please Print)
Capacity
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
(Including Zip Code)
Area Code and Tel Number
- --------------------------------------------------------------------------------
Tax Identification or Social Security No
- ---------------------------------------------------------------------
(Complete Accompanying Substitute Form W-9)
MEDALLION SIGNATURE GUARANTEE
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 3)
Authorized Signature
- --------------------------------------------------------------------------------
Name of Firm
- --------------------------------------------------------------------------------
[place seal here]
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<PAGE> 10
INSTRUCTIONS TO LETTER OF CONSENT/TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFERS AND CONSENT
SOLICITATION
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND ORIGINAL SECURITIES. This
Letter of Transmittal is to be completed by holders if (i) certificates
representing Original Securities are to be physically delivered to the Exchange
Agent herewith by such holders, or (ii) tender of Original Securities is to be
made by book-entry transfer to the Exchange Agent's account at DTC, and, in each
case, instructions are not being transmitted through ATOP.
All physically delivered Original Securities, or a confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of all Original
Securities delivered electronically, as well as a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof) or
properly transmitted agent's message, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at its address set
forth herein before the Early Exchange Time (if the holder wishes to be eligible
to receive $1,000 principal amount of applicable New Securities for each $1,000
of Original Securities) or applicable Expiration Time (if the holder wishes to
be eligible to receive only [$ ] principal amount of applicable New
Securities for each $1,000 of Original Securities, subject to the provisions
regarding payment of cash in lieu of any fractional interest in New Securities),
as the case may be.
Any financial institution that is a participant in DTC may electronically
transmit its acceptance of the Exchange Offers by causing DTC to transfer
Original Securities to the Exchange Agent in accordance with DTC's ATOP
procedures for such transfer prior to the Early Exchange Time or Expiration
Time, as the case may be. The Exchange Agent will make available its general
participant account for the Original Securities at DTC for purposes of the
Exchange Offers. DELIVERY OF A LETTER OF TRANSMITTAL TO DTC WILL NOT CONSTITUTE
VALID DELIVERY TO THE EXCHANGE AGENT.
If a holder tenders after the Early Exchange Time, the holder could become
entitled to a cash payment in lieu of any fractional interest in New Securities.
Because Tenneco will aggregate the New Securities to which a tendering
registered holder is entitled before making any such cash payment, registered
holders should, in that case, submit a separate tender for each of their
beneficial owners. THIS SHOULD BE DONE ONLY IF A TENDER IS BEING MADE AFTER THE
EARLY EXCHANGE TIME.
The method of delivery of this Letter of Transmittal, the Original
Securities and all other required documents, including delivery through DTC and
any acceptance or agent's message delivered through ATOP, is at the option and
risk of the tendering holder. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. Instead of delivery
by mail, it is recommended that the holder use an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery.
No Letter of Transmittal or tendered Original Securities should be sent to
Tenneco, Packaging, the Information Agent, DTC, Morgan Stanley Dean Witter or
Credit Suisse First Boston. Neither Tenneco nor the Exchange Agent is under any
obligation to notify any tendering holder of Tenneco's acceptance of tendered
Original Securities prior to the closing of the Exchange Offers.
NEW SECURITIES WILL BE DELIVERED ONLY IN BOOK-ENTRY FORM THROUGH DTC AND
ONLY TO THE DTC ACCOUNT OF THE TENDERING HOLDER OR THE TENDERING HOLDER'S
CUSTODIAN. ACCORDINGLY, A HOLDER WHO TENDERS ORIGINAL SECURITIES MUST SPECIFY IN
THE BOX TITLED "DTC PARTICIPANT INFORMATION" THE DTC PARTICIPANT NAME, NUMBER
AND CONTACT INFORMATION TO WHICH ANY NEW SECURITIES SHOULD BE DELIVERED.
2. AMOUNT OF TENDERS. Tenders of Original Securities will be accepted only
in principal amounts of $1,000 or integral multiples of $1,000. If less than the
entire principal amount of Original Securities held by the holder is tendered,
the holder should fill in the principal amount tendered in column (5) labeled
"Aggregate Principal Amount Tendered and in Respect of Which Consent is Given
(If Less Than All)" of the box entitled "Description of Original Securities
Tendered And in Respect of Which Consent is Given" above. The entire principal
amount of Original Securities delivered to the Exchange Agent will be deemed to
have been tendered for exchange unless otherwise indicated. If the entire
principal amount of all Original Securities held by the holder is not tendered
for exchange, then new certificates representing the Original
10
<PAGE> 11
Securities for the principal amount of Original Securities not tendered for
exchange will be sent to the holder at its registered address, unless a
different address is provided in the box entitled "Special Delivery
Instructions" in this Letter of Transmittal, as soon as practicable following
the applicable Expiration Time.
3. SIGNATURES ON THE LETTER OF TRANSMITTAL; INSTRUMENTS OF TRANSFER AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. For purposes of this discussion, the term
"registered holder" means an owner of record as well as any DTC participant that
has Original Securities credited to its DTC account. Except as otherwise
provided below, all signatures on this Letter of Transmittal must be guaranteed
by a recognized participant in the Securities Transfer Agents Medallion Program,
the NYSE Medallion Signature Program or the Stock Exchange Medallion Program
(each, a "Medallion Signature Guarantor"). Signatures on the Letter of
Transmittal need not be guaranteed if:
- the Letter of Transmittal is signed by the registered physical holder(s)
of the Original Securities or by a participant in DTC whose name appears
on a security position listing as the owner of the Original Securities
and the holder(s) have not completed the portion entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the Letter
of Transmittal; or
- the Original Securities are tendered for the account of an "eligible
institution."
An "eligible institution" is one of the following firms or other entities
identified in Rule 17Ad-15 under the Securities Exchange Act of 1934 (as the
terms are defined in the Rule): (a) a bank; (b) a broker, dealer, municipal
securities dealer, municipal securities broker, government securities dealer or
government securities broker; (c) a credit union; (d) a national securities
exchange, registered securities association or clearing agency; or (e) a savings
institution.
If the Letter of Transmittal is signed by the registered holder(s) of
Original Securities tendered, the signature(s) must correspond with the name(s)
as written on the face of the Original Securities without alteration,
enlargement or any change whatsoever. If any of the Original Securities tendered
are held by two or more registered holders, all of the registered holders must
sign the Letter of Transmittal. If any of the Original Securities are registered
in different names on different Original Securities, the holders must complete,
sign and submit as many separate Letters of Transmittal as there are different
registrations of certificates.
In the following cases, the certificates for Original Securities that are
tendered must be endorsed or accompanied by an appropriate instrument of
transfer, signed exactly as the name of the registered owner appears on the
certificates, with the signatures on the certificates or instruments of transfer
guaranteed by a Medallion Signature Guarantor:
- if the New Securities issued in the Exchange Offers are to be registered
in the name of, or payments are to be made to, a person other than the
person whose signature is on the Letter of Transmittal;
- if Original Securities that are not exchanged are to be returned to a
person other than the registered owner; or
- if a Letter of Transmittal is signed by a person other than the
registered holder(s) of the Original Securities tendered.
In addition, a tender of Original Securities before the Early Exchange Time by
someone other than the registered holder must be accompanied by either a valid
proxy of, or a Consent signed by, the registered holder(s). This is because
Original Securities may not be tendered before the Early Exchange Time without
also delivering a Consent with respect to those Original Securities, and only
registered holders are entitled to deliver Consents. The signature on the proxy
or Consent must be guaranteed by a Medallion Signature Guarantor.
Tenneco will not accept any alternative, conditional, irregular or
contingent tenders. By executing the Letter of Transmittal (or facsimile
thereof) or transmitting an agent's message, you waive any right to receive any
notice of the acceptance of your Original Securities for exchange.
If this Letter of Transmittal or any tendered Original Securities or
instruments of transfer are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
11
<PAGE> 12
fiduciary or representative capacity, such persons should so indicate when
signing and, unless waived by Tenneco, evidence satisfactory to Tenneco of their
authority to so act must be submitted with this Letter of Transmittal.
Beneficial owners whose tendered Original Securities are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee if
they desire to tender such Original Securities.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If a check and/or
certificates for unpurchased or untendered Original Securities are to be issued
in the name of a person other than the signer of this Letter of Transmittal, or
if a check is to be sent and/or such Original Securities are to be returned to
someone other than the signer of this Letter of Transmittal or to an address
other than that shown above, the appropriate "Special Issuance Instructions"
and/or "Special Delivery Instructions" boxes on this Letter of Transmittal
should be completed. All Original Securities tendered by book-entry transfer and
not accepted for payment will be returned by crediting the account at DTC
designated above as the account for which such Original Securities were
delivered.
5. TRANSFER TAXES. Tenneco will pay all transfer taxes, if any, applicable
to the transfer and sale of Original Securities to Tenneco in the Exchange
Offers. If transfer taxes are imposed for any other reason, the amount of those
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. Other reasons transfer taxes could be
imposed include: (a) if New Securities in book-entry form and/or substitute
Original Securities for Original Securities not exchanged are to be delivered
to, or are to be registered or issued in the name of, any person other than the
registered holder of the Original Securities tendered; or (b) if tendered
Original Securities are registered in the name of any person other than the
person signing the Letter of Transmittal. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with this Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
holder and/or withheld from any payments due with respect to the Original
Securities tendered by such holder. It will not be necessary for transfer tax
stamps to be affixed to the tendered Original Securities listed in this Letter
of Transmittal.
6. BACKUP U.S. FEDERAL INCOME TAX WITHHOLDING; TAX IDENTIFICATION NUMBER.
U.S. federal income tax law requires that the holder(s) of any Original
Securities which are accepted for exchange (or other payee) must provide the
Exchange Agent (as payer) with the holder's correct taxpayer identification
number ("TIN"), which, in the case of a holder who is an individual (other than
a resident alien), is his or her social security number. For holders other than
individuals, such holders' TIN is their employer identification number. If the
Exchange Agent is not provided with the correct TIN, the holder (or other payee)
may be subject to backup U.S. federal income tax withholding on payments made in
exchange for any Original Securities and a penalty may be imposed by the
Internal Revenue Service ("IRS"). Backup withholding is not an additional
federal income tax. Rather, the amount of tax withheld will be credited against
the federal income tax liability of persons subject to backup withholding. If
backup withholding results in an over-payment of taxes, a refund may be obtained
from the IRS. Exempt holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. Each holder should consult with a tax advisor regarding
qualifications for exemption from backup withholding and the procedure for
obtaining such exemption. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each holder of tendered Original Securities
must provide such holder's correct TIN by completing the Substitute Form W-9 set
forth herein, certifying that the TIN provided is correct (or that such holder
or other payee is awaiting a TIN), and that either: (1) the holder (or other
payee) has not been notified by the IRS that such holder (or other payee) is
subject to backup withholding as a result of failure to report all interest or
dividends; or (2) if previously so notified, the IRS has notified the holder (or
other payee) that such holder (or other payee) is no longer subject to backup
withholding. If the tendered Original Securities are registered in more than one
name or are not in the name of the actual owner, consult the "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
information on which TIN to report.
12
<PAGE> 13
Tenneco reserves the right in its sole discretion to take all necessary or
appropriate measures to comply with Tenneco's obligation regarding backup
withholding.
7. VALIDITY OF TENDERS. All questions concerning the validity, form,
eligibility (including time of receipt), acceptance, and withdrawal of tendered
Original Securities will be determined by Tenneco in its sole discretion, which
determination will be final and binding. Tenneco reserves the absolute right to
reject any and all Original Securities not validly tendered or any Original
Securities the acceptance of which would, in the opinion of its counsel, be
unlawful. Tenneco also reserves the absolute right to waive any defects or
irregularities in tenders of Original Securities, whether or not similar defects
or irregularities are waived in the case of other tendered securities. The
interpretation of the terms and conditions of the Exchange Offers and Consent
Solicitation (including this Letter of Transmittal and the instructions hereto)
by Tenneco shall be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Original Securities must be
cured within such time as Tenneco shall determine. Neither Tenneco, the Exchange
Agent, nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Original Securities, nor
shall any of them incur any liability for failure to give such notification.
Tenders of Original Securities will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any Original Securities
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the Exchange Agent to the holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the applicable Expiration Time.
8. WAIVER OF CONDITIONS. Tenneco reserves the absolute right to amend or
waive any of the conditions in the Exchange Offers and Consent Solicitation
concerning any Original Securities.
9. MUTILATED, LOST, STOLEN, OR DESTROYED SECURITIES. Any holder whose
tendered Original Securities have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated herein for further
instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Information Agent at the address
and telephone number indicated herein. Holders may also contact their broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offers and Consent Solicitation.
11. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offers and Consent
Solicitation -- Withdrawal Rights."
13
<PAGE> 14
IMPORTANT TAX INFORMATION
Under U.S. federal income tax law, a holder who tenders Original Securities
for payment and who delivers Consent is required to provide the Exchange Agent
(as payer) with such holder's correct TIN on the Substitute Form W-9 below and
to certify that the TIN provided on the Substitute Form W-9 is correct (or that
such holder is awaiting a TIN) or otherwise establish a basis for exemption from
backup withholding. If such holder is an individual, the TIN is his or her
social security number. If a holder is a resident alien, such holder is not
eligible to obtain a social security number. Such holder must provide the payer
with an IRS individual taxpayer identification number (ITIN). If the Exchange
Agent is not provided with the correct TIN, a $50 penalty may be imposed by the
IRS, and payments made to such holder with respect to Original Securities
purchased pursuant to an Exchange Offer may be subject to backup withholding.
Certain holders (including, among others, certain foreign persons) are not
subject to these backup withholding and reporting requirements. Exempt holders
(other than certain foreign persons) should indicate their exempt status on
Substitute Form W-9. A foreign person may qualify as an exempt recipient by
submitting to the Exchange Agent a properly completed IRS Form W-8, signed under
penalties of perjury, attesting to that holder's exempt status. A Form W-8 can
be obtained from the Exchange Agent. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the holder or other payee. Backup withholding is not
an additional federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
The box in Part 3 of the Substitute Form W-9 may be checked if the holder
has not been issued a TIN and has applied for a TIN or intends to apply for a
TIN in the near future. If the box in Part 3 is checked, the holder or other
payee must also complete the Certificate of Awaiting Taxpayer Identification
Number below in order to avoid backup withholding. Notwithstanding that the box
in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification
Number is completed, the Exchange Agent will withhold 31% of all payments made
pursuant to an Exchange Offer prior to the time a properly certified TIN is
provided to the Exchange Agent.
The holder is required to give the Exchange Agent the correct TIN (e.g.,
Social Security number or Employer Identification Number) of the record owner of
the Original Securities. If the Original Securities are registered in more than
one name or are not registered in the name of the actual owner, consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional guidance on which number to report.
14
<PAGE> 15
<TABLE>
<S> <C> <C>
PAYER'S NAME: THE CHASE MANHATTAN BANK, AS EXCHANGE AGENT
NAME: (If joint names, list first and circle the name of the person or entity
whose number you enter in Part 1 below.) See instructions if your name is
SUBSTITUTE changed.
FORM W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR Address:
TAXPAYER IDENTIFICATION
NUMBER (TIN)
City, State and Zip Code:
PART 1: PLEASE PROVIDE YOUR TAXPAYER -----------------------------
IDENTIFICATION NUMBER IN THE BOX AT RIGHT Social Security Number
AND CERTIFY BY SIGNING AND DATING BELOW.
or ----------------------------
Taxpayer Identification Number
PART 2: Check the box if you are NOT subject to backup withholding under the
provisions of section 3406(a)(1)(C) of the Internal Revenue Code because: (1)
you have not been notified that you are subject to backup withholding as a
result of failure to report all interest or dividends; or (2) the Internal
Revenue Service has notified you that you are no longer subject to backup
withholding. [ ]
PART 3: Awaiting TIN [ ]
</TABLE>
Certification: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS TRUE, ACCURATE AND COMPLETE
SIGNATURE DATE ________________ , 1999
NAME
(Please Print)
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFERS. PLEASE
REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either: (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office; or (b)
I intend to mail or deliver an application in the near future. I understand
that, if I do not provide a taxpayer identification number to the Exchange
Agent, 31% of all reportable payments made to me will be withheld until I
provide a certified taxpayer identification number.
- ------------------------------------------------------
------------------------------------------------, 1999
Signature Date
- ------------------------------------
Name (Please Print)
15
<PAGE> 16
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF-
1. An individual account The individual
2. Two or more individuals (joint account) The actual owner of the account or, if combined
funds, the first individual on the account(1)
3. Custodian account of a minor (Uniform Gift to The minor(2)
Minors Act)
4. a. The usual revocable savings trust account The grantor-trustee(1)
(grantor is also trustee)
b. So-called trust account that is not legal or The actual owner(1)
valid trust under state law.
5. Sole proprietorship The owner(3)
FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER IDENTIFICATION NUMBER OF-
6. A valid trust, estate, or pension trust The legal entity(4)
7. Corporate account The corporation
8. Association, club, religious, charitable, The organization
educational or other tax-exempt organization
9. Partnership account The partnership
10. A broker or registered nominee The broker nominee
11. Account with the Department of Agriculture in The public entity
the name of a public entity (such as a state or
local government, school district, or prison)
that receives agricultural program payments
</TABLE>
- ---------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has an SSN, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name. You may also enter your business or
"doing business as" name. You may use either your social security number or
your employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the identifying number of the personal representative or
trustee unless the legal entity itself is not designated in the account
title.)
NOTE: If no name is circled when there is more than one name listed, the
number will be considered to be that of the first name listed.
16
<PAGE> 17
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
Note: Section references are to the Internal Revenue Code unless otherwise
noted.
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service (the "IRS") and apply for a
number.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and persons registered under the Investment Advisors Act
of 1940 who regularly act as brokers are exempt. Payments subject to reporting
under sections 6041 and 6041A are generally exempt from backup withholding only
if made to payees described in items (1) through (7), except a corporation
(other than certain hospitals described in Regulations section 1.6041-3(c)) that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (1) through (5) are exempt from backup
withholding for barter exchange transactions and patronage dividends.
(1) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7), if the account satisfies the
requirements of section 401(f)(2).
(2) The United States or any of its agencies or instrumentalities.
(3) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(4) A foreign government or any of its political sub-divisions, agencies or
instrumentalities.
(5) An international organization or any of its agencies or instrumentalities.
(6) A corporation
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States, the District of Columbia or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the Investment
Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc. Nominee List.
(15) A trust exempt from tax under section 664 or described in Section 4947.
Payments of dividends and patronage dividends that generally are exempt from
backup withholding include the following: - Payments to nonresident aliens
subject to withholding under section
1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
- - Payments of patronage dividends not paid in money.
- - Payments made by certain foreign organizations.
- - Section 404(k) payments made by an ESOP.
Payments of interest that generally are exempt from backup withholding include
the following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments of mortgage interest to you.
Exempt payees described above should file substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM AND CHECK
THE BOX IN PART 2, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE
A NON-RESIDENT ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE
WITH PAYER A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN
STATUS).
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A and 6050N and the regulations promulgated thereunder.
PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividend, interest,
or other payments to give taxpayer identification numbers to payers who must
report the payments to the IRS. The IRS uses the numbers for identification
purposes. Payers must generally withhold 31% of taxable interest, dividend, and
certain other payments to a payee who does not furnish a taxpayer identification
number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your correct taxpayer identification number to a requester, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 18
THE DEALER MANAGERS FOR THE EXCHANGE OFFERS AND CONSENT SOLICITATION ARE:
<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER CREDIT SUISSE FIRST BOSTON
1585 Broadway, Second Floor Eleven Madison Avenue, Fourth Floor
New York, NY 10036 New York, NY 10010
Attn: Liability Management Group Attn: Liability Management Group
(800) 624-1808 (800) 820-1653
</TABLE>
Any questions concerning the terms
of the Exchange Offers may be directed to the Dealer Managers.
THE INFORMATION AGENT FOR THE EXCHANGE OFFERS AND CONSENT SOLICITATION IS:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 State Street, 10th Floor
New York, New York 10004
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
Any questions concerning tender procedures or requests for additional copies of
this
document may be directed to the Information Agent.
<PAGE> 1
EXHIBIT 99.2
LETTER TO DTC PARTICIPANTS MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON
[$ ]
EXCHANGE OFFERS AND CONSENT SOLICITATION
OUTSTANDING DEBT SECURITIES OF TENNECO INC.
(TO BE RENAMED TENNECO AUTOMOTIVE INC.)
EXCHANGED FOR
NEW DEBT SECURITIES OF TENNECO PACKAGING INC.
(TO BE RENAMED)
EACH OF THE EXCHANGE OFFERS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS EXTENDED (THE "EXPIRATION TIME") OR
EARLIER TERMINATED.
THE CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY, ON
, 1999, UNLESS EXTENDED (THE "EARLY EXCHANGE
TIME") OR EARLIER TERMINATED. HOLDERS MUST TENDER BEFORE THE EARLY EXCHANGE TIME
TO BE ELIGIBLE TO RECEIVE $1,000 PRINCIPAL AMOUNT OF APPLICABLE NEW SECURITIES
FOR EACH $1,000 PRINCIPAL AMOUNT OF ORIGINAL SECURITIES, AS DESCRIBED BELOW.
HOLDERS WHO TENDER AFTER THE EARLY EXCHANGE TIME BUT BEFORE THE APPLICABLE
EXPIRATION TIME WILL BE ELIGIBLE TO RECEIVE ONLY [$ ] PRINCIPAL AMOUNT
OF APPLICABLE NEW SECURITIES FOR EACH $1,000 PRINCIPAL AMOUNT OF ORIGINAL
SECURITIES, AS DESCRIBED BELOW.
TENDERED SECURITIES MAY BE WITHDRAWN AND CONSENTS MAY BE REVOKED AT ANY TIME
BEFORE THE EARLIER OF (1) THE EARLY EXCHANGE TIME AND (2) 5:00 P.M., NEW YORK
CITY TIME, ON THE DATE THAT TENNECO PUBLICLY ANNOUNCES IT HAS RECEIVED THE
REQUIRED CONSENTS, AS DESCRIBED BELOW.
To DTC Participants, Including Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees:
We have been appointed by Tenneco Inc., a Delaware corporation ("Tenneco"),
to act as Dealer Managers in connection with the offers to exchange, upon the
terms and subject to the conditions set forth in the Prospectus and Consent
Solicitation of Tenneco and Tenneco Packaging Inc. (to be renamed), a Delaware
corporation ("Packaging"), dated , 1999 (the
"Prospectus"), and in the related Letter of Consent/Transmittal enclosed
herewith (the "Letter of Transmittal"), up to [$ ] aggregate principal
amount of newly issued debt securities (the "New Securities") of Packaging for
any and all of the [$ ] aggregate principal amount of certain
outstanding securities issued by Tenneco (the "Original Securities") described
herein (each such offer is referred to individually as an "Exchange Offer" and
collectively as the "Exchange Offers"). In connection with the Exchange Offers,
Tenneco is soliciting consents ("Consents") to amendments to the indenture under
which Tenneco issued the Original Securities
<PAGE> 2
(the "Proposed Amendments") that would eliminate the restrictions on Tenneco's
operations currently included in that indenture (the "Consent Solicitation").
For each $1,000 principal amount of Original Securities validly tendered
and accepted for exchange, Tenneco is offering (1) $1,000 principal amount of
the corresponding series of Packaging's New Securities if the Original
Securities are validly tendered before the Early Exchange Time, as shown in the
applicable column of the table below, or (2) [$ ] principal amount of the
corresponding series of Packaging's New Securities if the Original Securities
are validly tendered after the Early Exchange Time but before the applicable
Expiration Time, as shown in the applicable column of the table below.
Notwithstanding the foregoing, Tenneco will only issue New Securities with
principal amounts of $1,000 or integral multiples of $1,000. Tenneco will: (1)
aggregate the New Securities to which the exchanging registered holder would
otherwise be entitled, as provided in the Prospectus; (2) round this amount down
to the nearest $1,000 and issue New Securities to the exchanging registered
holder in the rounded amount; and (3) compensate the exchanging registered
holder for this rounding by paying cash in an amount equal to the principal
amount of the fractional New Security.
<TABLE>
<CAPTION>
FOR EACH: EXCHANGING HOLDERS WILL RECEIVE
----------------------- THE FOLLOWING AMOUNT OF PACKAGING'S NEW SECURITIES:
AGGREGATE $1,000 PRINCIPAL AMOUNT ---------------------------------------------------------------------------------
PRINCIPAL OF TENNECO'S ORIGINAL IF ORIGINAL SECURITIES ARE VALIDLY IF ORIGINAL SECURITIES ARE VALIDLY
AMOUNT SECURITIES TENDERED BEFORE THE EARLY EXCHANGE TIME TENDERED AFTER THE EARLY EXCHANGE TIME*
- --------- ----------------------- --------------------------------------- ---------------------------------------
<S> <C> <C> <C>
[To come]
</TABLE>
- ---------------
* The valid tender must be received before the applicable Expiration Time. See
description above regarding payment of cash in lieu of a fractional interest in
New Securities.
If a holder tenders after the Early Exchange Time, the holder could become
entitled to a cash payment in lieu of any fractional interest in the New
Securities. Because Tenneco will aggregate the New Securities to which a
tendering registered holder is entitled before making any such cash payment,
registered holders should, in that case, submit a separate tender for each of
their beneficial owners. For these purposes, a registered holder includes a
participant in The Depository Trust Company with New Securities credited
directly to its account. THIS SHOULD BE DONE ONLY IF A TENDER IS BEING MADE
AFTER THE EARLY EXCHANGE TIME.
Tenneco will also pay accrued but unpaid interest on Original Securities
exchanged through the date Tenneco accepts them for exchange. If, however,
Tenneco accepts for exchange any particular series of Original Securities after
an interest record date for that series and on or before the related interest
payment date, accrued but unpaid interest will instead be paid to the holder of
those Original Securities as of the record date (if different from the tendering
holder).
ANY NEW SECURITIES ISSUED IN EXCHANGE FOR ORIGINAL SECURITIES WILL BE
ISSUED ONLY IN BOOK-ENTRY FORM THROUGH THE DEPOSITORY TRUST COMPANY ("DTC"),
WHICH MEANS THAT NO EXCHANGING HOLDER WILL RECEIVE CERTIFICATES EVIDENCING ANY
NEW SECURITIES.
Subject to the terms and conditions of each Exchange Offer and the Consent
Solicitation and applicable law, Tenneco will make payment for the Original
Securities accepted for exchange by depositing with The Chase Manhattan Bank, as
exchange agent (the "Exchange Agent"): (1) New Securities (in book-entry form);
(2) cash for any fractional interest in New Securities; and (3) cash for the
payment of any applicable accrued but unpaid interest on Original Securities.
This will occur on the first New York Stock Exchange trading day after Tenneco
accepts the related Original Securities for exchange. The Exchange Agent will
act
2
<PAGE> 3
as agent for the tendering holders for the purpose of receiving payments and/or
New Securities (in book-entry form) from Tenneco and then delivering payments
and/or New Securities (in book-entry form) to or at the direction of those
holders. The Exchange Agent will make this delivery on the same day Tenneco
deposits payment for the related Original Securities, or as soon thereafter as
practicable.
For your information and for forwarding to your clients for whom you hold
Original Securities registered in your name or in the name of your nominee or
who hold Original Securities registered in their own names, we are enclosing the
following documents:
1. The Prospectus;
2. The Letter of Transmittal to be used by holders of Original Securities
to tender their Original Securities and to Consent to the Proposed
Amendments and the execution of a supplemental indenture relating
thereto (as described in the Prospectus);
3. A form of letter which may be sent to your clients for whose accounts
you hold Original Securities in your name or in the name of your
nominees with space provided for obtaining such clients' instructions
with regard to the Exchange Offers and Consent Solicitation.
4. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
5. A return envelope addressed to the Exchange Agent.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS
PROMPTLY.
IMPORTANT: A PROPERLY COMPLETED LETTER OF TRANSMITTAL (OR A FACSIMILE
THEREOF) OR A PROPERLY TRANSMITTED "AGENT'S MESSAGE" (AS DESCRIBED IN THE
PROSPECTUS), TOGETHER WITH THE ORIGINAL SECURITIES AND ALL OTHER REQUIRED
DOCUMENTS, MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EARLY EXCHANGE
TIME WITH RESPECT TO HOLDERS WISHING TO RECEIVE $1,000 PRINCIPAL AMOUNT OF
APPLICABLE NEW SECURITIES FOR EACH $1,000 PRINCIPAL AMOUNT OF ORIGINAL
SECURITIES AND ACCRUED INTEREST. A PROPERLY COMPLETED LETTER OF TRANSMITTAL (OR
A FACSIMILE THEREOF) OR PROPERLY TRANSMITTED AGENT'S MESSAGE, TOGETHER WITH THE
ORIGINAL SECURITIES AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
EXCHANGE AGENT PRIOR TO THE APPLICABLE EXPIRATION TIME WITH RESPECT TO HOLDERS
WISHING TO RECEIVE ONLY [$___] PRINCIPAL AMOUNT OF APPLICABLE NEW SECURITIES FOR
EACH $1,000 PRINCIPAL AMOUNT OF ORIGINAL SECURITIES, ACCRUED INTEREST AND ANY
APPLICABLE PAYMENT FOR THE FRACTIONAL INTEREST IN THE NEW SECURITY.
Holders of Original Securities who desire to accept an Exchange Offer in
respect of their Original Securities must Consent to the Proposed Amendments and
the execution of the related supplemental indenture with respect to those
Original Securities. The Proposed Amendments and supplemental indenture are
described in the Prospectus under the caption "The Proposed Amendments."
CONSUMMATION OF THE EXCHANGE OFFERS AND CONSENT SOLICITATION IS CONDITIONED
UPON, AMONG OTHER THINGS, SATISFACTION OR TENNECO'S WAIVER OF THE FOLLOWING
CONDITIONS: (1) RECEIPT BY TENNECO OF THE REQUIRED CONSENTS TO AMEND THE
INDENTURE UNDER WHICH TENNECO ISSUED THE ORIGINAL SECURITIES (AS DESCRIBED IN
THE PROSPECTUS); (2) ANY AND ALL CONDITIONS TO TENNECO'S CONCURRENT CASH TENDER
OFFERS (AS DESCRIBED IN THE PROSPECTUS); (3) MATERIAL CONDITIONS TO TENNECO'S
PLANNED SPIN-OFF OF PACKAGING TO ITS PUBLIC STOCKHOLDERS (AS DESCRIBED IN THE
PROSPECTUS); AND (4) ANY AND ALL OTHER CONDITIONS TO TENNECO'S PRE-SPIN-OFF DEBT
REALIGNMENT (OF WHICH THE EXCHANGE OFFERS ARE ONE COMPONENT, AS DESCRIBED IN THE
PROSPECTUS).
In order to take advantage of the Exchange Offers, a duly executed and
properly completed Letter of Transmittal and any signature guarantees, or a
properly transmitted agent's message, should be delivered to the Exchange Agent,
and certificates representing the tendered Original Securities (or confirmations
of book-entry transfer) should be delivered to the Exchange Agent, all in
accordance with the instructions set forth in the Letter of Transmittal and the
Prospectus.
Neither Tenneco nor Packaging will pay any fees or commissions to any
broker, dealer or other person in connection with the solicitation of tenders of
Original Securities and Consents pursuant to the Exchange Offers and Consent
Solicitation, except for the Dealer Managers, Information Agent and Exchange
Agent as identified and described in the Prospectus. Tenneco will, however,
reimburse brokers, dealers, commercial banks and trust companies for customary
mailing and handling expenses incurred by them in forwarding material to their
customers.
Tenneco will pay or cause to be paid all transfer taxes, if any, with
respect to the sale and transfer of any Original Securities to it pursuant to
the Exchange Offers, except as otherwise provided in Instruction 5 of the Letter
of Transmittal.
3
<PAGE> 4
Questions and requests for assistance should be addressed to either of the
Dealer Managers at the addresses and telephone numbers set forth on the back
cover page of the enclosed Prospectus. Requests for additional copies of the
enclosed materials should be directed to Georgeson Shareholder Communications
Inc., as Information Agent, at its address and telephone number set forth on the
back cover page of the enclosed Prospectus. Such additional copies will be
furnished promptly at Tenneco's expense.
Very truly yours,
MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS IS INTENDED TO
CONSTITUTE YOU OR ANY PERSON THE AGENT OF TENNECO, PACKAGING, MORGAN STANLEY
DEAN WITTER, CREDIT SUISSE FIRST BOSTON, THE EXCHANGE AGENT, THE INFORMATION
AGENT OR ANY OF THEIR AFFILIATES OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE
ANY STATEMENT ON THEIR BEHALF OTHER THAN STATEMENTS EXPRESSLY MADE IN THE
PROSPECTUS OR THE LETTER OF TRANSMITTAL OR USE ANY DOCUMENTS IN CONNECTION WITH
THE EXCHANGE OFFERS OR CONSENT SOLICITATION OTHER THAN FOR THE PURPOSES
DESCRIBED HEREIN.
4
<PAGE> 1
EXHIBIT 99.3
LETTER TO BENEFICIAL HOLDERS
[$ ]
EXCHANGE OFFERS AND CONSENT SOLICITATION
OUTSTANDING DEBT SECURITIES
OF
TENNECO INC.
(TO BE RENAMED TENNECO AUTOMOTIVE INC.)
EXCHANGED FOR
NEW DEBT SECURITIES OF
TENNECO PACKAGING INC. (TO BE RENAMED)
EACH OF THE EXCHANGE OFFERS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS EXTENDED (THE "EXPIRATION TIME") OR
EARLIER TERMINATED.
THE CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY, ON
, 1999, UNLESS EXTENDED ("THE EARLY EXCHANGE
TIME") OR EARLIER TERMINATED. HOLDERS MUST TENDER BEFORE THE EARLY EXCHANGE TIME
TO BE ELIGIBLE TO RECEIVE $1,000 PRINCIPAL AMOUNT OF APPLICABLE NEW SECURITIES
FOR EACH $1,000 PRINCIPAL AMOUNT OF ORIGINAL SECURITIES, AS DESCRIBED BELOW.
HOLDERS WHO TENDER AFTER THE EARLY EXCHANGE TIME BUT BEFORE THE APPLICABLE
EXPIRATION TIME WILL BE ELIGIBLE TO RECEIVE ONLY [$ ] PRINCIPAL AMOUNT
OF APPLICABLE NEW SECURITIES FOR EACH $1,000 PRINCIPAL AMOUNT OF ORIGINAL
SECURITIES, AS DESCRIBED BELOW.
TENDERED SECURITIES MAY BE WITHDRAWN AND CONSENTS MAY BE REVOKED AT ANY TIME
BEFORE THE EARLIER OF (1) THE EARLY EXCHANGE TIME AND (2) 5:00 P.M., NEW YORK
CITY TIME, ON THE DATE THAT TENNECO PUBLICLY ANNOUNCES IT HAS RECEIVED THE
REQUIRED CONSENTS, AS DESCRIBED BELOW.
[ ,] 1999
To Our Clients:
Enclosed for your consideration are a Prospectus and Consent Solicitation
of Tenneco Inc., a Delaware corporation ("Tenneco"), and Tenneco Packaging Inc.
(to be renamed), a Delaware corporation ("Packaging"), dated [ ],
1999 (the "Prospectus"), and the related Letter of Consent/Transmittal (the
"Letter of Transmittal"). These documents relate to:
- the offers by Tenneco to exchange, upon the terms and subject to the
conditions set forth in the Prospectus and in the Letter of Transmittal,
up to [$ ] aggregate principal amount of newly issued debt
securities (the "New Securities") of Packaging for any and all of the
[$ ] aggregate principal amount of certain outstanding debt
securities issued by Tenneco (the "Original Securities") described herein
(each such offer is referred to individually as an "Exchange Offer" and
collectively as the "Exchange Offers"); and
<PAGE> 2
- in connection with the Exchange Offers, Tenneco's solicitation of
consents (the "Consent Solicitation") to amendments to the indenture
under which Tenneco issued the Original Securities that would eliminate
the restrictions on Tenneco's operations currently included in that
indenture (the "Proposed Amendments").
For each $1,000 principal amount of Original Securities validly tendered
and accepted for exchange, Tenneco is offering (1) $1,000 principal amount of
the corresponding series of Packaging's New Securities if the Original
Securities are validly tendered before the Early Exchange Time, as shown in the
applicable column of the table below, or (2) [$ ] principal amount of New
Securities if the Original Securities are validly tendered after the Early
Exchange Time but before the applicable Expiration Time, as shown in the
applicable column of the table below. Notwithstanding the foregoing, Tenneco
will only issue New Securities with principal amounts of $1,000 or integral
multiples of $1,000. Tenneco will: (1) aggregate the New Securities to which a
tendering registered holder would otherwise be entitled, as provided in the
Prospectus; (2) round this amount down to the nearest $1,000 and issue New
Securities to that holder in the rounded amount; and (3) compensate that holder
for this rounding by paying cash in an amount equal to the principal amount of
the fractional New Security.
<TABLE>
<CAPTION>
EXCHANGING HOLDERS WILL RECEIVE THE FOLLOWING
PRINCIPAL AMOUNT OF
FOR EACH: PACKAGING'S NEW SECURITIES:
----------------------- --------------------------------------------------------
AGGREGATE $1,000 PRINCIPAL AMOUNT IF ORIGINAL SECURITIES IF ORIGINAL SECURITIES
PRINCIPAL OF TENNECO'S ORIGINAL ARE VALIDLY TENDERED BEFORE ARE VALIDLY TENDERED AFTER
AMOUNT SECURITIES THE EARLY EXCHANGE TIME THE EARLY EXCHANGE TIME*
- --------- ----------------------- --------------------------- --------------------------
<S> <C> <C> <C>
[to come]
</TABLE>
- ---------------
* The valid tender must be received before the applicable Expiration Time. See
description above regarding payment of cash in lieu of a fractional interest in
New Securities.
Tenneco will also pay accrued but unpaid interest on Original Securities
exchanged through the date Tenneco accepts them for exchange. If, however,
Tenneco accepts for exchange any particular series of Original Securities after
an interest record date for that series and on or before the related interest
payment date, accrued but unpaid interest will instead be paid to the holder of
those Original Securities as of the record date (if different from the tendering
holder).
THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND
CANNOT BE USED BY YOU TO TENDER ORIGINAL SECURITIES HELD BY US FOR YOUR ACCOUNT
OR TO CONSENT TO THE PROPOSED AMENDMENTS (A "CONSENT").
ANY NEW SECURITIES ISSUED IN EXCHANGE FOR ORIGINAL SECURITIES WILL BE
ISSUED ONLY IN BOOK-ENTRY FORM THROUGH THE DEPOSITORY TRUST COMPANY ("DTC"),
WHICH MEANS THAT NO EXCHANGING HOLDER WILL RECEIVE CERTIFICATES EVIDENCING ANY
NEW SECURITIES.
We are the registered holder of Original Securities held for your account.
A tender of these securities can be made and a Consent to the Proposed
Amendments described in the Prospectus may be given only by us as the registered
holder and pursuant to your instructions.
We request that you advise us whether you wish us to tender and to deliver
a Consent to the Proposed Amendments with respect to any or all of the Original
Securities held by us for your account, upon the terms and subject to the
conditions set forth in the Prospectus and the Letter of Transmittal.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to execute the Letter of Transmittal and tender your Original
Securities and Consent to the Proposed Amendments on your behalf in accordance
with the terms of the Exchange Offers and Consent Solicitation. THE DEADLINE FOR
HOLDERS TO QUALIFY TO RECEIVE $1,000 PRINCIPAL AMOUNT OF APPLICABLE NEW
SECURITIES FOR EACH $1,000 PRINCIPAL AMOUNT OF ORIGINAL SECURITIES IS 5:00 P.M.,
NEW YORK CITY TIME, ON [ ], 1999, UNLESS EXTENDED OR EARLIER
TERMINATED.
If we tender your Original Securities after the Early Exchange Time, you
could become entitled to a cash payment in lieu of any fractional interest in
New Securities. Because Tenneco will aggregate the New
2
<PAGE> 3
Securities to which a tendering registered holder is entitled before making any
such cash payment, we must in that case submit a separate tender for you. If we
fail to do this, you may not receive this cash payment.
Your attention is directed to the following:
1. Subject to the terms and conditions of each Exchange Offer and the
Consent Solicitation and applicable law, Tenneco will make payment for the
Original Securities accepted for exchange by depositing with The Chase Manhattan
Bank, as exchange agent (the "Exchange Agent"): (1) New Securities (in book-
entry form); (2) cash for any fractional New Securities; and (3) cash for the
payment of any applicable accrued but unpaid interest on Original Securities.
This will occur on the first New York Stock Exchange trading day after Tenneco
accepts the related Original Securities for exchange. The Exchange Agent will
act as agent for the tendering holders for the purpose of receiving payments
and/or New Securities (in book-entry form) from Tenneco and then delivering
payments and/or New Securities (in book-entry form) to or at the direction of
those holders. The Exchange Agent will make this delivery on the same day
Tenneco deposits payment for the related Original Securities, or as soon
thereafter as practicable.
2. Packaging is currently owned by Tenneco. Tenneco intends to spin-off
Packaging to its public stockholders. Upon completion of the spin-off, Packaging
will become an independent, publicly held company engaged in Tenneco's current
packaging businesses. The Exchange Offers are one component of a plan to realign
Tenneco's debt before the spin-off.
3. Each Exchange Offer will expire at 5:00 p.m., New York City time, on
[ ], 1999, unless extended or earlier terminated. The Consent
Solicitation will expire at 5:00 p.m., New York City time, on [ ],
1999, unless extended or earlier terminated. Consummation of the Exchange Offers
and Consent Solicitation is conditioned upon, among other things, satisfaction
or Tenneco's waiver of the following conditions: (1) receipt by Tenneco of the
required consents to amend the indenture under which Tenneco issued the Original
Securities (as described in the Prospectus); (2) any and all conditions to
Tenneco's concurrent cash tender offers (as described in the Prospectus); (3)
material conditions to the spin-off (as described in the Prospectus); and (4)
any and all other conditions to Tenneco's pre-spin-off debt realignment (of
which the exchange offers are one component, as described in the Prospectus).
4. Holders of Original Securities who desire to accept an Exchange Offer in
respect of their Original Securities must Consent to the Proposed Amendments
with respect to those Original Securities. The valid tender of any Original
Securities will automatically constitute a Consent to the Proposed Amendments
with respect to those Original Securities. The Proposed Amendments would
eliminate the restrictions on Tenneco's operations currently included in the
indenture under which Tenneco issued the Original Securities. This includes
eliminating a covenant that might, if held to apply to the spin-off, otherwise
require Packaging to become the obligor of the Original Securities (the
application of which Tenneco and Packaging believe is uncertain in these
circumstances).
5. If you desire to receive $1,000 principal amount of applicable New
Securities for each $1,000 principal amount of Original Securities and accrued
interest, we must receive your instructions in ample time to permit us to effect
a tender of Original Securities and delivery of a related Consent on your behalf
before the Early Exchange Time, which is 5:00 p.m., New York City time, on
[ ], 1999, unless extended or earlier terminated.
6. If you desire to tender any Original Securities and receive only [$ ]
principal amount of applicable New Securities for each $1,000 principal amount
of Original Securities, accrued interest and any applicable payment for the
fractional New Security, we must receive your instructions in ample time to
permit us to effect a tender of Original Securities on your behalf before the
applicable Expiration Time. See above regarding the procedures for payment of
cash in lieu of fractional interests in New Securities.
7. Tenders of Original Securities may only be withdrawn (and Consents
thereby may only be revoked) before the earlier of (1) the Early Expiration Time
and (2) 5:00 p.m., New York City time, on the date that Tenneco publicly
announces it has received the required consents to amend the indenture under
which Tenneco issued the Original Securities.
3
<PAGE> 4
8. Any transfer taxes with respect to the sale and transfer of any Original
Securities pursuant to the Exchange Offers will be paid by Tenneco, except as
otherwise provided in Instruction 5 of the Letter of Transmittal.
If you wish to have us tender any or all of your Original Securities and
Consent to the Proposed Amendments, please complete, detach and return to us the
instruction form set forth below. An envelope to return your instructions is
enclosed. Your instructions should be forwarded to us in ample time to permit us
to submit a tender and Consent on your behalf by the Early Exchange Time or
applicable Expiration Time, as the case may be.
Exchange Offers are not being made to, and Consents are not being solicited
from (nor will tenders of Original Securities be accepted from or on behalf of),
holders in any jurisdiction in which the Exchange Offers or Consent
Solicitation, or the acceptance thereof, would not be in compliance with the
laws of that jurisdiction. However, Tenneco may, in its sole discretion, take
such action as it may deem necessary to make the Exchange Offers and solicit
Consents in any such jurisdiction, and may extend the Exchange Offers to, and
solicit Consents from, holders in that jurisdiction.
4
<PAGE> 5
INSTRUCTION WITH RESPECT TO EXCHANGE OFFERS
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus of Tenneco and Packaging dated [ ], 1999, and the
related Letter of Transmittal in connection with the Exchange Offers and Consent
Solicitation by Tenneco.
This will instruct you to: (a) tender the Original Securities indicated
below held by you for the account of the undersigned, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal; and (b) Consent to the Proposed Amendments and the execution of a
supplemental indenture relating thereto with respect to the Original Securities
tendered, as described in the Prospectus.
- ------------------------------------------------------
Signature
- ------------------------------------------------------
Name (Please Print)
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
Address
- ------------------------------------------------------
Daytime Phone
- ------------------------------------------------------
Dated
- ------------------------------------------------------
Signature
(If more than one account holder)
- ------------------------------------------------------
Name (Please Print)
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
Address
- ------------------------------------------------------
Daytime Phone
- ------------------------------------------------------
Dated
Type of Original Securities to be tendered
and as to which Consent is given:
<TABLE>
<CAPTION>
ORIGINAL SECURITY BEING TENDERED (CHECK ONLY ONE*): PRINCIPAL AMOUNT TENDERED**
--------------------------------------------------- ---------------------------
<S> <C>
[ ]
[ ]
[ ] [TO COME]
[ ]
[ ]
[ ]
[ ]
</TABLE>
- ------------------------
* A separate instruction must be completed for each type of Original Security
tendered.
** The tender of Original Securities will constitute a Consent to the Proposed
Amendments and the execution of a supplemental indenture relating thereto, as
described in the Prospectus.
5
<PAGE> 1
EXHIBIT 99.4
LETTER TO HOLDERS MORGAN STANLEY DEAN WITTER
OF PHYSICAL SECURITIES CREDIT SUISSE FIRST BOSTON
[$ ]
EXCHANGE OFFERS AND CONSENT SOLICITATION
OUTSTANDING DEBT SECURITIES OF TENNECO INC.
(TO BE RENAMED TENNECO AUTOMOTIVE INC.)
EXCHANGED FOR
NEW DEBT SECURITIES OF TENNECO PACKAGING INC.
(TO BE RENAMED)
EACH OF THE EXCHANGE OFFERS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS EXTENDED (THE "EXPIRATION TIME") OR
EARLIER TERMINATED.
THE CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY, ON
, 1999, UNLESS EXTENDED ("THE EARLY EXCHANGE
TIME") OR EARLIER TERMINATED. HOLDERS MUST TENDER BEFORE THE EARLY EXCHANGE TIME
TO BE ELIGIBLE TO RECEIVE $1,000 PRINCIPAL AMOUNT OF APPLICABLE NEW SECURITIES
FOR EACH $1,000 PRINCIPAL AMOUNT OF THE CORRESPONDING SERIES OF APPLICABLE
ORIGINAL SECURITIES, AS DESCRIBED BELOW. HOLDERS WHO TENDER AFTER THE EARLY
EXCHANGE TIME BUT BEFORE THE APPLICABLE EXPIRATION TIME WILL BE ELIGIBLE TO
RECEIVE ONLY [$ ] PRINCIPAL AMOUNT OF APPLICABLE NEW SECURITIES FOR
EACH $1,000 PRINCIPAL AMOUNT OF ORIGINAL SECURITIES, AS DESCRIBED BELOW.
TENDERED SECURITIES MAY BE WITHDRAWN AND CONSENTS MAY BE REVOKED AT ANY TIME
BEFORE THE EARLIER OF (1) THE EARLY EXCHANGE TIME AND (2) 5:00 P.M., NEW YORK
CITY TIME, ON THE DATE THAT TENNECO PUBLICLY ANNOUNCES IT HAS RECEIVED THE
REQUIRED CONSENTS, AS DESCRIBED BELOW.
, 1999
To Holders of Physical Securities:
We have been appointed by Tenneco Inc., a Delaware corporation ("Tenneco"),
to act as Dealer Managers in connection with the offers to exchange, upon the
terms and subject to the conditions set forth in the Prospectus and Consent
Solicitation of Tenneco and Tenneco Packaging Inc. (to be renamed), a Delaware
corporation ("Packaging"), dated , 1999 (the "Prospectus"), and in the
related Letter of Consent/Transmittal enclosed herewith (the "Letter of
Transmittal"), up to [$ ] aggregate principal amount of newly issued
debt securities (the "New Securities") of Packaging for any and all of the
[$ ] aggregate principal amount of certain outstanding securities
issued by Tenneco (the "Original Securities") described herein (each such offer
is referred to individually as an "Exchange Offer" and collectively as the
"Exchange Offers"). In connection with the Exchange Offers, Tenneco is
soliciting consents ("Consents") to amendments to the indenture under which
Tenneco issued the Original Securities
<PAGE> 2
that would eliminate the restrictions on Tenneco's operations currently included
in that indenture (the "Consent Solicitation").
For each $1,000 principal amount of Original Securities validly tendered
and accepted for exchange, Tenneco is offering (1) $1,000 principal amount of
the corresponding series of Packaging's New Securities if you validly tender
your Original Securities before the Early Exchange Time, as shown in the
applicable column of the table below, or (2) [$ ] principal amount of the
corresponding series of Packaging's New Securities if you validly tender your
Original Securities after the Early Exchange Time but before the applicable
Expiration Time, as shown in the applicable column of the table below.
Notwithstanding the foregoing, Tenneco will only issue New Securities with
principal amounts of $1,000 or integral multiples of $1,000. Tenneco will: (1)
aggregate the New Securities to which you would otherwise be entitled, as
provided in the Prospectus; (2) round this amount to the nearest $1,000 and
issue New Securities in the rounded amount; and (3) compensate you for this
rounding by paying cash in an amount equal to the principal amount of the
fractional New Security.
<TABLE>
<CAPTION>
YOU WILL RECEIVE THE FOLLOWING PRINCIPAL AMOUNT
OF PACKAGING'S NEW SECURITIES:
FOR EACH: -----------------------------------------------------
----------------------- IF YOU VALIDLY TENDER THE IF YOU VALIDLY TENDER THE
AGGREGATE $1,000 PRINCIPAL AMOUNT ORIGINAL SECURITIES ORIGINAL SECURITIES
PRINCIPAL OF TENNECO'S ORIGINAL BEFORE THE EARLY AFTER THE EARLY
AMOUNT SECURITIES EXCHANGE TIME EXCHANGE TIME*
- --------- ----------------------- ------------------------- -------------------------
<S> <C> <C> <C>
[To come]
</TABLE>
- ---------------
* The valid tender must be received before the applicable Expiration Time. See
description above regarding payment of cash in lieu of a fractional interest in
New Securities.
Tenneco will also pay accrued but unpaid interest on Original Securities
exchanged through the date Tenneco accepts them for exchange. If, however,
Tenneco accepts for exchange any particular series of Original Securities after
an interest record date for that series and on or before the related interest
payment date, accrued but unpaid interest will instead be paid to the holder of
those Original Securities as of the record date (if different from the tendering
holder).
ANY NEW SECURITIES ISSUED TO YOU IN EXCHANGE FOR YOUR ORIGINAL SECURITIES
WILL BE ISSUED ONLY IN BOOK-ENTRY FORM THROUGH THE DEPOSITORY TRUST COMPANY
("DTC"), WHICH MEANS THAT YOU WILL NOT RECEIVE A CERTIFICATE EVIDENCING ANY NEW
SECURITIES THAT ARE ISSUED TO YOU.
Subject to the terms and conditions of each Exchange Offer and the Consent
Solicitation and applicable law, Tenneco will make payment for the Original
Securities accepted for exchange by depositing with The Chase Manhattan Bank, as
exchange agent (the "Exchange Agent"): (1) New Securities (in book-entry form);
(2) cash for any fractional interest in New Securities; and (3) cash for the
payment of any applicable accrued but unpaid interest on Original Securities.
This will occur on the first New York Stock Exchange trading day after Tenneco
accepts the related Original Securities for exchange. The Exchange Agent will
act as agent for the tendering holders for the purpose of receiving payments
and/or New Securities (in book-entry form) from Tenneco and then delivering
payments and/or New Securities (in book-entry form) to or at the direction of
those holders. The Exchange Agent will make this delivery on the same day
Tenneco deposits payment for the related Original Securities, or as soon
thereafter as practicable.
For your information, we are enclosing the following documents:
1. The Prospectus;
2. The Letter of Transmittal to be used by you to tender your Original
Securities and to Consent to the proposed amendments (as described in
the Prospectus);
3. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
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<PAGE> 3
4. A return envelope addressed to the Exchange Agent.
If you decide to tender any or all of the Original Securities that you hold
in the Exchange Offers, you must complete the accompanying Letter of Transmittal
and send it, with any other required documents, to the Exchange Agent at one of
the addresses indicated on the front of the Letter of Transmittal, in compliance
with the procedures described in the Prospectus and in the Letter of
Transmittal. To receive your New Securities in book-entry form, you will need to
contact a broker, dealer, commercial bank, trust company or other nominee in
order to provide the necessary DTC account information on the Letter of
Transmittal (see Instruction 1 of the Letter of Transmittal) and inform them
that delivery of the New Securities will be made through a DTC deposit
transaction. Failure to provide the necessary account information may result in
your tender being rejected or may cause a delay in confirmation of your New
Securities, as well as a delay in payment for any fractional interest in New
Securities or accrued but unpaid interest on your Original Securities that are
exchanged. The Letter of Transmittal requires you to provide other information
as well, so please be sure to follow the instructions carefully.
Questions and requests for assistance should be addressed to either of the
Dealer Managers at the addresses and telephone numbers set forth on the back
cover page of the enclosed Prospectus. Requests for additional copies of the
enclosed materials should be addressed to Georgeson Shareholder Communications
Inc., the Information Agent for the Exchange Offers, at its address and
telephone number set forth on the back cover page of the enclosed Prospectus.
Such additional copies will be furnished promptly at Tenneco's expense.
Very truly yours,
MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON
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