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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 29, 1999.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TENNECO AUTOMOTIVE INC.
TENNECO AUTOMOTIVE OPERATING COMPANY INC.
CLEVITE INDUSTRIES INC.
THE PULLMAN COMPANY
TENNECO GLOBAL HOLDINGS INC.
TENNECO INTERNATIONAL HOLDING CORP.
TMC TEXAS INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 3714 76-0515284
DELAWARE 3714 74-1933558
DELAWARE 3714 22-2940561
DELAWARE 3714 02-0359911
DELAWARE 3714 76-0450674
DELAWARE 3714 74-2067082
DELAWARE 3714 76-0523820
(Primary Standard
(State or other jurisdiction of Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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500 NORTH FIELD DRIVE
LAKE FOREST, ILLINOIS 60045
TELEPHONE: (847) 482-5000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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TIMOTHY R. DONOVAN Copy to:
SENIOR VICE PRESIDENT AND GENERAL COUNSEL JODI A. SIMALA
TENNECO AUTOMOTIVE INC. JENNER & BLOCK
500 NORTH FIELD DRIVE ONE IBM PLAZA
LAKE FOREST, ILLINOIS 60045 CHICAGO, ILLINOIS 60611
TELEPHONE: (847) 482-5000 TELEPHONE (312) 923-2692
(Name, address, including zip code,
and telephone number, including area code,
of agent for service)
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC. As soon as practicable after this Registration Statement becomes
effective.
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 of the earlier effective
Registration Statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
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11 5/8% Senior Subordinated Notes
due 2009............................ $500,000,000 100% $500,000,000 $132,000
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Guarantees of 11 5/8% Senior
Subordinated Notes due 2009....... $500,000,000 (2) (2) None
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f) under the Securities Act of 1933.
(2) No further fee is payable pursuant to Rule 457(n) under the Securities Act
of 1933.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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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The information in this preliminary prospectus is not complete and may
be changed. We are not offering to sell, or asking you to buy, any
securities. We will not make any offer to sell these securities or
accept any offer to buy them until we have delivered this prospectus in
its final form. We also will not sell those securities in any
jurisdiction where it would be illegal to offer or sell them, or solicit
purchasers, prior to registering or qualifying them under that
jurisdiction's securities laws.
PRELIMINARY PROSPECTUS (SUBJECT TO COMPLETION; DATED DECEMBER 29, 1999)
TENNECO LOGO
OFFER TO EXCHANGE
ALL OUTSTANDING
11 5/8% SENIOR SUBORDINATED NOTES DUE 2009
($500,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
FOR
11 5/8% SENIOR SUBORDINATED NOTES DUE 2009
OF
TENNECO AUTOMOTIVE INC.
(FORMERLY KNOWN AS TENNECO INC.)
PRINCIPAL TERMS OF EXCHANGE OFFER
- - We are offering a total of $500,000,000 of new notes, which are registered
with the Securities and Exchange Commission, in exchange for our outstanding
notes.
- - The exchange offer expires 5:00 p.m., New York City time, on , ,
unless extended.
- - You may withdraw tenders of outstanding notes at any time before the exchange
offer expires.
- - The exchange offer is not subject to any condition other than that the
exchange offer will not violate applicable law or any applicable
interpretations of the Staff of the Securities and Exchange Commission.
- - There is no existing market for the new notes, and we do not intend to apply
for their listing on any securities exchange or for their quotation through
the Nasdaq Stock Market.
- - We believe the exchange of notes will not be a taxable exchange for U.S.
federal income tax purposes.
- - We will not receive any proceeds from the exchange offer.
- - The terms of the new notes are substantially identical to the outstanding
notes, except for various transfer restrictions and registration rights
relating to the outstanding notes.
- - All outstanding notes that are validly tendered and not validly withdrawn will
be exchanged.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 17
BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is , .
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary..................... 1
Risk Factors........................... 17
Forward-looking Statements............. 24
Where You Can Find More Information.... 25
Incorporation of Information by
Reference............................ 25
Use of Proceeds........................ 27
Capitalization......................... 28
Unaudited Pro Forma Consolidated
Financial Statements................. 29
Supplemental Consolidated Financial
Data................................. 35
Selected Financial Data................ 36
The Exchange Offer..................... 40
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 50
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The Spin-off........................... 71
Business............................... 76
Management............................. 90
Principal Stockholders................. 100
Description of Senior Credit
Facility............................. 101
Description of the New Notes........... 104
United States Federal Income Tax
Consequences......................... 144
Plan of Distribution................... 150
Legal Matters.......................... 151
Experts................................ 151
Index to Financial Statements.......... F-1
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Some of the market data included in this prospectus is based on independent
industry publications or other publicly available information. Although we
believe that these independent sources are reliable, the accuracy and
completeness of this information is not guaranteed and has not been
independently verified.
THIS PROSPECTUS INCORPORATES BY REFERENCE IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT US WHICH IS NOT INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS.
SEE "AVAILABLE INFORMATION" AND "INCORPORATION BY REFERENCE." 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 OUTSTANDING NOTES UPON WRITTEN OR ORAL REQUEST
TO TIMOTHY R. DONOVAN, SENIOR VICE PRESIDENT AND GENERAL COUNSEL, TENNECO
AUTOMOTIVE INC., 500 NORTH FIELD DRIVE, LAKE FOREST, ILLINOIS 60045, TELEPHONE
NUMBER (847) 482-5000. TO OBTAIN TIMELY DELIVERY OF THIS INFORMATION, YOU MUST
REQUEST THIS INFORMATION NO LATER THAN FIVE BUSINESS DAYS BEFORE THE EXPIRATION
OF THE EXCHANGE OFFER. THEREFORE, YOU MUST REQUEST INFORMATION ON OR BEFORE
, .
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PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus and does
not contain all of the information you need to consider in making your
investment decision. To understand all of the terms of this exchange offer and
for a more complete understanding of our business, you should read carefully
this entire prospectus and the documents incorporated by reference in this
prospectus.
Unless the context otherwise requires, in this prospectus:
- "Tenneco" refers to Tenneco Automotive Inc., a Delaware corporation, and
its subsidiaries. Tenneco was known as Tenneco Inc. before the spin-off
of Tenneco Inc.'s packaging and administrative services businesses on
November 4, 1999.
- "Automotive," "we," "us" and "our" refer to Tenneco after giving effect
to the spin-off described above.
- "Pactiv" or "Packaging" refers to Pactiv Corporation, a Delaware
corporation, and its subsidiaries. Pactiv owns the packaging and
administrative service businesses that Tenneco spun-off on November 4,
1999. Pactiv was known as Tenneco Packaging Inc. before the spin-off.
Because of the spin-off, Tenneco's financial statements presented in this
prospectus reflect its former paperboard packaging and specialty packaging
segments as discontinued operations. See Note 2 to the Financial Statements of
Tenneco Automotive Inc. and Consolidated Subsidiaries included in this
prospectus.
THE EXCHANGE OFFER
On October 14, 1999, we completed the private offering of $500 million of
11 5/8% Senior Subordinated Notes due 2009. We are now offering to exchange
these outstanding notes for new notes that have been registered under the
Securities Act of 1933. We entered into a registration rights agreement with the
initial purchasers in the private offering in which we agreed, among other
things, to deliver to you this prospectus and to use our best efforts to
complete the exchange offer within 180 days of the issuance of the outstanding
11 5/8% Senior Subordinated Notes due 2009. You should read the discussion under
the headings "-- Summary Description of the New Notes" and "Description of the
New Notes" for further information regarding the new, registered notes. You
should also read the discussion under the headings "-- Summary of the Terms of
the Exchange Offer" and "The Exchange Offer" for further information regarding
the exchange offer and resale of the new notes.
OUR COMPANY
GENERAL
We are one of the world's largest designers, manufacturers and distributors
of automotive ride control and emissions control products and systems for the
automotive original equipment, or "OE," market and repair and replacement
market, or aftermarket, with leading market shares in North America and Europe.
We operate a global business with 1998 net sales of approximately $3.2 billion
and sell products in over 100 countries. We have approximately 23,500 employees
and 100 facilities in 25 countries. Our executive offices are located at 500
North Field Drive, Lake Forest, IL 60045. The phone number is (847) 482-5000.
We manufacture and sell ride control products, such as shock absorbers,
struts and suspension systems, which are designed to function as safety
components for vehicles in addition to providing a comfortable ride. We also
manufacture and sell emissions control components, such as mufflers, catalytic
converters, manifolds and pipes, all of which play a critical role in safely
conveying noxious exhaust gases away from the passenger compartment, reducing
the level of pollutants and reducing engine exhaust noise.
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In the OE market, we serve more than 25 different original equipment
manufacturers, or "OEMs," on a global basis, with our largest OE customers being
Ford, DaimlerChrysler, General Motors, Volkswagen Group and Toyota. We provide
products or systems for six of the top ten passenger car models and eight of the
top ten light truck models produced globally for 1998. Sales across our OEM
customer base are well-diversified for our industry, with our two largest
customers, Ford and DaimlerChrysler, representing 12.8% and 10.9%, respectively,
of 1998 net sales. Over the last several years, we have successfully executed a
strategy to increase our presence in the OE market. As a result, we have
increased our OE net sales from $736 million to $1,962 million, or by 167%, from
1994 to 1998.
In the aftermarket, we serve over 500 customers, including wholesalers and
retailers such as National Auto Parts Association (NAPA), Monro Muffler Brake
and Advance Auto Parts in North America, and Temot, Autodistribution
International and Kwik-Fit in Europe. Our top 10 aftermarket customers accounted
for less than 11% of our 1998 net sales. We sell our ride control products
primarily under the well-recognized Monroe(R) brand name. Our Monroe(R) ride
control product line has achieved 98% brand recognition in North America within
its targeted consumer market. We sell our emissions control products primarily
under the Gillet(TM) and industry-leading Walker(R) brand names.
We are well-balanced across our product lines, markets and geographic
regions. Ride control accounted for 44% of our 1998 net sales and 55% of our
1998 operating income, and emissions control accounted for the remainder. As
described above, we have achieved a balanced OE and aftermarket revenue base by
successfully increasing our sales to OEMs over the last several years.
Furthermore, our aftermarket business benefits from the design, manufacturing
and technological expertise of our OE business, and we believe this OE expertise
provides us with a significant advantage over many of our aftermarket
competitors. In the past five years, through internal growth and several
strategic acquisitions, we believe we have also strengthened our market position
around the globe. Currently, we have operations in 25 countries and generated
approximately 48% of our 1998 net sales in markets outside of North America. We
believe our participation in both the OE and aftermarket businesses and our
geographic presence reduce our exposure to the cyclicality of the automotive
industry.
We have focused on improving our advanced technology position relative to
our competition in the OE market and have implemented a strategy to leverage
this position into the aftermarket. As a result, in 1998 we were awarded the
Chrysler Technology Role Model Award (awarded to one manufacturer each year)
based on our Walker(R) electronic silencing technology and the successful
implementation of an advanced suspension technology. Also in 1998, we were named
Volvo Supplier of the Year in recognition of our technology and overall quality.
Our commitment to high quality standards and sound management practices and
policies is demonstrated by our successful participation in the International
Standards Organization/Quality Standards certificants process. Over 90% of our
manufacturing facilities have achieved ISO 9000 certification, excluding
facilities held in joint ventures. Of those 60 manufacturing facilities where we
have determined that QS certification is required to service our customers or
would provide us with an advantage in securing additional business, 85% have
achieved QS 9000 certification, and we are pursuing certification of the
remaining 15%. In addition, we have received Ford Q1 certification at 20
facilities and 1998 Chrysler Gold Pentastar Awards at four facilities.
The following table sets forth our estimated 1998 market positions by
product category based on unit volume estimates for each of our primary
geographic regions. These estimates are prepared in accordance
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with what we believe to be standard industry practice and are based on industry
sources and our knowledge of our relative position in each market.
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PRODUCT CATEGORY REGION MARKET POSITION(1)
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Aftermarket Emissions Control North America #1
Europe #1
Aftermarket Ride Control North America #1
Europe #1
OE Emissions Control North America #1
Europe #2
OE Ride Control North America #2
Europe #4
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(1) Calculations of our market position for 1998 exclude components manufactured
by OEMs, other than Delphi Automotive Systems Corporation, which was
separated from General Motors in May 1999.
COMPETITIVE STRENGTHS
Several significant existing and emerging trends are dramatically reshaping
the automotive industry. Key trends that we believe are affecting automotive
parts suppliers include customer and supplier consolidation, increased OEM
outsourcing of development, design and systems integration activities,
globalization and standardization. We believe that we are positioned to respond
to these trends because of our following strengths.
Tier 1 Capabilities. The OEMs are consolidating and are increasingly
outsourcing parts and systems to simplify the vehicle assembly process, lower
costs, and reduce vehicle development time. This shift has created the role of
the Tier 1 systems integrator and supplier. We have been a Tier 1 integrator for
over ten years. We supply modules or systems for 25 vehicle platforms currently
in production worldwide and we have modules or systems for three additional
platforms under development. We also work extensively with our OEM customers in
designing and engineering ride control and emissions control products and
systems for existing and new vehicle platforms. We are currently working with
OEMs on 33 "global" platforms, which are single platforms in production and/or
development in two or more regions. One or more of our products were included on
more than 70 vehicle launches for the 21 months ended June 30, 1999.
Global Presence. OEMs are increasingly requiring suppliers to provide parts
on a global basis. This requires a worldwide approach to supply chain
management, engineering, sales and distribution. Our global presence positions
us to meet the global sourcing, quality and engineering requirements of our
customers. Our worldwide footprint, in addition to our 19 manufacturing
facilities in the United States, includes 32 emissions control manufacturing
facilities and 17 ride control manufacturing facilities located in Argentina,
Australia, Belgium, Brazil, Canada, China, the Czech Republic, India, Mexico,
New Zealand, South Africa, Spain, Turkey and the United Kingdom. As a result, we
believe we are well-positioned to meet the demand of OEMs for globally
positioned suppliers, as well as to meet the needs of aftermarket customers by
providing high-quality, brand-named products on a worldwide basis.
Technology Leadership. Automotive OEMs are increasingly demanding
technological innovation from suppliers for improved vehicle performance and
functionality, causing the technical content of automobiles to increase rapidly.
To continue developing innovative products, systems and modules, we maintain 16
research and development facilities and have entered into several strategic
alliances focused on advanced technology designs. We provide technologically
advanced products by regularly updating and enhancing our product line and
introducing new products. For example, we developed several adaptive damping
systems which reduce undesirable vehicle motion. Also, we developed a
self-lubricating elastomer, which has the additional ability to reduce friction
between moving components in a suspension system, thereby reducing noise and
vibration. As a result of increased technological content, we believe our future
success in the
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aftermarket will depend on our success in maintaining and expanding our OE
markets. We believe our strong OE presence will give us a significant advantage
by allowing us to introduce our OE products to the aftermarket as these products
move through their life cycles.
Strong OEM Relationships. We have long-standing relationships with our OEM
customers around the world. We work with these customers in all stages of
production, including design, development, component sourcing, quality
assurance, manufacturing and delivery. We believe our success in developing
these relationships can be attributed to our design and manufacturing
performance and global capabilities.
Well-Positioned on Popular Vehicle Platforms and Across Aftermarket
Distribution Channels. We manufacture and distribute products for many of the
most-recognized car and light truck models worldwide. Our products are included
on six of the top ten passenger car models and eight of the top ten light truck
models produced globally for 1998, including: the VW Golf, GM Corsa, Ford
Escort, Toyota Corolla, Opel Astra, Honda Civic, Ford F-Series Pickup, Chevy CK
Pickup, Ford Explorer, Dodge Ram Pickup, Ford Ranger, Dodge Caravan, Toyota
Hilux and Ford Windstar. For the aftermarket, we have a dedicated sales force
and consumer brand marketing professionals who sell and market our products
through all the primary channels of distribution, including full-line and
specialty warehouse distributors, jobbers, installers, car dealers and
automotive parts retailers. We have recently adopted a strategy to enhance our
aftermarket profitability by introducing differentiated product lines targeted
to the different aftermarket distribution channels. For example, in the fourth
quarter of 1999, we introduced to the professional installer channel a premium
ride control product which uses acceleration-sensitive damping technology.
BUSINESS STRATEGY
Our objective is to enhance profitability by leveraging our global position
in the manufacture of emissions control and ride control products and systems.
We intend to use our 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 our business strategy are described below.
"Own" the Product Life Cycle. We believe that leveraging our proprietary
"black box" OE design and engineering capabilities enables us to utilize our OE
technology to introduce new products into the aftermarket, where these products
should continue to generate future revenue streams. Innovative products such as
Sensa-Trac(R) shocks, which provide balance between comfort and control, and
Quiet-Flow(TM) mufflers, which reduce back pressure without sacrificing noise
control, are examples of how our market balance between OE and aftermarket sales
allows us to leverage our cost structure over the entire product life cycle.
Develop and Commercialize Innovative, Value-Added Products. We intend to
continue to manufacture and develop innovative, value-added products, both on
our own and through strategic alliances, with a focus on the development of
highly engineered systems and complex assemblies and modules. These products
generally carry higher profit margins than standard components and allow a
supplier to differentiate its offerings from its competitors. Furthermore, we
intend to expand our product lines by continuing to identify and target new
fast-growing niche markets, by developing new products for existing markets, by
making strategic acquisitions and by establishing alliances with other
suppliers. For example, we introduced a new acceleration-sensitive damping
product to the aftermarket installer channel in the fourth quarter of 1999, and
our Walker(R) electronic noise cancellation products incorporate technology that
we acquired but which had not previously been applied to the automotive market.
Leverage Aftermarket Brand Names. We manufacture and market brand-named
products, including Monroe(R) ride control products and Walker(R) emissions
control products. We also have been successful in introducing additional branded
products outside of the Monroe(R) and Walker(R) umbrellas, such as Rancho(R)
ride control products, DynoMax(R) high performance emissions control products,
Clevite(TM) elastomeric vibration control components and Aluminox(TM) emissions
control products in Europe. We are also capitalizing on our brand strength by
incorporating newly acquired product lines within existing product
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families. Our brand equity is a key asset in a time of customer consolidation
and merging channels of distribution.
Diversify End-Markets. We intend to continue to leverage our design,
marketing and manufacturing capabilities by producing products for a variety of
adjacent end-markets. We are targeting opportunities in the aerospace,
two-wheeler, specialty vehicle, industrial and heavy duty vehicle markets, and
we have already expanded our product offerings to include exhaust products for
motorcycles and suspension springs for golf carts. We believe these new markets
will allow us to capitalize on our existing technical and manufacturing
infrastructure to achieve growth, and we expect these markets to generate
margins above traditional OE margins.
Expand Full-System Capabilities. The automotive parts industry is
undergoing a consolidation of parts suppliers, as OEMs increasingly require
suppliers to provide design assistance and innovation for full systems rather
than just individual components. In response to this trend, we continually 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 individual components. We are also committed to
expanding our systems capabilities by establishing joint ventures and strategic
alliances, such as our agreement with Ohlins Racing A.B. to jointly develop
advanced, electronically controlled suspension damping systems.
Maintain Operating Cost Leadership. We intend to seek continuous cost
reduction through, among other things, standardizing products and processes,
increasing efficiency and enhancing global coordination. We have adopted several
management techniques to assist in improving best practices and maintaining
efficiency. For example, we have adopted a process of measuring the economic
value added of our operations to help ensure that returns exceed capital costs.
We have also introduced the Business Operating System as a disciplined approach
to manage continuous improvement by assembling and analyzing data for quick and
effective problem resolution.
Execute Focused Acquisitions and Alliances. Historically, we have been
successful at identifying and capitalizing on strategic acquisitions and
alliances to achieve growth. As described above, we intend to continue to pursue
strategic alliances and focused acquisitions to obtain proven proprietary
technology and recognized research capabilities necessary to help develop
leadership in systems integration. An example of this is our acquisition of
Kinetic Ltd., discussed below, which significantly expanded our capability in
advanced ride control technology suspension systems.
RECENT DEVELOPMENTS
Strategic Repositioning. Several dynamics continue to challenge our
aftermarket business, including increasing average product lives, consolidating
distribution channels and increasing competition. Our plan to address these
dynamics consists of: (1) the rationalization of manufacturing and distribution
operations in order to reduce our cost structure; (2) the elimination of
selected quarterly promotional programs in order to better balance demand and
supply within our aftermarket distribution channels; (3) the introduction of a
strategy to more effectively manage product lines targeted at different
aftermarket distribution channels; and (4) management changes and the
introduction of management techniques designed to improve our best practices and
identify additional cost savings.
In the fourth quarter of 1998, we recorded a pre-tax charge to income from
continuing operations of $53 million ($34 million after-tax). This represented
severance benefits, exit costs and asset impairments related to the closing of
two plant locations and five distribution centers and the elimination of 302
positions at those locations, as well as the elimination of 454 administrative
positions in our business unit and corporate operations. This rationalization of
manufacturing and distribution capabilities has increased the capacity
utilization of our existing facilities and has effectively reduced our breakeven
point in the aftermarket. We expect to realize annual savings of about $27
million as a result of these restructuring initiatives. While we have begun to
realize the benefits of the restructuring, we expect these savings will be fully
realized beginning in the second quarter of 2000. To further reduce our cost
structure, we are also implementing a supplemental restructuring plan which will
involve the closure of additional manufacturing
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and distribution facilities in North America and Europe. This supplemental plan
has been approved by our Board of Directors and will result in an additional
pre-tax charge in the fourth quarter of 1999 of approximately $55 million, of
which approximately 50-60% is expected to be cash. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- General."
Acquisition of Kinetic. In early 1999, we acquired Kinetic Ltd., an
Australian company with a proprietary technology in advanced suspension
engineering. The Kinetic Suspension System is a passive and reactive
hydraulic/mechanical system which offers advanced roll-control technology,
thereby enhancing both on-road handling and off-road performance. This system
was recently named the Gold Award winning entry of the International Grand Prix
for Technical Innovation at the Paris Equip Auto Showcase. We have established a
group of dedicated employees to develop and pursue a roll-out of the Kinetic
technology in both the OE market and the aftermarket. We are working with four
OEMs on prototypes based on this technology, and we have been awarded business
on a platform for a vehicle scheduled for introduction in 2002.
The Spin-off. The spin-off of Pactiv was the final step in the
transformation of Tenneco from a highly diversified industrial corporation to
independent companies focused on their core businesses. Earlier this year,
Tenneco separated its paperboard packaging business from the rest of its
operations and used the cash proceeds to repay a portion of its short-term debt.
On November 4, 1999, Tenneco separated its packaging and administrative services
businesses from the rest of its operations by completing the spin-off of Pactiv
to holders of Tenneco common stock. For more information, see "The Spin-off."
The following describes the principal transactions that Tenneco and Pactiv
undertook to complete the spin-off.
- Corporate Restructuring Transactions. Tenneco restructured 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 were owned directly and indirectly by
Pactiv and (b) its automotive business were owned directly and indirectly
by Tenneco and its non-packaging subsidiaries.
- Debt Realignment. Before the spin-off, Tenneco realigned substantially
all of its existing debt through a combination of tender offers, exchange
offers, prepayments and other refinancings. The purpose was to allocate
this debt between us and Pactiv before the companies were separated. To
retire its existing public debt, Tenneco exchanged some series of its
then-existing public debt for new Pactiv public debt and purchased other
series of this debt for cash. Tenneco conducted a concurrent consent
solicitation which removed the restrictions on Tenneco's operations that
were included in the related indenture. Tenneco also repaid other
non-public debt and repurchased subsidiary preferred stock. To finance
the cash tender offers and other cash payments, we issued the $500
million of outstanding notes pursuant to a private offering and entered
into a new senior secured credit facility.
- Distribution of Packaging Common Stock. Tenneco completed the spin-off
by distributing all Pactiv common stock to the holders of Tenneco common
stock at a one-for-one ratio.
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The exchange offer relates to the exchange of up to $500 million aggregate
principal amount of outstanding notes for an equal aggregate principal amount of
new notes. The new notes will be our obligations, entitled to the benefits of
the indenture governing the outstanding notes. The form and terms of the new
notes are identical in all material respects to the form and terms of the
outstanding notes except that the new notes have been registered under the
Securities Act, and therefore are not entitled to the benefits of the
registration rights granted under the registration rights agreement executed as
part of the offering of the outstanding notes. When we refer to the "notes" in
this prospectus, we are referring to both the outstanding notes and the new
notes.
6
<PAGE> 10
If we do not complete the exchange offer on or before April 12, 2000, the
interest rate on the outstanding notes will increase by .25% per annum during
each subsequent 90-day period, up to a maximum overall increase of 1% per annum,
until we complete the exchange offer.
Registration Rights
Agreement...................... You are entitled to exchange your outstanding
notes for registered new notes with
substantially identical terms. The exchange
offer is intended to satisfy these rights.
After the exchange offer is complete, you
will no longer be entitled to any exchange or
registration rights with respect to your
notes.
The Exchange Offer............. We are offering to exchange $1,000 principal
amount of new 11 5/8% Senior Subordinated
Notes due 2009 which have been registered
under the Securities Act for each $1,000
principal amount of our outstanding 11 5/8%
Senior Subordinated Notes due 2009.
Expiration Time................ The exchange offer will expire at 5:00 p.m.,
New York City time, on
, , unless we
decide to extend the expiration time.
Conditions to the Exchange
Offer.......................... We will not complete this exchange offer if
it violates applicable law or staff
interpretations of the Securities and
Exchange Commission. Holders of outstanding
notes will have specified rights against our
company under the registration rights
agreement executed as part of the private
offering of the outstanding notes should we
fail to complete the exchange offer. See "The
Exchange Offer -- Purpose and Effect of the
Exchange Offer."
Resale of the New Notes........ We believe that the new notes may be offered
for resale, resold and otherwise transferred
by you without compliance with the
registration and prospectus delivery
provisions of the Securities Act, subject to
the conditions described below. We have based
this belief on letters issued in connection
with past offerings of this kind in which the
staff of the Securities and Exchange
Commission has interpreted the laws and
regulations relating to the resale of notes
to the public without the requirement of
further registration under the Securities
Act. See Shearman & Sterling (available July
2, 1993); Morgan Stanley & Co. Incorporated
(available June 5, 1991); and Exxon Capital
Holdings Corporation (available May 13,
1988). In order for the new notes to be
offered for resale, resold or otherwise
transferred:
- you must acquire the new notes in the
ordinary course of your business;
- you must not participate or intend to
participate, and you must have no
arrangement or understanding with any
person to participate, in the distribution
of the new notes issued to you;
- you must not be a broker-dealer who
purchased your outstanding notes directly
from us for resale under Rule 144A or any
other available exemption under the
Securities Act; and
7
<PAGE> 11
- you must not be an "affiliate" of ours
within the meaning of Rule 405 under the
Securities Act.
If you do not meet the above conditions, you
may incur liability under the Securities Act
if you transfer any new note without
delivering a prospectus meeting the
requirements of the Securities Act. We do not
assume or indemnify you against this
liability.
If you are a broker-dealer and you are issued
new notes in this exchange offer for your own
account in exchange for outstanding notes
which were acquired as a result of
market-making or other trading activities,
you must acknowledge that you will deliver
this prospectus, as it may be amended or
supplemented, in connection with any resale
of new notes issued in the exchange offer.
For a period of 180 days after the date this
exchange offer is completed, we will make
this prospectus and any amendment or
supplement to this prospectus available to
broker-dealers for use in connection with
resales.
We are not offering to exchange with you, and
will not accept surrenders for exchange from
you, in any jurisdiction in which this
exchange offer or its acceptance would not
comply with the securities or blue sky laws
of that jurisdiction. Furthermore, if you
acquire the new notes, you are responsible
for compliance with securities or blue sky
laws regarding resales. We assume no
responsibility for compliance with these
requirements.
Accrued Interest on the New
Notes and the Outstanding
Notes.......................... Each new note will bear interest from October
14, 1999, the issuance date of the
outstanding notes. The holders of outstanding
notes that are accepted for exchange will be
deemed to have waived the right to receive
payment of accrued interest on those
outstanding notes from October 14, 1999 to
the date of issuance of the new notes.
Interest on the outstanding notes accepted
for exchange will cease to accrue upon
issuance of the new notes.
Consequently, if you exchange your
outstanding notes for new notes, you will
receive the same interest payment on April
15, 2000, which is the first interest payment
date with respect to the outstanding notes
and the new notes, that you would have
received if you had not accepted this
exchange offer.
Procedures for Tendering
Outstanding Notes............ If you are a holder of an outstanding note
and you wish to tender your note for exchange
pursuant to the exchange offer, you must
transmit to The Bank of New York, as exchange
agent, prior to the expiration time:
- an original or a facsimile of a properly
completed and duly executed copy of the
letter of transmittal, which accompanies
this prospectus, together with your
outstanding notes and any other
documentation required by the letter of
8
<PAGE> 12
transmittal, at the address provided on the
cover page of the letter of transmittal; or
- if the original notes you own are held of
record by The Depository Trust Company
("DTC") in book-entry form and you are
making delivery by book-entry transfer, a
computer-generated message transmitted by
means of the Automated Tender Offer Program
system of DTC in which you acknowledge and
agree to be bound by the terms of the
letter of transmittal and which, when
received by the exchange agent, forms a
part of a confirmation of book-entry
transfer. As part of the book-entry
transfer, DTC will facilitate the exchange
of your notes and update your account to
reflect the issuance of the new notes to
you. The Automated Tender Offer Program
allows you to electronically transmit your
acceptance of the exchange offer to DTC
instead of physically completing and
delivering a letter of transmittal to the
exchange agent.
In addition, you must deliver to the exchange
agent on or before the expiration time:
- if you are effecting delivery by book-entry
transfer, a timely confirmation of
book-entry transfer of your outstanding
notes into the account of the exchange
agent at DTC; or
- if necessary, the documents required for
compliance with the guaranteed delivery
procedures.
By executing and delivering the letter of
transmittal or effecting delivery by
book-entry transfer, you are representing to
us that, among other things:
- the person receiving the new notes in this
exchange offer, whether or not that person
is the holder, is receiving them in the
ordinary course of business;
- neither you nor any other person receiving
your new notes in the exchange offer has an
arrangement or understanding with any
person to participate in the distribution
of the new notes; and
- neither you nor any other person receiving
your new notes in the exchange offer is an
"affiliate" of ours within the meaning of
Rule 405 under the Securities Act, or, if
you are an "affiliate" of ours, that you
will comply with the registration and
prospectus delivery requirements of the
Securities Act, to the extent applicable.
Special Procedures for
Beneficial Owners............ If you are a beneficial owner of outstanding
notes that are registered in the name of a
broker, dealer, commercial bank, trust
company or other nominee and you wish to
tender the notes in this exchange offer, you
should promptly contact the registered holder
and instruct that person to tender on your
behalf. If you wish to tender on your own
behalf you must, before completing and
executing the letter of transmittal and
9
<PAGE> 13
delivering your outstanding notes, either
make appropriate arrangements to register
ownership of the outstanding notes in your
name or obtain a properly completed bond
power from the registered holder. The
transfer of registered ownership may take
considerable time.
Guaranteed Delivery
Procedures..................... If you wish to tender your outstanding notes
and:
- time will not permit your notes or other
required documents to reach the exchange
agent by the expiration time; or
- the procedure for book-entry transfer
cannot be completed on time;
you may tender outstanding notes by
completing a notice of guaranteed delivery
and complying with the guaranteed delivery
procedures. See "The Exchange
Offer -- Guaranteed Delivery Procedures."
Shelf Registration Statement... We have agreed to register the outstanding
notes on a shelf registration statement and
use our best efforts to cause the shelf
registration statement to be declared
effective by the Securities and Exchange
Commission if:
- any changes in law or of the applicable
interpretations of the staff of the
Securities and Exchange Commission do not
permit us to effect this exchange offer;
- we do not complete the exchange offer on or
before April 12, 2000;
- any holder of outstanding notes is not
eligible under applicable securities laws
to participate in the exchange offer, and
the holder has requested us to file the
shelf registration statement and has
satisfied conditions relating to the
provision of information to us.
We have agreed to maintain the effectiveness
of the shelf registration statement for, in
some circumstances, at least two years from
the date of the original issuance of the
outstanding notes to cover resales of the
notes held by the holders. See "The Exchange
Offer -- Purpose and Effect of the Exchange
Offer."
Withdrawal Rights.............. You may withdraw the tender of your
outstanding notes at any time before the
expiration time.
Acceptance of Outstanding Notes
and
Delivery of New Notes........ So long as this exchange offer does not
violate applicable law or staff
interpretations of the Securities and
Exchange Commission, we will accept for
exchange any and all outstanding notes which
are properly tendered and not validly
withdrawn before the expiration time. The new
notes issued in this exchange offer will be
delivered promptly following the expiration
time.
United States Federal Income
Tax
Consequences................. Based on the advice of our counsel, we
believe the exchange of outstanding notes for
new notes will not be a taxable exchange
10
<PAGE> 14
for United States federal income tax
purposes. See "United States Federal Income
Tax Consequences."
Consequences of Failure to
Exchange....................... All outstanding notes that are not exchanged
will continue to be subject to the
restrictions on transfer contained in the
outstanding notes and in the related
indenture. In general, the outstanding notes
may not be offered or sold unless registered
under the Securities Act, except pursuant to
an exemption from, or in a transaction not
subject to, the Securities Act and applicable
state securities laws. Except in connection
with a shelf registration statement as
described above, we will have no obligation
to register outstanding notes under the
Securities Act after we complete the exchange
offer.
To the extent that outstanding notes are
tendered and accepted in this exchange offer,
we expect that the trading market for
outstanding notes will be adversely affected.
See "Risk Factors."
Exchange Agent................. The Bank of New York is serving as the
exchange agent in connection with the
exchange offer. The exchange agent will
assist us in the exchange offer by performing
various administrative functions on our
behalf.
Dissenter's Rights............. No dissenter's rights of appraisal exist in
connection with the exchange offer.
SUMMARY DESCRIPTION OF THE NEW NOTES
For a more complete description of the terms of the new notes, see
"Description of the New Notes."
Issuer........................ Tenneco Automotive Inc.
General....................... The form and terms of the new notes are
identical in all material respects to the form
and terms of the outstanding notes except that:
- the new notes will bear a "Series B"
designation to differentiate them from the
outstanding notes, which bear a "Series A"
designation;
- the new notes have been registered under the
Securities Act and, therefore, will not bear
legends restricting their transfer; and
- the holders of new notes will not be entitled
to rights under the registration rights
agreement, including any registration rights
or rights to additional interest.
The new notes will evidence the same debt as
the outstanding notes and will be entitled to
the benefits of the indenture under which the
outstanding notes were issued.
Notes Offered................. $500,000,000 aggregate principal amount of
11 5/8% Senior Subordinated Notes due 2009.
Maturity...................... October 15, 2009.
Interest Payments............. April 15 and October 15, commencing April 15,
2000.
11
<PAGE> 15
Optional Redemption........... At any time on or after October 15, 2004, we
may redeem the new notes in whole or in part,
at a redemption price of 105.813% of their
principal amount, declining ratably to their
principal amount after October 15, 2007, plus
accrued and unpaid interest, if any, to the
redemption date.
Optional Redemption After Some
Equity Offerings............ At any time and from time to time on or prior
to October 15, 2002, we may redeem the new
notes with the net cash proceeds of some equity
offerings, as long as:
- we pay 111.625% of the principal amount of
the new notes to be redeemed, plus accrued
and unpaid interest, if any, to the \date
of redemption; and
- at least 65% of the aggregate principal
amount of all notes issued under the
indenture remain outstanding afterwards.
Change of Control............. Upon a change of control with respect to us,
you will have the right, as a holder of new
notes, to require us to repurchase all of your
new notes at a repurchase price equal to 101%
of their principal amount, plus accrued and
unpaid interest, if any, to the date of
repurchase. We might not be able to pay you the
required price for new notes you request us to
purchase at that time because we may not have
enough funds or the terms of our other debt may
prevent us from paying you. See "Description of
the New Notes -- Change of Control."
Ranking....................... The new notes will be unsecured and will rank
in right of payment behind all of our existing
and future senior debt. The new notes will
effectively rank in right of payment behind
debt and other liabilities of our subsidiaries
which are not guarantors. Because the new notes
are subordinated, in the event of our
bankruptcy, liquidation or dissolution, holders
of new notes will not be entitled to receive
any payment until all holders of our senior
debt have been paid in full.
On a pro forma basis after giving effect to the
spin-off, at September 30, 1999 we would have
had approximately $1,173 million of senior debt
outstanding and approximately $459 million
available for borrowing under our new senior
secured credit facility. See "Unaudited Pro
Forma Consolidated Financial Statements" and
"The Spin-off -- Debt Realignment." Holders of
the new notes will rank in right of payment
behind all of this outstanding debt and
available debt.
Guarantees.................... All of our material domestic wholly owned
subsidiaries will fully and unconditionally
guarantee the new notes on a joint and several
basis. Our future material domestic restricted
subsidiaries that incur indebtedness will be
required to execute a similar guarantee. The
subsidiary guarantees will each be unsecured
and rank in right of payment behind each
subsidiary guarantor's existing and future
senior debt.
12
<PAGE> 16
Restrictive Covenants......... We will issue the new notes under an indenture
between us and The Bank of New York, as
trustee. The indenture limits our ability and
the ability of our restricted subsidiaries to:
- incur more debt;
- create liens;
- pay dividends and make distributions or
repurchase stock;
- make investments;
- merge or consolidate or transfer and sell
assets;
- issue stock of subsidiaries; and
- engage in transactions with affiliates.
These covenants are subject to a number of
important exceptions and limitations, which are
described under the heading "Description of the
New Notes." All of our present subsidiaries are
restricted for purposes of the indenture.
Risk Factors.................. You should consider carefully all of the
information set forth in this prospectus and,
in particular, should evaluate the specific
factors set forth under "Risk Factors" in
deciding whether to participate in the exchange
offer.
13
<PAGE> 17
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
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 nine
month periods ended September 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 nine months ended September 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 nine months ended September 30,
1999 as indicative of the results that may be expected for the full year.
The following summary unaudited pro forma consolidated financial data as of
and for the nine months ended September 30, 1999, and for the year ended
December 31, 1998, reflect the effects of:
- the debt realignment;
- the spin-off of Pactiv and related transactions; and
- the April 1999 contribution of Pactiv's containerboard assets to a new
joint venture and the June 1999 sale of Pactiv's folding carton assets.
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 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 September 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.
Following the spin-off, Tenneco executed a one-for-five reverse stock
split. All share and per share amounts in the summary consolidated financial
data reflect the reverse stock split.
There is other information we believe is relevant to understanding our
results of operations following the spin-off. These items relate to corporate
overhead costs incurred by Tenneco and its administrative services operations
that we expect will differ for us following the spin-off. For further
information you should see "Supplemental Consolidated Financial Data."
You should read all of this information in conjunction with the:
- "Unaudited Pro Forma Consolidated Financial Statements"; and
- "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(continued on next page)
14
<PAGE> 18
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------
PRO FORMA
1998 1998 1997 1996 1995 1994
--------- ---- ---- ---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Revenues
Net sales and operating
revenues...................... $ 3,237 $ 3,237 $ 3,226 $ 2,980 $ 2,479 $ 1,989
Other income, net............... (25) (25) 37 (22) 60 (8)
----------- ----------- ----------- ----------- ----------- -----------
3,212 3,212 3,263 2,958 2,539 1,981
----------- ----------- ----------- ----------- ----------- -----------
Costs and expenses(a)
Cost of sales (exclusive of
depreciation shown below)..... 2,332 2,332 2,303 2,140 1,788 1,354
Engineering, research, and
development................... 31 31 34 70 60 38
Selling, general, and
administrative................ 477 472 421 412 360 307
Depreciation and amortization... 150 150 110 94 83 52
----------- ----------- ----------- ----------- ----------- -----------
2,990 2,985 2,868 2,716 2,291 1,751
----------- ----------- ----------- ----------- ----------- -----------
Income from continuing operations
before interest expense, income
taxes, and minority interest.... 222 227 395 242 248 230
Interest expense (net of
interest capitalized)(b)..... 169 69 58 60 44 33
Income tax expense............ (29) 13 80 79 91 52
Minority interest............. -- 29 23 21 23 --
----------- ----------- ----------- ----------- ----------- -----------
Income from continuing
operations...................... $ 82 116 234 82 90 145
===========
Income (loss) from discontinued
operations, net of income tax
(c)............................. NA 139 127 564 645 307
Extraordinary loss, net of income
tax(d).......................... NA -- -- (236) -- (5)
Cumulative effect of changes in
accounting principles, net of
income tax(e)................... NA -- (46) -- -- (39)
----------- ----------- ----------- ----------- -----------
Net income (loss)................ NA $ 255 $ 315 $ 410 $ 735 $ 408
=========== =========== =========== =========== ===========
Average number of shares of
common stock outstanding
Basic......................... 33,701,115 33,701,115 34,052,946 33,921,875 34,552,840 32,461,438
Diluted....................... 33,766,906 33,766,906 34,160,327 34,105,223 34,702,331 32,582,485
Earnings (loss) per average share
of common stock --
Basic:
Continuing operations........ $ 2.43 $ 3.45 $ 6.87 $ 2.45 $ 2.60 $ 4.46
Discontinued operations(c)... NA 4.13 3.73 16.27 18.32 7.61
Extraordinary loss(d)........ NA -- -- (6.96) -- (.15)
Cumulative effect of changes
in accounting
principles(e).............. NA -- (1.35) -- -- (1.20)
----------- ----------- ----------- ----------- -----------
$ 7.58 $ 9.25 $ 11.76 $ 20.92 $ 10.72
=========== =========== =========== =========== ===========
Diluted:
Continuing operations........ $ 2.42 $ 3.44 $ 6.85 $ 2.43 $ 2.59 $ 4.45
Discontinued operations(c)... NA 4.12 3.72 16.18 18.24 7.58
Extraordinary loss(d)........ NA -- -- (6.96) -- (.15)
Cumulative effect of changes
in accounting
principles(e).............. NA -- (1.35) -- -- (1.20)
----------- ----------- ----------- ----------- -----------
$ 7.56 $ 9.22 $ 11.65 $ 20.83 $ 10.68
=========== =========== =========== =========== ===========
Cash dividends per common
share........................... NA $ 6.00 $ 6.00 $ 9.00 $ 8.00 $ 8.00
BALANCE SHEET DATA:
Net assets of discontinued
operations(c)................. NA $ 1,739 $ 1,771 $ 1,883 $ 1,469 $ 700
Total assets.................... NA $ 4,759 $ 4,682 $ 4,653 $ 3,635 $ 2,315
Short-term debt(b).............. NA 304 75 74 109 31
Long-term debt(b)............... NA 671 713 639 469 303
Debt allocated to discontinued
operations(b)................. NA 2,456 2,123 1,590 1,454 813
Minority interest............... NA 407 408 304 301 301
Shareowners' equity............. NA 2,504 2,528 2,646 3,148 2,900
STATEMENT OF CASH FLOWS DATA:
Net cash provided (used) by
operating activities.......... NA $ 532 $ 519 $ 253 $ 1,443 $ 450
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
---------------------------------------
PRO FORMA
1999 1999 1998
--------- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Revenues
Net sales and operating
revenues...................... $ 2,473 $ 2,473 $ 2,468
Other income, net............... 10 10 12
----------- ----------- -----------
2,483 2,483 2,480
----------- ----------- -----------
Costs and expenses(a)
Cost of sales (exclusive of
depreciation shown below)..... 1,812 1,812 1,731
Engineering, research, and
development................... 39 39 18
Selling, general, and
administrative................ 307 303 333
Depreciation and amortization... 110 110 110
----------- ----------- -----------
2,268 2,264 2,192
----------- ----------- -----------
Income from continuing operations
before interest expense, income
taxes, and minority interest.... 215 219 288
Interest expense (net of
interest capitalized)(b)..... 126 58 49
Income tax expense............ 31 60 48
Minority interest............. -- 21 22
----------- ----------- -----------
Income from continuing
operations...................... $ 58 80 169
===========
Income (loss) from discontinued
operations, net of income tax
(c)............................. NA (99) 146
Extraordinary loss, net of income
tax(d).......................... NA (7) --
Cumulative effect of changes in
accounting principles, net of
income tax(e)................... NA (134) --
----------- -----------
Net income (loss)................ NA $ (160) $ 315
=========== ===========
Average number of shares of
common stock outstanding
Basic......................... 33,423,014 33,423,014 33,785,955
Diluted....................... 33,491,690 33,491,690 33,876,785
Earnings (loss) per average share
of common stock --
Basic:
Continuing operations........ $ 1.74 $ 2.40 $ 4.99
Discontinued operations(c)... NA (2.98) 4.35
Extraordinary loss(d)........ NA (.20) --
Cumulative effect of changes
in accounting
principles(e).............. NA (4.00) --
----------- -----------
$ (4.78) $ 9.34
=========== ===========
Diluted:
Continuing operations........ $ 1.73 $ 2.40 $ 4.97
Discontinued operations(c)... NA (2.98) 4.34
Extraordinary loss(d)........ NA (.20) --
Cumulative effect of changes
in accounting
principles(e).............. NA (4.00) --
----------- -----------
$ (4.78) $ 9.31
=========== ===========
Cash dividends per common
share........................... NA $ 4.50 $ 4.50
BALANCE SHEET DATA:
Net assets of discontinued
operations(c)................. NA $ 1,483 $ 1,940
Total assets.................... $ 3,017 $ 4,494 $ 4,999
Short-term debt(b).............. 63 237 197
Long-term debt(b)............... 1,610 796 822
Debt allocated to discontinued
operations(b)................. NA 1,985 2,233
Minority interest............... 17 411 410
Shareowners' equity............. 441 2,140 2,664
STATEMENT OF CASH FLOWS DATA:
Net cash provided (used) by
operating activities.......... NA $ (166) $ 365
</TABLE>
(continued on next page)
15
<PAGE> 19
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------
PRO FORMA
1998 1998 1997 1996 1995 1994
--------- ---- ---- ---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Net cash (used) by investing
activities....................... NA (754) (887) (685) (1,162) (113)
Net cash provided (used) by
financing activities.......... NA 216 354 147 (356) (151)
Capital expenditures for
continuing operations......... NA 195 221 188 208 114
OTHER DATA:
EBITDA(f)....................... $ 372 $ 377 $ 505 $ 336 $ 331 $ 282
Ratio of earnings to fixed
charges(g).................... 1.3 2.2 4.8 2.3 2.6 5.4
Book value per share............ NA 74.30 74.24 78.00 91.11 89.34
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
---------------------------------------
PRO FORMA
1999 1999 1998
--------- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net cash (used) by investing
activities....................... NA (1,068) (469)
Net cash provided (used) by
financing activities.......... NA 1,244 96
Capital expenditures for
continuing operations......... NA 104 121
OTHER DATA:
EBITDA(f)....................... $ 325 $ 329 $ 398
Ratio of earnings to fixed
charges(g).................... 1.7 2.3 3.2
Book value per share............ 13.19 64.03 78.85
</TABLE>
- -------------------------
NOTE: The Financial Statements of Tenneco Automotive Inc. and Consolidated
Subsidiaries discussed in the following notes are included in this prospectus.
They cover the three years ended December 31, 1998 and the nine months ended
September 30, 1999 and 1998.
(a) Automotive recorded charges for restructuring and realignment of operations
of $53 million in 1998, $64 million in 1996 and $22 million in 1994.
(b) Debt amounts for 1998, 1997, and 1996, and for September 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
September 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 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 Automotive Inc. and Consolidated Subsidiaries for additional
information.
(c) 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 Automotive
Inc. and Consolidated Subsidiaries for additional information.
(d) 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 Automotive Inc. and
Consolidated Subsidiaries for additional information.
(e) 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 Automotive Inc. and
Consolidated Subsidiaries for additional information.
(f) 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. In addition, 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.
(g) 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.
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RISK FACTORS
You should read and carefully consider each of the following factors, as
well as the other information contained or incorporated by reference into this
prospectus, before making a decision to tender your outstanding notes in the
exchange offer.
The risk factors set forth below, other than the first and second risk
factors described below, are generally applicable to the outstanding notes as
well as the new notes.
RISKS FACTORS RELATED TO INVESTMENT IN THE NOTES
IF YOU DO NOT EXCHANGE YOUR OUTSTANDING NOTES PURSUANT TO THIS EXCHANGE
OFFER, YOU MIGHT NOT BE ABLE TO EVER SELL YOUR OUTSTANDING NOTES.
As outstanding notes are tendered and accepted in the exchange offer, the
trading market for the remaining untendered or tendered but not accepted
outstanding notes will be adversely affected. We anticipate that most holders of
the outstanding notes will elect to exchange the outstanding notes for new notes
due to the absence of restrictions on the resale of new notes under the
Securities Act. Therefore, we anticipate that the liquidity of the market for
any outstanding notes remaining after the consummation of the exchange offer
will be substantially limited.
We will only issue new notes in exchange for outstanding notes that you
timely and properly tender. Therefore, you should allow sufficient time to
ensure timely delivery of the outstanding notes and you should carefully follow
the instructions on how to tender your outstanding notes. Neither we nor the
exchange agent are required to tell you of any defects or irregularities with
respect to your tender of the outstanding notes.
If you do not tender your outstanding notes or if we do not accept some of
your outstanding notes, those outstanding notes will continue to be subject to
the transfer and exchange restrictions in:
- the indenture,
- the legend on the outstanding notes, and
- the offering memorandum relating to the outstanding notes.
The restrictions on transfer of your outstanding notes arise because we
issued the outstanding notes pursuant to an exemption from the registration
requirements of the Securities Act and applicable state securities laws. In
general, you may only offer or sell the outstanding notes if they are registered
under the Securities Act and applicable state securities laws, or offered and
sold pursuant to an exemption from these requirements. If you do not tender your
outstanding notes, or if your outstanding notes are not accepted for exchange,
generally you will have no further right to require us to register your
outstanding notes after the exchange offer. Except in connection with this
exchange offer, we do not presently intend to register the outstanding notes
under the Securities Act.
THERE IS NO ESTABLISHED TRADING MARKET FOR THE NEW NOTES AND NO GUARANTEE
THAT A MARKET WILL DEVELOP OR THAT YOU WILL BE ABLE TO SELL YOUR NEW NOTES.
The new notes will constitute a new issue of securities, and there has not
been an established trading market for the new notes. A market may not develop,
and you may not be able to resell your new notes. Future trading prices of the
new notes will depend on many factors, including, among other things, prevailing
interest rates, our operating results and the market for similar securities. The
initial purchasers of the outstanding notes in the private offering have advised
us that they currently intend to make a market in the new notes. However, the
initial purchasers are not obligated to do so, and any market-making may be
discontinued at any time without notice.
The liquidity of, and trading market for, the new notes may also be
materially and adversely affected by declines in the market for high yield
securities generally. Such a decline may materially and adversely affect such
liquidity and trading independent of our financial performance and prospects.
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OUR SUBSTANTIAL DEBT COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES. THIS DEBT COULD
ALSO ADVERSELY AFFECT OUR OPERATING FLEXIBILITY AND PUT US AT A COMPETITIVE
DISADVANTAGE.
We have incurred a substantial amount of debt as a result of the debt
realignment related to the spin-off of Pactiv. As of September 30, 1999, on a
pro forma basis, we would have had indebtedness for money borrowed of about
$1,673 million if the spin-off had occurred on that date. This debt will require
significant interest payments. See "Unaudited Pro Forma Consolidated Financial
Statements." Subject to the limits contained in the indenture for the notes and
the new senior secured bank credit facility we entered into in connection with
the spin-off, we and our subsidiaries may incur additional debt from time to
time to finance capital expenditures, investments or acquisitions, or for other
general corporate purposes.
Our substantial level of debt and these significant demands on our cash
resources could have important effects on your investment. These effects may
include:
- making it more difficult for us to satisfy our obligations with respect
to the notes and our other debt;
- making it more difficult for us to obtain additional financing for
working capital, capital expenditures, acquisitions or other general
corporate purposes;
- requiring a substantial portion of our cash flow to be dedicated to debt
service payments instead of other purposes;
- increasing our vulnerability to general adverse economic and industry
conditions;
- limiting our financial flexibility in planning for and reacting to
changes in the industry in which we compete;
- placing us at a disadvantage as compared to less leveraged competitors;
and
- limiting our ability to borrow additional funds and increasing the cost
of borrowing.
Our ability to pay principal and interest on the notes, to repay our
secured debt and to satisfy our other debt obligations will depend upon our
future operating performance and the availability of refinancing debt. If we are
unable to service our debt and fund our business, we may be forced to reduce or
delay capital expenditures, seek additional debt financing or equity capital,
restructure or refinance our debt or sell assets.
OUR OPERATIONS ARE SUBSTANTIALLY RESTRICTED BY THE TERMS OF OUR DEBT, WHICH
COULD ADVERSELY AFFECT US AND INCREASE YOUR CREDIT RISK.
The indenture relating to the notes and the new senior secured bank credit
facility we entered into in connection with the spin-off include a number of
significant financial and other restrictive covenants. These covenants could
adversely affect us, and adversely affect investors, by limiting our ability to
plan for or react to market conditions or to meet our capital needs. These
covenants, among other things, restrict our ability to:
- - dispose of assets;
- - incur liens, guarantees or additional debt;
- - engage in sale-leaseback transactions;
- - pay dividends or make distributions;
- - engage in mergers or consolidations,
- - enter into investments or acquisitions;
- - engage in transactions with affiliates; and
- - repurchase or redeem capital stock.
THE INDENTURE AND OUR NEW SENIOR SECURED BANK CREDIT FACILITY CONTAIN
RESTRICTIVE COVENANTS THAT, IF NOT SATISFIED OR WAIVED, COULD RESULT IN
ACCELERATION OF OUR OUTSTANDING DEBT OBLIGATIONS.
The indenture and our new senior secured bank credit facility each contain
a number of restrictive covenants. Our failure to comply with these covenants
could result in an event of default which, if not
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cured or waived, could result in us being required to repay these borrowings
before their due date. If we were unable to make this repayment or otherwise
refinance these borrowings, the lenders under our senior secured credit facility
could foreclose on our assets. If we were able to refinance these borrowings on
less favorable terms, our results of operations and financial condition could be
adversely impacted by increased costs and rates.
DESPITE OUR DEBT LEVELS AFTER THE SPIN-OFF, WE MAY STILL BE ABLE TO INCUR
SIGNIFICANTLY MORE DEBT.
Despite the restrictions and limitations described above, we may be able to
incur significant additional indebtedness. The new senior secured credit
facility we entered into in connection with the spin-off will permit additional
borrowings of approximately $459 million, on a pro forma basis at September 30,
1999 after giving effect to the spin-off, and the indenture governing the notes
also permits us to incur additional indebtedness in specified circumstances. If
additional debt is added to our debt levels, the related risks that we face
could increase.
THE NOTES ARE SUBORDINATED TO ALL OF OUR SENIOR AND SECURED DEBT.
The payment of principal, interest and any other obligations with respect
to the notes and the subsidiary guarantees is generally subordinated to, and
ranks in right of payment behind, all of our and the subsidiary guarantors'
debt. This includes debt under the new senior secured bank credit facility but
will exclude any future indebtedness that expressly provides that it ranks equal
to, or junior in right of payment to, the notes and the subsidiary guarantees.
Further, as described below, the notes are subordinated in right of repayment to
obligations of the non-guarantor subsidiaries, including without limitation any
trade payables of those subsidiaries. As of September 30, 1999, the
non-guarantor subsidiaries had outstanding indebtedness of approximately $561
million and other outstanding liabilities, including trade payables and accrued
expenses, of $412 million. See "Description of the New Notes -- Subordination."
Upon any distribution to our creditors or the creditors of a subsidiary
guarantor in a bankruptcy, liquidation or reorganization or similar proceeding,
the holders of senior debt, including the lenders under the new senior secured
credit facility, will be entitled to be paid in full in cash before any payment
may be made with respect to the notes. Because we and the subsidiary guarantors
may not have sufficient funds or assets to pay all creditors, holders of notes
may receive less, ratably, than the holders of senior debt. In addition our new
senior secured credit facility is secured by (1) substantially all of our
domestic assets, (2) 100% of the capital stock of our material domestic
subsidiaries and (3) up to 66% of the capital stock of our material first-tier
foreign subsidiaries. Accordingly, upon our liquidation or reorganization, the
holders of notes will have no claim against these assets or the capital stock of
these subsidiaries until the lenders under this bank credit facility are paid in
full. See "Description of Senior Credit Facility."
In addition, the payment of principal, interest and any other obligations
with respect to the notes will be prohibited in the event of a payment default
on any of our senior debt and may be delayed, at the option of the holders of
that senior debt, for up to 179 consecutive days in the event of specified non-
payment defaults. See "Description of the New Notes -- Subordination."
As of September 30, 1999, on a pro forma basis as if the spin-off had
occurred on that date, we had approximately $1,173 million of consolidated
senior debt outstanding and approximately $459 million of maximum undrawn
capacity under our new revolving credit facility. In addition, subject to the
terms of the indenture, we will be permitted to borrow substantial additional
indebtedness, including senior debt, in the future.
NOT ALL OF OUR SUBSIDIARIES GUARANTEE THE NOTES AND ASSETS OF OUR
NON-GUARANTOR SUBSIDIARIES MAY NOT BE AVAILABLE TO MAKE PAYMENTS ON THE
NOTES.
Some of our subsidiaries are not guarantors of the notes. Payments on the
notes will only be required to be made by us and the subsidiary guarantors. As a
result, no payments are required to be made from assets of subsidiaries which do
not guarantee the notes unless those assets are transferred (by dividend or
otherwise) to us or a subsidiary guarantor.
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As of, and for the nine months ended, September 30, 1999, the non-guarantor
subsidiaries represented approximately 51% of the consolidated assets of
Automotive (excluding net assets of discontinued operations), approximately 56%
of the consolidated net sales of Automotive (excluding intercompany sales), and
approximately 53% of the consolidated EBITDA of Automotive. The non-guarantor
subsidiaries consist of all of our foreign subsidiaries and immaterial domestic
subsidiaries. To the extent we expand our international operations, a larger
percentage of our consolidated assets, net sales, EBITDA and operating income
may be derived from non-guarantor foreign subsidiaries. Our ability to
repatriate cash from foreign subsidiaries may be limited. See "-- Risks Relating
to Our Business -- We are subject to risks related to our international
operations."
THE SUBSIDIARY GUARANTEES RAISE FRAUDULENT TRANSFER ISSUES, WHICH COULD
IMPAIR THE ENFORCEABILITY OF THE SUBSIDIARY GUARANTEES.
Under U.S. bankruptcy law and comparable provisions of state fraudulent
transfer laws, a court could subordinate or void any guarantee if it found that
the guarantee was incurred with actual intent to hinder, delay or defraud
creditors or the guarantor did not receive fair consideration or reasonably
equivalent value for the guarantee and the guarantor was any of the following:
- insolvent or was rendered insolvent because of the guarantee;
- engaged in a business or transaction for which its remaining assets
constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay at maturity.
If a court voided a guarantee as a result of fraudulent conveyance, or held it
unenforceable for any other reason, noteholders would cease to have a claim
against the guarantor and would be solely creditors of Tenneco and any other
guarantors.
WE MAY NOT HAVE SUFFICIENT FUNDS OR BE PERMITTED BY OUR SENIOR DEBT TO
PURCHASE NOTES UPON A CHANGE OF CONTROL.
Upon a change of control, we will be required to make an offer to purchase
all outstanding notes. However, we cannot assure you that we will have or will
be able to borrow sufficient funds at the time of any change of control to make
any required repurchases of notes, or that restrictions in our senior secured
bank credit facility or other senior debt we may incur in the future would
permit us to make the required repurchases. For the foreseeable future, we
expect covenants in our new senior secured credit facility will not permit us to
make the required repurchases.
RISKS RELATING TO OUR BUSINESS
CONSOLIDATION AMONG AUTOMOTIVE PARTS CUSTOMERS AND SUPPLIERS COULD MAKE IT
MORE DIFFICULT FOR US TO COMPETE FAVORABLY.
Our 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, we are competing for
business from fewer customers. Due to the cost focus of these major customers,
we have been, and expect to continue to be, required to reduce prices. We cannot
be certain that we 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 we cannot achieve cost savings and
operational improvements sufficient to allow us to compete favorably in the
future with these larger companies, our financial condition and results of
operations could be adversely affected due to a reduction of, or inability to
increase, sales. See "Business -- Industry Trends."
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WE ARE DEPENDENT ON LARGE CUSTOMERS FOR FUTURE REVENUES.
We depend on major vehicle manufacturers for a substantial portion of our
net sales. For example, during 1998 Ford and DaimlerChrysler accounted for 12.8%
and 10.9% of our net sales, respectively. The loss of all or a substantial
portion of our sales to any of our large volume customers could have a material
adverse effect on our financial condition and results of operations by reducing
cash flows and our ability to spread costs over a larger revenue base. We 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
"Business -- Analysis of Revenues."
WE 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 our more traditional customers. We cannot assure you that
we will be able to maintain or increase aftermarket sales through increasing our
sales to retailers. Furthermore, because of the cost focus of major retailers,
we have been, and expect to continue to be, required to offer price concessions.
Our 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 our business and operating results.
WE 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, we
face significant competition within each of our 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
"Business -- Overview of Automotive Parts Industry" and "Business -- Industry
Trends." We cannot assure you that we will be able to continue to compete
favorably in this competitive market or that increased competition will not have
a material adverse effect on our business by reducing our ability to increase or
maintain sales or profit margins.
WE MAY BE UNABLE TO REALIZE OUR BUSINESS STRATEGY OF IMPROVING OPERATING
PERFORMANCE.
We have either implemented or plan to implement several important strategic
initiatives designed to improve our operating performance. The failure to
achieve the goals of these initiatives could have a material adverse effect on
our business, particularly since we rely on these initiatives to offset pricing
pressures from our customers, as described above. We cannot assure you that we
will be able to successfully implement or realize the expected benefits of any
of these initiatives or that we will be able to sustain improvements made to
date. See "Prospectus Summary -- Our Company -- Recent Developments" and
"Business -- Business Strategy."
WE ARE SUBJECT TO RISKS RELATED TO OUR INTERNATIONAL OPERATIONS.
We have manufacturing and distribution facilities in many countries,
principally in North America, Europe and Latin America, and sell our products
worldwide. For 1998, about 48% of our net sales were derived from operations
outside North America. International operations are subject to various risks
which could have a material adverse effect on those operations or our 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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WE MAY BE UNABLE TO REALIZE SALES REPRESENTED BY OUR 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 our OE customers will actually produce, the timing of that
production and the mix of options that our OE customers and consumers may
choose. In addition, our customers generally have the right to replace us with
another supplier at any time for a variety of reasons. Accordingly, we cannot
assure you that we will in fact realize any or all of the future sales
represented by our awarded business.
EXCHANGE RATE FLUCTUATIONS COULD CAUSE A DECLINE IN OUR FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
As a result of our international operations, we generate a significant
portion of our net sales and incur a significant portion of our expenses in
currencies other than the U.S. dollar. To the extent we are 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 our business. For example, where we have significantly more costs than
revenues generated in a foreign currency, we are subject to risk if that foreign
currency appreciates against the U.S. dollar because the appreciation
effectively increases our cost in that country. We generally seek to mitigate
the effect of exchange rate fluctuations from time to time through the use of
derivative financial instruments, but cannot assure you that we will continue
this practice or be successful in these efforts.
The financial condition and results of operations of some of our operating
entities are reported in foreign currencies and then translated into U.S.
dollars at the applicable exchange rate for inclusion in our consolidated
financial statements. As a result, appreciation of the U.S. dollar against these
foreign currencies will have a negative impact on our 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. We do 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, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
THE CYCLICALITY OF AUTOMOTIVE PRODUCTION AND SALES COULD CAUSE A DECLINE IN
OUR FINANCIAL CONDITION AND RESULTS.
A decline in automotive sales and production would likely cause a decline
in our sales to vehicle manufacturers, and could result in a decline in our
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 our products. The highly cyclical nature of the
automotive industry presents a risk that is outside our control and that cannot
be accurately predicted.
LONGER PRODUCT LIVES OF AUTOMOTIVE PARTS ARE ADVERSELY AFFECTING AFTERMARKET
DEMAND FOR SOME OF OUR 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 our aftermarket products. Aftermarket sales
represented approximately 39% of our net sales for 1998. See
"Business -- Industry Trends."
THE HOURLY WORKFORCE IN THE AUTOMOTIVE INDUSTRY IS HIGHLY UNIONIZED AND OUR
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
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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 our facilities or at
a significant supplier could have an adverse impact on us by disrupting demand
for our products and/or our ability to manufacture our products.
WE MAY INCUR MATERIAL PRODUCT WARRANTY COSTS.
From time to time, we receive product warranty claims from our 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. We cannot assure you
that costs associated with providing product warranties will not be material.
WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO SUCCESSFULLY TRANSITION TO AN
INDEPENDENT PUBLIC COMPANY.
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
Pactiv'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 Tenneco had operated
independently of Pactiv during the periods presented.
IF NOT FULLY RESOLVED, THE YEAR 2000 ISSUE COULD ADVERSELY AFFECT OUR
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 we are 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 our major suppliers, financial institutions or others with whom we conduct
business are unsuccessful in implementing timely solutions, Year 2000 issues
could have a material adverse effect on our financial condition and results of
operations. This adverse effect could result from interruptions in our ability
to manufacture our products, process and ship orders, and properly bill and
collect accounts receivable. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
RISK FACTORS RELATING TO THE SPIN-OFF
WE 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 undertook numerous corporate
restructuring transactions and realigned 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 us.
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, we 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 us.
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FORWARD-LOOKING STATEMENTS
This prospectus 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," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business." Although we 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 our business;
- changes in automobile manufacturers' actual and forecasted requirements
for our products;
- labor disruptions at our facilities or at any of our significant
customers or suppliers;
- customer acceptance of new products;
- capital availability or costs, including changes in interest rates or
market perceptions of our company;
- 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 our control.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933 covering the offering of the new
notes. This document does not contain all of the information included in this
registration statement and its associated exhibits and schedules. For more
information about us and the new notes, you should read this registration
statement and its associated exhibits and schedules. This document summarizes
provisions of contracts and other documents that it refers you to. If we have
filed any contract or other document as an exhibit to the registration statement
covering the new notes, 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.
We file annual, quarterly and other reports, proxy statements and other
information with the SEC. You may read and copy our 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 our common stock is listed on the
New York, Chicago and Pacific Stock Exchanges, you may review reports and other
information concerning us at these exchanges.
In addition, we maintain a website where you can find information about us
at http://www.tenneco-automotive.com.
INCORPORATION OF INFORMATION BY REFERENCE
The SEC allows "incorporation by reference" of information filed with the
SEC into this prospectus. This means that we 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 SEC by us, File No. 1-12387, are
incorporated by reference into this document and shall be deemed to be a part
hereof:
(a) our Annual Report on Form 10-K for the fiscal year ended December
31, 1998;
(b) our Quarterly Reports on Form 10-Q for the fiscal quarter ended
March 31, 1999, the fiscal quarter ended June 30, 1999, as amended,
and the fiscal quarter ended September 30, 1999;
(c) our Definitive Proxy Statements for the Annual Meeting of
Stockholders held on May 11, 1999 and the Special Meeting of
Stockholders held on October 25, 1999;
(d) our Current Report on Form 8-K dated April 12, 1999;
(e) our Current Report on Form 8-K dated July 14, 1999.
(f) our Current Report on Form 8-K dated August 20, 1999, which includes
financial and other information that supersedes the comparable
information in our Annual Report on Form 10-K for the fiscal year
ended December 31, 1998, our Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1999 and June 30, 1999 and our
Current Report on Form 8-K dated July 14, 1999;
(g) our Current Report on Form 8-K dated October 4, 1999, as amended;
(h) our Current Report on Form 8-K dated October 7, 1999;
25
<PAGE> 29
(i) our Current Report on Form 8-K dated October 12, 1999;
(j) our Current Report on Form 8-K dated October 25, 1999;
(k) our Current Report on Form 8-K dated November 4, 1999; and
(l) All documents subsequently filed by us 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 notes.
26
<PAGE> 30
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. The net proceeds
of the sale by us of the outstanding notes were approximately $482 million,
after deducting underwriting discounts and commissions and other expenses of the
offering payable by us. These net proceeds, together with initial borrowings
under our new senior secured credit facility and new credit facilities entered
into by Pactiv, were used to fund the cash portions of the debt realignment. See
"The Spin-off -- Debt Realignment."
27
<PAGE> 31
CAPITALIZATION
The following table sets forth the unaudited historical capitalization of
Tenneco as of September 30, 1999, and the unaudited pro forma capitalization of
Tenneco as of September 30, 1999 after giving effect to the debt realignment and
the 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 Automotive Inc. and Consolidated Subsidiaries and related notes,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Unaudited Pro Forma Consolidated Financial Statements," each of
which is included elsewhere in this prospectus.
<TABLE>
<CAPTION>
TENNECO
----------------------
SEPTEMBER 30, 1999
----------------------
HISTORICAL PRO FORMA
---------- ---------
(IN MILLIONS)
<S> <C> <C>
Short-term debt, including current maturities of long-term
debt........................................................ $ 237 $ 63
Long-term debt.............................................. 796 22
Senior Credit Facility(a)................................... -- 1,088
11 5/8% Senior subordinated notes due 2009.................. -- 500
Debt allocated to discontinued operations(b)................ 1,985 --
------ ------
Total debt.................................................. 3,018 1,673(c)
------ ------
Minority interest of continuing operations.................. 411 17
Minority interest of discontinued operations................ 21 --
------ ------
Total minority interest..................................... 432 17
------ ------
Shareowners' equity......................................... 2,140 441
------ ------
Total capitalization........................................ $5,590 $2,131
====== ======
</TABLE>
- -------------------------
(a) The senior credit facility consists of $1,050 million in term loans
borrowed upon the consummation of the spin-off and a $500 million revolving
credit facility, of which $38 million on a pro forma basis was borrowed
upon consummation of the spin-off. See "Description of Senior Credit
Facility."
(b) Tenneco's historical practice was 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.
(c) Represents amounts outstanding under the Tenneco borrowings incurred in
connection with the debt realignment. The pro forma capitalization is based
on the actual results of the cash tender offer and the exchange offer
completed as part of Tenneco's debt realignment prior to the spin-off.
After completion of those offers, Tenneco retained the obligation to repay
approximately $85 million in debt securities not tendered or exchanged by
security holders. Of these securities, approximately $63 million were due
on November 15, 1999, and are reflected as current maturities of long-term
debt in the above table. The remaining $22 million of these securities is
shown as long-term debt. See "The Spin-off -- Debt Realignment" and
"Description of Senior Credit Facility."
28
<PAGE> 32
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Balance Sheet of Tenneco as
of September 30, 1999, and the Unaudited Pro Forma Consolidated Statements of
Income for the nine months ended September 30, 1999 and the year ended December
31, 1998, reflect the effects of:
- the debt realignment;
- the spin-off of Pactiv and related transactions; and
- the April 1999 contribution of Pactiv's containerboard assets to a new
joint venture and the June 1999 sale of Pactiv'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 September 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 September 30, 1999 or January 1,
1998, or results which may be attained in the future.
The spin-off represents the pro rata distribution of Pactiv common stock to
the holders of Tenneco common stock. Consequently, no gain or loss will be
recognized as a result of the spin-off.
Following the spin-off, Tenneco executed a one-for-five reverse stock
split. All share and per share amounts in the unaudited pro forma consolidated
financial statements reflect the reverse stock split.
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 Automotive Inc. and
Consolidated Subsidiaries for the year ended December 31, 1998 and the nine
months ended September 30, 1999.
29
<PAGE> 33
TENNECO
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 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........... $ 42 $ -- $ -- $ 42
Receivables................................... 680 -- -- 680
--
Inventories................................... 403 -- -- 403
Other current assets.......................... 91 31(a) -- 122
------ ----- ------- ------
Total current assets....................... 1,216 31 -- 1,247
Plant, property, and equipment, net............. 1,055 -- -- 1,055
Goodwill and intangibles, net................... 505 -- -- 505
Other assets and deferred charges............... 235 34(a) (59)(f) 210
Net assets of discontinued operations........... 1,483 -- (1,483)(b) --
------ ----- ------- ------
Total assets............................... $4,494 $ 65 $(1,542) $3,017
====== ===== ======= ======
LIABILITIES AND
SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt (including current maturities
on long-term debt)......................... $ 237 $(174)(a) $ -- $ 63
Trade payables................................ 365 -- -- 365
Other current liabilities..................... 286 -- -- 286
------ ----- ------- ------
Total current liabilities.................. 888 (174) -- 714
Long-term debt.................................. 796 814(a) -- 1,610
Deferred income taxes........................... 104 -- (24)(f) 80(d)
Other liabilities and deferred credits.......... 155 -- -- 155
Minority interest............................... 411 (394)(a) -- 17
Shareowners' equity............................. 2,140 (181)(a) (1,483)(b) 441
(35)(f)
------ ----- ------- ------
Total liabilities and shareowners'
equity................................... $4,494 $ 65 $(1,542) $3,017
====== ===== ======= ======
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Consolidated Financial
Statements.
30
<PAGE> 34
TENNECO
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 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....................... $ 2,473 $ -- $ -- $ -- $ 2,473
Other income, net................. 10 -- -- -- 10
------------ ---- ---- ----- ------------
2,483 -- -- -- 2,483
------------ ---- ---- ----- ------------
OPERATING COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)...... 1,812 -- -- -- 1,812
Engineering, research, and
development.................... 39 -- -- -- 39
Selling, general, and
administrative................. 303 -- -- 4(f) 307
Depreciation and amortization..... 110 -- -- -- 110
------------ ---- ---- ----- ------------
2,264 -- -- 4 2,268
INCOME BEFORE INTEREST EXPENSE,
INCOME TAXES, AND MINORITY
INTEREST.......................... 219 -- -- (4) 215
Interest expense.................... 58 (15)(c) 83(e) -- 126(e)
Income tax expense.................. 60 6(g) (33)(g) (2)(g) 31
Minority interest................... 21 -- (21)(h) -- --
------------ ---- ---- ----- ------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS........................ $ 80 $ 9 $(29) $ (2) $ 58
============ ==== ==== ===== ============
EARNINGS PER SHARE
Average shares of common stock --
Basic........................ 33,423,014 33,423,014
Diluted...................... 33,491,690 33,491,690
Income from continuing
operations --
Basic........................ $2.40 $1.74
Diluted...................... $2.40 $1.74
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Consolidated Financial
Statements.
31
<PAGE> 35
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(f) 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)(c) 153(e) -- 169(e)
Income tax expense (benefit).... 13 21(g) (61)(g) (2)(g) (29)
Minority interest............... 29 -- (29)(h) -- --
------------ ---- ---- ----- ------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS.................... $ 116 $ 32 $(63) $ (3) $ 82
============ ==== ==== ===== ============
EARNINGS PER SHARE
Average shares of common
stock --
Basic.................... 33,701,115 33,701,115
Diluted.................. 33,766,906 33,766,906
Income from continuing
operations --
Basic.................... $3.45 $2.43
Diluted.................. $3.44 $2.43
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Consolidated Financial
Statements.
32
<PAGE> 36
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 acquired certain subsidiary preferred stock as part of the debt
realignment. In the cash tender offer, Tenneco offered to purchase
securities with a book value of approximately $1,374 million. Of this
amount, approximately $1,292 million was tendered by security holders.
Therefore, Tenneco retained the obligation to pay the remaining $82 million
of debt securities as they become due. Approximately $63 million of these
securities were due on November 15, 1999 and have been reflected as current
maturities on long-term debt on the accompanying pro forma balance sheet. In
the exchange offer, Tenneco offered to exchange new Pactiv public debt
securities for Tenneco debt securities with a book value of approximately
$1,166 million. Of this amount, approximately $1,163 million was exchanged
by security holders. Therefore, Tenneco retained the obligation to pay the
remaining $3 million of debt securities as they become due. The new Pactiv
debt securities were recorded at the net carrying amount of the Tenneco debt
securities for which they were exchanged. In other words, the new Pactiv
debt securities were not considered to be "substantially different" for
accounting purposes from the Tenneco debt securities for which they were
exchanged. Tenneco will incur an extraordinary charge as a result of the
debt realignment related to the cash tender offers which it expects will be
approximately $12 million after tax. Other costs, including transaction
costs 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 spin-off of Pactiv common stock to holders of Tenneco common
stock at an exchange ratio of one share of Pactiv common stock for each
share of Tenneco common stock.
(c) 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.
(d) Deferred income taxes at September 30, 1999 include $45 million of net
operating loss carryforwards which will be utilized by Pactiv in connection
with the paperboard transactions.
33
<PAGE> 37
(e) To reflect the adjustment to interest expense from the allocation of Tenneco
debt to Pactiv in the debt realignment as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1999 1998
----------------- ------------
(IN MILLIONS)
<S> <C> <C>
Interest expense on historical debt(1)......... $(58) $(69)
Reduction of interest expense from paperboard
transactions(2).............................. 15 53
Interest expense on the new Tenneco
borrowings(3)................................ 122 161
Amortization of debt financing costs and
commitment fees(4)........................... 4 7
---- ----
Adjustment to interest expense................. $ 83 $152
==== ====
</TABLE>
- -------------------------
(1) Weighted average outstanding historical debt and average annual
effective interest rates were $1,010 million and 7.2%, respectively,
for the nine months ended September 30, 1999 and $1,155 million and
7.0%, respectively, for the year ended December 31, 1998.
(2) See Note (c) 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 5/8%, respectively, for the nine months ended
September 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.
(f) To reflect the increase in net periodic pension costs resulting from the
transfer to Pactiv of prepaid pension costs attributable to Automotive
employees. Automotive employees will no longer participate in the Tenneco
Retirement Plan following the spin-off and Pactiv has become the sponsor of
this plan. These prepaid pension costs were transferred to Pactiv in
connection with the corporate restructuring transactions.
(g) To reflect the income tax expense effects of pro forma adjustments at an
assumed statutory tax rate of 40%.
(h) To eliminate the minority interest related to the acquisition of subsidiary
preferred stock in connection with the debt realignment.
34
<PAGE> 38
SUPPLEMENTAL CONSOLIDATED FINANCIAL DATA
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 became part of Pactiv upon the spin-off, the costs have
been included in Pactiv's historical operating results and are not in our
historical or pro forma EBIT. We must be able to obtain these functions in order
to operate as a public company following the spin-off. We have entered into
services agreements under which Pactiv and a third party will provide us with
specified administrative services for a period of time. Additionally, our EBIT
includes charges for restructuring and sales of receivables which we believe
require additional explanation. The following information discusses these items
in detail and their financial impact on Tenneco.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
----------------- ------------------
(MILLIONS)
<S> <C> <C>
- Costs for shared services -- Pactiv owns the
administrative services operations. Tenneco must
acquire the services from Pactiv and third party
service providers under services agreements. Had the
administrative services operations been allocated
based on the provisions of the services agreements,
approximately $27 million would have been billed to
Automotive for 1998, and Automotive would have
incurred $3 million in additional depreciation....... $(30) $(23)
- 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............................................ $(20) $(15)
- 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 Note 3
to the Financial Statements of Tenneco Automotive
Inc. and Consolidated Subsidiaries................... $ 54 $ --
- 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 Financial Condition and
Results of Operations" for further information on the
expected savings..................................... $ 25 $ 10
</TABLE>
35
<PAGE> 39
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
nine month periods ended September 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 nine months ended September 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 nine months ended September 30, 1999 as indicative of the
results that may be expected for the full year.
Following the spin-off, Tenneco executed a one-for-five reverse stock
split. All share and per share amounts in the selected financial data reflect
the reverse stock split.
There is other information we believe is relevant to understanding our
results of operations following the spin-off. These items relate to corporate
overhead costs incurred by Tenneco and its administrative services operations
that we expect will differ following the spin-off. For further information you
should see "Supplemental Consolidated Financial Data."
You should read all of this information in conjunction with the Financial
Statements of Tenneco Automotive Inc. and Consolidated Subsidiaries for the year
ended December 31, 1998 and for the nine months ended September 30, 1999,
contained elsewhere in this prospectus.
36
<PAGE> 40
<TABLE>
<CAPTION>
Nine Months
Years Ended December 31, Ended September 30,
------------------------------------------------------------------- -------------------------
1998(a) 1997(a) 1996(a) 1995 1994 1999(a) 1998(a)
------- ------- ------- ---- ---- ------- -------
<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 $ 2,473 $ 2,468
=========== =========== =========== =========== =========== =========== ===========
Income from continuing
operations before interest
expense, income taxes, and
minority interest --
Automotive.................. $ 248 $ 407 $ 249 $ 240 $ 223 $ 223 $ 305
Other....................... (21) (12) (7) 8 7 (4) (17)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total..................... 227 395 242 248 230 219 288
Interest expense (net of
interest capitalized)(c)...... 69 58 60 44 33 58 49
Income tax expense.............. 13 80 79 91 52 60 48
Minority interest............... 29 23 21 23 -- 21 22
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from continuing
operations.................... 116 234 82 90 145 80 169
Income (loss) from discontinued
operations, net of income
tax(d)........................ 139 127 564 645 307 (99) 146
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 (160) 315
Preferred stock dividends....... -- -- 12 12 60 -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) to common
stock......................... $ 255 $ 315 $ 398 $ 723 $ 348 $ (160) $ 315
----------- ----------- ----------- ----------- ----------- ----------- -----------
Average number of shares of
common stock outstanding
Basic....................... 33,701,115 34,052,946 33,921,875 34,552,840 32,461,438 33,423,014 33,785,955
Diluted..................... 33,766,906 34,160,327 34,105,223 34,702,331 32,582,485 33,491,690 33,876,785
Earnings (loss) per average
share of common stock --
Basic:
Continuing operations..... $ 3.45 $ 6.87 $ 2.45 $ 2.60 $ 4.46 $ 2.40 $ 4.99
Discontinued
operations(d)........... 4.13 3.73 16.27 18.32 7.61 (2.98) 4.35
Extraordinary loss(e)..... -- -- (6.96) -- (.15) (.20) --
Cumulative effect of
changes in accounting
principles(f)........... -- (1.35) -- -- (1.20) (4.00) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 7.58 $ 9.25 $ 11.76 $ 20.92 $ 10.72 $ (4.78) $ 9.34
=========== =========== =========== =========== =========== =========== ===========
Diluted:
Continuing operations..... $ 3.44 $ 6.85 $ 2.43 $ 2.59 $ 4.45 $ 2.40 $ 4.97
Discontinued
operations(d)........... 4.12 3.72 16.18 18.24 7.58 (2.98) 4.34
Extraordinary loss(e)..... -- -- (6.96) -- (.15) (.20) --
Cumulative effect of
changes in accounting
principles(f)........... -- (1.35) -- -- (1.20) (4.00) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 7.56 $ 9.22 $ 11.65 $ 20.83 $ 10.68 $ (4.78) $ 9.31
=========== =========== =========== =========== =========== =========== ===========
Cash dividends per common
share......................... $ 6.00 $ 6.00 $ 9.00 $ 8.00 $ 8.00 $ 4.50 $ 4.50
</TABLE>
(continued on next page)
37
<PAGE> 41
<TABLE>
<CAPTION>
Nine Months
Years Ended December 31, Ended September 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 $ 1,483 $ 1,940
Total assets.............................. 4,759 4,682 4,653 3,635 2,315 4,494 4,999
Short-term debt(c)........................ 304 75 74 109 31 237 197
Long-term debt(c)......................... 671 713 639 469 303 796 822
Debt allocated to discontinued
operations(c)........................... 2,456 2,123 1,590 1,454 813 1,985 2,233
Minority interest......................... 407 408 304 301 301 411 410
Shareowners' equity....................... 2,504 2,528 2,646 3,148 2,900 2,140 2,664
STATEMENT OF CASH FLOWS DATA(B)
Net cash provided (used) by operating
activities.............................. $ 532 $ 519 $ 253 $ 1,443 $ 450 $ (166) $ 365
Net cash (used) by investing activities... (754) (887) (685) (1,162) (113) (1,068) (469)
Net cash provided (used) by financing
activities.............................. 216 354 147 (356) (151) 1,244 96
Capital expenditures for continuing
operations.............................. 195 221 188 208 114 104 121
OTHER DATA:
EBITDA(g)................................. $ 377 $ 505 $ 336 $ 331 $ 282 $ 329 $ 398
Ratio of earnings to fixed charges(h)..... 2.2 4.8 2.3 2.6 5.4 2.3 3.2
</TABLE>
- -------------------------
NOTE: The Financial Statements of Tenneco Automotive Inc. and Consolidated
Subsidiaries discussed in the following notes are included in this prospectus.
They cover the three years ended December 31, 1998 and the nine months ended
September 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
nine months ended September 30, 1999 and 1998, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
(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
Automotive Inc. and Consolidated Subsidiaries for additional information.
See also "Business -- Strategic Acquisitions and Alliances" included
elsewhere in this prospectus.
(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
September 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 Automotive 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 Automotive
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 Automotive Inc. and
Consolidated Subsidiaries for additional information.
(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 Automotive Inc. and
Consolidated Subsidiaries for additional information.
(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,
EBITDA should not be considered as an alternative to net income or operating
income as an indicator of the operating
(continued on next page)
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<PAGE> 42
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.
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<PAGE> 43
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Tenneco originally sold the outstanding notes to the initial purchasers,
under the terms of a purchase agreement dated October 8, 1999. The initial
purchasers subsequently resold the notes to qualified institutional buyers in
reliance on Rule 144A and Regulation S under the Securities Act. As a condition
to the purchase agreement, Tenneco, the subsidiary guarantors and the initial
purchasers entered into a registration rights agreement, which is filed as an
exhibit to the registration statement of which this prospectus forms a part, in
which Tenneco and the guarantors agreed to:
(1) file a registration statement registering the new notes with the
Securities and Exchange Commission within 120 days after the original
issuance of the outstanding notes;
(2) use their best efforts to have the registration statement relating
to the new notes declared effective by the Securities and Exchange
Commission within 150 days after the original issuance of the outstanding
notes; and
(3) unless the exchange offer would not be permitted by applicable law
or staff interpretation of the Securities and Exchange Commission, commence
the exchange offer and use their best efforts to issue, within 180 days
after the original issuance of the outstanding notes, new notes in exchange
for all outstanding notes tendered before the expiration time.
We have agreed to keep the exchange offer open for not less than 20
business days, or longer if required by applicable law, after the date on which
notice of the exchange offer is mailed to the holders of the outstanding notes.
The registration rights agreement also requires us to include in the prospectus
for the exchange offer information necessary to allow broker-dealers to satisfy
the prospectus delivery requirements in connection with resales of the new notes
received by those broker-dealers in the exchange offer. See "-- Resale of the
New Notes."
For each outstanding note surrendered to us in the exchange offer, the
holder of that note will receive a new note having a principal amount equal to
that of the surrendered outstanding note. See "-- Interest on the New Notes" for
a description of how interest will accrue on each new note and cease to accrue
on the outstanding notes.
We have agreed to file with the Securities and Exchange Commission a shelf
registration statement to cover resales of the outstanding notes by holders who
satisfy certain conditions relating to the provision of information in
connection with the shelf registration statement if:
(1) we are not permitted to consummate the exchange offer because it
is not permitted by applicable law or interpretations of the staff of the
Securities and Exchange Commission; or
(2) the exchange offer is not consummated on or before April 12, 2000;
or
(3) any holder of "private exchange notes" so requests; or
(4) in the case of any holder of outstanding notes who participates in
the exchange offer, that holder does not receive new notes that may be
resold without restriction under state and federal securities laws, other
than due solely to the holder's status as an affiliate of ours.
For purposes of the foregoing, "private exchange notes" refer to notes that
are issued privately by us in exchange for outstanding notes to any initial
purchaser of outstanding notes who holds such notes acquired by it and having,
or that are reasonably likely to be determined to have, the status of an unsold
allotment in the initial distribution, or any other holder of outstanding notes
who is not entitled to participate in the exchange offer, upon the request of
that initial purchaser or holder. Any private exchange notes will be issued
simultaneously with the delivery of the new notes in the exchange offer, and
will be identical in all material respects to the new notes.
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<PAGE> 44
We will, in the event of the filing of a shelf registration statement,
provide to each holder of outstanding notes eligible to participate in the shelf
registration statement copies of the prospectus which is a part of the shelf
registration statement, notify each such holder when the shelf registration
statement for the outstanding notes has become effective and take certain other
actions as are required to permit resales of the outstanding notes. A holder of
outstanding notes that sells the notes under the shelf registration statement
generally will be required to be named as a selling securityholder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
civil liability provisions under the Securities Act in connection with such
sales and will be bound by the provisions of the registration rights agreement
which are applicable to the holder, including indemnification obligations. In
addition, each such holder will be required to deliver information to be used in
connection with the shelf registration statement and to provide comments on the
shelf registration statement within the time periods set forth in the
registration rights agreement in order to have their notes included in the shelf
registration statement and to benefit from the provisions regarding liquidated
damages.
We will pay liquidated damages to each holder of outstanding notes if:
(1) we fail to file any of the registration statements on or before
the date specified for such filing in the registration rights agreement;
(2) any of such registration statements is not declared effective by
the Securities and Exchange Commission before the date specified for such
effectiveness (the "Effectiveness Target Date");
(3) we fail to consummate the exchange offer on or before April 12,
2000; or
(4) any shelf registration statement is declared effective but
thereafter ceases to be effective during the periods specified in the
registration rights agreement, unless all notes have been disposed of
thereunder. Each such event described in clauses (1) through (4), above, is
referred to herein as a "registration default".
The amount of liquidated damages will be equal to a per annum rate of 0.25%
on the principal amount of outstanding notes held by each holder. with respect
to the first 90-day period immediately following the occurrence of the first
registration default. Liquidated damages will increase by an additional per
annum rate of 0.25% with respect to each subsequent 90-day period until all
registration defaults have been cured, up to a maximum amount of liquidated
damages for all registration defaults of 1.00% per annum on the principal amount
of outstanding notes. We will pay all accrued liquidated damages on each
interest payment date in the manner provided for the payment of interest in the
indenture. Following the cure of all registration defaults, the accrual of
liquidated damages will cease.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and the accompanying letter of transmittal, we will accept all outstanding notes
validly tendered before 5:00 p.m., New York City time, on , . We will
issue $1,000 principal amount of new notes in exchange for each $1,000 principal
amount of outstanding notes accepted in the exchange offer. Holders may tender
some or all of their outstanding notes in the exchange offer in integral
multiples of $1,000.
The form and terms of the new notes are identical to the outstanding notes
except for the following:
(1) the new notes bear a Series B designation and a different CUSIP
number from the outstanding notes to differentiate the new notes from the
outstanding notes;
(2) the new notes have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer; and
(3) the holders of the new notes will not generally be entitled to
rights under the registration rights agreement, including the provisions
providing for an increase in the interest rate on the notes in certain
circumstances relating to the timing of the exchange offer, all of which
rights generally will terminate when the exchange offer is terminated.
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<PAGE> 45
The new notes will evidence the same debt as the outstanding notes and will
be entitled to the benefits of the indenture under which the outstanding notes
were issued. As of the date of this prospectus, $500 million in aggregate
principal amount of the notes is outstanding. Solely for reasons of
administration and no other reason, we have fixed the close of business on
, 2000 as the record date for the exchange offer for purposes of
determining the persons to whom this prospectus and the letter of transmittal
will be mailed initially. Only a registered holder of outstanding notes, or such
holder's legal representative or attorney-in-fact, as reflected on the records
of the trustee under the notes indenture, may participate in the exchange offer.
There will be no fixed record date, however, for determining registered holders
of the outstanding notes entitled to participate in the exchange offer.
The holders of outstanding notes do not have any appraisal or dissenters'
rights under the General Corporation Law of the State of Delaware or the notes'
indenture in connection with the exchange offer.
We shall be deemed to have accepted validly tendered outstanding notes
when, as and if we have given oral or written notice thereof to the exchange
agent. The exchange agent will act as agent for the tendering holders for the
purpose of receiving the new notes from us.
If any tendered outstanding notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth in this
prospectus or otherwise, the certificates for any such unaccepted notes will be
returned, without expense, to the tendering holder as promptly as practicable
after the expiration time.
Those holders who tender outstanding notes in the exchange offer will not
be required to pay brokerage commissions or fees or, subject to the instructions
in the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes. We will pay all charges and expenses, other than certain
applicable taxes, in connection with the exchange offer. See "-- Fees and
Expenses."
EXPIRATION TIME; EXTENSIONS; AMENDMENTS
The term "expiration time" shall mean 5:00 p.m., New York City time, on
, 2000 unless we, in our sole discretion, extend the exchange offer,
in which case the term "expiration time" shall mean the latest time to which the
exchange offer is extended.
We have no current plans to extend the exchange offer. In order to extend
the expiration time, we will notify the exchange agent of any extension by oral
or written notice and will make a public announcement of such extension, in each
case prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration time.
We reserve the right, in our sole discretion, to
- delay accepting any notes, or
- terminate the exchange offer,
if any of the conditions set forth below under "-- Conditions to the Exchange
Offer" shall not have been satisfied, in each case by giving oral or written
notice of such delay, extension or termination to the exchange agent. We also
reserve the right to extend the exchange offer or amend the terms of the
exchange offer in any manner. Any delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by a public announcement
of the matter. If the exchange offer is amended in a manner determined by us to
constitute a material change, we will promptly disclose the amendment by means
of a prospectus supplement that will be distributed to the registered holders of
the outstanding notes and the exchange offer will be extended for a period of
five to ten business days, as required by law, depending upon the significance
of the amendment and the manner of disclosure to the registered holders,
assuming the exchange offer would otherwise expire during that five to ten
business day period.
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<PAGE> 46
Without limiting the manner in which we may choose to make a public
announcement of any delay, extension, termination or amendment of the exchange
offer, we shall not have an obligation to publish, advertise or otherwise
communicate any public announcement other than by making a timely release of the
announcement to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
Each new note will bear interest from October 14, 1999, the issuance date
of the outstanding notes. The holders of outstanding notes that are accepted for
exchange will be deemed to have waived the right to receive payment of any
accrued interest on those outstanding notes from October 14, 1999 to the date of
issuance of the new notes. Interest on the outstanding notes accepted for
exchange will cease to accrue upon issuance of the new notes. Consequently, if
you exchange your outstanding notes for new notes, you will receive the same
interest payment on April 15, 2000, which is the first interest payment date
with respect to the outstanding notes and the new notes, that you would have
received if you had not accepted the exchange offer.
PROCEDURES FOR TENDERING
Only a registered holder of outstanding notes may tender outstanding notes
in the exchange offer. To effectively tender in the exchange offer, a holder
must transmit to The Bank of New York, as exchange agent, before the expiration
time either:
- a properly completed and duly executed letter of transmittal, which
accompanies this prospectus, or a facsimile of the letter of transmittal,
with the signature on the letter of transmittal guaranteed if the letter
of transmittal so requires, and all other documents required by the
letter of transmittal, or
- if the outstanding notes are being tendered pursuant to the book-entry
procedures described below, an "Agent's Message" (as defined below)
instead of a letter of transmittal.
In addition, prior to the expiration time, either:
- the exchange agent must receive certificates for the outstanding notes
along with the accompanying letter of transmittal; or
- the exchange agent must receive a timely confirmation of book-entry
transfer of the outstanding notes into the exchange agent's account at
DTC according to the procedures for book-entry transfer described below,
along with a properly completed letter of transmittal or a properly
transmitted Agent's Message; or
- the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the exchange agent must receive any physical
delivery of a letter of transmittal and other required documents at the address
set forth below under "-- Exchange Agent" prior to the expiration time.
By executing the letter of transmittal or effecting delivery by book-entry
transfer, each holder is making to us those representations set forth under the
heading "-- Resale of the New Notes."
The tender by a holder of outstanding notes will constitute an agreement
between that holder and us in accordance with the terms and subject to the
conditions set forth in this prospectus and in the letter of transmittal.
The method of delivery of outstanding notes and the letter of transmittal
and all other required documents to the exchange agent is at the election and
sole risk of the holder. As an alternative to delivery by mail, holders may wish
to consider overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure delivery to the exchange agent before the expiration
time. No letter of transmittal or outstanding notes should be sent to us.
Holders may request that their respective brokers, dealers, commercial banks,
trust companies or nominees effect the above transactions for them.
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<PAGE> 47
Only a registered holder of outstanding notes may tender outstanding notes
in connection with the exchange offer. The term "holder" with respect to the
exchange offer means any person in whose outstanding notes are registered on our
books, any other person who has obtained a properly completed bond power from
the registered holder, or any person whose notes are held of record by DTC who
desires to deliver their notes by book-entry transfer at DTC.
Any beneficial owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should promptly contact the person in whose name the notes are
registered and instruct the registered holder to tender on the beneficial
owner's behalf. If, as a beneficial owner, you wish to tender on your own
behalf, you must, before completing and executing the letter of transmittal and
delivering your outstanding notes, either make appropriate arrangements to
register ownership of the outstanding notes in your name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed by an Eligible Institution (defined below) unless the notes tendered
are tendered (1) by a registered holder who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery Instructions" on the
letter of transmittal or (2) for the account of an Eligible Institution. In the
event that signatures on a letter of transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, the guarantee must be by an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (an "Eligible Institution").
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes listed therein, such notes must be
endorsed or accompanied by properly completed bond powers, signed by such
registered holder as such registered holder's name appears on such notes with
the signature on such bond powers guaranteed by an Eligible Institution.
If the letter of transmittal or any notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and submit with the letter of
transmittal evidence satisfactory to us of their authority to so act.
We understand that the exchange agent will make a request, promptly after
the date of this prospectus, to establish accounts with respect to the
outstanding notes at the book-entry transfer facility of DTC for the purpose of
facilitating this exchange offer. Subject to the establishment of these
accounts, any financial institution that is a participant in the book-entry
transfer facility system may make book-entry delivery of outstanding notes by
causing the transfer of outstanding notes into the exchange agent's account with
respect to outstanding notes in accordance with DTC's procedures for transfer.
Although delivery of the notes may be effected through book-entry transfer into
the exchange agent's account at the book-entry transfer facility, unless the
holder complies with the procedures described in the following paragraph, an
appropriate letter of transmittal properly completed and duly executed with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the exchange agent at its address
set forth below before the expiration time, or the guaranteed delivery
procedures described below must be complied with. The delivery of documents to
the book-entry transfer facility does not constitute delivery to the exchange
agent.
The exchange agent and DTC have confirmed that the exchange offer is
eligible for the Automated Tender Offer Program ("ATOP") of DTC. Accordingly,
DTC participants may electronically transmit their acceptance of the exchange
offer by causing DTC to transfer outstanding notes to the exchange agent in
accordance with the procedures for transfer established under ATOP. DTC will
then send an "Agent's Message" to the exchange agent. The term "Agent's Message"
means a message transmitted by DTC, which when received by the exchange agent
forms part of the confirmation of a book-entry transfer, and which states that
DTC has received an express acknowledgment from the participant in DTC tendering
notes which are the subject of such book-entry confirmation that the participant
has received and agrees to be bound by the terms of the letter of transmittal
and that we may enforce such agreement against that
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<PAGE> 48
participant. In the case of an Agent's Message relating to guaranteed delivery,
the term means a message transmitted by DTC and received by the exchange agent
which states that DTC has received an express acknowledgment from the
participant in DTC tendering notes that the participant has received and agrees
to be bound by the notice of guaranteed delivery.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance and withdrawal of the tendered notes will be determined by
us in our sole discretion, which determinations will be final and binding. We
reserve the absolute right to reject any and all notes not validly tendered or
any notes the acceptance of which would, in the opinion of our counsel, be
unlawful. We also reserve the absolute right to waive any defects,
irregularities or conditions of tender as to particular notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of notes must be cured within such time as we shall determine. Although we
intend to notify holders of defects or irregularities with respect to the
tenders of outstanding notes, neither we, the notes exchange agent nor any other
person shall incur any liability for failure to give such notification. Tenders
of outstanding notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any outstanding notes received by the
exchange agent that are not validly tendered and as to which the defects or
irregularities have not been cured or waived, or if outstanding notes are
submitted in a principal amount greater than the principal amount of outstanding
notes being tendered by such tendering holder, such unaccepted or non-exchanged
outstanding notes will be returned by the exchange agent to the tendering
holders, or, in the case of notes tendered by book-entry transfer into the
exchange agent's account at the book-entry transfer facility under the
book-entry transfer procedures described above, such unaccepted or non-exchanged
outstanding notes will be credited to an account maintained with such book-entry
transfer facility, unless otherwise provided in the letter of transmittal
designated for such outstanding notes, as soon as practicable following the
expiration date.
GUARANTEED DELIVERY PROCEDURES
Those holders who wish to tender their outstanding notes and:
- whose outstanding notes are not immediately available; or
- who cannot deliver their outstanding notes, the letter of
transmittal or any other required documents to the exchange agent before
the expiration time; or
- who cannot complete the procedures for book-entry transfer before
the expiration time,
may effect a tender if:
- the tender is made through an Eligible Institution;
- before the expiration time, the exchange agent receives from that
Eligible Institution a properly completed and duly executed notice of
guaranteed delivery, a form of which accompanies this prospectus, by
facsimile transmission, mail or hand delivery, setting forth the name and
address of the holder, the certificate number or numbers of such
outstanding notes and the principal amount of outstanding notes tendered,
stating that the tender is being made thereby, and guaranteeing that,
within five New York Stock Exchange trading days after the expiration time,
either (a) the letter of transmittal, or facsimile thereof, together with
the certificate(s) representing the outstanding notes and any other
documents required by the letter of transmittal, will be deposited by the
Eligible Institution with the exchange agent or (b) that a confirmation of
book-entry transfer of such outstanding notes into the exchange agent's
account at DTC, along with a letter of transmittal or Agent's Message, will
be delivered to the exchange agent; and
- either (a) the properly completed and duly executed letter of
transmittal, or facsimile thereof, together with the certificate(s)
representing all tendered outstanding notes in proper form for transfer and
all other documents required by the letter of transmittal or (b) if
applicable, confirmation of a book-entry transfer into the exchange agent's
account at DTC, along with a letter of transmittal or
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<PAGE> 49
Agent's Message, are actually received by the exchange agent within five
NYSE trading days after the expiration time.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of outstanding notes may be
withdrawn at any time prior to the expiration time.
To effectively withdraw a tender of outstanding notes in the exchange
offer, the exchange agent must receive a telegram, telex, letter or facsimile
transmission notice of withdrawal at its address set forth herein prior to the
expiration time. Any notice of withdrawal must:
- specify the name of the person having deposited the outstanding
notes to be withdrawn;
- identify the outstanding notes to be withdrawn, including the
certificate number or numbers and the aggregate principal amount of the
notes or, in the case of outstanding notes transferred by book-entry
transfer, the name and number of the account at DTC to be credited;
- be signed by the holder in the same manner as the original signature
on the letter of transmittal by which the outstanding notes were tendered,
including any required signature guarantees, or be accompanied by documents
of transfers sufficient to permit the trustee with respect to the
outstanding notes to register the transfer of the outstanding notes into
the name of the person withdrawing the tender; and
- specify the name in which any outstanding notes are to be
registered, if different from that of the person depositing the outstanding
notes.
All questions as to the validity, form and eligibility, including time of
receipt, of notices of withdrawal will be determined by us, and our
determination shall be final and binding on all parties. Any outstanding notes
withdrawn will be deemed not to have been validly tendered for purposes of the
exchange offer and no new notes will be issued with respect thereto unless the
outstanding notes so withdrawn are validly retendered. Any outstanding notes
which have been tendered but which are not accepted for exchange because of the
rejection of the tender due to uncured defects or the prior termination of the
exchange offer, or which have been validly withdrawn, will be returned to the
holder thereof without cost to the holder as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. Properly
withdrawn outstanding notes may be retendered by following one of the procedures
described above under "-- Procedures for Tendering" at any time before the
expiration time.
CONDITIONS OF THE EXCHANGE OFFER
The exchange offer is subject to the condition that the exchange offer, or
the making of any exchange by a holder, does not violate applicable law or any
applicable interpretation of the staff of the Securities and Exchange
Commission.
If we determine that the exchange offer is not permitted by applicable law,
we may terminate the exchange offer. In connection with any termination we may:
- refuse to accept any outstanding notes and return any outstanding
notes that have been tendered;
- extend the exchange offer and retain all outstanding notes tendered
before the expiration time, subject to the rights of the holders of
tendered outstanding notes to withdraw their tendered outstanding notes; or
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<PAGE> 50
- waive the termination event with respect to the exchange offer and
accept all properly tendered outstanding notes that have not been properly
withdrawn.
If the waiver constitutes a material change in the exchange offer, we will
disclose the change by means of a supplement to this prospectus that will be
distributed to each registered holder of outstanding notes, and we will extend
the exchange offer for a period of five to ten business days, depending upon the
significance of the waiver, if the exchange offer would otherwise expire during
that period.
EXCHANGE AGENT
The Bank of New York has been appointed as exchange agent for the exchange
offer. Questions and requests for assistance, requests for additional copies of
this prospectus or the letter of transmittal and requests for the notice of
guaranteed delivery should be directed to the exchange agent, addressed as
follows:
<TABLE>
<S> <C>
By Overnight Courier & By Hand after
4:30 p.m. on the expiration date only: By Hand up to 4:30 p.m.:
The Bank of New York The Bank of New York
101 Barclay Street, 7E 101 Barclay Street, 7E
New York, NY 10286 New York, NY 10286
Attn: Reorganization Section Attn: Reorganization Section
By Registered or Certified Mail: Facsimile Transmission: 212-815-6339
The Bank of New York
101 Barclay Street, 7E Confirm by Telephone: [ ]
New York, NY 10286 Attn: Reorganization Section
Attn: Reorganization Section
</TABLE>
Any requests or deliveries to an address or facsimile number other than as
set forth above will not constitute a valid delivery.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
for tenders is being made by mail. Additional solicitations, however, may be
made by our officers and regular employees and those of our affiliates in
person, by telegraph or telephone.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. We will pay the exchange agent,
however, reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket expenses in connection with the
exchange offer.
We will pay the cash expenses to be incurred in connection with the
exchange offer. These expenses include fees and expenses of the exchange agent
and the trustee, accounting and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes pursuant to the exchange offer. If, however, a transfer tax is
imposed for any reason other than the exchange of outstanding notes pursuant to
the exchange offer, then the amount of any such transfer taxes, whether imposed
on the registered holder or any other persons, will be payable by the tendering
holder. If satisfactory evidence of payment of these taxes or exemption
therefrom is not submitted with the letter of transmittal, the amount of the
transfer taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
Because the terms of the new notes are not "substantially different" from
the terms of the outstanding notes, the new notes will be recorded at the same
carrying value as the outstanding notes, which is face
47
<PAGE> 51
value as reflected in our accounting records on the date of exchange.
Accordingly, we will not recognize any gain or loss on the exchange transaction
for accounting purposes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of outstanding notes who do not exchange their outstanding notes
for new notes under the exchange offer will remain subject to the restrictions
on transfer of the outstanding notes:
- as set forth in the legend printed on the outstanding notes as a
consequence of the issuance of the outstanding notes under the exemptions
from, or in transactions not subject to, the registration requirements of
the Securities Act and applicable state securities laws; and
- otherwise as set forth in the offering memorandum distributed in
connection with the private offering of the outstanding notes.
In general, you may not offer or sell the outstanding notes unless they are
registered under the Securities Act, or if the offer or sale is exempt from
registration under the Securities Act and applicable state securities laws.
Except as required by the registration rights agreement, we do not intend to
register resales of the outstanding notes under the Securities Act.
RESALE OF THE NEW NOTES
Based on no-action letters issued by the staff of the Securities and
Exchange Commission to third parties, we believe the new notes issued pursuant
to the exchange offer in exchange for outstanding notes may be offered for
resale, resold and otherwise transferred by any holder (other than (1) a
broker-dealer who purchased such notes directly from us for resale pursuant to
Rule 144A or any other available exemption under the Securities Act or (2) a
person that is an "affiliate" of ours within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided, however, that the holder is
acquiring the new notes in its ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the new notes. In the event that our belief
is inaccurate, holders of new notes who transfer new notes in violation of the
prospectus delivery provisions of the Securities Act and without an exemption
from registration thereunder may incur liability under the Securities Act. We do
not assume or indemnify holders against such liability.
If, however, any holder acquires new notes in the exchange offer for the
purpose of distributing or participating in a distribution of the new notes,
that holder cannot rely on the position of the staff of the Securities and
Exchange Commission enunciated in the referenced no-action letters or any
similar interpretive letters, and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, unless an exemption from registration is otherwise
available. Further, each participating broker-dealer that receives new notes for
its own account in exchange for notes, where the exchanged outstanding notes
were acquired by such participating broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of the new notes. Although a
broker-dealer may be an "underwriter" within the meaning of the Securities Act,
the letter of transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of new notes received in exchange for notes.
As contemplated by these no-action letters and the registration rights
agreement, each holder tendering outstanding notes in the exchange offer is
required to represent to us in the letter of transmittal, that, among things:
(1) the person receiving the new notes pursuant to the exchange offer,
whether or not such person is the holder, is receiving them in the ordinary
course of business;
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<PAGE> 52
(2) neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
new notes and that such holder is not engaged in, and does not intend to
engage in, a distribution of new notes;
(3) neither the holder nor any such other person is an "affiliate" of
ours within the meaning of Rule 405 under the Securities Act, or, if the
holder is an "affiliate" of ours, that the holder will comply with the
registration and prospectus delivery requirements of the Securities Act, to
the extent applicable;
(4) the holder acknowledges and agrees that:
(a) any person participating in the exchange offer for the purpose
of distributing the new notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection
with a secondary resale transaction with respect to the new notes
acquired by such person and cannot rely on the position of the staff of
the SEC set forth in no-action letters that are discussed above and
under the heading "-- Purpose and Effect of the Exchange Offer;" and
(b) any broker-dealer that receives new notes for its own account
in exchange for outstanding notes pursuant to the exchange offer must
deliver this prospectus in connection with any resale of such new notes,
but by so acknowledging, the holder shall not be deemed to admit that,
by delivering a prospectus, it is an "underwriter" within the meaning of
the Securities Act; and
(5) the holder understands that a secondary resale transaction
described in clause (4)(a) above should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 of Regulation S-K of the Securities and Exchange
Commission.
The exchange offer is not being made to, and we will not accept surrenders
for exchange from, holders of the notes in any jurisdiction in which the
exchange offer or its acceptance would not comply with the securities or blue
sky laws of such jurisdiction.
All resales must be made in compliance with state securities or "blue sky"
laws. Such compliance may require that the exchange notes be registered or
qualified in a state or that the resales be made by or through a licensed
broker-dealer, unless exemptions from these requirements are available. We
assume no responsibility with regard to compliance with these requirements.
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<PAGE> 53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following review of Tenneco's financial condition and results of
operations should be read in conjunction with the Financial Statements of
Tenneco Automotive Inc. and Consolidated Subsidiaries and notes thereto
presented beginning on page F-1.
GENERAL
Tenneco's Automotive business is one of the world's largest designers,
manufacturers, and distributors of ride control and emissions control products
and systems for the automotive original equipment market and aftermarket, with
leading market shares in North America and Europe. Now that the spin-off of
Pactiv is complete, Tenneco's continuing business consists solely of the
Automotive business.
In the original equipment business, Automotive sells most of its products
under business awards which generally last for the production life of the
platform model. See "Risk Factors -- Risks Relating to Our Business." Automotive
normally begins working on products awarded for new or redesigned models two to
five years before the marketing of those models to the public. One or more of
Automotive's products were included on 72 vehicle launches in the 18 months
ended June 30, 1999. The portion of Automotive's net sales derived from the
original equipment market has increased significantly over the past several
years, from approximately 37 percent in 1994, to approximately 61 percent in
1998 as Automotive has continued to focus on the introduction of new products
into the original equipment market.
In the aftermarket business, Automotive sells its products through all of
the primary channels of distribution, including full-line and specialty
warehouse distributors, jobbers, installers, car dealers and automotive parts
retailers. Several dynamics continue to challenge the aftermarket business.
These dynamics include longer average product lives, consolidating distribution
channels and increased competition. Automotive's plan to address these dynamics
consists of: (1) the rationalization of manufacturing and distribution
operations in order to reduce the cost structure; (2) the elimination of
selected quarterly promotional programs in order to better balance demand and
supply within the aftermarket distribution channels; (3) the introduction of a
strategy to more effectively manage product lines targeted at different
aftermarket distribution channels; and (4) management changes and the
introduction of management techniques designed to improve Automotive's best
practices and identify additional cost savings. As a result, while aftermarket
revenues have decreased, Automotive believes these actions improve its strategic
position.
- In the fourth quarter of 1998, Automotive recorded a $53 million pre-tax
($34 million after-tax) restructuring charge which represented severance
benefits, exit costs, and asset impairments related to closing two plant
locations and five distribution centers in North America and the
elimination of 302 positions at those facilities as well as the
elimination of 454 administrative positions. These actions are expected
to result in annual cost savings of $27 million, including $2 million in
reduced depreciation expense. Automotive expects those savings will be
fully realized beginning in the second quarter of 2000. See "-- Nine
Months Ended September 30, 1999 and 1998 -- Restructuring and Other
Charges." To further reduce its cost structure, Automotive is also
implementing a supplemental restructuring plan which will involve the
closure of additional manufacturing and distribution facilities in North
America and Europe. This supplemental plan has been approved by the Board
of Directors and will result in an additional charge in the fourth
quarter of 1999 of approximately $55 million before taxes, of which
approximately 50 to 60 percent is expected to be cash.
- To better align demand and supply within its distribution channels,
during the fourth quarter of 1998 Automotive eliminated selected
quarterly promotional programs, principally in the North American
aftermarket, and has implemented a marketing strategy designed to
increase demand at the consumer level. These actions, which initially
reduced revenues and profitability, position Automotive for growth as
supply and demand are better aligned in the aftermarket and customer
inventories become normalized.
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<PAGE> 54
- To improve its competitive position in the aftermarket, Automotive has
introduced a strategy to more effectively manage product lines targeted
at different aftermarket distribution channels. This strategy is designed
to introduce differentiated product lines targeted at different
distribution channels. These include (1) the introduction of a premium
ride control product ("Monroe Reflex(TM)") which incorporates
acceleration-sensitive damping to the professional installer channel in
the fourth quarter of 1999 and the subsequent repositioning of
Sensa-Trac(R) as a lower-priced offering, (2) the introduction of several
lower-priced exhaust product offerings, and (3) the targeting of
additional retail sales channels.
- To enhance its management team and focus, Automotive initiated several
management changes and introduced several management techniques,
including a measurement approach for analyzing the economic value added
of operations and the Business Operating System as a disciplined approach
to manage continuous improvement.
BACKGROUND OF THE SPIN-OFF TRANSACTIONS
Tenneco Automotive Inc. was known as Tenneco Inc. before the spin-off on
November 4, 1999, of Tenneco Inc.'s packaging business, as described below. In
this Management's Discussion and Analysis, discussions of Tenneco refer to
Tenneco Inc. and its subsidiaries before the spin-off and to Tenneco Automotive
Inc. and its subsidiaries after the spin-off.
In July 1998, Tenneco's Board of Directors authorized management to develop
a broad range of strategic alternatives to separate the automotive, paperboard
packaging and specialty packaging businesses. Subsequently, Tenneco completed
the following actions:
- In January 1999, Tenneco announced an agreement to contribute its
containerboard business to a new joint venture with an affiliate of
Madison Dearborn Partners. The proceeds from the transaction, including
debt assumed by the new joint venture, were approximately $2 billion. The
transaction closed in April 1999. Tenneco retained a 43% percent interest
in the joint venture.
- In April 1999, Tenneco announced an agreement to sell its folding carton
operations to Caraustar Industries. This transaction closed in June 1999.
The folding carton operations and the containerboard business together
represented Tenneco's paperboard packaging operating segment.
- On November 4, 1999, Tenneco completed the spin-off of Tenneco Packaging
Inc., now known as Pactiv Corporation. The morning following the
spin-off, Tenneco changed its name from "Tenneco Inc." to "Tenneco
Automotive Inc." and effected a reverse stock split whereby every five
shares of Tenneco common stock were converted into one share of Tenneco's
new common stock.
The separation of the automotive and packaging businesses was accomplished
by the spin-off of the common stock of Packaging to Tenneco shareowners. At the
time of the spin-off, Packaging included Tenneco's specialty packaging business,
the remaining interest in the containerboard joint venture and Tenneco's
administrative services operations. After the spin-off, Packaging changed its
name to Pactiv Corporation. In August 1999, Tenneco received a letter ruling
from the Internal Revenue Service that the spin-off would be tax-free for U.S.
federal income tax purposes to Tenneco and its shareowners.
Before the spin-off, Tenneco realigned substantially all of its existing
debt through a combination of tender offers, exchange offers, and other
refinancings. The company's debt realignment was financed by borrowings by
Tenneco under new credit facilities, the issuance by Tenneco of subordinated
debt, and borrowings by Packaging under new credit facilities and the issuance
by Packaging of its new publicly-traded debt in exchange for certain series of
the publicly-traded debt of Tenneco that was outstanding before the spin-off and
debt realignment. The debt of Packaging was rated investment grade and the debt
of Tenneco was rated non-investment grade by both Standard & Poor's and Moody's
debt rating agencies.
As a result of these transactions, Tenneco's former specialty and
paperboard packaging operating segments are presented as discontinued operations
in the accompanying financial statements. Tenneco's
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<PAGE> 55
sole continuing operation is its automotive segment ("Automotive"). Refer to
Notes 2 and 3 to the financial statements for further information related to
discontinued operations.
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
RESULTS OF CONTINUING OPERATIONS
Net Sales and Operating Revenues
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998 % CHANGE
------- ------- ---------
<S> <C> <C> <C>
North America................................. $1,321 $1,287 3 %
Europe........................................ 945 949 --
Rest of World................................. 207 232 (11)
------ ------
$2,473 $2,468 --
====== ======
</TABLE>
Revenues for Automotive's North American operations were $1.3 billion, a 3
percent increase over the same period in 1998. Aftermarket revenues decreased
$82 million in the nine months ended September 30, 1999 from the comparable
period in 1998. Weaker industry conditions in the North American aftermarket
were more than offset by the $116 million increase in sales to North American
original equipment manufacturers. This increase is primarily attributable to
Tenneco Automotive's strong presence in the light duty truck market, where North
American light duty truck production has increased by one million units from the
nine months ended September 30, 1998 to the comparable period in 1999, and
otherwise generally higher North American vehicle production levels.
Automotive's European revenues were $945 million, essentially flat from the
same period a year earlier. European aftermarket revenues decreased $36 million
in the nine months ended September 30, 1999 from the comparable period in 1998.
This reduction was offset by increased sales to European original equipment
manufacturers of $32 million for the nine months ended September 30, 1999
compared to the same period in 1998 resulting primarily from new program
launches.
Automotive's revenues from operations in the rest of the world decreased 11
percent to $207 million compared to $232 million in the nine months ended
September 30, 1998. Difficult economic conditions in South America and currency
devaluation in Brazil led to a $38 million decrease in revenues. This was
partially offset by an increase of $13 million in revenues from solid Australian
and improving Asian results.
Income Before Interest Expense, Income Taxes and Minority Interest
("Operating Income")
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1999 1998 % CHANGE
---- ---- --------
<S> <C> <C> <C>
North America.................................... $143 $129 11 %
Europe........................................... 74 147 (50)
Rest Of World.................................... 6 29 (79)
Other............................................ (4) (17) NM
---- ----
$219 $288 (24)%
==== ====
</TABLE>
North American operating income was $143 million for the nine months ended
September 30, an 11 percent improvement over the same period in the prior year.
Improved operating efficiencies in manufacturing and other cost reduction
actions including results from earlier period restructuring initiatives
contributed $26 million to these results. Additionally, Automotive's strong
position in the solid selling light truck market and otherwise generally higher
North American vehicle production levels increased operating income by $18
million. Lower North American aftermarket volumes and the change in accounting
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<PAGE> 56
principles with respect to the capitalization of start-up activities somewhat
offset this improvement in operating income for the nine months ended September
30, 1999 compared to the same period in 1998.
European operating income decreased 50 percent from $147 million to $74
million. The lower operating income in Europe is primarily attributable to the
change in accounting for platform start-up costs, lower aftermarket volumes and
a shift in the mix of original equipment revenues from higher to lower margin
business.
Operating income from operations in the rest of the world declined 79
percent to $6 million from $29 million, as difficult economic conditions in
South America and currency devaluation in Brazil reduced operating income by $16
million.
Operating Income as a Percentage of Revenue
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1999 1998 % CHANGE
---- ---- --------
<S> <C> <C> <C>
North America..................................... 10.8% 10.0% 8 %
Europe............................................ 7.8 15.5 (50)
Rest of World..................................... 2.9 12.5 (77)
Tenneco Automotive................................ 8.9% 11.7% (24)%
</TABLE>
Since revenue was essentially flat, operating income as a percentage of
revenue declined primarily as a result of the factors cited in the discussion of
operating income above.
Interest Expense, net of interest capitalized
For the nine months ended September 30, 1998, Tenneco allocated $129
million in interest expense to discontinued specialty packaging operations. For
the comparable period in 1999, $115 million in interest expense was allocated to
discontinued operations. Adjusting for this allocation, interest expense was $5
million lower in the first three quarters of 1999 than the comparable period in
1998. The lower interest expense is primarily attributable to debt reduction
from the proceeds of the sale of Tenneco's containerboard interest early in the
second quarter of 1999.
Income Taxes
Tenneco's effective tax rate for the nine months ended September 30, 1999
was 37% compared to 20% in the third quarter last year. The 1998 rate was lower
as a result of certain non-recurring foreign tax benefits in that quarter. The
1999 rate was unfavorably impacted by the tax effect of the recapitalization of
Automotive's foreign subsidiaries.
Earnings Per Share
In October 1999, Tenneco's shareowners approved an amendment to the
Certificate of Incorporation providing for a one-for-five reverse stock split of
Tenneco's common stock. As a result, the reverse stock split is reflected for
all periods in this computation of earnings per share of common stock
outstanding. Income from continuing operations was $2.40 per diluted common
share for the nine months ended September 30, 1999, compared to $4.97 per
diluted common share in the comparable period of 1998. Discontinued operations
generated a loss of $2.98 per diluted common share during 1999 compared to
income of $4.34 per diluted common share for the prior year. The current year
period also included a $.20 per diluted common share extraordinary loss on early
retirement of debt in connection with the sale of the containerboard assets, and
$4.00 per diluted common share of charges related to the cumulative effect of
changes in accounting principles noted above. Net loss was $4.78 per diluted
common share for the nine months ended September 30, 1999, compared to $9.31 net
income per diluted common share in the comparable period of 1998.
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<PAGE> 57
Minority Interest
Minority interest is primarily related to dividends on the preferred stock
of a U.S. subsidiary. The preferred stock was repurchased before the spin-off in
conjunction with Tenneco's debt realignment.
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. Tenneco recorded a pre-tax charge to income from continuing
operations of $53 million, $34 million after-tax, or $1.02 per diluted common
share. Of the pre-tax charge, for operational restructuring plans, $36 million
related to the consolidation of the manufacturing and distribution operations of
Automotive's North American aftermarket business. A staff and related cost
reduction plan, which covers employees in Automotive's operating units and
corporate operations, is expected to cost $17 million.
The Automotive aftermarket restructuring involves closing two plant
locations and five distribution centers, resulting in the elimination of 302
positions. The staff and related cost reduction plan involves the elimination of
454 administrative positions in Automotive's business units and its corporate
operations.
The fixed assets at the locations to be closed were written down to their
fair value, less costs to sell, in the fourth quarter of 1998. As a result of
the single-purpose nature of the assets, fair value was estimated at scrap value
less cost to dispose. 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 2000. The effect of suspending depreciation for these
impaired assets is a reduction in depreciation and amortization expense of
approximately $2 million on an annual basis.
As of September 30, 1999, approximately 670 employees have been terminated.
To address customer service and production transfer issues, the closure of one
plant location and one Automotive aftermarket distribution center has been
delayed until the first and second quarters of 2000, respectively. All other
restructuring actions, with the exception of the final disposal of certain
assets, are being executed according to the initial plan and are expected to be
complete by the fourth quarter of 1999. During the nine months ended September
30, 1999, the Automotive aftermarket business closed one plant location and four
distribution centers.
Amounts related to the restructuring plan are shown in the following table:
<TABLE>
<CAPTION>
CASH
PAYMENTS
NINE MONTHS
DECEMBER 31, 1998 ENDED BALANCE AT
RESTRUCTURING SEPTEMBER 30, SEPTEMBER 30,
CHARGE BALANCE 1999 1999
----------------- ------------- -------------
(MILLIONS)
<S> <C> <C> <C>
Severance........................................... $15 $6 $ 9
Facility exit costs................................. 1 1 --
--- -- ---
$16 $7 $ 9
=== == ===
</TABLE>
Automotive expects to realize annual savings of $27 million as a result of
these restructuring initiatives, primarily from a reduction in salary and
related employee expenses. Reduced depreciation charges comprise $2 million of
the balance. Tenneco expects these savings will be fully realized beginning in
the second quarter of 2000.
To further reduce its cost structure, Tenneco is also implementing a
supplemental restructuring plan which will involve the closure of additional
manufacturing and distribution facilities in North America and Europe. This
supplemental plan has been approved by the Board of Directors and will result in
an additional charge in the fourth quarter of 1999 of approximately $55 million
before taxes, of which approximately 50 to 60 percent could be cash.
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<PAGE> 58
DISCONTINUED OPERATIONS AND EXTRAORDINARY LOSS
On November 5, 1999, Tenneco spun-off its specialty packaging businesses
into a separate, independent company. The specialty packaging company also owns
the remaining interest in the containerboard joint venture and the
administrative services operations. The specialty and paperboard packaging
businesses, and the administrative services operations, have been reflected as
discontinued operations in the accompanying financial statements.
Revenues and income for the paperboard packaging discontinued operations
are shown in the following table.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- --------------
1999 1998 1999 1998
----- ----- ----- ------
<S> <C> <C> <C> <C>
Net sales and operating revenues............................ $-- $415 $ 445 $1,185
=== ==== ===== ======
Income before income taxes and interest allocation.......... $ 8 $ 35 $ 30 $ 101
Income tax (expense) benefit................................ -- (12) (11) (38)
--- ---- ----- ------
Income before interest allocation........................... 8 23 19 63
Allocated interest expense, net of income tax............... -- (8) (5) (20)
--- ---- ----- ------
Income from discontinued operations before disposition...... 8 15 14 43
Gain (loss) on disposition, net of income tax............... -- 10 (169) 19
--- ---- ----- ------
Income (loss) from discontinued operations.................. $ 8 $ 25 $(155) $ 62
=== ==== ===== ======
</TABLE>
Revenues and income for the specialty packaging business and administrative
services operations are shown in the following table:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- ---------------
1999 1998 1999 1998
----- ----- ------ ------
<S> <C> <C> <C> <C>
Net sales and operating revenues............................ $754 $696 $2,158 $2,067
==== ==== ====== ======
Income before income taxes and interest allocation.......... 69 74 213 247
Income tax (expense) benefit................................ (39) (36) (87) (96)
---- ---- ------ ------
Income before interest allocation........................... 30 38 126 151
Allocated interest expense, net of income tax............... (26) (23) (70) (67)
---- ---- ------ ------
Income (loss) from discontinued operations.................. $ 4 $ 15 $ 56 $ 84
==== ==== ====== ======
</TABLE>
The current year period also included a $7 million extraordinary loss on
early retirement of debt in connection with the sale of the containerboard
assets.
Nine months ended September 30, 1999 results from discontinued operations
for the specialty packaging segment includes a pre-tax charge of $29 million
relating to 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.
CHANGES IN ACCOUNTING PRINCIPLES
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use," which establishes
new accounting and reporting standards for the costs of computer software
developed or obtained for internal use. This statement requires prospective
application for fiscal years beginning after December 15, 1998. Tenneco adopted
SOP 98-1 on January 1, 1999. The
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<PAGE> 59
impact of this new standard did not have a significant effect on Tenneco's
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. Prior to January 1, 1999,
Tenneco capitalized certain costs related to start-up activities, primarily
engineering costs for new automobile original equipment platforms. Tenneco
adopted SOP 98-5 on January 1, 1999, and recorded an after-tax charge for the
cumulative effect of this change in accounting principle of $102 million (net of
a $50 million tax benefit), or $3.05 per diluted common share. The change in
accounting principle decreased income from continuing operations by $11 million
(net of a $8 million tax benefit), or $.33 per diluted common share for the nine
months ended September 30, 1999. If the new accounting method had been applied
retroactively, income from continuing operations for the nine months ended
September 30, 1998, would have been lower by $10 million (net of a $7 million
tax benefit), or $.30 per diluted common share. For the three months ended
September 30, 1999, the change in accounting principle decreased income from
continuing operations by $6 million (net of $4 million tax benefit), or $.18 per
diluted common share. If the new accounting method had been applied
retroactively, income from continuing operations for the three months ended
September 30, 1998, would have been lower by $5 million (net of a $3 million tax
benefit), or $.15 per diluted common share.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 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. Tenneco is currently evaluating the new standard but has not yet
determined the impact it will have on its financial position or results of
operations.
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 connection with Tenneco's decision to separate its automotive and
specialty packaging businesses into independent public companies, Tenneco
determined that a change to an expense-as-incurred method of accounting for
automotive aftermarket customer acquisition costs was preferable in order to
permit improved comparability of stand-alone financial results with its
aftermarket industry competitors. Tenneco recorded an after-tax charge for the
cumulative effect of this change in accounting principle of $32 million (net of
a $22 million tax benefit), or $.95 per diluted common share. The change in
accounting principle increased income from continuing operations by $8 million
(net of $5 million in income tax expense), or $.24 per diluted common share for
the nine months ended September 30, 1999. If the new accounting principle had
been applied retroactively, income from continuing operations for the nine
months ended September 30, 1998, would have been higher by $1 million (net of $1
million in income tax expense), or $.03 per diluted common share. For the three
months ended September 30, 1999, the change in accounting principle increased
income from continuing operations by $3 million (net of $1 million in income tax
expense), or $.09 per diluted common share. If the new accounting principle had
been applied retroactively, income from continuing operations for the three
months ended September 30, 1998, would have been higher by $3 million (net of $2
million in income tax expense), or $.09 per diluted common share.
56
<PAGE> 60
LIQUIDITY AND CAPITAL RESOURCES
Capitalization
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998 % CHANGE
------------- ------------ --------
<S> <C> <C> <C>
Short term debt and current maturities.................... $ 237 $ 304 (22)%
Long-term debt............................................ 796 671 19
Debt allocated to discontinued operations................. 1,985 2,456 (19)
------ ------
Total debt................................................ 3,018 3,431 (12)
------ ------
Minority interest of continuing operations................ 411 407 1
Minority interest of discontinued operations.............. 21 14 50
------ ------
Total minority interest................................... 432 421 3
------ ------
Common shareowners' equity................................ 2,140 2,504 (15)
------ ------
Total capitalization...................................... $5,590 $6,356 (12)%
====== ======
</TABLE>
Tenneco's ratio of debt to total capitalization was 54 percent at September
30, 1999 and at December 31, 1998. This ratio was calculated before giving
effect to the debt realignment and spin-off, described below, which were
completed after September 30, 1999. Tenneco expects its debt to total
capitalization ratio to increase significantly as a result of these
transactions.
Prior to the spin-off, Tenneco realigned substantially all of its existing
debt. To accomplish this, Tenneco initiated an offer to exchange Packaging debt
securities for Tenneco debt securities having a book value of $1,166 million.
Tenneco also initiated a cash tender offer to purchase debt securities having a
book value of $1,374 million and repaid substantially all of its short-term
borrowings. Finally, Tenneco retired approximately $400 million of subsidiary
preferred stock. These transactions were financed by borrowings by Tenneco under
a new credit facility, senior subordinated debt issued by Tenneco, and
borrowings by Packaging under new credit facilities. The debt of Packaging was
rated investment grade and the debt of Tenneco was rated non-investment grade by
debt rating agencies.
As part of the debt realignment, on September 30, 1999 Tenneco entered into
a $1.55 billion committed senior secured financing arrangement with a syndicate
of banks and other financial institutions consisting of: (i) a $500 million,
six-year revolving credit facility; (ii) a $450 million six-year term loan;
(iii) a $300 million eight-year term loan and; (iv) a $300 million eight and
one-half year term loan. A portion of each term loan is payable in quarterly
installments beginning September 30, 2001. Borrowings under this facility bear
interest at an annual rate equal to, at the borrower's option, either (i) the
London Interbank Offering Rate plus a margin of 275 basis points for the
six-year revolving credit facility and the six-year term loan, 325 basis points
for the eight-year term loan and 350 basis points for the eight and one-half
year term loan; or (ii) a rate consisting of the greater of The Chase Manhattan
Bank's prime rate or the Federal Funds rate plus 50 basis points, plus a margin
of 175 basis points for the six-year revolving credit facility and the six-year
term loan, 225 basis points for the eight-year term loan and 250 basis points
for the eight and one-half year term loan. Under the provisions of the senior
credit facility agreement, the interest margins for borrowings under the
revolving credit facility and the six-year term loan may be adjusted based on
the consolidated leverage ratio (total debt divided by consolidated earnings
before interest, taxes, depreciation and amortization ("EBITDA") as defined in
the senior credit facility agreement) measured at the end of each quarter
starting with the fiscal quarter ending December 31, 2000.
The senior credit facility agreement requires that Tenneco initially
maintain: (i) a consolidated leverage ratio (consolidated indebtedness divided
by consolidated EBITDA) not greater than 4.75; (ii) a consolidated interest
coverage ratio (consolidated EBITDA divided by consolidated interest expense)
not less than 2.00; and (iii) a consolidated fixed charge coverage ratio
(consolidated EBITDA less consolidated capital expenditures, divided by
consolidated interest expense) not less than 1.00. Under the terms of the senior
credit facility agreement, the maximum permitted consolidated leverage ratio
will
57
<PAGE> 61
decrease beginning in the year 2001, the minimum permitted consolidated interest
coverage ratio will increase beginning in the year 2001 and the minimum
permitted consolidated fixed charge coverage ratio will increase beginning in
the year 2002. The senior credit facility agreement also contains restrictions
on Tenneco's operations that are customary for similar facilities, including
limitations on: (a) incurring additional liens; (b) sale and leaseback
transactions; (c) liquidations and dissolutions (d) incurring additional
indebtedness or guarantees; (e) capital expenditures; (f) dividends; (g) mergers
and consolidations; and (h) prepayments and modifications of subordinated and
other debt instruments. Compliance with these requirements and restrictions is a
condition for any incremental borrowings under the senior credit facility
agreement and failure to meet these requirements enables the lenders to require
repayment of any outstanding loans.
The senior subordinated debt indenture requires that Tenneco, as a
condition to incurring certain types of indebtedness not otherwise permitted,
initially maintain an interest coverage ratio of not less than 2.00. Under the
terms of the indenture, the minimum interest coverage ratio will increase
beginning in 2001. The indenture also contains restrictions on Tenneco's
operations, including limitations on: (1) incurring additional indebtedness or
liens; (2) dividends; (3) distributions and stock repurchases; (4) investments;
and (5) mergers and consolidations. See "Description of the New Notes."
Upon completion of the debt realignment and spin-off, Tenneco's total
indebtedness was approximately $1.7 billion. Tenneco believes that cash flows
from operations, combined with available borrowing capacity described above,
will generally be sufficient to meet its future capital requirements for the
following year.
Cash Flows
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 1998 % CHANGE
------ ----- --------
<S> <C> <C> <C>
Cash provided (used) by:
Operating activities -- continuing operations... $ (100) $ 33 (403)%
Investing activities -- continuing operations... $ (161) $(181) 11 %
Financing activities............................ $1,244 $ 96 1,195 %
</TABLE>
Operating Activities
Cash provided by continuing operating activities declined by $133 million
for the nine months ended September 30, 1999 compared to the comparable 1998
period. Income from continuing operations was $89 million lower and investments
in working capital were $63 million more for the nine months ended September 30,
1999 compared to the 1998 period. The increase in working capital was primarily
attributable to the one-time impact of terminating Automotive's accounts
receivable factoring program in connection with the spin-off, which increased
receivables by $67 million.
Cash provided by Tenneco's discontinued operations declined by $398 million
in the first nine months ended 1999 compared to the 1998 period. The paperboard
operations were responsible for $213 million which is primarily attributable to
the purchase of containerboard business accounts receivable in contemplation of
the sale of the containerboard business in April. Additionally, containerboard
results are reflected for the first four months in 1999 and for the first nine
months in 1998 due to the sale of this business. Investment in working capital
within the specialty packaging business increased by $139 million in the nine
months ended 1999 compared to the 1998 period.
Investing Activities
Cash used by investing activities from continuing operations was $20
million lower in the nine months ended September 30, 1999 compared to the same
period in 1998. Capital expenditures were $17 million lower in the nine months
ended September 30, 1999 compared to the same period in 1998 due to more
effective capital management. This was offset by the acquisition of Kinetic Ltd.
for $36 million. Kinetic,
58
<PAGE> 62
an Australian suspension engineering company with advanced roll-control
technology, provides enhanced on-road handling while improving off-road
performance.
Cash used by investments in discontinued operations increased by $619
million in the nine months ended September 30, 1999 compared to the 1998 period.
During the second quarter of 1999, Tenneco acquired for approximately $1.1
billion certain assets previously used by the containerboard business under
operating leases and timber cutting rights. This was required in order to
complete the April containerboard sale. The source of the funds for these
capital expenditures was borrowings by Packaging prior to the containerboard
sale. See "Financing Activities" below. Tenneco also received approximately $300
million in proceeds related to the containerboard and folding carton sale
transactions.
Financing Activities
Excluding borrowings required to complete the containerboard sale
transaction, cash used by financing activities was $517 million for the nine
months ended September 30, 1999. This primarily reflected the use of the net
proceeds of the containerboard sale transaction to reduce Tenneco's short-term
debt.
Before the containerboard sale transaction, Packaging borrowed
approximately $1.8 billion. These borrowings were used to acquire the assets
used under operating leases and timber cutting rights described under "Investing
Activities" above, and to purchase the containerboard business accounts
receivable described under "Operating Activities" above. Packaging remitted the
balance of the borrowings to Tenneco to retire short-term debt. 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.
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 will not be able to properly recognize dates beyond
the year 1999 ("the Year 2000 issue"). Tenneco'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,
Tenneco has a detailed process in place to identify and assess Year 2000 issues
and to remediate, replace or establish alternative procedures addressing
non-Year 2000 compliant systems, hardware, and equipment.
Tenneco has substantially completed inventorying its systems and equipment,
including computer systems and business applications, as well as date-sensitive
technology embedded in its equipment and facilities. Tenneco continues to plan
for and undertake remediation, replacement, or establishment of alternative
procedures for non-compliant Year 2000 systems and equipment; and test
remediated, replaced or alternative procedures for systems and equipment.
Tenneco believes that approximately 99 percent of Automotive's major
business applications systems and approximately 99 percent of Automotive's
manufacturing equipment had achieved Year 2000 compliance as of September 30,
1999. Tenneco has confirmed that none of its Automotive 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.
Tenneco has also contacted Automotive's major suppliers, financial
institutions, and others with whom Automotive conducts business to determine
whether they will be able to resolve in a timely manner Year 2000 problems
possibly affecting Automotive. 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. Tenneco 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
Automotive begins to conduct business.
59
<PAGE> 63
Based upon current estimates, Tenneco believes that costs to address
Automotive's Year 2000 issues and implement necessary changes to its existing
systems and equipment including costs incurred to date, will range from $15 to
$17 million. As of September 30, 1999, approximately $13 million of the costs
had been incurred. These costs are being expensed as they are incurred, except
that in some instances Tenneco may determine that replacing existing computer
systems or equipment may be more effective and efficient, particularly where
additional functionality is available. These replacements would be capitalized
and would reduce the estimated expense associated with Year 2000 issues.
If Tenneco 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 Automotive
conducts business are unsuccessful in implementing timely solutions, Year 2000
issues could have a material adverse effect on Tenneco's financial condition or
results of operations. Possible worst case scenarios include interruptions in
Automotive's ability to manufacture its products, process and ship orders, and
bill and collect accounts receivable due to internal systems failures or the
systems failures of its suppliers or customers. Tenneco believes it will be able
to timely resolve Automotive's own Year 2000 issues.
As part of its planning and readiness activities, Tenneco 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,
and assuring the availability of key personnel at year end to address unforeseen
Year 2000 problems.
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
the Company's operational divisions 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, Tenneco 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. Tenneco
believes that the costs associated with transitioning to the Euro will not be
material to its consolidated financial position or the results of its
operations.
ENVIRONMENTAL AND OTHER MATTERS
Tenneco and certain 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 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 financial
statements.
60
<PAGE> 64
At October 1, 1999, Tenneco had been designated as a potentially
responsible party in four Superfund sites. Tenneco has estimated its share of
the remediation costs for these sites to be approximately $2 million in the
aggregate and has established reserves that it believes are adequate for such
costs. This amount is evenly split between continuing operations and
discontinued operations. In addition, Tenneco may have the obligation to
remediate current or former facilities and estimates its share of remediation
costs at these facilities to be approximately $16 million for continuing
operations. For both the Superfund sites and its current and former facilities,
Tenneco has established reserves that it believes are adequate for these costs.
Although Tenneco 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, Tenneco 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 Tenneco's liability could be joint and several, meaning that
Tenneco could be required to pay in excess of its share of remediation costs.
Tenneco's understanding of the financial strength of other potentially
responsible parties has been considered, where appropriate, in Tenneco's
determination of its estimated liability. Tenneco believes that the costs
associated with its current status as a potentially responsible party in the
Superfund sites referenced above, or as a liable party at its current or former
facilities, will not be material to its consolidated financial position or
results of operations.
Tenneco estimates that its capital expenditures for environmental matters
for 1999 and 2000 will be $2 million and $3 million, respectively.
Tenneco 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
its financial position or results of operations.
YEARS 1998 AND 1997
RESULTS OF CONTINUING OPERATIONS
Tenneco reported income from continuing operations of $116 million for the
year ended December 31, 1998, compared to $234 million for the same period in
1997. The 1998 figure includes a $34 million after-tax charge to restructure the
automotive aftermarket business and to reduce overhead and manufacturing costs
throughout every part of the business. Excluding the restructuring charge,
Tenneco's income from continuing operations for the 1998 period was $150 million
compared to $234 million for the year ended December 31, 1997. The decline
results from lower Automotive operating income combined with higher interest
expense and minority interest.
Net Sales and Operating Revenues
<TABLE>
<CAPTION>
%
1998 1997 CHANGE
------ ------ ------
(MILLIONS)
<S> <C> <C> <C>
Automotive............................................ $3,237 $3,226 --%
</TABLE>
Automotive's revenue for 1998 was essentially flat with 1997 as increases
in original equipment revenue in North America and Europe of $215 million were
offset by a $165 million decline in aftermarket revenues throughout the world, a
$54 million reduction due to the adverse impact of a strong U.S. dollar, with
the remaining change due to the mix of products sold. Original equipment revenue
increased as Automotive continued to place its ride control and exhaust products
on many of the world's best-selling vehicles. Lower aftermarket demand was
driven by customer consolidations that temporarily increased field inventory
levels in North America and Europe; milder than normal winter weather; and
continuing soft Asian and South American replacement markets. Additionally,
Automotive began reducing its quarterly promotional programs in an effort to
better balance supply and demand going into 1999.
61
<PAGE> 65
Operating Income
The following table presents operating income for the years 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997 % CHANGE
---- ---- --------
(MILLIONS)
<S> <C> <C> <C>
Automotive........................................... $248 $407 (39)%
Other................................................ (21) (12) NM
---- ----
$227 $395 (43)%
==== ====
</TABLE>
Excluding restructuring charges, a comparison of Tenneco's 1998 and 1997
operating income is as follows:
<TABLE>
<CAPTION>
1998 1997 % CHANGE
---- ---- --------
(MILLIONS)
<S> <C> <C> <C>
Automotive........................................... $301 $407 (26)%
Other................................................ (21) (12) NM
---- ----
$280 $395 (29)%
==== ====
</TABLE>
Automotive's operating income in 1998 reflected strong volume growth in the
original equipment business which was more than offset by lower volumes in the
aftermarket. The net impact of volume was a decline in operating income of $43
million. Adverse currency movements caused a further deterioration of $14
million. The 1997 operating income included $10 million related to the favorable
resolution of a legal action and a net reduction of $4 million in certain
reserves, primarily related to ongoing reorganization initiatives which had
proceeded more rapidly and efficiently than planned, allowing Automotive to
adjust its cost estimate for completing the initiatives. Charges in 1998 for bad
debts, a higher level of costs related to customer acquisition activity and
marketing, and pricing adjustments in the original equipment business produced
the balance of the earnings decline.
Tenneco's "Other" operating loss in 1997 reflects gain on liquidation of
overseas subsidiaries.
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>
Automotive............................................ 7.7% 12.6% (39)%
Total................................................. 7.0% 12.2% (43)%
</TABLE>
Operating income as a percentage of revenue declined primarily as a result
of the factors cited in the discussion of operating income above since revenue
was essentially flat.
Excluding the fourth quarter 1998 restructuring charge described below,
operating income as a percentage of revenue for the same periods were as
follows:
<TABLE>
<CAPTION>
1998 1997 % CHANGE
---- ---- --------
<S> <C> <C> <C>
Automotive............................................ 9.3% 12.6% (26)%
Total................................................. 8.7% 12.2% (29)%
</TABLE>
Interest Expense, net of interest capitalized
Tenneco incurred interest expense of $69 million, a $11 million increase
over 1997. For the year 1998, $171 million of interest expense was allocated to
discontinued operations compared with $158 million during 1997. Adjusting for
the allocation, interest expense increased by $24 million. This increase was
attributable to higher average debt levels in 1998 resulting from inclusion for
the full year of amounts used
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<PAGE> 66
to acquire the protective and flexible packaging business of KNP BT in late
April 1997 for the specialty packaging segment, a higher level of working
capital to support higher revenue levels and Tenneco's share repurchase
activity.
Income Taxes
Tenneco's effective tax rate for 1998 was 8 percent, compared to 24 percent
for 1997. The 1998 effective tax rate was lower than the statutory rate as a
result of certain non-recurring foreign and state tax benefits, lower foreign
tax rates and a reduction in Tenneco's estimated tax liabilities related to
certain global tax audits. The 1997 effective tax rate benefitted from the
non-recurring impact of certain foreign tax benefits and the benefit of
previously unrecognized deferred tax assets.
Minority Interest
Minority interest was $29 million in 1998, compared to $23 million in 1997.
This primarily represents dividends on the preferred stock of a U.S. subsidiary.
In December 1997, this subsidiary issued additional preferred stock. See the
Notes to the Financial Statements of Tenneco Automotive Inc. and Consolidated
Subsidiaries contained elsewhere in this document for additional information.
DISCONTINUED OPERATIONS
See Note 2 to the Financial Statements of Tenneco Automotive Inc. and
Consolidated Subsidiaries contained elsewhere in this document for information
regarding the results of discontinued operations.
Fourth quarter 1998 results from discontinued operations for the paperboard
packaging segment include a pre-tax charge of $14 million related to Tenneco's
restructuring plan to reduce administrative and operational overhead costs. The
paperboard packaging restructuring plan involved closing four box plants and the
elimination of 78 manufacturing and 198 administrative positions.
CHANGE IN ACCOUNTING PRINCIPLE
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," Tenneco recorded an after-tax charge of $46 million or $.27 per
diluted common share in the fourth quarter of 1997, which was reported as a
cumulative effect of a change in accounting principle.
EARNINGS PER SHARE
Income from continuing operations was $3.44 per diluted common share for
1998, compared to $6.85 per diluted common share in 1997. (All references to
earnings per share in this Management's Discussion and Analysis are on a diluted
basis unless otherwise noted.) Discontinued operations contributed $4.12 per
diluted common share for 1998 compared to $3.72 per diluted common share for
1997. For 1997, Tenneco also recorded a charge for the cumulative effect of a
change in accounting principle noted above of $1.35 per diluted common share,
resulting in net income of $9.22 per diluted common share compared to $7.56 per
diluted common share for 1998.
CASH FLOWS
<TABLE>
<CAPTION>
1998 1997
----- -----
(MILLIONS)
<S> <C> <C>
Cash provided (used) by:
Operating activities...................................... $ 532 $ 519
Investing activities...................................... (754) (887)
Financing activities...................................... 216 354
</TABLE>
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<PAGE> 67
Operating Activities
Cash flow provided by operating activities was $13 million higher in 1998
than in 1997. Income before depreciation, depletion and amortization was $78
million lower than in 1997, largely as a result of higher interest expense and
the restructuring charge taken during the fourth quarter of 1998, for which the
bulk of the cash outflows will occur during 1999. Noncash charges for deferred
income taxes were higher in 1997 than in 1998, primarily as a result of tax
benefits derived from the 1996 reorganization and debt realignment and a 1996
tax net operating loss which was carried back to earlier years.
Investing Activities
Investing activities used $133 million less cash in 1998 than in 1997.
Capital expenditures for continuing operations declined by $26 million in 1998.
Capital expenditures and acquisitions for discontinued operations decreased in
1998 by $124 million, as lower acquisitions in 1998 were partially offset by
higher capital spending. During 1998, the most significant acquisitions were
Richter Manufacturing, a North American protective packaging business, and the
Belvidere, Illinois dual-ovenable paperboard tray manufacturing facility of
Champion International. Acquisition activity in 1997 primarily related to the
purchase of KNP BT's protective and flexible packaging business. The higher
capital expenditures were primarily a result of $84 million spent to acquire
certain leased timberlands in contemplation of the separation of the
containerboard assets from Tenneco's other businesses.
Financing Activities
Financing activities in 1998 generated $138 million less cash than in 1997.
During 1997, a Tenneco subsidiary issued preferred stock, the net proceeds of
which were $99 million. During 1998, Tenneco repurchased $22 million more of its
common stock than in 1997. During 1997, Tenneco refinanced a portion of its
short-term debt by issuing $100 million of 10-year 7 1/2% notes, $200 million of
30-year 7 7/8% debentures, and $300 million of 20-year 7 5/8% debentures. The
net proceeds of these debt offerings was $593 million. During 1998, Tenneco's
short-term debt (excluding current maturities on long-term debt) increased by
$540 million.
Capital Commitments
Tenneco estimates that expenditures of approximately $231 million will be
required by its Automotive and specialty packaging businesses after December 31,
1998, to complete facilities and projects authorized at such date, and
substantial commitments have been made in connection therewith. Of this amount,
approximately $121 million pertains to the continuing Automotive operations and
approximately $110 million pertains to the discontinued specialty packaging
operations.
Dividends on Common Stock
In October 1999, Tenneco's shareowners approved an amendment to the
Certificate of Incorporation providing for a one-for-five reverse stock split of
Tenneco's common stock. As a result, the reverse stock split is reflected in the
dividends declared on its common shares. Tenneco Inc. declared dividends on its
common shares of $1.50 per share for each quarter in 1998. Declaration of
dividends is at the discretion of the Board of Directors. The Board has not
adopted a dividend policy as such. Subject to legal and contractual
restrictions, its decisions regarding dividends are based on all considerations
that in its business judgment are relevant at the time, including past and
projected earnings, cash flows, economic, business and securities market
conditions, and anticipated developments concerning Tenneco's business and
operations.
Now that the spin-off of Packaging is complete, Tenneco is highly leveraged
and restricted with respect to the payment of dividends by the terms of its
financing arrangements. Accordingly, its annual dividend is expected to be
nominal.
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<PAGE> 68
DERIVATIVE FINANCIAL INSTRUMENTS
Foreign Currency Exchange Rate Risk
Tenneco 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. Tenneco's primary
exposure to changes in foreign currency rates results from intercompany loans
made between Tenneco affiliates to minimize the need for borrowings from third
parties. Additionally, Tenneco 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. Tenneco has from
time to time also entered into forward contracts to hedge its net investment in
foreign subsidiaries. Tenneco does not currently enter into derivative financial
instruments for speculative purposes.
In managing its foreign currency exposures, Tenneco identifies and
aggregates naturally occurring offsetting positions and then hedges residual
exposures through third party derivative contracts. The following table
summarizes by major currency the notional amounts, weighted average settlement
rates, and fair value for foreign currency forward purchase and sale contracts
as of December 31, 1998. All contracts in the following table mature in 1999.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------------------------
WEIGHTED
NOTIONAL AMOUNT AVERAGE FAIR VALUE
IN FOREIGN CURRENCY SETTLEMENT RATES IN U.S. DOLLARS
------------------- ---------------- ---------------
(MILLIONS EXCEPT SETTLEMENT RATES)
<S> <C> <C> <C> <C>
Belgian Francs -Purchase 594 0.029 $ 17
-Sell (644) 0.029 (19)
British Pounds -Purchase 98 1.660 163
-Sell (152) 1.660 (252)
Canadian Dollars -Purchase 112 0.654 73
-Sell (176) 0.654 (115)
Danish Krone -Purchase 79 0.157 12
-Sell -- -- --
French Francs -Purchase 497 0.179 89
-Sell (97) 0.179 (17)
German Marks -Purchase 3 0.599 2
-Sell (56) 0.599 (33)
Portuguese Escudo -Purchase 1,947 0.006 11
-Sell (30) 0.006 --
Spanish Pesetas -Purchase 4,545 0.007 32
-Sell (325) 0.007 (2)
U.S. Dollars -Purchase 105 1.000 105
-Sell (33) 1.000 (33)
Other -Purchase 395 .043 17
-Sell (719) 0.068 (49)
-----
$ 1
=====
</TABLE>
Interest Rate Risk
Following the realignment of Tenneco's debt in connection with the spin-off
of Packaging, Tenneco's financial instruments that are sensitive to market risk
for changes in interest rates are its debt securities. Tenneco primarily uses a
revolving credit facility to finance its short-term capital requirements.
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 from 6 to 8 and one-half years. Tenneco has $500 million
of long-term debt obligations that have fixed interest rates and $1.05 billion
of long-term debt obligations that have variable interest rates which pay a
current market rate of interest.
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Should Tenneco decide to redeem its fixed rate, long-term debt securities prior
to their stated maturity, it would generally incur costs based on the fair value
of the debt at that time.
Since Tenneco's debt was issued in connection with the debt realignment,
its book value approximates its fair value.
The statements and other information (including the tables) in this
"Derivative Financial Instruments" section constitute "forward-looking
statements."
YEARS 1997 AND 1996
The year ended December 31, 1997, represents the first full year of Tenneco
Inc. and consolidated subsidiaries' operation as a global manufacturing company
focused on its automotive parts and packaging businesses.
Tenneco Inc. was spun-off from the company previously known as Tenneco Inc.
("Old Tenneco") on December 11, 1996, following a series of transactions
undertaken to realign the assets, liabilities and operations of Old Tenneco such
that the automotive parts ("Automotive"), packaging ("Specialty Packaging" and
"Paperboard Packaging") and the administrative services ("Tenneco Business
Services") businesses were owned by Tenneco Inc. and the shipbuilding business
was owned by Newport News Shipbuilding Inc. ("Newport News"). Old Tenneco
distributed the shares of Tenneco Inc. and Newport News to its shareowners on
December 11, 1996. On December 12, 1996, Old Tenneco, which then consisted
primarily of the energy business ("Energy") and certain previously discontinued
operations of Old Tenneco, merged with a subsidiary of El Paso Natural Gas
Company.
Although the separation of Tenneco Inc. from Old Tenneco was structured as
a spin-off for legal, tax and other reasons, Tenneco Inc. kept certain important
aspects of Old Tenneco, including its executive management, Board of Directors
and headquarters. Most importantly, the combined assets, revenues, and operating
income of Automotive, Specialty Packaging and Paperboard Packaging represented
more than half the assets, revenues and operating income of Old Tenneco prior to
the distributions and merger. Consequently, this Management's Discussion and
Analysis of Financial Condition and Results of Operations and Tenneco's
financial statements for periods prior to the distributions and merger present
the net assets and results of operations of Old Tenneco's shipbuilding and
energy businesses, as well as its farm and construction equipment business which
was disposed of before the distributions and merger, as discontinued operations.
Refer to Note 2 to the Financial Statements of Tenneco Automotive Inc. and
Consolidated Subsidiaries contained elsewhere in this document for further
discussion.
For purposes of this Management's Discussion and Analysis "Tenneco" or the
"Company" refers to Old Tenneco and its subsidiaries before the above described
corporate reorganization transactions and to Tenneco Inc., formerly known as New
Tenneco Inc., and its subsidiaries after those transactions.
The following review of Tenneco's financial condition and results of
operations should be read in conjunction with the financial statements and
related notes of Tenneco Automotive Inc. and Consolidated Subsidiaries.
RESULTS OF CONTINUING OPERATIONS
Tenneco reported income from continuing operations for the year ended
December 31, 1997, of $234 million compared to $82 million for the same period
in 1996. The improvement resulted from record operating results at Automotive
and a lower effective tax rate for 1997 compared to 1996.
Net Sales and Operating Revenues
<TABLE>
<CAPTION>
%
1997 1996 CHANGE
------ ------ ------
(MILLIONS)
<S> <C> <C> <C>
Automotive............................................ $3,226 $2,980 8%
</TABLE>
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Automotive's revenue increase over 1996 resulted from acquisition
performance, volume gains, and improved pricing and product mix. Companies
acquired in 1996 and 1997 contributed $238 million to revenue gains during 1997.
For companies acquired in 1996, these revenue gains include only revenues earned
through the first anniversary of the 1996 acquisition. Performance following the
first year of ownership is included in the other year over year measures of
performance. Volume growth with both existing and new customers resulted in
revenue increases of $128 million, while improved price realizations and a more
favorable product mix added $35 million to 1997 revenues. These revenue gains
were partially offset by the impact of the strong U.S. dollar in overseas
markets, which resulted in $141 million in lower revenues than would have been
realized had the U.S. dollar not strengthened during the year.
Operating Income
<TABLE>
<CAPTION>
%
1997 1996 CHANGE
---- ---- ------
(MILLIONS)
<S> <C> <C> <C>
Automotive............................................... $407 $249 63%
Other.................................................... (12) (7) NM
---- ----
$395 $242 63%
==== ====
</TABLE>
During 1996, Automotive recorded a pre-tax charge of $64 million to
streamline certain exhaust operations and realign the ride control product line.
Absent this charge, 1996 operating income would have been $313 million. The
remaining increase in operating income during 1997 is primarily attributable to
acquisition performance, cost reduction initiatives, and improved realizations,
partially offset by the impact of the strong U.S. dollar in overseas markets.
Acquisitions, including the impact of 1996 transactions calculated through the
first anniversary of the date of each acquisition, added $35 million to 1997
operating income. Cost reduction initiatives contributed more than $40 million
to the 1997 operating income improvement while improved pricing realization and
product mix combined with volume growth resulted in higher 1997 operating income
of more than $30 million. During the third quarter of 1997, Automotive benefited
from a net reduction of $4 million in certain reserves, primarily related to
ongoing reorganization initiatives which have proceeded more rapidly and
efficiently than planned, allowing Automotive to adjust its cost estimates for
completing these initiatives. Additionally, favorable resolution of a legal
action contributed $10 million to third quarter 1997 results. Partially
offsetting these operating income gains was the impact of the strong U.S. dollar
on overseas earnings, which reduced 1997 operating income by $22 million, and
fourth quarter charges totaling $4 million related to a customer bankruptcy and
a prior asset sale.
The increase in Tenneco's "Other" operating loss reflects the cost of
factoring a higher level of receivables, offset in part by gain recognized on
liquidation of overseas subsidiaries in 1997.
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
---- ---- ------
(MILLIONS)
<S> <C> <C> <C>
Automotive................................................. 12.6% 8.4% 50%
Total...................................................... 12.2% 8.1% 51%
</TABLE>
Automotive's operating income as a percentage of revenue increased as
operating income grew 63 percent while revenues increased by 8 percent.
Interest Expense, net of interest capitalized
Tenneco incurred interest expense of $216 million during 1997, an increase
of $21 million over 1996. These amounts include $158 million and $135 million of
interest allocated to discontinued operations in
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1997 and 1996, respectively. The increase reflects a higher level of borrowings
during 1997, resulting primarily from acquisitions made in both Specialty
Packaging and Automotive, as well as Tenneco's share repurchase activity.
Income Taxes
Tenneco's effective tax rate for 1997 was 24 percent, compared to 43
percent for 1996. The 1997 tax rate was lower than the statutory rate due to the
non-recurring impact of certain foreign tax benefits and the benefit of
previously unrecognized deferred tax assets. For 1996, the effective tax rate
was in excess of the statutory rate primarily as a result of the realignment
charges recorded for Automotive's European operations which were not fully
benefited for tax purposes.
Minority Interest
Minority interest in 1997 was $23 million compared to $21 million in 1996.
This is primarily related to dividends on the preferred stock of a U.S.
subsidiary. In December 1997, this subsidiary issued additional preferred stock.
See Note 10 to the Financial Statements of Tenneco Inc. and Consolidated
Subsidiaries contained elsewhere in this document for additional information.
The preferred stock was repurchased before the spin-off in conjunction with
Tenneco's debt realignment.
DISCONTINUED OPERATIONS AND EXTRAORDINARY LOSS
For 1997, discontinued operations include the Paperboard Packaging and the
Specialty Packaging operations, which were discontinued in June and August 1999,
respectively. The Paperboard Packaging operations generated income of $21
million after income tax expense of $10 million, or $.12 per diluted common
share. The Specialty Packaging operations generated income of $106 million after
income tax expense of $75 million, or $.63 per diluted common share.
For 1996, discontinued operations include the Paperboard Packaging and
Specialty Packaging operations, as well as, the energy and shipbuilding
operations, which were discontinued in December 1996, and the farm and
construction equipment operations, which were discontinued in March 1996. During
this year, income from discontinued operations from Paperboard Packaging was $71
million, net of income tax expense of $48 million; income from Specialty
Packaging discontinued operations was $65 million, net of income tax expense of
$67 million; income from discontinued operations for energy was $127 million,
net of income tax expense of $32 million; income from discontinued operations
for shipbuilding was $70 million, net of income tax expense of $32 million; loss
from discontinued operations for farm and construction equipment was $1 million,
net of an income tax benefit of $1 million. Additionally, income from
discontinued operations included a $340 million gain, net of income tax expense
of $83 million, on the sale of Tenneco's remaining investment in the farm and
construction equipment business, and transaction costs -- consisting primarily
of financial advisory, legal, accounting, printing, and other costs -- of $108
million, net of an income tax benefit of $17 million, that were incurred in
connection with the 1996 corporate reorganization. In total, discontinued
operations generated $564 million of income, net of income tax expense of $244
million, or $3.23 per diluted common share.
See the Notes to the Financial Statements of Tenneco Automotive Inc. and
Consolidated Subsidiaries contained elsewhere in this document for further
discussion of discontinued operations.
Income from discontinued operations in 1997 included a one-time $38 million
pre-tax gain which resulted from the refinancing of two containerboard mill
leases. Income from the discontinued Paperboard Packaging 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.
Extraordinary loss for 1996 was $236 million, net of an income tax benefit
of $126 million, or $1.38 per diluted common share. The extraordinary loss was
incurred as a result of the debt realignment undertaken before the December 1996
corporate reorganization and consists principally of the fair value
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paid in the cash tender offers and the fair value of debt exchanged in the debt
exchange offers in excess of the historical net carrying value for the debt
tendered and exchanged.
EARNINGS PER SHARE
Income from continuing operations was $6.85 per diluted common share in
1997, up from $2.43 per diluted common share in 1996. Tenneco also recorded
income from discontinued operations of $3.72 per diluted common share and a
charge for the cumulative effect of a change in accounting principle discussed
above of $1.35 per diluted common share, resulting in net income of $9.22 per
diluted common share for 1997. During 1996, discontinued operations earned
$16.18 per diluted common share while Tenneco recorded an extraordinary loss on
retirement of debt of $6.96 per diluted common share. Net income in 1996 was
$11.65 per diluted common share. Average shares of common stock outstanding
increased slightly during 1997. For further information regarding the
calculation of earnings per share, refer to the Notes to the Financial
Statements of Tenneco Automotive Inc. and Consolidated Subsidiaries contained
elsewhere in this document.
CASH FLOWS
<TABLE>
<CAPTION>
1997 1996
----- -----
(MILLIONS)
<S> <C> <C>
Cash provided (used) by:
Operating activities...................................... $ 519 $ 253
Investing activities...................................... (887) (685)
Financing activities...................................... 354 147
</TABLE>
Operating Activities
Cash flow provided by operating activities was $266 million higher in 1997
than 1996. Tenneco's discontinued operations generated $308 million in 1997 and
used $15 million in cash flow in 1996, for an improvement of $323 million.
Within continuing operations, income before depreciation was higher in 1997 by
$168 million. Tenneco also generated cash flow benefits from tax refunds during
1997, resulting primarily 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 more than offset by increased working
capital associated with higher revenue levels and increased cash outflows
associated with the realignment plan implemented in the fourth quarter of 1996.
Investing Activities
During 1996 Tenneco's investing cash flows included expenditures of $425
million for businesses acquired, primarily for Clevite. Capital expenditures for
continuing operations in 1997 were $33 million higher than in 1996. The sale of
discontinued operations provided $24 million in 1997 and $1,197 million in 1996
of investing cash flow. The 1996 amount arose primarily from sale of Tenneco's
remaining Case Corporation shares and a business owned by Energy. Tenneco also
spent $622 million in 1997 and $1,106 million in 1996 for capital expenditures
and business acquisitions for discontinued operations. In April 1997, Specialty
Packaging acquired the flexible and protective packaging businesses of KNP BT.
In 1996, Specialty Packaging acquired the foam products business.
Financing Activities
During 1997, Tenneco refinanced a portion of its short term debt by issuing
$100 million of 10 year 7 1/2% notes, $200 million of 30 year 7 7/8% debentures,
and $300 million of 20 year 7 5/8% debentures. The net proceeds to Tenneco of
these debt offerings was $593 million. Tenneco retired $23 million in long-term
debt during 1997 according to its terms and reduced short-term debt by a net $31
million. A subsidiary of Tenneco also issued preferred stock, the net proceeds
of which were $99 million. During 1996, financing activities included the debt
realignment executed in December to facilitate the separation of New Tenneco,
Energy, and Newport News, as well as the issuance of $296 million in preferred
stock by Old
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Tenneco which remained with Old Tenneco in the Energy merger. During 1997,
Tenneco issued $48 million in common stock, related to employee benefit plans,
and repurchased $132 million in common stock under its common stock repurchase
plan. Tenneco also paid 1997 dividends on its common stock of $204 million.
Activity in 1996 included common stock issued of $164 million, common stock
repurchases of $172 million, common and preferred stock dividends of $313
million and cash of $99 million transferred to Energy and Newport News in the
December 1996 corporate reorganization.
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THE SPIN-OFF
The details of Tenneco's spin-off of Pactiv and the transactions completed
in connection therewith are described below.
MANNER OF SPIN-OFF
To effect the spin-off, Tenneco's Board of Directors declared a special
distribution consisting of all of the capital stock of Pactiv. The shares of
common stock of Pactiv were distributed to holders of record of Tenneco's
outstanding common stock at the close of business on October 29, 1999, without
any consideration being paid by those holders, on the basis of one share of
common stock of Pactiv for every share of common stock of Tenneco. The spin-off
became effective after the close of business on November 4, 1999.
CORPORATE RESTRUCTURING TRANSACTIONS
Before the spin-off, Tenneco effected various corporate restructuring
transactions which restructured, divided and separated its then-existing
businesses so that, in general, the assets, liabilities and operations of its
packaging businesses and administrative services operations were owned and
operated, directly or indirectly, by Pactiv and would, therefore, be spun-off to
Tenneco's then-existing stockholders. As a result of the spin-off, our remaining
assets, liabilities and operations consist primarily of those assets,
liabilities and operations related to Tenneco's automotive business.
Upon completion of the corporate restructuring transactions and spin-off,
Tenneco's assets at the time of the spin-off were allocated as follows:
- We received or retained all of Tenneco's assets at the time not expressly
allocated to Pactiv or its subsidiaries as described below; and
- Pactiv received or retained (1) those assets related to the conduct of
Tenneco's past and current packaging businesses and administrative
services operations and (2) all rights expressly allocated to Pactiv and
its subsidiaries under the distribution agreement or any related
agreement we entered into with Pactiv as part of the spin-off.
Upon completion of the corporate restructuring transactions and spin-off,
Tenneco's liabilities at the time of the spin-off were allocated as follows:
- We assumed or retained responsibility for (1) those liabilities related
to the assets allocated to us as described above and the current and past
conduct of Tenneco's automotive business, (2) liabilities for possible
violations of securities laws in connections with the spin-off related to
disclosures or omissions regarding Automotive's business, results of
operations, prospects or management, (3) those liabilities expressly
allocated to us or our subsidiaries under the distribution agreement or
any related agreement, and (4) all other liabilities of Tenneco or any of
its subsidiaries which do not constitute Pactiv liabilities, as described
below; and
- Pactiv assumed or retained responsibility for: (1) those liabilities
related to the Pactiv assets described above and the current and past
conduct of Tenneco's packaging businesses and administrative services
operations, (2) liabilities for possible violations of securities laws in
connection with the spin-off related to disclosures or omissions
regarding Pactiv's business, results of operations, prospects or
management, and (3) those other liabilities expressly allocated to Pactiv
or its subsidiaries under the distribution agreement or any related
agreement.
In addition, we and Pactiv each agreed to 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 that party.
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DEBT REALIGNMENT
Prior to the spin-off, Tenneco realigned its debt, including transaction
fees and specified preferred stock obligations, through a combination of tender
offers, exchange offers, prepayments and other refinancings. As part of the debt
realignment, Tenneco (1) offered to purchase for cash approximately $1,283
million aggregate principal amount of various series of its outstanding public
debt securities (the "Tender Offers"), (2) offered to exchange up to
approximately $1,176 million aggregate principal amount of newly issued debt
securities of Pactiv for its remaining series of outstanding public debt
securities (the "Exchange Offers"), (3) repaid approximately $934 million of
other non-public debt and (4) repurchased $400 million of outstanding subsidiary
preferred stock.
The Tender and Exchange Offers were completed on November 4, 1999, with
Tenneco retiring approximately $2,376 million aggregate principal amount of its
outstanding public debt. Approximately $84 million aggregate principal amount of
Tenneco's public debt was outstanding after completion of the Tender and
Exchange Offers, of which $63 was retired in November 1999 in accordance with
its terms. As part of the Tender and Exchange Offers, Tenneco solicited consents
from the holders of its public debt to amendments to the indenture under which
the debt was issued. The required consents were received, and the indenture was
amended to eliminate all of the operating restrictions that were formerly
contained in the indenture.
To fund the cash portions of the debt realignment, we (1) borrowed $1,092
million under a new senior secured credit facility, described below under
"Description of Senior Credit Facility", and (2) issued the outstanding notes
which are subject to this exchange offer. Also as part of the debt realignment,
Pactiv (1) made borrowings under new credit facilities entered into in
connection with the spin-off and remitted the proceeds to Tenneco and (2) issued
new public debt pursuant to the Exchange Offers described above.
Now that the debt realignment is complete, we are responsible for all of
Tenneco's existing public debt that was not retired in the Tender or Exchange
Offers, borrowings under the new senior secured credit facility and the
outstanding notes. Pactiv is responsible for its new public debt securities
issued in the Exchange Offers and the borrowings under the new Pactiv credit
facilities described above.
RELATIONSHIP BETWEEN US AND PACTIV AFTER THE SPIN-OFF
The distribution agreement and principal ancillary agreements that we
entered into with Pactiv in connection with the spin-off are described below.
DISTRIBUTION AGREEMENT
In addition to providing for the terms of the spin-off and the various
actions that were required to be taken before the spin-off, the distribution
agreement contains other provisions governing the relationship between us and
Pactiv after the spin-off.
Responsibility for Liabilities. The distribution agreement provides that
after the spin-off date: (1) we are responsible for paying, performing and
discharging our allocated liabilities according to their terms, and (2) Pactiv
is responsible for performing and discharging its allocated liabilities
according to their terms. See "-- Corporate Restructuring Transactions." The
distribution agreement provide for cross-indemnities so that: (1) we must
indemnify Pactiv and its respective subsidiaries, directors, officers, employees
and agents, and other related parties, against all losses arising out of or in
connection with our allocated liabilities or the breach of the distribution
agreement or any ancillary agreement by us; and (2) Pactiv must indemnify us and
our respective subsidiaries, directors, officers, employees and agents, and
other related parties, against all losses arising out of or in connection with
Pactiv's allocated liabilities or the breach of the distribution agreement or
any ancillary agreement by Pactiv.
Further Assurances. We and Pactiv have each agreed to use all reasonable
efforts to take all action following the spin-off that is reasonably necessary
or advisable to consummate the transactions contemplated by and carry out the
purposes of the distribution agreement.
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Information Sharing. The distribution agreement provides for the transfer
and sharing of books and records between us and Pactiv 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 businesses and administrative
services operations, on the other hand, that did not arise from ordinary trading
transactions were 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 and specified trade supply agreements, were
terminated.
Expenses. Tenneco used a portion of the funds borrowed by us and Pactiv as
part of the debt realignment to fund the payment of fees, costs and expenses
associated with the spin-off. 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 us and Pactiv. All other
fees, costs and expenses will be paid by the party incurring the fees, costs or
expenses.
HUMAN RESOURCES AGREEMENT
The human resources agreement entered into between us and Pactiv governs
labor, employment, compensation and benefit matters in connection with the
spin-off. Under the human resources agreement, each of us and Pactiv agreed to:
- continue employment of each of our respective retained employees, subject
to our 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 our rights to
seek changes in our relationships with the organizations; and
- continue sponsorship of hourly employee benefit plans in accordance with
their terms.
Effective on the spin-off date, Pactiv became 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"). We 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 were frozen as of the last day of November 1999, and
Pactiv will amend the Tenneco Retirement Plan to provide that all benefits
accrued through that day by Automotive employees are fully vested and
non-forfeitable. Generally, each of us and Pactiv will retain liabilities with
respect to benefits accrued by our respective current and former employees under
the Tenneco Inc. Supplemental Executive Retirement Plan and with respect to the
welfare benefits of our respective current and former employees and their
dependents. In addition, as of the spin-off date, participation by current and
former employees of Automotive in the Tenneco Inc. Deferred Compensation Plan
was discontinued and we succeeded to those liabilities.
Under the human resources agreement, Tenneco generally caused outstanding
restricted stock and performance share equivalent unit awards to become fully
earned and vested before the spin-off. Tenneco common stock options held by
Pactiv employees were replaced by options to purchase shares of Pactiv common
stock on terms economically equivalent to the old Tenneco options. Tenneco
common stock options held by Automotive employees were adjusted to maintain
equivalent economic terms to the options outstanding immediately prior to the
spin-off.
TAX SHARING AGREEMENT
A tax sharing agreement was also entered into between us and Pactiv in
connection with the spin-off. This agreement provides for the allocation of tax
liabilities between the parties arising before, as a result of and after the
spin-off. As a general rule, we are liable for all taxes not specifically
allocated to Pactiv
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under the terms of the tax sharing agreement. Generally, Pactiv is liable for
taxes imposed exclusively on Pactiv and its affiliates engaged in the packaging
and administrative services businesses. In the case of U.S. federal income taxes
imposed on the combined activities of Tenneco's automotive and packaging groups,
Pactiv is generally liable to us for federal income taxes attributable to the
activities of its 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, Pactiv will generally be liable for the tax that would be
imposed if the Pactiv 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 will be the responsibility of the legal entity on which the
taxes are imposed. However, if any of those transaction taxes arise due to any
action taken or permitted by us or Pactiv 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 us or Pactiv, will be responsible for the resulting tax liability.
Additionally, if any transaction taxes arise under Section 355(e) of the
Internal Revenue 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 us
or Pactiv, 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 us and Pactiv.
Section 355(e) of the Internal Revenue 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 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 some 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.
We and Pactiv agreed 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 the
ability of us or Pactiv to engage in some 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
Prior to the spin-off, Tenneco's administrative services operations
provided a number of services to Tenneco's operating units. These services
included: (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.
Upon completion of the spin-off, Tenneco's administrative services
operations became a part of Pactiv. Accordingly, we entered into a transition
services agreement with Pactiv under which Pactiv will continue to provide us
with specified administrative services. Specifically, Pactiv will provide or
cause to be provided to us the following services:
- financial reporting, human resource administration, cash management and
tax services for a period of up to one year following the spin-off, for
which we will pay a fixed fee; and
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- telecommunication and information technology services ("ITOC Services")
until December 31, 2001, for which we will pay Pactiv its direct costs
plus 50% of Pactiv's unreimbursed overhead expenses related to providing
the ITOC Services.
In addition, we entered into a separate agreement with a third-party
service provider to provide us with accounts payable, payroll processing and
related services through December 31, 2002. For these services, we will pay a
fixed fee, subject to adjustment based on actual usage.
We estimate that our fee for these services is currently approximately $3.4
million per month. We will generally receive a rebate equal to 25% of any
overhead costs savings and 50% of any direct costs savings that Pactiv achieves
in providing its services, except that we will receive the full benefit of any
direct costs savings attributable to volume reductions.
In addition, the transition services agreement with Pactiv contemplates
that on or before December 31, 2001 Pactiv will transfer to us, with no
additional consideration paid to Pactiv, assets that will enable us to provide
the ITOC Services for ourselves. To the extent this transfer occurs before
December 31, 2001 and we therefore assume expenses for the provision of the
related ITOC Services, we will receive a credit against the applicable fees
described above.
Because we retained a portion of the administrative support for Tenneco's
European operations, we also agreed to provide Pactiv 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, Pactiv may elect to have us continue to provide specified services for
up to six months on a month-to-month basis. Pactiv will pay us a monthly fee for
these services.
INSURANCE AGREEMENT
The insurance agreement entered into between us and Pactiv provides for the
separation and administration of Tenneco's insurance programs in effect prior to
the spin-off and the purchase of "run-off " policies for fiduciaries and
directors and officers. In general, the insurance agreement provides that we and
Pactiv 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, we and Pactiv will obtain coverage through Tenneco's existing policies
plus supplemental coverage that was purchased. "Run-off" insurance policies were
also purchased 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. We and Pactiv will each be responsible for administering our
respective insurance programs after the spin-off and for purchasing insurance as
necessary to cover our 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, we continue to 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, Pactiv
entered into a trademark transition license agreement with us. Under this
agreement, we granted to Pactiv and its subsidiaries a limited, royalty-free
license to use the Trademarks with respect to Pactiv 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) 12 months after the spin-off, with respect to stationery and similar
supplies, and (3) 18 months after the spin-off, with respect to signage and
other advertising material.
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BUSINESS
TENNECO BEFORE THE SPIN-OFF
Before the spin-off, Tenneco was a global manufacturing company whose major
businesses consisted of (1) the manufacture and sale of automotive emissions
control and ride control products and systems, and (2) the manufacture and sale
of specialty packaging and consumer products for the foodservice, consumer,
protective, flexible and institutional/industrial markets. Now that the spin-off
is complete, our remaining operations consist solely of Automotive. See "The
Spin-off."
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 "old" Tenneco completed the transfer of its
automotive and packaging businesses to Tenneco, and spun off Tenneco to its
public stockholders. In connection with that spin-off, the "old" 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, references to
Tenneco Inc. also refer to the company formerly known as Tenneco.
GENERAL
With 1998 revenues of over $3.2 billion, we are one of the world's largest
producers of automotive emissions control and ride control systems and products.
We serve both original equipment (OE) manufacturers and replacement markets
worldwide through leading brands, including Monroe(R) brand ride control and
Walker(R) brand emissions control products. On an independent basis, we would
have ranked as number 457 based on revenues on the 1998 Fortune 500 listing of
U.S. companies.
As an automotive parts supplier, we design, market and sell 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.
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 us, 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 our
products do, can also drive aftermarket demand.
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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 we believe 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.
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, we are 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. We are an established Tier 1 supplier with ten years of product
integration experience. We have modules or systems for 25 vehicle platforms in
production worldwide and modules or systems for three additional platforms under
development. For example, we supply ride control modules for the Chrysler JA
Cirrus/Stratus/Breeze and the emissions control system for the Porsche Boxster.
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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.
- 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, we can supply our 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. We believe 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. We also expect 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. We currently work 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, we have developed
several adaptive damping systems which reduce undesirable vehicle motion. Also,
we have 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.
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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, we are
well-positioned to benefit from more rigorous environmental standards.
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, we are well-positioned to
leverage its products and technology into the aftermarket. Furthermore, an
opportunity exists for replacement of certain 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. We are
well-positioned to respond to this changing aftermarket situation because of its
focus on cost reduction and high-quality, premium brands.
BUSINESS STRATEGY
Our objective is to enhance profitability by leveraging our global position
in the manufacture of emissions control and ride control products and systems.
We intend to apply our 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 our business strategy are described below.
"OWN" THE PRODUCT LIFE CYCLE
Using our global engineering capabilities and its advanced technology
position, we are pursuing opportunities to design unique, value-added products
for vehicle manufacturers that yield higher margins in the OE market. We expect
to take advantage of our 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 our market balance between OE and aftermarket sales allows us
to leverage our cost structure over the entire product life cycle.
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DEVELOP AND COMMERCIALIZE INNOVATIVE, VALUE-ADDED PRODUCTS
We intend 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, we intend 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 us and by establishing strategic alliances
with other suppliers.
One example of our focus on innovation is our 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 our electronic competencies we entered into an agreement with
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, we 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
We manufacture and market 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. We continue 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.
We are also capitalizing on our brand strength by incorporating newly
acquired product lines within existing product families. Our brand equity is a
key asset in a time of customer consolidation and merging channels of
distribution.
DIVERSIFY END-MARKETS
One of our goals is to apply our existing design, marketing and
manufacturing capabilities to produce products for a variety of adjacent
markets. We believe that these capabilities could be used for heavy duty vehicle
and industrial applications, various recreational vehicles, scooters and
bicycles. We expect that expanding into markets other than automotive parts will
allow us to capitalize on our advanced 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
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rather than just specific parts. In response to this trend, we have developed
integrated, electronically linked global engineering and manufacturing
facilities to maintain our presence on top selling vehicles. We have has over 10
years of experience as an integrator of systems and modules. We are currently
supplying modules or systems for 25 vehicle platforms worldwide and has modules
or systems for three additional platforms under development. We also plan 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
our ability to deliver full-system capabilities.
MAINTAIN OPERATING COST LEADERSHIP
We intend to continue to reduce costs by:
- standardizing products and processes throughout our operations;
- further developing our global supply chain management capabilities;
- improving our information technology;
- 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, we 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 our North American
aftermarket operations. The operational restructuring, designed to better match
our capacity to market demand, involves closing two plant locations and five
distribution centers, with the elimination of 302 positions at those locations.
We expect to complete this by mid-2000. The administrative restructuring
involves the reduction of approximately 450 administrative staff positions. We
expect to complete this by the end of 1999. We are also planning a supplemental
restructuring plan. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- General."
We have 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.
We have also adopted a management process of measuring the economic value
of its operations to help ensure returns exceed capital costs. We are planning
to link the successful application of this management discipline to our
incentive compensation program.
EXECUTE FOCUSED ACQUISITIONS AND ALLIANCES
In the past, we have been successful in identifying and capitalizing on
strategic acquisitions and alliances to achieve growth. Through these
acquisitions and alliances, we have: (1) expanded our 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, we intend to continue to pursue strategic acquisitions
that complement our existing technology and systems development efforts. This
focused strategy will assist us 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. We also plan to continue to pursue joint
venture and alliance opportunities to achieve our objectives and enhance
profitability.
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ANALYSIS OF REVENUES
The following table provides for each of the years 1996 through 1998, and
for the nine months ended September 30, 1999, information relating to our net
sales, by primary product lines and markets:
<TABLE>
<CAPTION>
NET SALES (MILLIONS)
------------------------------------------------
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------
SEPTEMBER 30, 1999 1998 1997 1996
------------------ ---- ---- ----
<S> <C> <C> <C> <C>
EMISSIONS CONTROL SYSTEMS & PRODUCTS
Aftermarket......................... $ 407 $ 590 $ 686 $ 710
OE Market........................... 1,033 1,224 1,067 989
------ ------ ------ ------
1,440 1,814 1,753 1,699
------ ------ ------ ------
RIDE CONTROL SYSTEMS & PRODUCTS
Aftermarket......................... 483 685 782 768
OE Market........................... 550 738 691 513
------ ------ ------ ------
1,033 1,423 1,473 1,281
------ ------ ------ ------
Total Automotive............... $2,473 $3,237 $3,226 $2,980
====== ====== ====== ======
</TABLE>
CUSTOMERS
We have developed long-standing business relationships with our customers
around the world. We work 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, We are well-positioned to
meet customer needs. We have a strong, established reputation with customers for
providing high-quality products at competitive prices, as well as for timely
delivery and customer service.
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We serve more than 25 different original equipment manufacturers on a
global basis, and our products or systems are included on six of the top 10
passenger car models and eight of the top 10 light truck models produced
globally for 1998. Our 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>
Our aftermarket customers are comprised of full-line and specialty
warehouse distributors, retailers, jobbers (traditional automotive parts stores
that have historically sold primarily to installers), installer chains and car
dealers. These customers include such wholesalers and retailers as National Auto
Parts Association (NAPA), Monro Muffler Brake, and Advance Auto Parts in North
America and Temot, Autodistribution International and Kwik-Fit in Europe. We
have a balanced mix of aftermarket customers, with our top 10 aftermarket
customers accounting for less than 11% of our total net sales for .
For each of the last three years, fewer than five customers individually
accounted for 5% or more of our net sales. For example, Ford accounted for
approximately 11.5%, 13.2% and 12.8% of our net sales in 1996, 1997 and 1998,
respectively, and DaimlerChrysler accounted for approximately 9.6%, 8.9% and
10.9% of our net sales in 1996, 1997 and 1998, respectively. No other customer
accounted for more than 10% of our net sales for those years.
COMPETITION
We operate 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.
In both the OE market and aftermarket, we compete with the vehicle
manufacturers, some of which are also customers of ours, and numerous
independent suppliers. In the OE market, we believe that we are among the top
three suppliers in the world for both emissions control and ride control
products and
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systems. In the aftermarket, we believe that we are 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.
We design, manufacture and distribute 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.
We 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 our affiliates 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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The following table provides for each of the years 1996 through 1998, and
for the nine months ended September 30, 1999, information relating to our sales
of emissions control systems:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
----------------------------------------------
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------
SEPTEMBER 30, 1999 1998 1997 1996
------------------ ---- ---- ----
<S> <C> <C> <C> <C>
UNITED STATES MARKET
Aftermarket......................... 31% 37% 43% 46%
OE Market........................... 69% 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.
We design, manufacture and distribute a variety of ride control products
and systems. Our 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.
We manufacture and market replacement shock absorbers for virtually all
North American, European and Asian makes of automobiles. In addition, we
manufacture and market 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 top 10 passenger car
models and seven of the 10 top light truck models produced globally for 1998. We
entered the ride control product line in 1977 with the acquisition of Monroe
Auto Equipment, which was founded in 1916 and introduced the world's
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first automotive shock absorber in 1926. When the term "Monroe" is used in this
document it refers to our affiliates that produce ride control products and
systems.
The following table provides for each of the years 1996 through 1998, and
for the nine months ended September 30, 1999, information relating to our sales
of ride control equipment:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
----------------------------------------------
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------
SEPTEMBER 30, 1999 1998 1997 1996
------------------ ---- ---- ----
<S> <C> <C> <C> <C>
UNITED STATES MARKET
Aftermarket......................... 41% 43% 50% 62%
OE Market........................... 59% 57% 50% 38%
---- ---- ---- ----
100% 100% 100% 100%
==== ==== ==== ====
FOREIGN SALES
Aftermarket......................... 52% 53% 56% 59%
OE Market........................... 48% 47% 44% 41%
---- ---- ---- ----
100% 100% 100% 100%
==== ==== ==== ====
TOTAL SALES BY GEOGRAPHIC AREA
United States....................... 49% 47% 48% 48%
European Union...................... 29% 32% 27% 34%
Canada.............................. 5% 3% 3% 3%
Other areas......................... 17% 18% 22% 15%
---- ---- ---- ----
100% 100% 100% 100%
==== ==== ==== ====
</TABLE>
SALES AND MARKETING
We sell directly to original equipment manufacturers. To maintain our
customer focus, our 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 our headquarters.
For the aftermarket, we use 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. We maintain an
aftermarket customer order fill rate of 95%, which reflects the percentage of
the average customer order we are able to fill from inventory. We sell our
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
We use state-of-the-art manufacturing to achieve superior product quality
at the lowest operating costs possible. Our manufacturing strategy centers on a
lean production system that reduces overall costs -- especially indirect
costs -- while maintaining quality standards and reducing manufacturing cycle
time. We deploy new technology where it makes sense to differentiate our
processes from our 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> 90
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 eight manufacturing facilities in the U.S. and ten
engineering and technical facilities worldwide. Monroe also operates 17
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.
PROPERTIES
We lease our principal 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 eight manufacturing facilities in the U.S. and ten
engineering and technical facilities worldwide. Monroe also operates 17
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.
Our 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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<PAGE> 91
Of our properties described above, approximately one-half are owned and
one-half are leased. Twelve of the properties are held through joint ventures.
We also have distribution facilities at our manufacturing sites and at a few
offsite locations, substantially all of which are leased.
Our commitment to sound management practices and policies is also
demonstrated by our 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, we would not be able to supply original equipment manufacturers
locally or globally. Over 90% of our manufacturing facilities have achieved ISO
9000 certification, excluding facilities held in joint ventures. Of those 60
manufacturing facilities where we have determined that QS certification is
required to service our customers or would provide us with an advantage in
securing additional business, 85% have achieved QS 9000 certification, and we
are pursuing certification of the remaining 15%.
We believe that substantially all of our 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.
We also believe that we have generally satisfactory title to the properties
owned and used in our respective businesses.
STRATEGIC ACQUISITIONS AND ALLIANCES
Strategic acquisitions, joint ventures and alliances have been an important
part of our growth. Through this strategy, we have expanded to meet customers'
global requirements. This strategy has also allowed us to acquire or align with
companies that possess proven technology and research capabilities, furthering
our leadership in systems integration.
EMISSIONS CONTROL
- In 1996, we established a joint venture in Dalian, China to supply
emissions control systems to the Northern Chinese automotive market,
expanded our 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, we acquired Autocan, a Mexican catalytic converter and exhaust
pipe assembly manufacturer. We 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, we established a joint venture in Shanghai, China to supply
emissions control systems to the Central and Southern Chinese automotive
markets. We also established a joint venture in Pune, India to supply
emissions control systems to OE customers and the aftermarket.
- In 1999, we 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, we 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, we 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, we expanded our capability to
deliver ride control systems to original equipment
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<PAGE> 92
manufacturers. The Clevite acquisition also complemented our interest in
global growth opportunities, since both Clevite and Monroe have
manufacturing operations in Mexico and Brazil.
- In September 1996, we acquired full ownership of Monroe Amortisor Imalat
ve Ticaret, a Turkish shock absorber manufacturer, in which we previously
held a 16.7% ownership interest.
- In December 1996, we 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, we increased our interest in Fric-Rot to more than
99% through the purchase of additional shares.
- In 1996, we also expanded our presence in Australia's ride control
product market with the acquisition of National Springs.
- In 1997, we entered into a joint venture which resulted in our
acquisition of majority ownership of Armstrong, a leading South African
manufacturer of ride control products.
- In early 1999, we completed our acquisition of Kinetic, an Australian
advanced suspension engineering company with advanced roll-control
technology. Also in 1999, we licensed elastomer technology and equipment
from Draftex, a French company. We intend to apply this technology to
manufacturing engine mounts and ride control products for sale in Mexico,
Central America and South America.
LEGAL AND ENVIRONMENTAL PROCEEDINGS
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for information about our 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. The lawsuit alleges 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 lawsuit seeks treble damages in an unspecified
amount, plus attorney fees. Under and in accordance with the distribution
agreement, as between us and Pactiv, Pactiv will be responsible for defending
the claims and for any liability resulting from the action. Accordingly, we
believe the outcome of this litigation will not have a material adverse effect
on our financial position or results of operations.
We are party to various other legal proceedings arising from our
operations. We believe that the outcome of these other proceedings, individually
and in the aggregate, will not have a material adverse effect on our financial
position or results of operations.
OTHER
As of September 30, 1999, we 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 our 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 us is steel. We believe that an
adequate supply of steel can presently be obtained from a number of different
domestic and foreign suppliers.
We hold a number of domestic and foreign patents and trademarks relating to
our 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 us
are important in the manufacturing, marketing and distribution of our products.
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<PAGE> 93
MANAGEMENT
BOARD OF DIRECTORS
In connection with the spin-off, the Board of Directors of Tenneco Inc. was
restructured. This restructured Board of Directors governs our management and
operations now that the spin-off is complete.
Our Board of Directors is currently divided into three classes serving
staggered three-year terms. On October 25, 1999, our stockholders approved a
proposal to eliminate our staggered board structure and provide instead for the
annual election of directors. Under this proposal, 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 serve as our directors and their
terms is provided below.
Terms Expiring at the 2000 Annual Meeting of Stockholders -- Class I
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. He became a director of Pactiv in
connection with the spin-off.
DAVID B. PRICE, JR. -- Mr. Price has been an Executive Vice President of
the BF Goodrich Company and President and Chief Operating Officer of BF Goodrich
Performance Materials, a producer of chemical additives and specialty plastics
for use in consumer and industrial products, since July 1997. Prior to joining
BF Goodrich, 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 was named a director in
November 1999.
Terms Expiring at the 2001 Annual Meeting of Stockholders -- Class II
DANA G. MEAD, CHAIRMAN OF THE BOARD -- In connection with the spin-off, Mr.
Mead retired as Chief Executive Officer of Tenneco. He served as an executive
officer of Tenneco from April 1992, when he joined Tenneco as Chief Operating
Officer, to November 1999. 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, Pactiv (Chairman), 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. Mr. Mead will continue, on a non-executive basis, as the
Chairman of the Board through March 2000.
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 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 -- 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
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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 Tenneco since January
1998. He became a director of Pactiv in connection with the spin-off.
Terms Expiring at the 2002 Annual Meeting of Stockholders -- Class III
MARK P. FRISSORA -- Mr. Frissora is our Chief Executive Officer and has
been serving as our President since April 1999. From 1996 to April 1999, he held
various positions within our operations including Senior Vice President and
General Manager of North American Original Equipment. Mr. Frissora joined us in
1996 from Aeroquip-Vickers Corporation, where he served from 1991 as Vice
President of North American marketing, sales and distribution. Mr. Frissora is
44 years old.
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 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 -- Mr. Stecko became the Chief Executive Officer of
Packaging Corporation of America, Pactiv'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 Pactiv. Prior to joining Tenneco,
Mr. Stecko spent 16 years with International Paper Company. Mr. Stecko is 54
years old and has been a director of Tenneco since November 1998. He is also a
director of State Farm Mutual Insurance Company and the Chairman of the Board of
Packaging Corporation of America. He became a director of Pactiv in connection
with the spin-off.
EXECUTIVE OFFICERS
The following provides information concerning the persons who serve as our
executive officers now that the spin-off is complete. These individuals were
named as our company's executive officers effective November 4, 1999, the day of
the Pactiv spin-off, at which time the then-existing executive officers of
Tenneco resigned. Prior to that time, these individuals served Tenneco's
automotive operations in various capacities. Accordingly, for periods prior to
November 4, 1999, references to service to "us" or "our company" reflect
services to Tenneco's automotive operations.
<TABLE>
<CAPTION>
AGE AT
NAME SEPTEMBER 30, 1999 TITLE
---- ------------------ -----
<S> <C> <C>
Mark P. Frissora............... 44 Chief Executive Officer
Richard J. Sloan............... Executive Vice President and Managing Director --
Europe
Mark A. McCollum............... 40 Senior Vice President and Chief Financial Officer
Richard P. Schneider........... 52 Senior Vice President -- Global Administration
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............... 41 Senior Vice President and General Manager --
North American Aftermarket
</TABLE>
MARK P. FRISSORA -- See "-- Board of Directors," above, for information
about Mr. Frissora.
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RICHARD J. SLOAN -- Mr. Sloan was named our Executive Vice President and
Managing Director -- Europe in October 1999. Prior to joining our company, Mr.
Sloan spent 18 years with United Technologies Automotive ("UTA"). He served as
President of UTA's Worldwide Interior Division from 1998 to October 1999 and
President of UTA Europe from 1993 to 1998.
MARK A. MCCOLLUM -- Mr. McCollum joined us 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, 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.
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 our
worldwide operations. He joined us 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.
TIMOTHY R. DONOVAN -- Mr. Donovan was named Senior Vice President and
General Counsel of our company 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 BF Goodrich 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 our company's North
American aftermarket business. From March 1997 to March 1999, he served as Vice
President of Manufacturing for our company'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.
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STOCK OWNERSHIP OF MANAGEMENT
The following table shows, as of November 30, 1999, the number of shares of
our company's common stock beneficially owned by: (1) each director; (2) each
person who is named in the Summary Compensation Table, below; and (3) all
directors and executive officers, as a group. The table also shows: (a) common
stock equivalents held by these directors and executive officers under benefit
plans; and (b) the total number of shares of 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............................................. 5,147 -- 5,147
M. Kathryn Eickhoff...................................... 5,634 -- 5,634
Mark P. Frissora......................................... 112,202 75,000 187,202
Dana G. Mead............................................. 618,880 9,078 627,958
Sir David Plastow........................................ 4,900 -- 4,900
Roger B. Porter.......................................... 2,711 -- 2,711
David B. Price, Jr. ..................................... -- -- --
Paul T. Stecko........................................... 5,125 -- 5,125
EXECUTIVE OFFICERS
Mark A. McCollum......................................... 88,363 21,000 109,363
Richard P. Schneider..................................... 62,068 16,500 18,568
David G. Gabriel......................................... 39,669 15,000 54,669
All executive officers and directors as a group.......... 1,013,584(5) 199,578 1,213,162(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.
(2) Includes restricted shares. At November 30, 1999, Messrs. Frissora,
McCollum, Schneider and Gabriel held 68,385, 29,308, 29,308 and 19,538
restricted shares, respectively. Also includes shares that are subject to
options, which are exercisable within 60 days of November 30, 1999 for Ms.
Eickhoff and Messrs. Andrews, Frissora, Mead, Plastow, Porter, McCollum,
Schneider and Gabriel to purchase 3,764, 1,882, 39,315, 579,904, 3,764,
1,882, 58,273, 29,830 and 18,534 shares, respectively.
(3) Less than one percent of the outstanding shares of our common stock, except
(1) for Mr. Mead, who beneficially owns approximately 1.8% and (2) for all
directors and executive officers as a group, who beneficially own
approximately 2.9%.
(4) Common stock equivalents are distributed in shares of our common stock or,
in some circumstances, cash after the individual ceases to serve as a
director or officer or after the applicable performance period. 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 737,148 shares that are subject to options that are exercisable
within 60 days of November 30, 1999, by all executive officers and directors
as a group, and includes 214,924 restricted shares for all executive
officers and directors as a group.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has three standing committees. These committees have
the following described responsibilities and authority:
The Audit Committee, comprised solely of outside directors, has the
responsibility, among other things, to: (1) recommend the selection of our
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 our basic accounting system and the effectiveness of our internal audit plan
and activities; (4) review with management and the independent public
accountants our certified financial statements and exercise general oversight of
our financial reporting process; and (5) review with us litigation and other
legal matters that may affect our financial condition and monitor compliance
with our business ethics and other policies.
The Compensation/Nominating/Governance Committee, comprised solely of
outside directors, has the responsibility, among other things, to: (1) establish
the salary rate of officers and employees of our company and its subsidiaries;
(2) examine periodically the compensation structure of our company; and (3)
supervise the welfare and pension plans and compensation plans of our company.
It will also have
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significant corporate governance responsibilities, among other things, to: (a)
review and determine the desirable balance of experience, qualifications and
expertise among members of the Board; (b) review possible candidates for
membership on the Board and recommend a slate of nominees for election as
directors at our annual stockholders' meeting; (c) review the function and
composition of the other committees of the Board and recommend membership on
these committees; and (d) review the qualifications and recommend candidates for
election as officers of our company.
The Three-year Independent Director Evaluation Committee, comprised solely
of outside directors, has the responsibility, among other things, to review our
qualified offer rights plan at least every three years and, if it deems it
appropriate, recommend that the full Board modify or terminate that plan.
EXECUTIVE COMPENSATION
The following table shows the compensation paid for 1998 by Tenneco to: (1)
our Chief Executive Officer, who became our Chief Executive Officer upon the
spin-off of Pactiv; and (2) each of our next three most highly compensated
executive officers, based on 1998 compensation and after giving effect to the
Pactiv spin-off, other than the Chief Executive Officer. The table shows amounts
paid to these persons for all services provided to Tenneco and its subsidiaries.
Messrs. Sloan, Donovan and Jackson had no compensation from Tenneco and its
subsidiaries prior to 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION 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 65,870 $ 9,393
Chief Executive Officer
Mark A. McCollum........................... $211,800 $ 75,000 $110,678 -- 28,230 $ 584
Senior Vice President and Chief Financial
Officer
Richard P. Schneider....................... $216,310 $ 80,000 $ 39,169 -- 28,230 $12,683
Senior Vice President -- Global
Administration
David G. Gabriel........................... $182,353 $ 60,000 $ 15,720 $187,800 18,820 $ 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 in
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, McCollum, Schneider and Gabriel held 19,300; 7,000; 11,500; 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, $238,441 for
Mr. McCollum, $391,725 for Mr. Schneider and $275,910 for Mr. Gabriel. These
restricted shares and performance share equivalent units were vested
immediately prior to the spin-off. Dividends/Dividend Equivalents were paid
on the restricted shares/performance share equivalent units held by each
individual.
(4) Upon completion of the Pactiv spin-off, employee stock options granted
before the spin-off which remained outstanding were adjusted to give effect
to (1) the spin-off and (2) the one-for-five reverse stock split of our
common stock effected in connection with the spin-off. The adjustment for
the spin-off amended the number of shares subject to these options, as well
as their
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exercise prices, so that the options immediately after the spin-off had
equivalent economic terms to the options immediately before the spin-off.
Amounts presented give effect to this adjustment.
(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, McCollum, Schneider and Gabriel were $2,993, $584, $7,670 and
$2,288, respectively.
Upon completion of the spin-off and the separation of our automotive
business into a stand-alone public company, we made equity incentive awards to
our executive officers. These awards consisted of grants of stock options,
restricted stock and performance share units.
At the time of the spin-off, Messrs. Frissora, Sloan, McCollum, Schneider,
Donovan, Jackson and Gabriel received options to purchase 375,000, 165,000,
120,000, 90,000, 90,000, 90,000 and 75,000 shares of common stock, respectively,
at an exercise price equal to 100% of the fair market value of a share of common
stock on the date of grant. These grants are intended to represent three-year
awards.
Upon the spin-off, Messrs. Frissora, Sloan, McCollum, Schneider, Donovan,
Jackson and Gabriel were also granted 75,000, 30,000, 21,000, 16,500, 16,500,
16,500 and 15,000 performance share equivalent units, respectively. These grants
are also intended to represent a three-year award.
Also in connection with the spin-off, we awarded shares of restricted
common stock to our executive officers, which vest in equal annual increments
over three years, assuming the grantee continues to be employed by us. Messrs.
Frissora, Sloan, McCollum, Schneider, Donovan, Jackson and Gabriel were granted
68,385, 39,077, 29,308, 29,308, 29,308, 29,308 and 19,538 shares of restricted
common stock, respectively.
The final piece of the equity incentive awards we made in connection with
the spin-off is comprised of awards of common stock equivalent units which vest
in equal annual installments over a three-year period based on the achievement
of performance goals. The units are payable in cash based on the market price of
our common stock at the time of payment. Messrs. Frissora, Sloan, McCollum,
Schneider, Donovan, Jackson and Gabriel received 129,331, 54,038, 37,810,
29,189, 29,189, 29,189, 29,189 and 29,783 common stock equivalent units,
respectively.
Also at the time of the spin-off, Mr. Frissora's annual salary was
increased to $580,000 and his bonus target was increased to . Bonus
targets for Messrs. McCollum, Schneider, and Gabriel have been increased on a
prorated basis for 1999. See also "-- Termination of Employment and
Change-in-Control Arrangements."
OPTIONS GRANTED IN 1998
The following table shows the number of options to purchase Tenneco common
stock granted during 1998 to the persons named in the Summary Compensation Table
above.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OF TOTAL
COMMON STOCK OPTIONS GRANTED
UNDERLYING TO TENNECO EMPLOYEES EXERCISE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED(#)(1) IN 1998(%) PRICE($)(2) DATE PRESENT VALUE(3)
---- --------------------- -------------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Mr. Frissora......... 65,870 2.0% $19.46 7/21/08 $360,150
Mr. McCollum......... 28,230 .9% $19.46 7/21/08 $154,350
Mr. Schneider........ 28,230 .9% $19.46 7/21/08 $154,350
Mr. Gabriel.......... 18,820 .5% $19.46 7/21/08 $102,900
</TABLE>
- -------------------------
(1) Gives effect to the adjustments of outstanding options in connection with
the Pactiv spin-off and our one-for-five reverse stock split in November
1999 described in Note (1) to the Summary Compensation Table, above.
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<PAGE> 99
(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. The
exercise prices were adjusted to give effect to the Pactiv spin-off and our
one-for-five reverse stock split. See Note (1) to the Summary Compensation
Table, above.
(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................................................ 15,603 123,327
Mr. McCollum................................................ 42,299 93,315
Mr. Schneider............................................... 17,276 108,896
Mr. Gabriel................................................. 11,092 43,937
</TABLE>
- -------------------------
(1) Gives effect to the adjustments of outstanding options in connection with
the Pactiv spin-off and our one-for-five reverse stock split in November
1999 described in Note (1) to the Summary Compensation Table, above.
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.................. 1,000 4 years 25% 100% 150%
Mr. McCollum.................. 700 4 years 25% 100% 150%
Mr. Schneider................. 900 4 years 25% 100% 150%
Mr. Gabriel................... 400 4 years 25% 100% 150%
</TABLE>
- -------------------------
(1) Estimated future payouts are based on earnings per share ("EPS") from
continuing operations. However, these performance share equivalent units
were 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 common stock
that may be earned under the 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 the award,
adjusted to give effect to our one-for-five reverse stock split in November
1999.
(3) Performance share equivalent units are earned at the rate of 25% per year
based on achievement of annual EPS goals. However, these performance share
equivalent units were 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, these performance share
equivalent units were 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, Pactiv became the sponsor of the Tenneco Retirement Plan. We expect to
adopt a salaried defined benefit pension plan patterned after the Tenneco
Retirement Plan. Our plan will count service prior to the spin-off for all
purposes, including benefit accrual, but there will be an offset for benefits
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accrued under the Tenneco Retirement Plan. Therefore, as to our employees, the
benefits described in the table will be provided by a combination of payments
from the Tenneco Retirement Plan and our new plan. We also expect to adopt plans
similar to the Tenneco Inc. supplemental pension plan. We also expect 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
company-sponsored 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, McCollum, Schneider 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. Each director who is not also an employee of us or our
subsidiaries, an "outside director," will be paid a yearly retainer fee of
$35,000 for service on the 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 also
receive cash attendance fees and committee chair and membership fees, and
reimbursement of their expenses for attending meetings of the Board of
Directors. Outside directors receive $1,000 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 is paid a fee of $7,000 per
chairmanship. Outside directors who serve as members of these committees are
paid $4,000 per committee membership. Members of the Three-year Independent
Director Evaluation Committee 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 is paid in common stock equivalent units.
These directors' stock equivalents will be payable in shares of our common stock
after an outside director ceases to serve as a director. 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 5,000 shares of common stock and
1,000 performance share equivalent units as additional incentive compensation.
Directors options: (a) are granted with per share exercise prices equal to 100%
of the fair market value of a share of common stock on the day the option is
granted; (b) 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.
Deferred Compensation Plan. We 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
provides these directors
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with various investment options. The investment options will include stock
equivalent units of our common stock, which may be paid out in either cash or
shares of our common stock.
Restricted Stock. In satisfaction of residual obligations 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 our 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
We maintain a key executive change-in-control severance benefit plan. The
purpose of the plan is to enable us 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 our company, as
that term is defined in the plan. The plan is 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, we expect that Messrs. Frissora, McCollum, Schneider and Gabriel
would have become entitled to receive payments from us in the amount of
$ , $ , $ and $ , respectively, had
their positions been terminated on November 30, 1999 following a
change-in-control, based on their current 1999 salaries of $ ,
$ , $ and $ , respectively. In addition,
restricted shares held in the name of those individuals under restricted stock
plans would have automatically reverted to us, and we 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.
Other than in connection with a change-in-control, we have 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. We have 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. Sloan receives an annual salary of . His target bonus is
and he will be included in the group of executors who qualify for the
benefits described above with respect to a change in control.
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.
In connection with the spin-off, Mr. Mead resigned as Chief Executive
Officer of Tenneco, and he entered into a revised agreement with Tenneco. Under
that agreement: (1) Mr. Mead will be paid an
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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 Pactiv 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) was granted options to purchase up to
50,000 shares of Pactiv common stock and options to purchase up to 50,000 shares
of our common stock at the time of the spin-off. Mr. Mead's agreement is with an
entity which is a subsidiary of Pactiv now that the spin-off is complete, and
the expense associated therewith was included in the spin-off expenses and 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.
During 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 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 Pactiv. During
1999, Jenner & Block continued to provide legal services to Tenneco and its
subsidiaries.
For additional information concerning certain relationships between Tenneco
and members of Tenneco's management prior to the spin-off, see the Tenneco Inc.
Proxy Statement for the Annual Meeting of Shareowners held on May 11, 1999.
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PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of our company's common
stock beneficially owned as of December 27, 1999 by owners of more than 5% of
our common stock who are known to us.
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES OF PERCENT OF COMMON
OF BENEFICIAL OWNER(1) COMMON STOCK OWNED(1) STOCK OUTSTANDING(1)
---------------------- --------------------- --------------------
<S> <C> <C>
Barrow, Hanley, Mewhinney & Strauss, Inc. .......... 4,152,208(2) 12.32%(2)
One McKinney Plaza
3232 McKinney Avenue
15th Floor
Dallas, Texas 75204-2429
Gabelli Asset Management Inc........................ 2,405,220(3) 7.14%(3)
One Corporate Center
Rye, New York 10580-1435
Highfields Capital Management....................... 2,612,998(4) 7.76%(4)
200 Clarendon Street
Boston, Massachusetts 02117
</TABLE>
- -------------------------
(1) This information is based on information contained in filings made with the
Securities and Exchange Commission regarding the ownership of our common
stock, adjusted to give effect to the one-for-five reverse stock split we
completed on November 5, 1999.
(2) Barrow, Hanley, Mewhinney & Strauss, Inc. has indicated that it has sole
voting power over 906,768 shares, shared voting power over 3,245,440 shares,
and sole dispositive power over 4,152,208 shares. Barrow, Hanley also
advised Tenneco that it is a registered investment advisor and these shares
are held on behalf of various clients.
(3) Gabelli Funds, LLC ("Gabelli Funds"), a wholly-owned subsidiary of Gabelli
Asset Management Inc. ("GAMI"), is the beneficial owner of 2.68% of the
common stock outstanding. Gabelli Funds has indicated that it has sole
voting power over 903,000 shares and sole dispositive power over 903,000
shares. Gabelli Funds has the same principal business address as GAMI. GAMCO
Investors, Inc. ("GAMCO"), a wholly owned subsidiary of GAMI, is the
beneficial owner of 4.40% of the common stock outstanding. GAMCO has
indicated that it has sole voting power over 1,481,820 shares and sole
dispositive power over 1,482,220 shares. GAMCO has the same principal
business address as GAMI. Gemini Capital Management Ltd. ("Gemini") is the
beneficial owner of .06% of the common stock outstanding. Gemini has
indicated that it has sole voting power over 20,000 shares and sole
dispositive power over 20,000 shares. The address of Gemini's principal
office is as follows: c/o Appleby, Spurling & Kempe, Cedar House, Cedar
Avenue, Hamilton HM12, Bermuda. Mario J. Gabelli is the Chief Executive
Officer of GAMCO and the Chief Investment Officer of GAMCO and Gabelli
Funds. Marc Gabelli is the President and Chief Investment Officer of Gemini.
Gabelli Funds and GAMCO also advised Tenneco that they are registered
investment advisors.
(4) Highfields GP LLC ("Highfields GP") is the general partner of Highfields
Capital Management ("Highfields"). Highfields GP has the same principal
business address as Highfields. Highfields Capital Management LP
("Highfields Management") is the investment advisor to Highfields Capital I
LP ("Highfields I"), Highfields II LP ("Highfields II") and Highfields
Capital Ltd. ("Highfields Limited," collectively, the "Funds"). Highfields
Management has the same principal business address as Highfields. Jonathon
S. Jacobson and Richard L. Grubman are both managing partners of Highfields
GP. Highfields GP, Highfields Management, Mr. Jacobson and Mr. Grubman filed
a statement with respect to the common stock owned by the Funds. The Funds
are the beneficial owners of 7.76% of the common stock outstanding. The
Funds have sole voting power over 2,612,998 shares and sole dispositive
power over 2,612,998 shares. Highfields Limited is the beneficial owner of
5.6% of the common stock outstanding. Highfields Limited has indicated that
it has sole voting power over 1,878,239 shares and sole dispositive power
over 1,878,239 shares. Highfields Limited's principal business address is as
follows: c/o Goldman Sachs (Cayman) Trust, Limited, Harbour Centre, North
Church Street, P.O. Box 896, George Town, Grand Cayman, Cayman Islands.
Neither Highfields I nor Highfields II owns more than 5% of the common stock
outstanding.
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DESCRIPTION OF SENIOR CREDIT FACILITY
GENERAL
In connection with the spin-off, we entered into a senior secured credit
facility with a syndicate, or group, of banks and financial institutions,
including Citibank as syndication agent, Commerzbank and Bank of America as
co-documentation agents and The Chase Manhattan Bank as administrative agent for
the lenders' syndicate. The credit facility is referred to as a senior credit
facility because borrowings under the credit facility are our unsubordinated
obligations and are secured as described below under the heading "-- Guarantee;
Security."
As is customary when a number of financial institutions form a syndicate to
make a loan, the lead arranger is responsible for enlisting other financial
institutions to participate in the loan. The syndication agent and the
administrative agent are authorized to perform mechanical and administrative
functions associated with making and monitoring the loan on behalf of all of the
other lenders who make up the lending syndicate.
The senior secured credit facility consists of:
- a Term Loan A facility of $450 million in term loans;
- a Term Loan B facility of $300 million in term loans;
- a Term Loan C facility of $300 million in term loans; and
- the revolving credit facility of up to $500 million in revolving credit
loans, including letters of credit of up to $250 million.
We borrowed $1,072 million under the senior secured credit facility
substantially contemporaneously with the spin-off, which consisted of $1,050
million in term loans and $22 million under the revolving credit facility. The
proceeds of these borrowings were used to fund a portion of the debt
realignment. Following the spin-off, the revolving credit facility will be
available for general corporate purposes.
REPAYMENT
The terms of the senior secured credit facility require that the revolving
credit facility be repaid on or before the sixth anniversary of the funding
date. Prior to that date, funds may be borrowed, repaid and reborrowed under the
revolving credit facility 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
The senior credit facility is jointly and severally guaranteed by each of
our material direct and indirect domestic subsidiaries. The senior credit
facility is also secured by substantially all of our tangible and intangible
domestic assets and is collateralized by a perfected security interest in all of
the capital stock of our material domestic subsidiaries and in up to 66% of the
capital stock of our first-tier foreign subsidiaries. The collateral will be
permanently released if we achieve specified long-term debt ratings and a
portion of the term loans has been paid in full.
COVENANTS
The senior credit facility requires us to maintain compliance with the
following financial tests:
- Maximum Leverage Ratio. Our maximum leverage ratio, which is the ratio of
our consolidated indebtedness to our consolidated EBITDA, cannot exceed a
fixed amount at the end of each period of four consecutive fiscal
quarters commencing with the quarter ending March 31, 2000.
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- Minimum Fixed Charge Coverage Ratio. Our fixed charge coverage ratio,
which is the ratio of our consolidated EBITDA less our consolidated
capital expenditures to our consolidated cash interest expense, must
exceed a minimum level at the end of each period of four consecutive
fiscal quarters commencing with the period ending December 31, 2000.
- Minimum Interest Coverage Ratio. Our interest coverage ratio, which is
the ratio of consolidated EBITDA to consolidated cash interest expense,
must exceed a minimum level at the end of each period of four consecutive
fiscal quarters commencing with the period ending on December 31, 2000.
For the fiscal quarters ending March 31, June 30 and September 30, 2000,
our interest coverage ratio must exceed the minimum level for the one,
two or three fiscal quarters, respectively, ending with each such fiscal
quarter.
In addition, the senior secured credit facility contains negative covenants
limiting (with some exceptions), among other things:
- additional liens;
- additional indebtedness or guarantees;
- additional capital expenditures;
- transactions with affiliates;
- mergers and consolidations;
- prepayments and modifications of the outstanding and new notes, and other
debt instruments;
- additional lines of business;
- liquidations and dissolutions;
- sales or other dispositions of assets;
- dividends;
- investments;
- loans and advances; and
- sales and leasebacks.
INTEREST
The borrowings under the senior secured credit facility bear interest at a
floating rate and may be maintained as base rate loans or as Eurodollar loans.
Base rate loans bear interest at the base rate, which is the greater of (1) the
applicable prime lending rate of the administrative agent or (2) the Federal
Funds Effective Rate plus 1/2 of 1%, plus, in each case, the applicable margin
as described below. Eurodollar loans will bear interest at the Eurodollar rate
as described in the senior secured credit facility, plus the applicable margin
as described below.
The applicable margin with respect to the revolving credit facility and
Term Loan A will vary from time to time in accordance with a pricing grid based
on our leverage ratio. The initial applicable margin with respect to the
revolving credit facility and Term Loan A is (1) 1.75%, in the case of base rate
loans and (2) 2.75% in the case of Eurodollar loans. The applicable margins with
respect to Term Loan B and Term Loan C will not fluctuate. The applicable margin
for Term Loan B is (1) 2.25% in the case of base rate loans and (2) 3.25% in the
case of Eurodollar loans. The applicable margin with respect to Term Loan C is
(1) 2.50% in the case of base rate loans and (2) 3.50% in the case of Eurodollar
loans.
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MANDATORY PREPAYMENTS
The senior secured credit facility requires us to prepay the term loan
facilities with:
- 100% of the net proceeds of any issuance or incurrence of indebtedness
after the funding date by us or our subsidiaries, subject to exceptions
for permitted debt;
- 50% of the net proceeds of any issuance of equity by us or our
subsidiaries, subject to some exceptions;
- 100% of the net proceeds of any sale or other disposition by us or our
subsidiaries of any assets, subject to certain exceptions, unless such
proceeds are reinvested in assets useful in our business, with certain
exceptions;
- 75% of excess cash flow as defined in the senior credit facility; and
- 100% of the net proceeds of casualty insurance, condemnation awards or
other recoveries, to the extent such proceeds are not reinvested in other
assets useful in our business and subject to some other exceptions.
The mandatory prepayment percentages listed above, other than the
percentage relating to issuance of equity, will be reduced if we achieve certain
performance measures established in the facility.
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DESCRIPTION OF THE NEW NOTES
The Company issued the outstanding notes, and will issue the new notes,
under an indenture (the "Indenture") dated as of October 14, 1999, as amended,
by and among the Company, the Guarantors and The Bank of New York, as Trustee
(the "Trustee"). The following summary of the Indenture does not include all of
the information included in the Indenture and may not include all of the
information that you would consider important. This summary is qualified by
reference to the Trust Indenture Act of 1939, as amended (the "TIA"), and to all
of the provisions of the Indenture, including the definitions of terms therein
and those terms made a part of the Indenture by reference to the TIA as in
effect on the date of the Indenture. A copy of the Indenture may be obtained
from us and is filed as an exhibit to the registration statement that includes
this prospectus. The definitions of most of the capitalized terms used in the
following summary are set forth below under "-- Certain Definitions." For
purposes of this section, references to the "Company" include only Tenneco
Automotive Inc. and not its Subsidiaries.
The new notes will be unsecured obligations of the Company, ranking
subordinate in right of payment to all Senior Debt of the Company. The form and
terms of the new notes will be identical to the outstanding notes except for the
following:
(1) the new notes bear a Series B designation and a different CUSIP
number from the outstanding notes to differentiate the new notes from the
outstanding notes;
(2) the new notes have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer; and
(3) the holders of the new notes will not generally be entitled to
rights under the registration rights agreement, including the provisions
providing for an increase in the interest rate on the notes in certain
circumstances relating to the timing of the exchange offer, all of which
rights generally will terminate when the exchange offer is terminated.
As used in this section, unless the context otherwise requires, the term
"notes" refers collectively to all notes issued under the indenture, including
the outstanding notes and new notes.
The new notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the Trustee will act as paying agent and registrar for the notes. The notes may
be presented for registration or transfer and exchange at the offices of the
registrar, which initially will be the Trustee's corporate trust office. The
Company may change any paying agent and registrar without notice to holders of
the notes. The Company will pay principal (and premium, if any) on the notes at
the Trustee's corporate office in New York, New York. Interest may be paid at
the Trustee's corporate trust office, by check mailed to the registered address
of the holders or by wire transfer if instructions therefor are furnished by a
holder. Any outstanding notes that remain outstanding after the completion of
the exchange offer, together with the new notes issued in connection with the
exchange offer, will be treated as a single class of securities under the
Indenture.
PRINCIPAL, MATURITY AND INTEREST
The notes are limited in aggregate principal amount to $750,000,000, of
which $500,000,000 were issued on the Issue Date, and will mature on October 15,
2009. Additional notes may be issued from time to time subject to the
limitations set forth under "Certain Covenants -- Limitation on Incurrence of
Additional Indebtedness." Interest on the notes will accrue at the rate of
11 5/8% per annum and will be payable semiannually in cash on each April 15 and
October 15 commencing on April 15, 2000, to the persons who are registered
holders at the close of business on the April 1 and October 1 immediately
preceding the applicable interest payment date. Interest on the notes will
accrue from and including the most recent date to which interest has been paid
or, if no interest has been paid, from and including the date of issuance,
provided, however, that interest on any new notes issued in the exchange offer
will accrue from and including the Issue Date for the outstanding notes. See
"The Exchange Offer -- Interest on the New Notes.".
The notes will not be entitled to the benefit of any mandatory sinking
fund.
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REDEMPTION
Optional Redemption. The notes will be redeemable, at the Company's option,
in whole at any time or in part from time to time, on and after October 15, 2004
upon not less than 30 nor more than 60 days' notice, at the following redemption
prices (expressed as percentages of the principal amount thereof) if redeemed
during the twelve-month period commencing on October 15 of the applicable year
set forth below, plus, in each case, accrued and unpaid interest, if any, to the
date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2004........................................................ 105.813%
2005........................................................ 103.875%
2006........................................................ 101.938%
2007 and thereafter......................................... 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings. At any time, or from time
to time, on or prior to October 15, 2002, the Company may, at its option, use
all or any portion of the net cash proceeds of one or more Public Equity
Offerings (as defined below) to redeem up to 35% of the aggregate principal
amount of the notes issued at a redemption price equal to 111.625% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of redemption; provided that at least 65% of the aggregate principal amount of
notes issued remains outstanding immediately after any such redemption. In order
to effect the foregoing redemption with the proceeds of any Public Equity
Offering, the Company shall make such redemption not more than 180 days after
the consummation of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with the Commission in accordance with the
Securities Act.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the notes are to be redeemed at any
time, selection of the notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the notes are listed or, if the notes are not then listed on a
national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that:
- no notes of a principal amount of $1,000 or less shall be redeemed in
part; and
- if a partial redemption is made with the proceeds of a Public Equity
Offering, selection of the notes or portions thereof for redemption shall
be made by the Trustee only on a pro rata basis or on as nearly a pro
rata basis as is practicable (subject to DTC procedures), unless such
method is otherwise prohibited.
Notice of an optional redemption shall be mailed at least 30 but not more
than 60 days before the redemption date (other than with respect to an optional
special redemption, as described above) to each holder of notes to be redeemed
at its registered address. If any note is to be redeemed in part only, the
notice of redemption that relates to such note shall state the portion of the
principal amount thereof to be redeemed. A separate note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the holder
thereof upon cancellation of the original note. On and after the redemption
date, interest will cease to accrue on notes or portions thereof called for
redemption as long as the Company has deposited with the paying agent funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
SUBORDINATION
The payment of all Obligations on the notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt. Upon any payment or distribution of assets or
securities of the Company of any kind or character, whether in cash, property or
securities, to
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creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due upon all Senior Debt must first be paid in full
in cash or Cash Equivalents, or such payment duly provided for to the
satisfaction of the holders of Senior Debt, before any payment or distribution
of any kind or character is made on account of any Obligations on the notes. If
any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any principal of,
interest on, unpaid drawings for letters of credit issued in respect of,
regularly accruing fees with respect to, or other Obligations with respect to,
any Senior Debt, no payment or distribution of any kind or character shall be
made by or on behalf of the Company with respect to any Obligations on the notes
or to acquire, redeem or defease any of the notes for cash or property or
otherwise. In addition, if any other event of default occurs and is continuing
with respect to any Designated Senior Debt, as such event of default is defined
in the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for such Designated Senior Debt gives
written notice of the event of default to the Trustee (a "Default Notice"),
then, unless and until all events of default with respect to such Designated
Senior Debt have been cured or waived or have ceased to exist or the Trustee
receives notice from the Representative for such Designated Senior Debt
terminating the Blockage Period (as defined below), during the 179 days after
the delivery of such Default Notice (the "Blockage Period"), neither the Company
nor any other Person on its behalf shall:
- make any payment or distribution of any kind or character with respect to
any Obligations on the notes; or
- acquire, redeem or defease any of the notes for cash or property or
otherwise.
Notwithstanding anything herein to the contrary, in no event will a
Blockage Period extend beyond 179 days from the date the Default Notice was
delivered to the Trustee and only one such Blockage Period may be commenced
within any 360 consecutive days. No event of default which existed or was
continuing on the date of the commencement of any Blockage Period with respect
to the Designated Senior Debt shall be, or be made, the basis for commencement
of a second Blockage Period by the Representative of such Designated Senior Debt
whether or not after a period of 360 consecutive days, unless such event of
default shall have been cured or waived or ceased to exist for a period of not
less than 90 consecutive days (it being acknowledged that any subsequent action,
or any breach of any financial covenants for a period commencing after the date
of commencement of such Blockage Period that, in either case, would give rise to
an event of default pursuant to any provisions of the Designated Senior Debt
under which an event of default previously existed or was continuing shall
constitute a new event of default for this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the holders of notes, may recover less, ratably, than holders of Senior Debt.
Any payment or distribution made to the Trustee or the holders of the notes
at a time when such payment or distribution is prohibited by the subordination
provisions of the Indenture shall be turned over to the holders of the Senior
Debt or their Representative as their interests may appear.
GUARANTEES
The notes are guaranteed by each of the Company's Wholly Owned Domestic
Restricted Subsidiaries (other than any Immaterial Domestic Subsidiaries) as of
the Spin-Off Date (after giving effect to the Spin-Off Transactions) and will be
guaranteed by certain of the Company's Restricted Subsidiaries formed or
acquired after the Spin-Off Date. See "-- Certain Covenants -- Issuance of
Subsidiary Guarantees." The Guarantee of each Guarantor will be subordinated to
all Guarantor Senior Debt of such Guarantor to the same extent as the notes are
subordinated to all Senior Debt. In the event of either (i) the issuance or sale
of Capital Stock of a Guarantor which results in the Guarantor no longer being a
Subsidiary of the
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Company, (ii) a Guarantor becoming an Unrestricted Subsidiary or (iii) the sale
of all or substantially all of the assets of a Guarantor pursuant to an Asset
Sale which complies with the provisions set forth under "-- Certain
Covenants -- Limitation on Asset Sales," the applicable Guarantor's Guarantee
will be released. The amount of each Guarantee will be limited to the extent
required under applicable fraudulent conveyance laws to cause such Guarantee to
be enforceable.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each holder will have the right to require that the Company purchase all or a
portion of such holder's notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest, if any, thereon to the date of purchase.
The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Company will:
- repay in full and terminate all commitments under all Indebtedness under
the Credit Agreement and all other Senior Debt the terms of which require
repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit
Agreement and all other such Senior Debt and to repay the Indebtedness
owed to each lender or holder which has accepted such offer; or
- obtain the requisite consents under the Credit Agreement and all other
Senior Debt to permit the repurchase of the notes as provided below.
The Company shall first comply with the covenant in the immediately
preceding sentence before it shall be required to repurchase notes pursuant to
the provisions described below.
Within 30 days following the date upon which the Change of Control occurs,
the Company must send, by first class mail, a notice to each holder, with a copy
to the Trustee, which notice shall govern the terms of the Change of Control
Offer. Such notice shall state, among other things, the purchase date, which
must be no earlier than 30 days nor later than 60 days from the date such notice
is mailed, other than as may be required by law (the "Change of Control Payment
Date"). Holders electing to have a note purchased pursuant to a Change of
Control Offer will be required to surrender the note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the note completed, to
the paying agent at the address specified in the notice prior to the close of
business on the third business day prior to the Change of Control Payment Date.
If a Change of Control Offer is required to be made, there can be no
assurance that the Company will be permitted by the terms of its Senior Debt to
make such a Change of Control Offer or that it will have available funds
sufficient to pay either (1) all Indebtedness under the Credit Agreement and
other Senior Debt the terms of which require payments upon a Change of Control
or (2) the Change of Control purchase price for all the notes that might be
delivered by holders seeking to accept the Change of Control Offer. In the event
the Company is required to purchase outstanding notes pursuant to a Change of
Control Offer, the Company expects that it would seek third party financing to
the extent it does not have available funds to meet its purchase obligations.
However, there can be no assurance that the Company would be able to obtain such
financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a holder's right to require the purchase of notes upon a
Change of Control. Restrictions in the Indenture described herein on the ability
of the Company and the Restricted Subsidiaries to incur additional Indebtedness,
to grant Liens on their property, to make Restricted Payments and to make Asset
Sales may also make more difficult or discourage a takeover of the Company,
whether favored or opposed by the management of the Company. Consummation of any
such transaction in certain circumstances may require the purchase of the notes,
and there can be no assurance that the Company or the acquiring party will have
sufficient financial resources to effect such purchase. Such restrictions and
the restrictions on transactions with Affiliates may, in certain circumstances,
make more difficult or discourage any leveraged
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buyout of the Company or any of its Subsidiaries by the management of the
Company. While such restrictions cover a wide variety of arrangements which have
traditionally been used to effect highly leveraged transactions, the Indenture
may not afford the holders protection in all circumstances from the adverse
aspects of a highly leveraged transaction, reorganization, restructuring, merger
or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent such
laws and regulations are applicable in connection with a Change of Control
Offer. To the extent that the provisions of any securities laws or regulations
conflict with the "Change of Control" provisions of the Indenture, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under the "Change of Control"
provisions of the Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. On the Spin-Off Date
(after giving effect to the Spin-Off Transactions) and after the Spin-Off Date
the Company will not, and will not permit any of the Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "incur") any Indebtedness (other than
Permitted Indebtedness); provided, however, that if no Default or Event of
Default shall have occurred and be continuing at the time of or as a consequence
of the incurrence of any such Indebtedness:
(a) the Company, any Guarantor, any Finance Subsidiary that is a
Domestic Restricted Subsidiary and any Accounts Receivable Entity that is a
Domestic Restricted Subsidiary may incur Indebtedness (including, without
limitation, Acquired Indebtedness) if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the
Consolidated Fixed Charge Coverage Ratio of the Company would be greater
than:
- 2.0 to 1.0, if the incurrence were to occur on or prior to October 15,
2001; or
- 2.25 to 1.0, if the incurrence were to occur after October 15, 2001;
and
(b) any Restricted Subsidiary that is not a Guarantor (and is not a
Finance Subsidiary or an Accounts Receivable Entity that is a Domestic
Restricted Subsidiary) may incur Indebtedness (including, without
limitation, Acquired Indebtedness) if, on the date of the incurrence of
such Indebtedness, after giving effect to the incurrence thereof:
(i) the Consolidated Fixed Charge Coverage Ratio of the Company
would be greater than:
- 2.0 to 1.0, if the incurrence were to occur on or prior to October
15, 2001; or
- 2.25 to 1.0, if the incurrence were to occur after October 15,
2001; and
(ii) if the agreements governing such Indebtedness contain an
encumbrance or restriction on the ability of the applicable Restricted
Subsidiary that is not a Guarantor (and is not a Finance Subsidiary or
an Accounts Receivable Entity that is a Domestic Restricted Subsidiary)
to pay dividends or make distributions on or in respect of its Capital
Stock, the Combined Fixed Charge Coverage Ratio of the Restricted
Subsidiaries that are not Guarantors would be greater than 2.5 to 1.0.
No Indebtedness incurred pursuant to the Consolidated Fixed Charge Coverage
Ratio test of the preceding paragraph (including, without limitation,
Indebtedness under the Credit Agreement) shall reduce the amount of Indebtedness
which may be incurred pursuant to any clause of the definition of Permitted
Indebtedness (including without limitation, Indebtedness under the Credit
Agreement pursuant to clause (2) of the definition of Permitted Indebtedness).
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Limitation on Restricted Payments. On the Spin-Off Date (after giving
effect to the Spin-Off Transactions) and after the Spin-Off Date, the Company
will not, and will not cause or permit any of the Restricted Subsidiaries to,
directly or indirectly:
(a) declare or pay any dividend or make any distribution (other than
dividends or distributions payable in Qualified Capital Stock of the
Company) on or in respect of shares of its Capital Stock to holders of such
Capital Stock (including by means of a Person (including an Unrestricted
Subsidiary) making such a payment with the proceeds of an Investment made
by the Company or any Restricted Subsidiary);
(b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any warrants, rights or options to purchase
or acquire shares of any class of such Capital Stock (including by means of
a Person (including an Unrestricted Subsidiary) making such a payment with
the proceeds of an Investment made by the Company or any Restricted
Subsidiary); or
(c) make any Investment (other than Permitted Investments);
(each of the foregoing actions set forth in clauses (a), (b) and (c) being
referred to as a "Restricted Payment"), if at the time of such Restricted
Payment or immediately after giving effect thereto:
(1) a Default or an Event of Default shall have occurred and be
continuing;
(2) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
covenant described under "-- Limitation on Incurrence of Additional
Indebtedness"; or
(3) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made after the Spin-Off Date (the amount
expended for such purpose, if other than in cash, being the Fair Market
Value of such property as determined reasonably and in good faith by the
Board of Directors of the Company) shall exceed the sum of:
(v) $30.0 million; plus
(w) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of the
Company earned during the period beginning on the first day of the
fiscal quarter during which the Spin-Off Date occurs and through the end
of the most recent fiscal quarter for which financial statements are
available prior to the date such Restricted Payment occurs (the
"Reference Date") (treating such period as a single accounting period);
plus
(x) 100% of the Fair Market Value of the net proceeds received by
the Company from any Person (other than a Subsidiary of the Company)
from the issuance and sale subsequent to the Spin-Off Date and on or
prior to the Reference Date of Qualified Capital Stock of the Company
(excluding any net proceeds from a Public Equity Offering to the extent
used to redeem notes); plus
(y) without duplication of any amounts included in clause (3)(x)
above, 100% of the Fair Market Value of the net proceeds of any
contribution to the common equity capital of the Company received by the
Company from a holder of the Company's Capital Stock (excluding any net
proceeds from a Public Equity Offering to the extent used to redeem the
notes) subsequent to the Spin-Off Date; plus
(z) an amount equal to the lesser of (A) the sum of the Fair Market
Value of the Capital Stock of an Unrestricted Subsidiary owned by the
Company and/or the Restricted Subsidiaries and the aggregate amount of
all Indebtedness of such Unrestricted Subsidiary owed to the Company and
each Restricted Subsidiary on the date of Revocation of such
Unrestricted Subsidiary as an Unrestricted Subsidiary in accordance with
the covenant described under "-- Limitation on Designations of
Unrestricted Subsidiaries" or (B) the Designation Amount with respect to
such Unrestricted Subsidiary on the date of the Designation of such
Subsidiary as
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an Unrestricted Subsidiary in accordance with the covenant described
under "-- Limitation on Designations of Unrestricted Subsidiaries."
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of such dividend if the dividend would have been permitted on
the date of declaration;
(2) the acquisition of any shares of Capital Stock of the Company,
either (A) solely in exchange for shares of Qualified Capital Stock of the
Company or (B) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of
shares of Qualified Capital Stock of the Company;
(3) so long as no Default or Event of Default shall have occurred and
be continuing, repurchases of Capital Stock (or rights or options therefor)
of the Company from officers, directors, employees or consultants pursuant
to equity ownership or compensation plans or stockholders agreements not to
exceed $15.0 million in the aggregate;
(4) dividends and distributions paid on Common Stock of a Restricted
Subsidiary on a pro rata basis;
(5) the distribution of the Capital Stock of Packaging to the
Company's shareholders pursuant to the Spin-Off Transactions; and
(6) repurchases on the Spin-Off Date in connection with the Spin-Off
Transactions, of any of the Variable Rate Voting Participating Preferred
Stock, par value $.01, of Tenneco International Holding Corp. outstanding
on the Issue Date.
In determining the aggregate amount of Restricted Payments made subsequent
to the Spin-Off Date in accordance with clause (3) of the first paragraph of
this covenant "-- Limitation on Restricted Payments", amounts expended pursuant
to clauses (1), (2) and (3) shall be included in such calculation.
Limitation on Asset Sales. After the Spin-Off Date the Company will not,
and will not permit any of the Restricted Subsidiaries to, consummate an Asset
Sale unless:
(1) the Company or the applicable Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the assets sold or otherwise disposed of;
(2) at least 75% of the consideration received by the Company or the
Restricted Subsidiary, as the case may be, from such Asset Sale shall be in
the form of cash or Cash Equivalents and is received at the time of such
disposition; and
(3) upon the consummation of an Asset Sale, the Company shall apply,
or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 365 days after receipt thereof either
(A) to repay any Senior Debt, Guarantor Senior Debt or Indebtedness of a
Restricted Subsidiary that is not a Guarantor, (B) to acquire Replacement
Assets, or (C) a combination of prepayment and investment permitted by the
foregoing clauses (3)(A) and (3)(B).
On the 366th day after an Asset Sale or such earlier date, if any, as the
Board of Directors of the Company or of such Restricted Subsidiary determines
not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in
clauses (3)(A), (3)(B) and (3)(C) of the preceding paragraph (each, a "Net
Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which
have not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (3)(A), (3)(B) and (3)(C) of the preceding paragraph (each
a "Net Proceeds Offer Amount") shall be applied by the Company to make an offer
to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer
Payment Date") not less than 30 nor more than 60 days following the applicable
Net Proceeds Offer Trigger Date, from all holders on a pro rata basis, that
principal amount of notes equal to the Net Proceeds Offer Amount at a
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price equal to 100% of the principal amount of the notes to be purchased, plus
accrued and unpaid interest, if any, thereon to the date of purchase; provided,
however, that if at any time any non-cash consideration received by the Company
or any Restricted Subsidiary, as the case may be, in connection with any Asset
Sale is converted into or sold or otherwise disposed of for cash (other than
interest received with respect to any such non-cash consideration) or Cash
Equivalents, then such conversion or disposition shall be deemed to constitute
an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in
accordance with this covenant.
The Company may defer the Net Proceeds Offer until there is an aggregate
unutilized Net Proceeds Offer Amount equal to or in excess of $35.0 million
resulting from one or more Asset Sales or deemed Asset Sales (at which time, the
entire unutilized Net Proceeds Offer Amount, and not just the amount in excess
of $35.0 million, shall be applied as required pursuant to this paragraph). The
first such date the aggregate unutilized Net Proceeds Offer Amount is equal to
or in excess of $35.0 million shall be treated for this purpose as the Net
Proceeds Offer Trigger Date.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and the Restricted Subsidiaries after the
Spin-Off Date as an entirety to a Person in a transaction permitted under "--
Merger, Consolidation and Sale of Assets," the successor corporation shall be
deemed to have sold the properties and assets of the Company and the Restricted
Subsidiaries not so transferred for purposes of this covenant, and shall comply
with the provisions of this covenant with respect to such deemed sale as if it
were an Asset Sale. In addition, the Fair Market Value of such properties and
assets of the Company or the Restricted Subsidiaries deemed to be sold shall be
deemed to be Net Cash Proceeds for purposes of this covenant.
Each Net Proceeds Offer will be mailed to the record holders as shown on
the register of holders within 30 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the Indenture. Upon receiving notice of the Net Proceeds Offer, holders may
elect to tender their notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent holders properly tender notes in an amount
exceeding the Net Proceeds Offer Amount, notes of tendering holders will be
purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer
shall remain open for a period of 20 business days or such longer period as may
be required by law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent such
laws and regulations are applicable in connection with the repurchase of notes
pursuant to a Net Proceeds Offer. To the extent that the provisions of any
securities laws or regulations conflict with the "Asset Sale" provisions of the
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
"Asset Sale" provisions of the Indenture by virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist after the Spin-Off Date or become effective after the Spin-Off
Date, any encumbrance or restriction on the ability of any Restricted Subsidiary
to:
(a) pay dividends or make any other distributions on or in respect of
its Capital Stock;
(b) make loans or advances or to pay any Indebtedness or other
obligation owed to the Company or any other Restricted Subsidiary; or
(c) transfer any of its property or assets to the Company or any other
Restricted Subsidiary,
except for such encumbrances or restrictions existing under or by reasons of:
(1) applicable law;
(2) the Indenture;
(3) the Credit Agreement;
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(4) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary;
(5) any instrument governing Acquired Indebtedness, which encumbrance
or restriction is not applicable to any Person, or the properties or assets
of any Person, other than the Person or the properties or assets of the
Person so acquired;
(6) agreements existing on the Spin-Off Date to the extent and in the
manner such agreements are in effect on the Spin-Off Date;
(7) any other agreement entered into after the Spin-Off Date which
contains encumbrances and restrictions which are not materially more
restrictive with respect to any Restricted Subsidiary than those in effect
with respect to such Restricted Subsidiary pursuant to agreements as in
effect on the Spin-Off Date;
(8) any instrument governing Indebtedness of a Foreign Restricted
Subsidiary;
(9) customary restrictions on the transfer of any property or assets
arising under a security agreement governing a Lien permitted under the
Indenture;
(10) any agreement governing Refinancing Indebtedness incurred to
Refinance the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (5), (6) or (8) above; provided,
however, that the provisions relating to such encumbrance or restriction
contained in any such Refinancing Indebtedness are not materially more
restrictive than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (5), (6) or (8);
(11) any agreement governing the sale or disposition of any Restricted
Subsidiary which restricts dividends and distributions pending such sale or
disposition; and
(12) any agreement, instrument or Lien placing encumbrances or
restrictions applicable only to a Finance Subsidiary or an Accounts
Receivable Entity.
Limitation on Issuances of Capital Stock of Restricted Subsidiaries. The
Company will not permit any of the Restricted Subsidiaries (other than a Finance
Subsidiary or an Accounts Receivable Entity) to issue any Preferred Stock after
the Spin-Off Date (other than to the Company or to a Restricted Subsidiary) or
permit any Person (other than the Company or a Restricted Subsidiary) to own
after the Spin-Off Date any Preferred Stock of any Restricted Subsidiary (other
than a Finance Subsidiary or an Accounts Receivable Entity). The Company will
not, and will not permit any Restricted Subsidiary to, issue, sell, transfer or
dispose of on or after the Spin-Off Date any Capital Stock of any Restricted
Subsidiary (other than a Finance Subsidiary or an Accounts Receivable Entity)
that is not a Guarantor (other than the granting of Liens permitted by the
covenant described under "-- Limitation on Liens") unless such issuance, sale,
transfer or disposition results in the issuer of such Capital Stock no longer
being a Restricted Subsidiary.
Limitation on Liens. The Company will not, and will not cause or permit any
of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or permit or suffer to exist after the Spin-Off Date, any Liens of any kind
against or upon any property or assets of the Company or any of the Guarantors,
whether owned on the Spin-Off Date or acquired after the Spin-Off Date, or any
proceeds therefrom, or assign or otherwise convey any right to receive income or
profits therefrom unless:
(1) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the notes or a Guarantee, the
notes or such Guarantee are secured by a Lien on such property, assets or
proceeds that is senior in priority to such Liens; and
(2) in all other cases, the notes are equally and ratably secured,
except for:
(A) Liens existing as of the Spin-Off Date to the extent and in the
manner such Liens are in effect on the Spin-Off Date;
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(B) Liens securing Senior Debt and Liens securing Guarantor Senior
Debt;
(C) Liens securing the notes and any Guarantees;
(D) Liens in favor of the Company or a Guarantor;
(E) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness secured by a Lien permitted under the
Indenture; provided, however, that such Liens do not extend to or cover
any property or assets of the Company or any of the Restricted
Subsidiaries not securing the Indebtedness so Refinanced; and
(F) Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. The Company will
not, and will not permit any Guarantor to, incur or suffer to exist after the
Spin-Off Date, Indebtedness that is senior in right of payment to the notes or
the Guarantee of such Guarantor, as the case may be, and subordinate in right of
payment to any other Indebtedness of the Company or such Guarantor, as the case
may be.
Merger, Consolidation and Sale of Assets. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Restricted Subsidiary to sell, assign, transfer, lease,
convey or otherwise dispose of) after the Spin-Off Date all or substantially all
of the Company's assets (determined on a consolidated basis for the Company and
the Restricted Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless:
(1) either (A) the Company shall be the surviving or continuing
corporation or (B) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and the Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x)
shall be a corporation organized and validly existing under the laws of the
United States or any State thereof or the District of Columbia and (y)
shall expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee, the
due and punctual payment of the principal of, and premium, if any, and
interest on all of the notes and the performance of every covenant of the
notes, the Indenture and the Registration Rights Agreement on the part of
the Company to be performed or observed;
(2) immediately after giving effect to such transaction and the
assumption contemplated by clause (1)(B)(y) above (including giving effect
to any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company
or such Surviving Entity, as the case may be, shall be able to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the covenant described under "-- Limitation on Incurrence of
Additional Indebtedness";
(3) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (1)(B)(y) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default or
Event of Default shall have occurred and be continuing; and
(4) the Company or the Surviving Entity shall have delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture
comply with the applicable provisions of the Indenture and that all
conditions precedent in the Indenture relating to such transaction have
been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more
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Restricted Subsidiaries, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company. In addition, for purposes of the foregoing, consummation of the
Spin-Off Transactions was deemed not to be a transfer, conveyance or disposition
of substantially all of the Company's assets.
The Indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the notes with the same effect as if such
surviving entity had been named as such.
No Guarantor (other than any Guarantor whose Guarantee is to be released in
accordance with the terms of the Guarantee and Indenture in connection with any
transaction complying with the provisions of the covenant described under "--
Limitation on Asset Sales") will, and the Company will not cause or permit any
Guarantor to, consolidate with or merge with or into any Person other than the
Company or any other Guarantor unless:
(1) the entity formed by or surviving any such consolidation or merger
(if other than the Guarantor) is a corporation organized and existing under
the laws of the United States or any State thereof or the District of
Columbia;
(2) such entity assumes by supplemental indenture all of the
obligations of the Guarantor under the Indenture, such Guarantor's
Guarantee and the Registration Rights Agreement;
(3) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
(4) immediately after giving effect to such transaction and the use of
any net proceeds therefrom on a pro forma basis, the Company could satisfy
the provisions of clause (2) of the first paragraph of this covenant; and
(5) the Company shall have delivered to the Trustee an officers'
certificate and opinion of counsel, each stating that such consolidation or
merger and, if a supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with the applicable
provisions of the Indenture and that all conditions precedent in the
Indenture relating to such transaction have been satisfied.
Limitation on Transactions with Affiliates. (a) The Company will not, and
will not permit any of the Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist after the Spin-Off Date any transaction or series
of related transactions (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with, or for
the benefit of, any of its Affiliates (each an "Affiliate Transaction"), other
than:
(x) Affiliate Transactions permitted under paragraph (b) below; and
(y) Affiliate Transactions on terms that are not materially less
favorable than those that would have reasonably been expected in a
comparable transaction at such time on an arm's-length basis from a Person
that is not an Affiliate of the Company or such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) on or after the
Spin-Off Date involving aggregate payments or other property with a Fair Market
Value in excess of $10.0 million shall be approved by the Board of Directors of
the Company or such Restricted Subsidiary, as the case may be, such approval to
be evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions. If the
Company or any Restricted Subsidiary enters into an Affiliate Transaction (or
series of related Affiliate Transactions related to a common plan) on or after
the Spin-Off Date that involves an
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aggregate Fair Market Value of more than $50.0 million, the Company or such
Restricted Subsidiary, as the case may be, shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such transaction or
series of related transactions to the Company or the relevant Restricted
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to:
(1) employment, consulting and compensation arrangements and
agreements of the Company or any Restricted Subsidiary consistent with past
practice or approved by a majority of the disinterested members of the
Board of Directors (or a committee comprised of disinterested directors);
(2) reasonable fees and compensation paid to and indemnity provided on
behalf of, officers, directors, employees, consultants or agents of the
Company or any Restricted Subsidiary as determined in good faith by the
Company's Board of Directors or senior management;
(3) transactions exclusively between or among the Company and any of
the Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries; provided that such transactions are not otherwise prohibited
by the Indenture;
(4) Restricted Payments, Permitted Investments or Permitted Liens
permitted by the Indenture; and
(5) the Spin-Off Transaction Agreements.
Issuance of Subsidiary Guarantees. If, on or after the Spin-Off Date after
giving effect to the Spin-Off Transactions, the Company forms or acquires any
Domestic Restricted Subsidiary (other than (w) an Acquired Subsidiary for so
long as it is not a Wholly Owned Domestic Restricted Subsidiary, (x) a Finance
Subsidiary, (y) an Accounts Receivable Entity or (z) an Immaterial Domestic
Subsidiary) that incurs any Indebtedness (other than Indebtedness owing to the
Company or a Restricted Subsidiary), or if, on or after the Spin-Off Date, any
Restricted Subsidiary that is not a Guarantor guarantees any Indebtedness of the
Company or a Guarantor (other than Indebtedness owing to the Company or a
Restricted Subsidiary), then the Company shall cause such Domestic Restricted
Subsidiary or Restricted Subsidiary that is not a Guarantor, as the case may be,
to:
(1) execute and deliver to the Trustee a supplemental indenture in
form reasonably satisfactory to the Trustee pursuant to which such Domestic
Restricted Subsidiary or Restricted Subsidiary that is not a Guarantor, as
the case may be, shall unconditionally guarantee (each, a "Guarantee") all
of the Company's obligations under the notes and the Indenture on the terms
set forth in the Indenture; and
(2) deliver to the Trustee an opinion of counsel (which may contain
customary exceptions) that such supplemental indenture has been duly
authorized, executed and delivered by such Domestic Restricted Subsidiary
or Restricted Subsidiary that is not a Guarantor, as the case may be, and
constitutes a legal, valid, binding and enforceable obligation of such
Domestic Restricted Subsidiary or Restricted Subsidiary that is not a
Guarantor, as the case may be.
Thereafter, such Domestic Restricted Subsidiary or Restricted Subsidiary
that was not a Guarantor, as the case may be, shall be a Guarantor for all
purposes of the Indenture. The Company may cause any other Restricted Subsidiary
of the Company to issue a Guarantee and become a Guarantor.
Payments for Consent. The Company will not, and will not cause or permit
any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any holder of
any notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture, the notes or the Guarantees unless
such consideration is offered to be paid to all holders who so consent, waive or
agree to amend in the time frame set forth in solicitation documents relating to
such consent, waiver or amendment.
Limitation on Designations of Unrestricted Subsidiaries. The Company may,
on or after the Spin-Off Date, designate any Subsidiary of the Company (other
than a Subsidiary of the Company which owns
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Capital Stock of a Restricted Subsidiary) as an "Unrestricted Subsidiary" under
the Indenture (a "Designation") only if:
(1) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation;
(2) the Company would be permitted under the Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "Designation Amount") equal to the sum of
(A) the Fair Market Value of the Capital Stock of such Subsidiary owned by
the Company and/or any of the Restricted Subsidiaries on such date and (B)
the aggregate amount of Indebtedness of such Subsidiary owed to the Company
and the Restricted Subsidiaries on such date; and
(3) the Company would be permitted to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the covenant
described under "-- Limitation on Incurrence of Additional Indebtedness" at
the time of Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment in the Designation Amount
pursuant to the covenant described under "-- Limitation on Restricted Payments"
for all purposes of the Indenture.
The Indenture will further provide that the Company shall not, and shall
not permit any Restricted Subsidiary to, at any time:
(x) provide direct or indirect credit support for or a guarantee of
any Indebtedness of any Unrestricted Subsidiary (including any undertaking
agreement or instrument evidencing such Indebtedness);
(y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary; or
(z) be directly or indirectly liable for any Indebtedness which
provides that the holder thereof may (upon notice, lapse of time or both)
declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a
default with respect to any Indebtedness of any Unrestricted Subsidiary
(including any right to take enforcement action against such Unrestricted
Subsidiary), except, in the case of clause (x) or (y), to the extent
permitted under the covenant described under "-- Limitation on Restricted
Payments."
The Indenture further provides that the Company may revoke any Designation
of a Subsidiary as an Unrestricted Subsidiary ("Revocation"), whereupon such
Subsidiary shall then constitute a Restricted Subsidiary, if
(1) no Default or Event of Default shall have occurred and be
continuing at the time and after giving effect to such Revocation; and
(2) all Liens and Indebtedness of such Unrestricted Subsidiaries
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by an officers'
certificate of the Company delivered to the Trustee certifying compliance with
the foregoing provisions.
Reports to Holders. The Indenture provides that the Company will deliver to
the Trustee within 15 days after the filing of the same with the Commission,
copies of the quarterly and annual reports and the information, documents and
other reports, if any, which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture further
provides that, notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
with such annual and quarterly reports and such information, documents and other
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reports specified in Section 13 or 15(d) of the Exchange Act. The Company will
also comply with the other provisions of TIA Section 314(a).
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(1) the failure to pay interest on any notes when the same becomes due
and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(2) the failure to pay the principal on any notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase notes tendered
pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(3) a default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a
period of 30 days after the Company receives written notice specifying the
default from the Trustee or the holders of at least 25% of the outstanding
principal amount of the notes (except in the case of a default with respect
to the covenant described under "-- Certain Covenants -- Merger,
Consolidation and Sale of Assets," which will constitute an Event of
Default with such notice requirement but without such passage of time
requirement);
(4) a default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of the Company or of any Restricted Subsidiary (or the payment
of which is guaranteed by the Company or any Restricted Subsidiary),
whether such Indebtedness now exists or is created after the Spin-Off Date,
which default (A) is caused by a failure to pay principal of such
Indebtedness after any applicable grace period provided in such
Indebtedness on the date of such default (a "payment default") or (B)
results in the acceleration of such Indebtedness prior to its express
maturity (and such acceleration is not rescinded, or such Indebtedness is
not repaid, within 30 days) and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a payment default or the maturity
of which has been so accelerated (and such acceleration is not rescinded,
or such Indebtedness is not repaid, within 30 days), aggregates $75.0
million;
(5) one or more judgments in an aggregate amount in excess of $75.0
million not covered by adequate insurance shall have been rendered against
the Company or any of the Restricted Subsidiaries and such judgments remain
undischarged, unpaid or unstayed for a period of 60 days after such
judgment or judgments become final and nonappealable;
(6) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries;
(7) any Guarantee of a Significant Subsidiary of the Company ceases to
be in full force and effect or any Guarantee of such a Significant
Subsidiary is declared to be null and void and unenforceable or any
Guarantee of such a Significant Subsidiary is found to be invalid or any
Guarantor which is such a Significant Subsidiary denies its liability under
its Guarantee (other than by reason of release of such Guarantor in
accordance with the terms of the Indenture); or
(8) the Release Conditions are not satisfied on or prior to December
31, 1999 and the Company fails to effect the special redemption on or prior
to January 14, 2000.
If an Event of Default (other than an Event of Default specified in clause
(6) above) shall occur and be continuing, the Trustee or the holders of at least
25% in principal amount of outstanding notes may declare the principal of,
premium, if any, and accrued interest on all the notes to be due and payable by
notice in writing to the Company and (if given by the holders) the Trustee
specifying the respective Events of Default and that it is a "notice of
acceleration," and the same shall become immediately due and payable. If an
Event of Default specified in clause (6) above occurs and is continuing, then
all unpaid
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principal of, premium, if any, and accrued and unpaid interest on all of the
outstanding notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any holder.
If any Designated Senior Debt is outstanding at the time of any acceleration of
the notes, the Company shall not make any payment with respect to the notes
until five business days after the holders of such Designated Senior Debt
receive notice of such acceleration.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the notes as described in the preceding paragraph,
the holders of a majority in principal amount of the then outstanding notes may
rescind and cancel such declaration and its consequences:
(1) if the rescission would not conflict with any judgment or decree;
(2) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
the acceleration;
(3) to the extent the payment of such interest is lawful, if interest
on overdue installments of interest and overdue principal, which has become
due otherwise than by such declaration of acceleration, has been paid;
(4) if the Company has paid the Trustee its reasonable compensation
and reimbursed the Trustee for its expenses, disbursements and advances;
and
(5) in the event of the cure or waiver of an Event of Default of the
type described in clause
(6) of the description above of Events of Default, the Trustee shall
have received an officers' certificate and an opinion of counsel that such
Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or Event of Default
or impair any right consequent thereto.
The holders of a majority in principal amount of the then outstanding notes
may waive any existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or premium, if
any, or interest on any notes.
Holders of the notes may not enforce the Indenture or the notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding notes 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.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon the Company obtaining knowledge of any
Default or Event of Default (provided that the Company shall provide such
certification at least annually whether or not it knows of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of any Guarantors discharged with respect to the
outstanding notes ("Legal Defeasance"). Such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding notes, except for:
(1) the rights of holders to receive payments in respect of the
principal of, premium, if any, and interest on the notes when such payments
are due;
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(2) the Company's obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes and the maintenance of an office or agency for payments;
(3) the rights, powers, trust, duties and immunities of the Trustee
and the Company's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission or failure to comply with such obligations shall not constitute a
Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events (not including nonpayment, bankruptcy,
receivership, reorganization and insolvency events) described under "-- Events
of Default" will no longer constitute an Event of Default with respect to the
notes.
In order to exercise Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the holders cash in U.S. dollars, non-callable U.S.
government obligations, or a combination thereof, in such amounts as will
be sufficient, in the opinion of a nationally recognized firm of
independent public accountants selected by the Company, to pay the
principal of, premium, if any, and interest on the notes on the stated date
of payment thereof or on the applicable redemption date, as the case may
be;
(2) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the holders will
not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the holders will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of or constitute a default under the Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound;
(6) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with the
intent of preferring the holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
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(7) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with;
(8) the Company shall have delivered to the Trustee an opinion of
counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Senior Debt, including, without limitation, those
arising under the Indenture, and (B) after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and
(9) certain other customary conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
notes and subordination provisions, as expressly provided for in the Indenture)
as to all outstanding notes when:
(1) either (a) all the notes theretofore authenticated and delivered
(except lost, stolen or destroyed notes which have been replaced or paid
and notes for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee
for cancellation or (b) all notes not theretofore delivered to the Trustee
for cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in
an amount sufficient to pay and discharge the entire Indebtedness on the
notes not theretofore delivered to the Trustee for cancellation, for
principal of, premium, if any, and interest on the notes to the date of
deposit together with irrevocable instructions from the Company directing
the Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be;
(2) the Company and/or the Guarantors have paid all other sums payable
under the Indenture; and
(3) the Company has delivered to the Trustee an officers' certificate
and an opinion of counsel stating that all conditions precedent under the
Indenture relating to the satisfaction and discharge of the Indenture have
been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, without the consent of the
holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies, so long as such change does not,
in the opinion of the Trustee, adversely affect the rights of any of the holders
in any material respect. In formulating its opinion on such matters, the Trustee
will be entitled to rely on such evidence as it deems appropriate, including,
without limitation, solely on an opinion of counsel. Other modifications and
amendments of the Indenture may be made with the consent of the holders of a
majority in principal amount of the then outstanding notes issued under the
Indenture, except that, without the consent of each holder affected thereby, no
amendment may:
(1) reduce the amount of notes whose holders must consent to an
amendment;
(2) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any notes;
(3) reduce the principal of or change or have the effect of changing
the fixed maturity of any notes, or change the date on which any notes may
be subject to redemption or repurchase, or reduce the redemption or
repurchase price therefor;
(4) make any notes payable in money other than that stated in the
notes;
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(5) make any change in provisions of the Indenture protecting the
right of each holder to receive payment of principal of, premium, if any,
and interest on such notes on or after the stated due date thereof or to
bring suit to enforce such payment, or permitting holders of a majority in
principal amount of the then outstanding notes to waive Defaults or Events
of Default;
(6) amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer after the
occurrence of a Change of Control or make and consummate a Net Proceeds
Offer with respect to any Asset Sale that has been consummated or modify
any of the provisions or definitions with respect thereto;
(7) modify or change any provision of the Indenture or the related
definitions affecting the subordination or ranking of the notes or any
Guarantee in a manner which adversely affects the holders;
(8) modify the provisions of "-- Certain Covenants -- Payments for
Consent" in any manner adverse to a holder of notes; or
(9) release any Guarantor from any of its obligations under its
Guarantee or the Indenture otherwise than in accordance with the terms of
the Indenture.
GOVERNING LAW
The Indenture provides that it, the notes and any Guarantees will be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise, as a prudent Person would exercise or
use under the circumstances in the conduct of its own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the new notes will be issued in registered,
global form in minimum denominations of $1,000 and integral multiples of $1,000
in excess thereof.
The new notes initially will be represented by one or more permanent
certificates in registered, global form without interest coupons (the "new
global notes"). The new global notes will be deposited upon issuance with the
trustee as custodian for The Depository Trust Company ("DTC"), in New York, New
York, and registered in the name of DTC or its nominee, in each case for credit
to an account of a direct or indirect participant in DTC as described below.
Except as set forth below, the new global notes may be transferred, in
whole, and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the new global notes may not be
exchanged for notes in certificated form except in the limited circumstances
described below. See "--Exchange of Book-Entry Notes for Certificated Notes."
Except in the limited
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circumstances described below, owners of beneficial interests in the new global
notes will not be entitled to receive physical delivery of certificated notes.
In addition, transfers of beneficial interests in the new global notes will
be subject to the applicable rules and procedures of DTC and its direct or
indirect participants, including, if applicable, those of the Euroclear System
and Cedel, S.A., which may change from time to time.
Initially, the Trustee will act as paying agent and registrar. The notes
may be presented for registration of transfer and exchange at the offices of the
registrar.
DEPOSITORY PROCEDURES FOR NEW NOTES
The following information regarding the operations and procedures of DTC,
Euroclear and Cedel has been provided by those organizations and is provided
solely as a matter of convenience. These operations and procedures are solely
within the control of the respective settlement systems and are subject to
change by them from time to time. We take no responsibility for these operations
and procedures (or the description thereof) and urge investors to contact the
system or their participants directly to discuss these matters.
DTC has advised us that it is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers and
dealers (including the initial purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities 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").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interests in, and transfers of ownership interests in, each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
DTC has also advised us that, pursuant to procedures established by it, (1)
upon deposit of the new global notes, DTC will credit the accounts of
Participants with portions of the principal amount of the new global notes and
(2) ownership of interests in the new global notes will be shown on, and the
transfer of ownership will be effected only through, records maintained by DTC,
with respect to the Participants, or by the Participants and the Indirect
Participants, with respect to other owners of beneficial interests in the new
global notes.
Investors in the new global notes may hold their interests directly through
DTC, if they are Participants in the system, or indirectly through
organizations, including Euroclear and Cedel, which are Participants in the
system. All interests in a new global note, including those held through
Euroclear or Cedel, may be subject to the procedures and requirements of DTC.
Those interests held through Euroclear or Cedel may also be subject to the
procedures and requirements of those systems. The laws of some states require
that some persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer beneficial interests in a new
global note to those persons will be limited to that extent. Because DTC can act
only on behalf of Participants, which in turn act on behalf of Indirect
Participants and some banks, the ability of a person having beneficial interests
in a new global note to pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
those interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE NEW GLOBAL NOTES WILL
NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and premium, if any, and interest
on a new global note registered in the name of DTC or its nominee will be
payable to DTC in its capacity as the registered
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holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee will treat the persons in whose names the notes, including the new
global notes, are registered as the owners thereof for the purpose of receiving
payments and for all other purposes. Consequently, neither we, the Trustee nor
any of our agents has or will have any responsibility or liability for (1) any
aspect of DTC's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interests in the
new global notes, or for maintaining, supervising or reviewing any of DTC's
records or any Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the new global notes or (2) any other matter
relating to the actions and practices of DTC or any of its Participants or
Indirect Participants. DTC has advised the Company that its current practice,
upon receipt of any payment in respect of securities such as the notes
(including principal and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in the principal amount of beneficial interest in the
relevant security as shown on the records of DTC, unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants, as the case
may be, and will not be the responsibility of DTC, the Trustee or the Company.
Neither the Company nor the Trustee will be liable for any delay by DTC or any
of its Participants or Indirect Participants in identifying the beneficial
owners of the notes, and the Company and the Trustee may conclusively rely on
and will be protected in relying on instructions from DTC or its nominee for all
purposes.
Interests in the new global notes are expected to be eligible to trade in
DTC's Same-Day Funds Settlement System and secondary market trading activity in
those interests will, therefore, settle in immediately available funds, subject
in all cases to the rules and procedures of DTC and its Participants. See
"-- Same-Day Settlement and Payment."
Transfers between Participants in DTC will be made in accordance with DTC's
procedures, and will be settled in same-day funds, and transfers between
indirect Participants who hold through a Participant will be made in accordance
with their respective rules and operating procedures of such Participant.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more Participants to whose
account DTC has credited the interests in the new global notes and only in
respect of the portion of the aggregate principal amount of the notes as to
which a Participant has given such direction. However, if there is an Event of
Default with respect to the notes, DTC reserves the right to exchange the new
global notes for legended notes in certificated form, and to distribute those
notes to its Participants.
Although DTC has agreed to the above procedures to facilitate transfers of
interests in new global notes among Participants in DTC, they are under no
obligation to perform or to continue to perform those procedures, and those
procedures may be discontinued at any time. Neither we nor the Trustee nor any
of our respective agents will have any responsibility for the performance by DTC
or their respective Participants or Indirect Participants of their respective
obligations under the rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A new global note is exchangeable for definitive notes in registered
certificated form only if (1) DTC either notifies us that it is unwilling or
unable to continue as depositary for the new global notes and fails to appoint a
successor depositary within 90 days or has ceased to be a clearing agency
registered under the Exchange Act, (2) we, at our option, notify the Trustee in
writing that we elect to cause the issuance of the notes or (3) there has
occurred and is continuing an Event of Default with respect to the notes. In
addition, beneficial interests in a new global note may be exchanged for notes
upon request but only upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the Indenture. In all cases, notes delivered in
exchange for any new global note or beneficial interests will be registered in
the
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names, and issued in any approved denominations, requested by or on behalf of
the depositary, in accordance with its customary procedures.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the new notes
represented by the new global notes (including principal, premium, if any, and
interest) be made by wire transfer of immediately available funds to the
accounts specified by the holder of the new global notes. With respect to notes
in certificated form, we will make all payments of principal, premium, if any,
and interest on the notes at the office or agency of the company maintained for
that purpose within the City and State of New York (initially the office of the
paying agent maintained for that purpose) or, at our option, by check mailed to
the holders at their respective addresses in the register of holders of notes;
however all payments of principal, premium, if any, and interest on notes in
certificated form the holders of which have given wire transfer instructions to
us will be required to be made by wire transfer of immediately available funds
to the accounts specified by the holders. The new notes represented by the new
global notes are expected to be eligible to trade in the PORTAL market and to
trade in DTC's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in those notes will, therefore, be required by DTC to be
settled in immediately available funds. We expect that secondary trading in any
certificated notes will also be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Accounts Receivable Entity" means a Person, including, without limitation,
a Subsidiary of the Company, whose operations consist solely of owning and/or
selling accounts receivable of the Company and its Subsidiaries and engaging in
other activities in connection with transactions that are Permitted Receivables
Financings.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with the Company or any of the Restricted
Subsidiaries or assumed by the Company or any Restricted Subsidiary in
connection with the acquisition of assets from such Person and in each case not
incurred by such Person in connection with, or in anticipation or contemplation
of, such Person becoming a Restricted Subsidiary or such acquisition, merger or
consolidation.
"Acquired Subsidiary" means a Person which becomes a Restricted Subsidiary
after the Spin-Off Date; provided that such Person has outstanding voting
Capital Stock prior to becoming a Subsidiary of the Company and a majority of
such voting Capital Stock was owned by Persons other than the Company and its
Restricted Subsidiaries.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"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 the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning set forth under "-- Certain
Covenants -- Limitation on Transactions with Affiliates."
"Asset Acquisition" means (1) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary, or shall be merged with or into the Company or
any Restricted Subsidiary, or (2) the acquisition by the Company or any
Restricted Subsidiary of the assets of any Person (other than a Restricted
Subsidiary) which constitute all
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or substantially all of the assets of such Person or comprises any division or
line of business of such Person or any other properties or assets of such Person
other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance, lease
(other than operating leases entered into in the ordinary course of business),
assignment or other transfer (other than the granting of a Lien in accordance
with the Indenture) for value by the Company or any of the Restricted
Subsidiaries (including any Sale and Leaseback Transaction) to any Person other
than the Company or a Restricted Subsidiary of (a) any Capital Stock of any
Restricted Subsidiary; or (b) any other property or assets of the Company or any
Restricted Subsidiary other than in the ordinary course of business; provided,
however, that Asset Sales shall not include:
(1) a transaction or series of related transactions for which the
Company or the Restricted Subsidiaries receive aggregate consideration of
less than $5 million;
(2) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of the Company as permitted by the
covenant described under "-- Certain Covenants -- Merger, Consolidation and
Sale of Assets";
(3) any Restricted Payment made in accordance with the covenant
described under "-- Certain Covenants -- Limitation on Restricted
Payments";
(4) sales of accounts receivable pursuant to a Permitted Receivables
Financing made in accordance with the covenant described under "-- Certain
Covenants -- Limitation on Incurrence of Additional Indebtedness"; or
(5) transactions consummated on the Spin-Off Date in connection with
the Spin-Off Transactions.
"Blockage Period" has the meaning set forth under "-- Subordination."
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (1) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (2) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Cash Equivalents" means:
(1) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's");
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(3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250 million;
(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (4)
above; and
(6) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (1) through
(5) above.
"Change of Control" means the occurrence of one or more of the following
events:
(1) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets
of the Company to any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of the
Indenture);
(2) the approval by the holders of Capital Stock of the Company of any
plan or proposal for the liquidation or dissolution of the Company (whether
or not otherwise in compliance with the provisions of the Indenture);
(3) any Person or Group shall become the beneficial owner, directly or
indirectly, of shares representing more than 35% of the aggregate ordinary
voting power represented by the issued and outstanding Capital Stock of the
Company; or
(4) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the stockholders of the Company was approved
pursuant to a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office.
"Change of Control Offer" has the meaning set forth under "-- Change of
Control."
"Change of Control Payment Date" has the meaning set forth under "-- Change
of Control."
"Combined EBITDA" means, with respect to the Restricted Subsidiaries that
are not Guarantors (and are not a Finance Subsidiary or an Accounts Receivable
Entity that is a Domestic Restricted Subsidiary), for any period, the sum
(without duplication) of:
(1) Combined Net Income; and
(2) to the extent Combined Net Income has been reduced thereby:
(A) all income taxes of the Restricted Subsidiaries that are not
Guarantors (and are not a Finance Subsidiary or an Accounts Receivable
Entity that is a Domestic Restricted Subsidiary) paid or accrued in
accordance with GAAP for such period;
(B) Combined Interest Expense; and
(C) Combined Non-cash Charges,
less any non-cash items increasing Combined Net Income for such period, all as
determined on a combined basis for the Restricted Subsidiaries that are not
Guarantors (and are not a Finance Subsidiary or an Accounts Receivable Entity
that is a Domestic Restricted Subsidiary) in accordance with GAAP.
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"Combined Fixed Charge Coverage Ratio" means, with respect to the
Restricted Subsidiaries that are not Guarantors (and are not a Finance
Subsidiary or an Accounts Receivable Entity that is a Domestic Restricted
Subsidiary), the ratio of Combined EBITDA during the four full fiscal quarters
(the "Four Quarter Period") ending on or prior to the date of the transaction
giving rise to the need to calculate the Combined Fixed Charge Coverage Ratio
(the "Transaction Date") to Combined Fixed Charges for the Four Quarter Period.
In addition to and without limitation of the foregoing, for purposes of this
definition, "Combined EBITDA" and "Combined Fixed Charges" shall be calculated
after giving effect on a pro forma basis for the period of such calculation to:
(1) the incurrence or repayment of any Indebtedness of any of the
Restricted Subsidiaries that are not Guarantors (and are not a Finance
Subsidiary or an Accounts Receivable Entity that is a Domestic Restricted
Subsidiary) (and the application of the proceeds thereof) giving rise to
the need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business
for working capital purposes pursuant to working capital facilities,
occurring during the Four Quarter Period or at any time subsequent to the
last day of the Four Quarter Period and on or prior to the Transaction
Date, as if such incurrence or repayment, as the case may be, (and the
application of the proceeds thereof) occurred on the first day of the Four
Quarter Period; and
(2) any Asset Sales or other disposition or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the
need to make such calculation as a result of one of the Restricted
Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or
an Accounts Receivable Entity that is a Domestic Restricted Subsidiary)
(including any Person who becomes such a Restricted Subsidiary as a result
of the Asset Acquisition) incurring, assuming or otherwise being liable for
Acquired Indebtedness and also including any Combined EBITDA (provided that
such Combined EBITDA shall be included only to the extent includable
pursuant to the definition of "Combined Net Income") attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale or
other disposition during the Four Quarter Period) occurring during the Four
Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date as if such Asset
Sale or Asset Acquisition or other disposition (including the incurrence,
assumption or liability for any such Acquired Indebtedness) occurred on the
first day of the Four Quarter Period.
If any of the Restricted Subsidiaries that are not Guarantors (and are not
a Finance Subsidiary or Accounts Receivable Entity that is a Domestic Restricted
Subsidiary) directly or indirectly guarantee Indebtedness of a third Person, the
preceding sentence shall give effect to the incurrence of such guaranteed
Indebtedness as if the Restricted Subsidiary had directly incurred or otherwise
assumed such guaranteed Indebtedness. Furthermore, in calculating "Combined
Fixed Charges" for purposes of determining the denominator (but not the
numerator) of this "Combined Fixed Charge Coverage Ratio":
(1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness in effect on the
Transaction Date;
(2) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rates, then the interest rate in effect on the Transaction
Date will be deemed to have been in effect during the Four Quarter Period;
and
(3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered
by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum in effect on the Transaction Date resulting
after giving effect to the operation of such agreements on such date.
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"Combined Fixed Charges" means, with respect to the Restricted Subsidiaries
that are not Guarantors (and are not a Finance Subsidiary or Accounts Receivable
Entity that is a Domestic Restricted Subsidiary) for any period, the sum,
without duplication, of:
(1) Combined Interest Expense, plus
(2) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of the Restricted Subsidiaries that are not
Guarantors (other than Finance Subsidiaries and Accounts Receivable
Entities that are Domestic Restricted Subsidiaries) paid, accrued and/or
scheduled to be paid or accrued during such period times (y) a fraction,
the numerator of which is one and the denominator of which is one minus the
then current effective consolidated federal, state and local income tax
rate of the Company, expressed as a decimal.
"Combined Interest Expense" means, with respect to the Restricted
Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or
Accounts Receivable Entity that is a Domestic Restricted Subsidiary) for any
period, the sum of, without duplication:
(1) the aggregate of the interest expense of the Restricted
Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or
Accounts Receivable Entity that is a Domestic Restricted Subsidiary) for
such period determined on a combined basis in accordance with GAAP,
including without limitation,
(A) any amortization of debt discount,
(B) the net costs under Interest Swap Obligations,
(C) all capitalized interest, and
(D) the interest portion of any deferred payment obligation;
(2) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by the Restricted
Subsidiaries that are not Guarantors (and are not a Finance Subsidiary or
Accounts Receivable Entity that is a Domestic Restricted Subsidiary) during
such period as determined on a consolidated basis in accordance with GAAP;
and
(3) net losses relating to sales of accounts receivable pursuant to
Permitted Receivable Financings during such period as determined on a
combined basis in accordance with GAAP;
provided that Combined Interest Expense shall not include any of the
foregoing to the extent owing to the Company or any Restricted Subsidiary
or to the extent owed by a Finance Subsidiary or an Accounts Receivable
Entity that is a Domestic Restricted Subsidiary.
"Combined Net Income" means, with respect to the Restricted Subsidiaries
that are not Guarantors (and are not Finance Subsidiaries or Accounts Receivable
Entities that are Domestic Restricted Subsidiaries), for any period, the
aggregate net income (or loss) of the Restricted Subsidiaries that are not
Guarantors (and are not Finance Subsidiaries or Accounts Receivable Entities
that are Domestic Restricted Subsidiaries) for such period as determined on a
combined basis in accordance with GAAP; provided that there shall be excluded
therefrom:
(1) after-tax gains and losses from Asset Sales or abandonments or
reserves relating thereto;
(2) extraordinary or non-recurring gains or losses (determined on an
after-tax basis);
(3) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary or
is merged or consolidated with any Restricted Subsidiary that is not a
Guarantor (and are not Finance Subsidiaries or Accounts Receivable Entities
that are Domestic Restricted Subsidiaries);
(4) the net income of any Person, other than a Restricted Subsidiary,
except to the extent of cash dividends or distributions paid to the
Restricted Subsidiaries that are not Guarantors (and are
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not Finance Subsidiaries or Accounts Receivable Entities that are Domestic
Restricted Subsidiaries) by such Person;
(5) any restoration to income of any contingency reserve, except to
the extent that (x) provision for such reserve was made out of Combined Net
Income accrued at any time following the Issue Date or (y) the restoration
is with respect to a charge or reserve contemplated by clause (7) below;
(6) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or
not such operations were classified as discontinued);
(7) restructuring charges of not more than $55.0 million to the extent
incurred in the quarter ending December 31, 1999 by Restricted Subsidiaries
that are not Guarantors (and are not Finance Subsidiaries or Accounts
Receivable Entities that are Domestic Restricted Subsidiaries); and
(8) any fees or expenses incurred in connection with the Spin-Off
Transactions.
"Combined Non-cash Charges" means, with respect to the Restricted
Subsidiaries that are not Guarantors (and are not Finance Subsidiaries or
Accounts Receivable Entities that are Domestic Restricted Subsidiaries), for any
period, the aggregate depreciation, amortization and other non-cash expenses of
the Restricted Subsidiaries that are not Guarantors (and are not Finance
Subsidiaries or Accounts Receivable Entities that are Domestic Restricted
Subsidiaries) reducing Combined Net Income for such period, determined on a
combined basis in accordance with GAAP (excluding any such charge which requires
an accrual of or a reserve for cash charges for any future period).
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, or if at any time after the execution of the Indenture such
Commission is not existing and performing the applicable duties now assigned to
it, then the body or bodies performing such duties at such time.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the
Spin-Off Date or issued after the Spin-Off Date, and includes, without
limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, with respect to the Company, for any period,
the sum (without duplication) of:
(1) Consolidated Net Income; and
(2) to the extent Consolidated Net Income has been reduced thereby:
(A) all income taxes of the Company and the Restricted Subsidiaries
paid or accrued in accordance with GAAP for such period;
(B) Consolidated Interest Expense; and
(C) Consolidated Non-cash Charges,
less any non-cash items increasing Consolidated Net Income for such period, all
as determined on a consolidated basis for the Company and the Restricted
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to the
Company, the ratio of Consolidated EBITDA of the Company during the Four Quarter
Period ending on or prior to the Transaction Date to Consolidated Fixed Charges
of the Company for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect
on a pro forma basis for the period of such calculation to:
(1) the incurrence or repayment of any Indebtedness of the Company or
any of the Restricted Subsidiaries (and the application of the proceeds
thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of the
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proceeds thereof), other than the incurrence or repayment of Indebtedness
in the ordinary course of business for working capital purposes pursuant to
working capital facilities, occurring during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the
case may be, (and the application of the proceeds thereof) occurred on the
first day of the Four Quarter Period; and
(2) any Asset Sales or other disposition or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the
need to make such calculation as a result of the Company or one of the
Restricted Subsidiaries (including any Person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (provided that such Consolidated EBITDA shall be
included only to the extent includable pursuant to the definition of
"Consolidated Net Income") attributable to the assets which are the subject
of the Asset Acquisition or Asset Sale or other disposition during the Four
Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to
the Transaction Date as if such Asset Sale or Asset Acquisition or other
disposition (including the incurrence, assumption or liability for any such
Acquired Indebtedness) occurred on the first day of the Four Quarter
Period.
If the Company or any of the Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if the Company or
any Restricted Subsidiary had directly incurred or otherwise assumed such
guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio":
(1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness in effect on the
Transaction Date;
(2) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rates, then the interest rate in effect on the Transaction
Date will be deemed to have been in effect during the Four Quarter Period;
and
(3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered
by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum in effect on the Transaction Date resulting
after giving effect to the operation of such agreements on such date.
"Consolidated Fixed Charges" means, with respect to the Company for any
period, the sum, without duplication, of:
(1) Consolidated Interest Expense, plus
(2) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of the Company (other than dividends paid in
Qualified Capital Stock) or any Restricted Subsidiary paid, accrued and/or
scheduled to be paid or accrued during such period times (y) a fraction,
the numerator of which is one and the denominator of which is one minus the
then current effective consolidated federal, state and local income tax
rate of the Company, expressed as a decimal.
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"Consolidated Interest Expense" means, with respect to the Company for any
period, the sum of, without duplication:
(1) the aggregate of the interest expense of the Company and the
Restricted Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP, including without limitation,
(A) any amortization of debt discount,
(B) the net costs under Interest Swap Obligations,
(C) all capitalized interest, and
(D) the interest portion of any deferred payment obligation;
(2) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by the Company and the
Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP; and
(3) net losses relating to sales of accounts receivable pursuant to
Permitted Receivable Financings during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to the Company, for any
period, the aggregate net income (or loss) of the Company and the Restricted
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP; provided that there shall be excluded therefrom:
(1) after-tax gains and losses from Asset Sales or abandonments or
reserves relating thereto;
(2) extraordinary or non-recurring gains or losses (determined on an
after-tax basis);
(3) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary or
is merged or consolidated with the Company or any Restricted Subsidiary;
(4) the net income (but not loss) of any Restricted Subsidiary to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by a contract, operation
of law or otherwise;
(5) the net income of any Person, other than a Restricted Subsidiary,
except to the extent of cash dividends or distributions paid to the Company
or to a Restricted Subsidiary by such Person;
(6) any restoration to income of any contingency reserve, except to
the extent that (x) provision for such reserve was made out of Consolidated
Net Income accrued at any time following the Spin-Off Date or (y) the
restoration is with respect to a charge or reserve contemplated by clause
(9) below;
(7) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or
not such operations were classified as discontinued);
(8) in the case of a successor to the Company by consolidation or
merger or as a transferee of the Company's assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of
assets;
(9) restructuring charges of not more than $55.0 million to the extent
incurred in the fiscal quarter ending December 31, 1999; and
(10) any fees or expenses incurred in connection with the Spin-Off
Transactions.
"Consolidated Net Tangible Assets" means, as of any date of determination,
the total assets, less goodwill and other intangibles (other than patents,
trademarks, copyrights, licenses and other intellectual property), shown on the
balance sheet of the Company and its Restricted Subsidiaries for the most
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recently ended fiscal quarter for which financial statements are available,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to the Company, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
the Company and the Restricted Subsidiaries reducing Consolidated Net Income of
the Company for such period, determined on a consolidated basis in accordance
with GAAP (excluding any such charge which requires an accrual of or a reserve
for cash charges for any future period).
"Corporate Restructuring" means the restructuring by the Company of the
assets, liabilities and operations of (x) its packaging business and
administrative services operations, so that such assets, liabilities and
operations are owned directly and indirectly by Packaging and its Subsidiaries,
and (y) its automotive business, so that such assets, liabilities and operations
are owned directly or indirectly by the Company and its Subsidiaries, in each
case in a manner consistent, in all material respects, with the description
thereof in this prospectus.
"Covenant Defeasance" has the meaning set forth under "-- Legal Defeasance
and Covenant Defeasance."
"Credit Agreement" means the Credit Agreement dated as of September 30,
1999, among the Company, the Guarantors, the lenders party thereto in their
capacities as lenders thereunder and Commerzbank and Bank of America, as
co-documentation agents, Citibank, N.A., as syndication agent and The Chase
Manhattan Bank, as administrative agent, together with the related documents
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (provided that such increase in borrowings is
permitted by the covenant described under "-- Certain Covenants -- Limitation on
Incurrence of Additional Indebtedness" (including the definition of Permitted
Indebtedness)) or adding Subsidiaries as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in currency values.
"Debt Realignment" means the realignment of all of the Company's
Indebtedness through a combination of tender offers, exchange offers,
prepayments and/or other refinancings, the purpose of which is to allocate
Indebtedness between the Company and Packaging before the separation of the
Company and Packaging effected by means of the Corporate Restructuring and the
Packaging Distribution and consistent in all material respects with the
description thereof in this prospectus insofar as such matters relate to the
Company.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice of both would be, an Event of Default.
"Default Notice" has the meaning set forth under "-- Subordination."
"Designated Senior Debt" means (1) Indebtedness under or in respect of the
Credit Agreement and (2) any other Indebtedness constituting Senior Debt which,
at the time of determination, has an aggregate principal amount of at least $50
million and is specifically designated in the instrument evidencing such Senior
Debt as "Designated Senior Debt" by the Company.
"Designation" has the meaning set forth under "-- Certain Covenants
- -- Limitation on Designations of Unrestricted Subsidiaries."
"Designation Amount" has the meaning set forth under "-- Certain Covenants
- -- Limitation on Designations of Unrestricted Subsidiaries."
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"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is mandatorily exchangeable for Indebtedness, or is redeemable or exchangeable
for Indebtedness, at the sole option of the holder thereof on or prior to the
final maturity date of the notes.
"Domestic Restricted Subsidiary" means a Restricted Subsidiary incorporated
or otherwise organized under the laws of the United States or any state thereof
or the District of Columbia.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto, and the rules and regulations of the
Commission promulgated thereunder.
"Fair Market Value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair Market Value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company.
"Finance Subsidiary" means a Restricted Subsidiary that is organized solely
for the purpose of owning Indebtedness of the Company and/or other Restricted
Subsidiaries and issuing securities the proceeds of which are utilized by the
Company and/or other Restricted Subsidiaries, and which engages only in such
activities and activities incident thereto.
"Foreign Restricted Subsidiary" means any Restricted Subsidiary that is
organized and existing under the laws of a jurisdiction other than the United
States, any State thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accounts and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting profession
of the United States, which are in effect as of the Issue Date.
"Guarantee" has the meaning set forth under "-- Certain Covenants
- -- Issuance of Subsidiary Guarantees."
"Guarantor" means (1) each Wholly-Owned Domestic Restricted Subsidiary of
the Company (other than any Immaterial Domestic Subsidiaries) as of the Spin-Off
Date (after giving effect to the Spin-Off Transactions) and (2) each other
Restricted Subsidiary that in the future executes a Guarantee pursuant to the
covenant described under "-- Certain Covenants -- Issuance of Subsidiary
Guarantees" or otherwise; provided that any Person constituting a Guarantor as
described above shall cease to constitute a Guarantor when its Guarantee is
released in accordance with the terms of the Indenture.
"Guarantor Senior Debt" means, with respect to any Guarantor, the principal
of, premium, if any, and interest (including any interest accruing subsequent to
the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on any Indebtedness of such Guarantor, whether
outstanding on the Spin-Off Date (after giving effect to the Spin-Off
Transactions) or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Guarantee of such
Guarantor. Without limiting the generality of the foregoing, "Guarantor Senior
Debt" shall also include the principal of, premium, if any, interest (including
any interest accruing subsequent to the filing of a petition of bankruptcy at
the rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on, and all other
amounts owing in respect of:
(x) all monetary obligations of every nature of the Company or any
Guarantor with respect to the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities;
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(y) all Interest Swap Obligations; and
(z) all obligations under Currency Agreements.
Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include:
(1) any Indebtedness of such Guarantor owing to a Subsidiary of such
Guarantor or any Affiliate of such Guarantor or any of such Affiliate's
Subsidiaries;
(2) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of such Guarantor or any Subsidiary of such
Guarantor (including, without limitation, amounts owed for compensation);
(3) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services;
(4) Indebtedness represented by Disqualified Capital Stock;
(5) any liability for federal, state, local or other taxes owed or
owing by such Guarantor;
(6) Indebtedness incurred in violation of the covenant described under
"-- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness";
(7) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to such Guarantor; and
(8) any Indebtedness which is, by its express terms, subordinated in
right of payment to any other Indebtedness of such Guarantor.
"Immaterial Domestic Subsidiaries" means at any time, any Domestic
Restricted Subsidiary of the Company having total assets (as determined in
accordance with GAAP) in an amount of less than 1% of the consolidated total
assets of the Company and its Domestic Restricted Subsidiaries (as determined in
accordance with GAAP); provided, however, that the total assets (as so
determined) of all Immaterial Domestic Subsidiaries shall not exceed 5% of
consolidated total assets of the Company and its Domestic Subsidiaries (as so
determined). In the event that the total assets of all Immaterial Domestic
Subsidiaries exceeds 5% of consolidated total assets of the Company and its
Domestic Restricted Subsidiaries, the Company will designate Domestic Restricted
Subsidiaries that would otherwise be Immaterial Domestic Subsidiaries to be
excluded as Immaterial Domestic Subsidiaries until such 5% threshold is met.
Notwithstanding the foregoing, no Domestic Restricted Subsidiary that guarantees
the Credit Agreement shall be deemed an Immaterial Domestic Restricted
Subsidiary.
"Incur" has the meaning set forth under "-- Certain Covenants -- Limitation
on Incurrence on Additional Indebtedness."
"Indebtedness" means, with respect to any Person, without duplication:
(1) all Obligations of such Person for borrowed money;
(2) all Obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(3) all Capitalized Lease Obligations of such Person;
(4) all Obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
Obligations under any title retention agreement (but excluding trade
accounts payable and other accrued liabilities arising in the ordinary
course of business that are not overdue by 90 days or more or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted);
(5) all Obligations for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar credit transaction;
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(6) guarantees and other contingent obligations in respect of
Indebtedness of any other Person referred to in clauses (1) through (5)
above and clauses (8) and (10) below;
(7) all Obligations of any other Person of the type referred to in
clauses (1) through (6) which are secured by any Lien on any property or
asset of such Person, the amount of such Obligation being deemed to be the
lesser of the Fair Market Value of such property or asset or the amount of
the Obligation so secured;
(8) all Obligations under currency agreements and interest swap
agreements of such Person;
(9) all Disqualified Capital Stock of the Company and all Preferred
Stock of a Restricted Subsidiary with the amount of Indebtedness
represented by such Disqualified Capital Stock or Preferred Stock being
equal to the greater of its voluntary or involuntary liquidation preference
and its maximum fixed repurchase price, but excluding accrued and unpaid
dividends, if any; and
(10) all Outstanding Permitted Receivables Financings.
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock or Preferred Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock or Preferred Stock as if such Disqualified Capital
Stock or Preferred Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the Fair Market Value of such Disqualified Capital
Stock or Preferred Stock, such Fair Market Value shall be determined reasonably
and in good faith by the Board of Directors of the issuer of such Disqualified
Capital Stock or Preferred Stock.
"Independent Financial Advisor" means a firm (1) which does not, and whose
directors, officers and employees and Affiliates do not, have a direct or
indirect material financial interest in the Company and (2) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Initial Purchasers" means Salomon Smith Barney Inc., Banc of America
Securities LLC, Bear, Stearns & Co. Inc., Chase Securities Inc., Credit Suisse
First Boston Corporation, Morgan Stanley & Co. Incorporated, Banc One Capital
Markets, Inc., BNY Capital Markets, Inc., Commerzbank Capital Markets
Corporation, First Union Securities, Inc., ING Barings LLC, Nesbitt Burns
Securities Inc., Scotia Capital Markets (USA) Inc., SG Cowen Securities
Corporation and TD Securities (USA) Inc.
"Interest Swap Obligations" means the obligations of the Company and the
Restricted Subsidiaries pursuant to any arrangement with any other Person,
whereby, directly or indirectly, the Company or any Restricted Subsidiary is
entitled to receive from time to time periodic payments calculated by applying
either a floating or a fixed rate of interest on a stated notional amount in
exchange for periodic payments made by such other Person calculated by applying
a fixed or a floating rate of interest on the same notional amount and shall
include, without limitation, interest rate swaps, caps, floors, collars and
similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and the Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiaries, as the case may be. If the Company or any Restricted Subsidiary
sells or otherwise disposes of any Capital Stock of any Restricted Subsidiary
(the "Referent Subsidiary") such that, after giving effect to any such sale or
disposition, the Referent Subsidiary shall cease to be a Restricted Subsidiary,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the Fair Market Value of the Capital Stock of the
Referent Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the notes.
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"Legal Defeasance" has the meaning set forth under "-- Legal Defeasance and
Covenant Defeasance."
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest), received
by the Company or any of the Restricted Subsidiaries from such Asset Sale net
of:
(1) reasonable out-of-pocket expenses and fees relating to such Asset
Sale (including, without limitation, legal, accounting and investment
banking fees, sales commissions and relocation expenses);
(2) taxes paid or payable after taking into account any reduction in
consolidated tax liability due to available tax credits or deductions and
any tax sharing arrangements;
(3) repayments of Indebtedness secured by the property or assets
subject to such Asset Sale that is required to be repaid in connection with
such Asset Sale; and
(4) appropriate amounts to be determined by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained
by the Company or any Restricted Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated
with such Asset Sale.
"Net Proceeds Offer" has the meaning set forth under "-- Certain
Covenants -- Limitation on Asset Sales."
"Net Proceeds Offer Amount" has the meaning set forth under "-- Certain
Covenants -- Limitation on Asset Sales."
"Net Proceeds Offer Payment Date" had the meaning set forth under
"-- Certain Covenants -- Limitation on Asset Sales."
"Net Proceeds Offer Trigger Date" has the meaning set forth under
"-- Certain Covenants -- Limitation on Asset Sales."
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Outstanding Permitted Receivables Financings" means the aggregate amount
of the receivables sold or financed pursuant to a Permitted Receivables
Financing that remain uncollected at any one time.
"Packaging" means Pactiv Corporation, a Delaware corporation formerly known
as Tenneco Packaging Inc.
"Packaging Distribution" means the distribution by the Company of all of
the issued and outstanding common stock of Packaging to the holders of the
Company's common stock consistent in all material respects with the description
thereof in the offering memorandum relating to the initial issuance of the
outstanding notes.
"Permitted Indebtedness" means, without duplication, each of the following:
(1) Indebtedness under the notes, the Indenture and any Guarantees not
to exceed $500.0 million in aggregate principal amount;
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(2) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed the
greater of:
(x) $1,550 million (reduced by any required permanent repayments
with the proceeds of Asset Sales (which are accompanied by a
corresponding permanent commitment reduction) thereunder); and
(y) the sum of (A) 85% of the net book value of the accounts
receivable of the Company and the Restricted Subsidiaries and (B) 50% of
the net book value of the inventory of the Company and the Restricted
Subsidiaries;
(3) other Indebtedness of the Company and the Restricted Subsidiaries
outstanding on the Spin-Off Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(4) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any Guarantor and Interest Swap Obligations of any
Restricted Subsidiary covering Indebtedness of such Restricted Subsidiary;
provided, however, that such Interest Swap Obligations are entered into to
protect the Company and the Restricted Subsidiaries from fluctuations in
interest rates on Indebtedness incurred in accordance with the Indenture to
the extent the notional principal amount of such Interest Swap Obligations
does not exceed the principal amount of the Indebtedness to which such
Interest Swap Obligations relates;
(5) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and the
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(6) Indebtedness of a Restricted Subsidiary to the Company or another
Restricted Subsidiary for so long as such Indebtedness is held by the
Company or a Restricted Subsidiary, in each case subject to no Lien held by
a Person other than the Company or a Restricted Subsidiary; provided that
if as of any date any Person other than the Company or a Restricted
Subsidiary owns or holds any such Indebtedness or holds a Lien in respect
of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(7) Indebtedness of the Company to a Restricted Subsidiary for so long
as such Indebtedness is held by a Restricted Subsidiary, in each case
subject to no Lien; provided that (A) any Indebtedness of the Company to
any Restricted Subsidiary is unsecured and (B) if as of any date any Person
other than a Restricted Subsidiary owns or holds any such Indebtedness or
any Person holds a Lien in respect of such Indebtedness, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the Company;
(8) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days after incurrence;
(9) Indebtedness of the Company or any of the Restricted Subsidiaries
represented by letters of credit for the account of the Company or any such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with self-
insurance or similar requirements in the ordinary course of business;
(10) Refinancing Indebtedness;
(11) additional Indebtedness of the Company and the Restricted
Subsidiaries in an aggregate principal amount not to exceed $75.0 million
at any one time outstanding;
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(12) Purchase Money Indebtedness and Capitalized Lease Obligations
(and any Indebtedness incurred to Refinance such Purchase Money
Indebtedness or Capitalized Lease Obligations) not to exceed 5% of
Consolidated Net Tangible Assets at any one time outstanding; and
(13) Outstanding Permitted Receivables Financings not to exceed $150.0
million at any one time outstanding;
If any Indebtedness incurred by the Company or any Restricted Subsidiary
would qualify in more than one of the categories of Permitted Indebtedness as
set forth in clauses (1) through (13) of this definition, the Company may
designate under which category such incurrence shall be deemed to have been
made.
"Permitted Investments" means:
(1) Investments by the Company or any Restricted Subsidiary in any
Person that is or will become immediately after such Investment a
Restricted Subsidiary or that will merge or consolidate into the Company or
a Restricted Subsidiary;
(2) Investments in the Company by any Restricted Subsidiary; provided
that any Indebtedness evidencing such Investment is unsecured;
(3) Investments in cash and Cash Equivalents;
(4) loans and advances to employees, officers and directors of the
Company and the Restricted Subsidiaries in the ordinary course of business
for bona fide business purposes not in excess of an aggregate of $15.0
million at any one time outstanding;
(5) Currency Agreements and Interest Swap Obligations entered into in
the ordinary course of the Company's or a Restricted Subsidiary's
businesses and otherwise in compliance with the Indenture;
(6) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers;
(7) Investments made by the Company or the Restricted Subsidiaries as
a result of consideration received in connection with an Asset Sale made in
compliance with the covenant described under "-- Certain Covenants
-- Limitation on Asset Sales";
(8) Investments in Persons, including, without limitation,
Unrestricted Subsidiaries and joint ventures, engaged in a business similar
or related to or logical extensions of the businesses in which the Company
and the Restricted Subsidiaries are engaged on the Spin-Off Date, not to
exceed 5% of Consolidated Net Tangible Assets at any one time outstanding;
(9) Investments in the notes; and
(10) Investments in an Accounts Receivable Entity.
"Permitted Liens" means the following types of Liens:
(1) Liens for taxes, assessments or governmental charges or claims
either (A) not delinquent or (B) contested in good faith by appropriate
proceedings and, in each case, as to which the Company or any Restricted
Subsidiary shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(2) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
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(3) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, contracts, performance
and return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(4) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(5) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not impairing in any
material respect the ordinary conduct of the business of the Company or any
of the Restricted Subsidiaries;
(6) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(7) purchase money Liens securing Indebtedness incurred to finance
property or assets of the Company or any Restricted Subsidiary acquired in
the ordinary course of business, and Liens securing Indebtedness which
Refinances any such Indebtedness; provided, however, that (A) the related
purchase money Indebtedness (or Refinancing Indebtedness) shall not exceed
the cost of such property or assets and shall not be secured by any
property or assets of the Company or any Restricted Subsidiary other than
the property and assets so acquired and (B) the Lien securing the purchase
money Indebtedness shall be created within 90 days after such acquisition;
(8) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(9) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(10) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements of the
Company or any of the Restricted Subsidiaries, including rights of offset
and set-off;
(11) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(12) Liens securing Indebtedness under Currency Agreements;
(13) Liens securing Acquired Indebtedness (and any Indebtedness which
Refinances such Acquired Indebtedness) incurred in accordance with the
covenant described under "-- Certain Covenants -- Limitation on Incurrence
of Additional Indebtedness"; provided that (A) such Liens secured the
Acquired Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary and were
not granted in connection with, or in anticipation of the incurrence of
such Acquired Indebtedness by the Company or a Restricted Subsidiary and
(B) such Liens do not extend to or cover any property or assets of the
Company or of any of the Restricted Subsidiaries other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Restricted
Subsidiary;
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(14) Liens securing Indebtedness of Foreign Restricted Subsidiaries
incurred in accordance with the Indenture; provided that such Liens do not
extend to any property or assets other than property or assets of Foreign
Restricted Subsidiaries; and
(15) Liens incurred in connection with a Permitted Receivables
Financing.
"Permitted Receivables Financing" means any sale by the Company or a
Restricted Subsidiary of accounts receivable intended to be (and which shall be
treated for purposes of the Indenture as) a true sale transaction with customary
limited recourse based upon the collectibility of the receivables sold and the
corresponding sale or pledge of such accounts receivable (or an interest
therein), in each case without any guarantee by the Company or any Restricted
Subsidiary other than an Accounts Receivable Entity.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Public Equity Offering" has the meaning set forth under "-- Redemption
- -- Optional Redemption upon Public Equity Offerings."
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary incurred for the purpose of financing all or any part of
the purchase price or the cost of an Asset Acquisition or construction or
improvement of any property; provided that the aggregate principal amount of
such Indebtedness does not exceed such purchase price or cost.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Reference Date" has the meaning set forth under "-- Certain Covenants
- -- Limitation on Restricted Payments."
"Refinance" means in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of Indebtedness incurred in accordance with the covenant
described under "-- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness" (other than pursuant to clause (2), (4), (5), (6), (7), (8), (9),
(11), (12) or (13) of the definition of Permitted Indebtedness), in each case
that does not:
(1) result in an increase in the aggregate principal amount of any
Indebtedness of such Person as of the date of such proposed Refinancing
(plus the amount of any premium reasonably necessary to Refinance such
Indebtedness and plus the amount of reasonable expenses incurred by the
Company in connection with such Refinancing); or
(2) create Indebtedness with (A) a Weighted Average Life to Maturity
that is less than the Weighted Average Life to Maturity of the Indebtedness
being Refinanced or (B) a final maturity earlier than the final maturity of
the Indebtedness being Refinanced;
provided that if such Indebtedness being Refinanced is Indebtedness of the
Company and/or a Guarantor, then such Refinancing Indebtedness shall be
Indebtedness solely of the Company and/or such Guarantor.
"Registration Rights Agreement" means the Registration Rights Agreement
dated the Issue Date among the Company, the Guarantors and the Initial
Purchasers.
"Replacement Assets" means assets and property that will be used in the
business of the Company and/or its Restricted Subsidiaries as existing on the
Spin-Off Date (after consummation of the Spin-Off Transactions) or in a business
the same, similar or reasonably related thereto (including Capital Stock of a
Person which becomes a Restricted Subsidiary).
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"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"Restricted Payment" has the meaning set forth under "-- Certain Covenants
- -- Limitation on Restricted Payments."
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a Board Resolution
delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in
compliance with the covenant described under "-- Certain Covenants -- Limitation
on Designations of Unrestricted Subsidiaries." Any such Designation may be
revoked by a Board Resolution of the Company delivered to the Trustee, subject
to the provisions of such covenant.
"Revocation" has the meaning set forth under "-- Certain Covenants
- -- Limitation on Designations of Unrestricted Subsidiaries."
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Spin-Off Date (after
consummation of the Spin-Off Transactions) or later acquired, which has been or
is to be sold or transferred by the Company or such Restricted Subsidiary to
such Person or to any other Person from whom funds have been or are to be
advanced on the security of such Property.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute or statutes thereto, and the rules and regulations of the
Commission promulgated thereunder.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Spin-Off Date (after
consummation of the Spin-Off Transactions) or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the notes. Without limiting the generality of the foregoing, "Senior
Debt" shall also include the principal of, premium, if any, interest (including
any interest accruing subsequent to the filing of a petition of bankruptcy at
the rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on, and all other
amounts owing in respect of:
(x) all monetary obligations of every nature of the Company under the
Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit,
fees, expenses and indemnities;
(y) all Interest Swap Obligations; and
(z) all obligations under Currency Agreements.
Notwithstanding the foregoing, "Senior Debt" shall not include:
(1) any Indebtedness of the Company to a Restricted Subsidiary or any
Affiliate of the Company or any of such Affiliate's Subsidiaries;
(2) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of the Company or any Restricted Subsidiary
(including without limitation, amounts owed for compensation);
(3) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services;
(4) Indebtedness represented by Disqualified Capital Stock;
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(5) any liability for federal, state, local or other taxes owed by the
Company;
(6) Indebtedness incurred in violation of the covenant described under
"-- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness";
(7) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company; and
(8) any Indebtedness which is, by its express terms, subordinated in
right of payment to any other Indebtedness of the Company.
"Significant Subsidiary" means, with respect to any Person, any Restricted
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities
Act.
"Spin-Off Date" means the date on which all of the Spin-Off Transactions
shall have been consummated, which is November 4, 1999.
"Spin-Off Transactions" means each of (1) the Corporate Restructuring, (2)
the Debt Realignment, and (3) the Packaging Distribution.
"Spin-Off Transaction Agreements" means the Distribution Agreement, Human
Resources Agreement, Tax Sharing Agreement, Transition Services Agreement,
Insurance Agreement and Trademark Transition License Agreement, each as entered
into in connection with the Spin-off Transactions and consistent in all material
respects with the description thereof in the offering memorandum relating to the
original issuance of the outstanding notes.
"Stub Debt" means any Indebtedness outstanding under the Indenture dated
November 1, 1996 by and between the Company and The Chase Manhattan Bank, after
the Company has consummated the Debt Realignment.
"Subsidiary," with respect to any Person, means (1) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (2) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Surviving Entity" has the meaning set forth under "-- Certain Covenants --
Merger, Consolidation and Sale of Assets."
"Transaction Date" has the meaning set forth in the definition of Combined
Fixed Charge Coverage Ratio.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to and in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries." Any such
designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (A) the then outstanding
aggregate principal amount of such Indebtedness into (B) the sum of the total of
the products obtained by multiplying (I) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (II) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Domestic Restricted Subsidiary" means a Wholly Owned
Restricted Subsidiary that is also a Domestic Restricted Subsidiary.
"Wholly Owned Restricted Subsidiary" of the Company means any Restricted
Subsidiary of which all the outstanding voting securities (other than in the
case of a Foreign Restricted Subsidiary, directors'
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qualifying shares or an immaterial amount of shares required to be owned by
other Persons pursuant to applicable law) are owned by the Company or any other
Wholly Owned Restricted Subsidiary.
"Working Capital Borrowings" means Indebtedness incurred by the Company or
the Restricted Subsidiaries prior to the consummation of the Spin-Off
Transactions incurred on a short-term basis to fund working capital
requirements.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of various United States federal
income tax consequences associated with the exchange of outstanding notes for
new notes pursuant to the exchange offer and the ownership and disposition of
the new notes. This discussion is the opinion of Jenner & Block, our tax counsel
in connection with the exchange offers. Except as otherwise indicated, it
applies only if you are a U.S. holder (as defined below) and are a beneficial
owner of new notes. The following discussion is based on current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury
Regulations (the "Regulations"), judicial authority and current administrative
rulings and pronouncements of the Internal Revenue Service ("IRS"). There can be
no assurance that the IRS will not take a contrary view, and no ruling from the
IRS has been or is expected to be sought with respect to such consequences.
Legislative, judicial, or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions described
in this prospectus. Any such changes or interpretations may or may not be
retroactive and could affect the tax consequences to holders of the notes.
We assume in our discussion below that the notes are held as capital
assets. This discussion is for general information only, and does not address
all of the tax consequences that may be relevant to particular holders in light
of their personal circumstances. For instance, special rules may apply to
certain types of holders such as:
- banks and other financial institutions;
- real estate investment trusts;
- regulated investment companies;
- insurance companies;
- tax-exempt organizations;
- S corporations;
- brokers and dealers in securities; or
- persons whose functional currency is not the U.S. Dollar.
In addition, special rules may apply to integrated transactions such as
certain hedging transactions, conversion transactions or "straddle"
transactions. Finally, this discussion does not include any description of the
tax laws of any state, local or foreign government that may be applicable to a
particular holder.
When we use the term "U.S. holder" we generally mean a beneficial owner of
new notes who (for U.S. federal income tax purposes):
- is an individual who is a citizen or resident of the United States (as
determined under U.S. federal income tax laws);
- is a corporation or partnership created or organized in or under the laws
of the United States or any political subdivision thereof (except in the
case of a partnership, as provided by Treasury Regulations that may be
issued in the future);
- is an estate whose income is includible in gross income for U.S. federal
income tax purposes regardless of its source; or
- is a trust if (1) a court within the United States is able to exercise
primary supervision over the administration of the trust and (2) at least
one U.S. person (alone or with other U.S. persons) has authority to
control all substantial decisions of the trust.
When we use the term "non-U.S. holder," we mean a beneficial owner of new
notes that is not a U.S. holder.
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WE ADVISE YOU TO CONSULT WITH YOUR OWN TAX ADVISORS REGARDING THE TAX
CONSEQUENCES TO YOU OF THE ACQUISITION, OWNERSHIP AND SALE OF THE NEW NOTES,
INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF
ACQUISITION, OWNERSHIP AND SALE OF THE NEW NOTES AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
Exchange of Notes. The exchange of outstanding notes for new notes pursuant
to the exchange offer will not be treated as a taxable event for U.S. Federal
income tax purposes because the new notes do not differ materially in kind or
extent from the old notes. As a result: (i) a U.S. holder will not recognize any
gain or loss on the exchange of outstanding notes for new notes; (ii) the
adjusted tax basis in the new notes will be the same as the adjusted tax basis
in the outstanding notes exchanged therefor; (iii) the holding period of the new
notes will include the holding period of the outstanding notes exchanged
therefor; and (iv) the adjusted issue price of the new notes will be the same as
the adjusted issue price of the outstanding notes exchanged therefor.
The exchange offer will result in no U.S. Federal income tax consequences
to non-exchanging U.S. holders.
Original Issue Discount. The new notes will be treated as issued with
original issue discount ("OID"), which each holder will be required to include
in its gross income. In general, a holder must include OID in income as ordinary
interest income as it accrues on the basis of a constant yield to maturity.
Generally, OID must be included in income in advance of the receipt of cash
representing such income. The amount of OID with respect to a new note will be
equal to the excess of the stated redemption price at maturity over the issue
price of the outstanding note exchanged for such note. The stated redemption
price at maturity of a new note will equal the sum of all payments other than
any "qualified stated interest" payments. Qualified stated interest is stated
interest that is unconditionally payable in cash or in property (other than debt
instruments of the issuer) at least annually at a single fixed rate.
A holder must generally include in gross income, for all days during its
tax year in which it holds such note, the sum of the "daily portion" of OID. The
daily portions are determined by allocating to each day in an "accrual period"
(generally the period between interest payments or compounding dates) a pro rata
portion of the original issue discount that accrued during such accrual period.
The amount of OID that will accrue during the accrual period is the product of
the "adjusted issued price" of the new note at the beginning of the accrual
period and its yield to maturity (determined on the basis of compounding at the
end of each accrual period and properly adjusted for the length of the
particular accrual period). The adjusted issue price of the new note is the sum
of the issue price of the outstanding note, plus prior accruals of OID, reduced
by the total payments made with respect to such note other than a payment of
qualified stated interest.
Acquisition Premium. To the extent a holder had acquisition premium with
respect to an outstanding note, the holder generally will have acquisition
premium with respect to a new note. A holder will reduce the OID includible in
gross income by a fraction the numerator of which is the acquisition premium,
and the denominator of which is the OID remaining to be accrued. Rather than
applying this constant fraction, a holder of an outstanding note with
acquisition premium may elect to compute OID accruals arising the constant yield
method described above.
Market Discount. If you purchased the outstanding notes after the original
issue but before this exchange offer for an amount that was less than the issue
price of the new notes, the new notes will be considered to have market
discount. Any gain recognized on the disposition of the new notes that have
market discount or, to the extent provided in Regulations, on the disposition of
exchanged basis property received in exchange for new notes that have market
discount, will be treated as ordinary income to the extent of the market
discount that accrued on the new notes while they were held by you.
Alternatively, you may elect to include market discount in income currently over
the life of the new notes. Such an election will apply to any bonds with market
discount acquired on or after the first day of the first taxable
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year to which such election applies and is revocable only with the consent of
the IRS. Market discount will accrue on a straight-line basis unless you elect
to accrue the market discount on a constant-yield method. Such an election will
apply to those new notes to which it is made and is irrevocable. Unless you
elect to include market discount in income on a current basis, as described
above, you could be required to defer the deduction of a portion of the interest
paid on any indebtedness incurred or maintained to purchase or carry the new
notes.
Election to Treat all Interest as OID. A holder may elect to treat all
"interest" on any outstanding note, and as a result, any new note received in
the exchange, as OID and calculated under the constant yield method described
above. For this purpose, "interest" includes stated interest, acquisition
discount, OID, de minimis OID, market discount and unstated interest, as
adjusted by any amortizable original premium or acquisition premium. The
election must be made for the taxable year in which the holder acquired the
outstanding note and may not be revoked without the consent of the IRS. An
election may also be made with respect to any new note not acquired in the
exchange. The election would be made in the taxable year in which such new note
was acquired.
Disposition of the New Notes. You will recognize taxable gain or loss on
the sale, exchange, redemption, retirement or other taxable disposition of the
new notes. The amount of your gain or loss equals the difference between the
amount you receive for the new note (in cash or other property, valued at fair
market value), minus the amount attributable to accrued interest on the note,
minus your adjusted tax basis in the new note. Your initial tax basis in a note
equals the price you paid for the note.
Your gain or loss will generally be a long-term gain or loss if you have
held the note for more than one year. Otherwise, it will be short-term capital
gain or loss. Payments attributable to accrued interest which you have not yet
included in income will be taxed as ordinary interest income.
INFORMATION REPORTING AND BACKUP WITHHOLDING
We will report to holders of the new notes and the IRS the amount of any
"reportable payments" and any amount withheld with respect to the new notes
during the calendar year.
In general, U.S. holders may be subject to information reporting
requirements and backup withholding at a rate of 31% with respect to (1)
interest (including OID) paid in respect of the notes and (2) proceeds received
on the sale, exchange or redemption of the notes unless the holder:
- is a corporation or comes within other applicable exempt categories and,
when required, demonstrates this fact; or
- provides a correct taxpayer identification number, certifies as to no
loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules.
A U.S. holder who does not provide us with the correct taxpayer
identification number may be subject to penalties imposed by the IRS. Any amount
withheld under these rules will be creditable against the United States federal
tax liability of a U.S. holder, and will be refundable to the extent that it
results in an overpayment of tax.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
Exchange of Notes. The U.S. federal income tax consequences to non-U.S.
holders of an exchange of outstanding notes for new notes are identical to those
discussed above for U.S. holders. The exchange will not be a taxable event for
U.S. federal income tax purposes. Similarly, the exchange offer will result in
no U.S. federal income tax consequences to non-exchanging non-U.S. holders.
Interest on the Notes. Under present United States federal income tax law,
and subject to the discussion below concerning backup withholding, the
"portfolio interest" exemption provides that no withholding of United States
federal income tax will be required with respect to the payment by us or any
paying agent of principal or interest on a new note owned by a non-U.S. holder,
if:
146
<PAGE> 150
- the beneficial owner does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of ours
entitled to vote within the meaning of section 871(h)(3) of the Code and
the related regulations;
- the beneficial owner is not a controlled foreign corporation that is
related to us through stock ownership;
- the beneficial owner is not a bank whose receipt of interest on a new
note is described in section 881(c)(3)(A) of the Code; and
- the beneficial owner satisfies the "statement requirement" (described
generally below) set forth in section 871(h) and section 881(c) of the
Code and the related Regulations.
To satisfy the "statement requirement," the beneficial owner of the new
note, or a financial institution holding the new note on behalf of the owner,
must provide, in accordance with specified procedures, us or our paying agent
with a statement to the effect that the beneficial owner is not a U.S. person.
According to current temporary Regulations, these requirements will be met if:
- the beneficial owner provides his name and address, and certifies, under
penalties of perjury, that he is not a U.S. person (which certification
may be made on an IRS Form W-8 (or successor form)); or
- a financial institution holding the new note on behalf of the beneficial
owner certifies, under penalties of perjury, that such statement has been
received by it and furnishes a paying agent with a copy of the statement.
The beneficial owner must inform us or our paying agent or the financial
institution within 30 days of any change of information to satisfy the
"statement requirement."
If a non-U.S. holder cannot satisfy the requirements of the "portfolio
interest" exception described above, payments of interest made to that non-U.S.
holder will be subject to a 30% withholding tax unless the beneficial owner of
the new note provides us or our paying agent, as the case may be, with a
properly executed:
- IRS Form 1001 (or successor form) claiming an exemption from withholding
under the benefit of an applicable tax treaty; or
- IRS Form 4224 (or successor form) stating that interest paid on the note
is not subject to withholding tax because it is effectively connected
with the beneficial owner's conduct of a trade or business in the United
States.
If a non-U.S. holder is engaged in a trade or business in the United States
and premium, if any, or interest on the new note is effectively connected with
the conduct of that trade or business, the non-U.S. holder, although exempt from
the withholding tax discussed above, will be subject to United States federal
income tax at applicable graduated individual or corporate rates on the interest
in the same manner as if it were a U.S. Holder. In addition, if the holder is a
foreign corporation, it may be subject to a branch profits tax equal to 30% of
its effectively connected earnings and profits for the taxable year, subject to
adjustments. For this purpose, interest on a new note will be included in the
foreign corporation's earnings and profits.
Sale, Exchange, Redemption or other Disposition of the New Notes. A
non-U.S. holder will generally not be subject to United States federal income
tax with respect to gain recognized on a sale, exchange, redemption or other
disposition of the new notes, unless:
- the gain is "effectively connected" with a trade or business of the
non-U.S. holder in the United States, or, if a tax treaty applies, is
attributable to a United States permanent establishment of the non-U.S.
holder; or
147
<PAGE> 151
- in the case of a non-U.S. holder who is an individual, such holder is
present in the United States for 183 or more days in the taxable year of
the sale or other disposition and certain other conditions are met.
If an individual non-U.S. holder meets the "effectively connected"
requirement described above, the individual will be taxed on the net gain
derived from the sale or other disposition under regular graduated United States
federal income tax rates. If an individual non-U.S. holder meets the 183 day
requirement described above, the individual will be subject to a flat 30% tax on
the gain derived from the sale or other disposition, which may be offset by
United States source capital losses recognized within the same taxable year as
the sale or other disposition (notwithstanding the fact that he is not
considered a resident of the United States).
If a non-U.S. holder that is a foreign corporation meets the "effectively
connected" requirement described above, it will be taxed on its gain under
regular graduated United States federal income tax rates and, in addition, may
be subject to the branch profits tax equal to 30% of its effectively connected
earnings and profits within the meaning of the Code for the taxable year, as
adjusted for specified items, unless it qualifies for a lower rate under an
applicable income tax treaty.
Federal Estate Tax. A new note beneficially owned by an individual who at
the time of death is a non-U.S. holder will not be subject to United States
federal estate tax as a result of his death if:
- he does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of ours entitled to vote
within the meaning of section 871(h)(3) of the Code; and
- the interest payments with respect to his notes would not have been, if
received at the time of his death, effectively connected with his conduct
of a United States trade or business.
Information Reporting and Backup Withholding. We will report to holders of
the new notes and the IRS the amount of any "reportable payments" and any amount
withheld with respect to the new notes during the calendar year.
No information reporting or backup withholding will be required with
respect to payments made by us or any paying agent to non-U.S. holders if the
"statement requirement" described under "Tax Consequences to Non-United States
Holders--Interest on the New Notes" has been received and the payor does not
have actual knowledge that the beneficial owner is a United States person.
In addition, backup withholding and information reporting will not apply if
payments of interest on the notes are paid or collected by a foreign office of a
custodian, nominee or other foreign agent on behalf of the beneficial owner of
the new notes, or if a foreign office of a broker (as defined in applicable
Treasury regulations) pays the proceeds of the sale of the notes to the owner.
If, however, such nominee, custodian, agent or broker is, for United States
federal income tax purposes, a U.S. person, a controlled foreign corporation or
a foreign person that derives 50% or more of its gross income for specified
periods from the conduct of a trade or business in the United States or, with
respect to payments made after December 31, 2000, a foreign partnership, if at
any time during its tax year, one or more of its partners are United States
persons who, in the aggregate, hold more than 50% of the income or capital
interest in the partnership or if, at any time during its tax year, such foreign
partnership is engaged in a United States trade or business, interest payments
will not be subject to backup withholding but will be subject to information
reporting, unless:
- such custodian, nominee, agent or broker has documentary evidence in its
records that the beneficial owner is not a U.S. person and certain other
conditions are met, or
- the beneficial owner otherwise establishes an exemption.
Temporary Treasury Regulations provide that the Treasury is considering
whether backup withholding will apply with respect to payments of principal,
interest or the proceeds of a sale that are not subject to backup withholding
under the current regulations.
148
<PAGE> 152
Payments of principal and interest on notes paid to the beneficial owner of
notes by a United States office of a custodian, nominee or agent, or the payment
by the United States office of a broker of the proceeds of sale of notes will be
subject to both backup withholding and information reporting unless the
beneficial owner satisfies the "statement requirement" described above and the
company does not have actual knowledge that the beneficial owner is a United
States person or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against a non-U.S. holder's U.S. federal income tax
liability if the required information is furnished to the IRS.
New Withholding Regulations. New regulations relating to withholding tax
on income paid to foreign persons will generally be effective for payments made
after December 31, 2000, subject to various transition rules. The new
withholding regulations modify and, in general, unify the way in which you
establish your status as a non-United States "beneficial owner" eligible for
withholding exemptions including the "portfolio interest" exemption, a reduced
treaty rate or an exemption from backup withholding. For example, the new
withholding regulations will require new forms, which you generally will have to
provide earlier than you would have had to provide replacements for expiring
existing forms.
149
<PAGE> 153
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for outstanding notes
where such outstanding notes were acquired as a result of market-making
activities or other trading activities. We have agreed that for a period of 180
days after the exchange offer is completed, we will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. All resales must be made in compliance with state
securities or blue sky laws. We assume no responsibility with regard to
compliance with these requirements.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time:
- in one or more transactions in the over-the-counter market,
- in negotiated transactions,
- through the writing of options on the new notes, or
- a combination of such methods of resale.
Such notes may be sold:
- at market prices prevailing at the time of resale,
- at prices related to such prevailing market prices, or
- at negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers
or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such new notes.
Any broker-dealer that resells new notes that were received by it for its
own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act. Any profit on any such
resale of new notes and any commissions or concessions received by any of them
may be deemed to be underwriting compensation under the Securities Act. The
letter of transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the exchange offer is completed, we will
promptly send additional copies of the prospectus and any amendment or
supplement to the prospectus to any broker-dealer requesting these copies in the
letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer other than commissions or concessions of any brokers or dealers
and will indemnify the holders of the outstanding notes, including any
broker-dealers, against various liabilities, including liabilities under the
Securities Act.
Following consummation of the exchange offer, we may, in our sole
discretion, commence one or more additional exchange offers to holders of
outstanding notes who did not exchange their outstanding notes for new notes in
the exchange offer on terms which may differ from those contained in the
registration rights agreement. We may use this prospectus, as it may be amended
of supplemented from time to time, in connection with any such additional
exchange offers. Such additional exchange offers may take place from time to
time until all outstanding notes have been exchanged for new notes.
150
<PAGE> 154
LEGAL MATTERS
Legal matters regarding the new notes will be passed upon for us by Jenner
& Block, Chicago, Illinois.
EXPERTS
The financial statements and schedule included in this document to the
extent and for the periods indicated in their report have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are included in this document in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
151
<PAGE> 155
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE OF
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED
DECEMBER 31, 1998
Report of independent public accountants.................... F-2
Statements of income for each of the three years in the
period ended December 31, 1998............................ F-3
Balance sheets -- December 31, 1998 and 1997................ F-4
Statements of cash flows for each of the three years in the
period ended December 31, 1998............................ F-5
Statements of changes in shareowners' equity for each of the
three years in the period ended December 31, 1998......... F-6
Statements of comprehensive income for each of the three
years in the period ended December 31, 1998............... F-7
Notes to consolidated financial statements.................. F-8
UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
Statements of income for the nine month periods ended
September 30, 1999 and 1998............................... F-48
Statements of cash flows for the nine month periods ended
September 30, 1999 and 1998............................... F-49
Balance Sheets -- September 30, 1999, December 31, 1998 and
September 30, 1998........................................ F-50
Statements of changes in shareowner's equity for the nine
month periods ended September 30, 1999 and 1998........... F-51
Statements of comprehensive income for the nine month
periods ended September 30, 1999 and 1998................. F-52
Notes to consolidated financial statements.................. F-53
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS............ S-1
</TABLE>
F-1
<PAGE> 156
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Tenneco Automotive Inc.:
We have audited the accompanying balance sheets of Tenneco Automotive Inc.
(formerly known as Tenneco Inc.) (a Delaware corporation) and consolidated
subsidiaries (see Note 1) as of December 31, 1998 and 1997, and the related
statements of income, cash flows, changes in shareowners' equity and
comprehensive income for each of the three years in the period ended December
31, 1998. These financial statements and the schedule referred to below are the
responsibility of Tenneco Automotive Inc.'s management. Our responsibility is to
express an opinion on these 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tenneco Automotive Inc. and
consolidated subsidiaries as of December 31, 1998 and 1997, and the results of
their 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 1 to the financial statements, in the fourth quarter
of 1997, Tenneco Automotive Inc. and consolidated subsidiaries 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
financial statements taken as a whole. The supplemental schedule listed in the
index to the financial statements and schedule relating to Tenneco Automotive
Inc. and consolidated subsidiaries is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. The supplemental schedule has been subjected to the
auditing procedures applied in the audits of the basic 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 financial statements
of Tenneco Automotive Inc. and consolidated subsidiaries taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
February 17, 1999
(except with respect to the
matters discussed in Notes 2 and 14
as to which the date is
August 20, 1999, and the
matters discussed in Note 15
as to which the date is
November 5, 1999)
F-2
<PAGE> 157
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
(MILLIONS EXCEPT SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C> <C>
REVENUES
Net sales and operating revenues.......................... $ 3,237 $ 3,226 $ 2,980
Other income, net......................................... (25) 37 (22)
---------- ---------- ----------
3,212 3,263 2,958
---------- ---------- ----------
COSTS AND EXPENSES
Cost of sales (exclusive of depreciation shown below)..... 2,332 2,303 2,140
Engineering, research, and development.................... 31 34 70
Selling, general, and administrative...................... 472 421 412
Depreciation and amortization............................. 150 110 94
---------- ---------- ----------
2,985 2,868 2,716
---------- ---------- ----------
INCOME BEFORE INTEREST EXPENSE, INCOME TAXES, AND MINORITY
INTEREST.................................................. 227 395 242
Interest expense (net of interest capitalized).......... 69 58 60
Income tax expense...................................... 13 80 79
Minority interest....................................... 29 23 21
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS........................... 116 234 82
Income from discontinued operations, net of income tax...... 139 127 564
---------- ---------- ----------
Income before extraordinary loss............................ 255 361 646
Extraordinary loss, net of income tax....................... -- -- (236)
---------- ---------- ----------
Income before cumulative effect of change in accounting
principle................................................. 255 361 410
Cumulative effect of change in accounting principle, net of
income tax................................................ -- (46) --
---------- ---------- ----------
NET INCOME.................................................. 255 315 410
Preferred stock dividends................................... -- -- 12
---------- ---------- ----------
NET INCOME TO COMMON STOCK.................................. $ 255 $ 315 $ 398
========== ========== ==========
EARNINGS PER SHARE
Average shares of common stock outstanding --
Basic................................................... 33,701,115 34,052,946 33,921,875
Diluted................................................. 33,766,906 34,160,327 34,105,223
Basic earnings per share of common stock --
Continuing operations................................... $ 3.45 $ 6.87 $ 2.45
Discontinued operations................................. 4.13 3.73 16.27
Extraordinary loss...................................... -- -- (6.96)
Cumulative effect of change in accounting principle..... -- (1.35) --
---------- ---------- ----------
$ 7.58 $ 9.25 $ 11.76
========== ========== ==========
Diluted earnings per share of common stock --
Continuing operations................................... $ 3.44 $ 6.85 $ 2.43
Discontinued operations................................. 4.12 3.72 16.18
Extraordinary loss...................................... -- -- (6.96)
Cumulative effect of change in accounting principle..... -- (1.35) --
---------- ---------- ----------
$ 7.56 $ 9.22 $ 11.65
========== ========== ==========
Cash dividends per share of common stock.................... $ 6.00 $ 6.00 $ 9.00
========== ========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements of income.
F-3
<PAGE> 158
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1997
------ ------
(MILLIONS)
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments....................... $ 29 $ 29
Receivables --
Customer notes and accounts, net....................... 430 402
Income taxes........................................... 3 38
Other.................................................. 10 4
Inventories............................................... 414 378
Deferred income taxes..................................... 39 21
Prepayments and other..................................... 139 178
------ ------
1,064 1,050
------ ------
Other assets:
Long-term notes receivable, net........................... 23 26
Goodwill and intangibles, net............................. 499 505
Deferred income taxes..................................... 39 55
Pension assets............................................ 101 93
Other..................................................... 201 153
------ ------
863 832
------ ------
Plant, property, and equipment, at cost..................... 1,944 1,767
Less -- Reserves for depreciation and amortization........ 851 738
------ ------
1,093 1,029
------ ------
Net assets of discontinued operations....................... 1,739 1,771
------ ------
$4,759 $4,682
====== ======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt (including current maturities on long-term
debt).................................................. $ 304 $ 75
Trade payables............................................ 337 286
Taxes accrued............................................. 31 73
Accrued liabilities....................................... 161 141
Other..................................................... 76 116
------ ------
909 691
------ ------
Long-term debt.............................................. 671 713
------ ------
Deferred income taxes....................................... 98 165
------ ------
Postretirement benefits..................................... 139 110
------ ------
Deferred credits and other liabilities...................... 31 67
------ ------
Commitments and contingencies
Minority interest........................................... 407 408
------ ------
Shareowners' equity:
Common stock.............................................. 2 2
Premium on common stock and other capital surplus......... 2,710 2,679
Accumulated other comprehensive income (loss)............. (91) (122)
Retained earnings......................................... 142 89
------ ------
2,763 2,648
Less -- Shares held as treasury stock, at cost............ 259 120
------ ------
2,504 2,528
------ ------
$4,759 $4,682
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-4
<PAGE> 159
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1998 1997 1996
----- ----- -------
(MILLIONS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations........................... $ 116 $ 234 $ 82
Adjustments to reconcile income from continuing operations
to cash provided (used) by continuing operations--
Depreciation and amortization........................... 150 110 94
Deferred income taxes................................... (76) 31 10
(Gain) loss on sale of businesses and assets, net....... 20 20 1
Changes in components of working capital--
(Increase) decrease in receivables.................... (88) (25) 128
(Increase) decrease in inventories.................... (32) (12) 22
(Increase) decrease in prepayments and other current
assets............................................... 26 (79) 45
Increase (decrease) in payables....................... (12) 107 (39)
Increase (decrease) in taxes accrued.................. (9) (8) (9)
Increase (decrease) in interest accrued............... -- 30 6
Increase (decrease) in other current liabilities...... 10 (108) 45
Other................................................... (42) (89) (117)
----- ----- -------
Cash provided (used) by continuing operations............... 63 211 268
Cash provided (used) by discontinued operations............. 469 308 (15)
----- ----- -------
Net cash provided (used) by operating activities............ 532 519 253
----- ----- -------
INVESTING ACTIVITIES
Net proceeds related to the sale of discontinued
operations................................................ 22 24 1,197
Net proceeds from sale of businesses and assets............. 10 5 3
Expenditures for plant, property, and equipment............. (195) (221) (188)
Acquisitions of businesses.................................. (3) (29) (425)
Expenditures for plant, property, and equipment and business
acquisitions--discontinued operations..................... (498) (622) (1,106)
Investments and other....................................... (90) (44) (166)
----- ----- -------
Net cash provided (used) by investing activities............ (754) (887) (685)
----- ----- -------
FINANCING ACTIVITIES
Issuance of common, treasury, and SECT shares............... 50 48 164
Purchase of common stock.................................... (154) (132) (172)
Issuance of NPS Preferred Stock............................. -- -- 296
Issuance of equity securities by a subsidiary............... -- 99 --
Redemption of preferred stock............................... -- -- (20)
Issuance of long-term debt.................................. 4 597 2,800
Retirement of long-term debt................................ (21) (23) (2,288)
Net increase (decrease) in short-term debt excluding current
maturities on long-term debt.............................. 540 (31) (221)
Cash transferred in Merger and Distributions................ -- -- (99)
Dividends (common and preferred)............................ (203) (204) (313)
----- ----- -------
Net cash provided (used) by financing activities............ 216 354 147
----- ----- -------
Effect of foreign exchange rate changes on cash and
temporary cash investments................................ 6 3 1
----- ----- -------
Increase (decrease) in cash and temporary cash
investments............................................... -- (11) (284)
Cash and temporary cash investments, January 1.............. 29 40 324
----- ----- -------
Cash and temporary cash investments, December 31 (Note)..... $ 29 $ 29 $ 40
===== ===== =======
Cash paid during the year for interest...................... $ 259 $ 206 $ 489
Cash paid during the year for income taxes (net of
refunds).................................................. $ 80 $(145) $ 685
</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 financial statements are an integral part of these
statements of cash flows.
F-5
<PAGE> 160
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------
1998 1997 1996
---------------------- ---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------- ----------- ------- ----------- ------
(MILLIONS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
PREFERRED STOCK
Balance January 1................................ -- $ -- -- $ -- -- $ --
Issuance of NPS Preferred Stock................ -- -- -- -- 6,000,000 296
Merger of energy business...................... -- -- -- -- (6,000,000) (296)
----------- ------ ----------- ------ ----------- ------
Balance December 31.............................. -- -- -- -- -- --
=========== ------ =========== ------ =========== ------
COMMON STOCK
Balance January 1................................ 172,569,889 2 171,567,658 2 191,351,615 957
Issued pursuant to benefit plans............... 1,100,308 -- 1,002,231 -- 84,796 --
Recapitalization of New Tenneco................ -- -- -- -- (19,868,753) (955)
----------- ------ ----------- ------ ----------- ------
Balance December 31.............................. 173,670,197 2 172,569,889 2 171,567,658 2
=========== ------ =========== ------ =========== ------
STOCK EMPLOYEE COMPENSATION TRUST (SECT)
Balance January 1................................ -- -- (215)
Shares issued.................................. -- -- 216
Adjustment to market value..................... -- -- (1)
------ ------ ------
Balance December 31.............................. -- -- --
------ ------ ------
PREMIUM ON COMMON STOCK AND OTHER CAPITAL SURPLUS
Balance January 1................................ 2,679 2,642 3,602
Premium on common stock issued pursuant to
benefit plans................................ 31 37 28
Adjustment of SECT to market value............. -- -- 1
Merger of energy business...................... -- -- (372)
Distribution of shipbuilding business.......... -- -- (270)
Recapitalization of New Tenneco................ -- -- (348)
Other.......................................... -- -- 1
------ ------ ------
Balance December 31.............................. 2,710 2,679 2,642
------ ------ ------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance January 1................................ (122) 23 26
Other comprehensive income..................... 31 (145) (3)
------ ------ ------
Balance December 31.............................. (91) (122) 23
------ ------ ------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance January 1................................ 89 (21) (469)
Net income..................................... 255 315 410
Dividends--
Preferred stock.............................. -- -- (9)
Common stock................................. (202) (205) (312)
Accretion of excess of redemption value of
preferred stock over fair value at date of
issue........................................ -- -- (3)
Recapitalization of New Tenneco................ -- -- 362
------ ------ ------
Balance December 31.............................. 142 89 (21)
------ ------ ------
LESS -- COMMON STOCK HELD AS TREASURY STOCK, AT
COST
Balance January 1................................ 2,928,189 120 -- -- 16,422,619 753
Shares acquired................................ 4,380,382 161 3,280,755 134 5,118,904 267
Shares issued pursuant to benefit and dividend
reinvestment plans........................... (550,893) (22) (352,566) (14) (1,672,770) (79)
Recapitalization of New Tenneco................ -- -- -- -- (19,868,753) (941)
----------- ------ ----------- ------ ----------- ------
Balance December 31.............................. 6,757,678 259 2,928,189 120 -- --
=========== ------ =========== ------ =========== ------
Total........................................ $2,504 $2,528 $2,646
====== ====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements of changes in shareowners' equity.
F-6
<PAGE> 161
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF COMPREHENSIVE INCOME
<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
------------- ------------- ------------- ------------- ------------- -------------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
NET INCOME........................ $ 255 $ 315 $ 410
----------- ----------- -----------
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
CUMULATIVE TRANSLATION
ADJUSTMENT
Balance January 1............... $ (122) $ 23 $ 26
Translation of foreign
currency statements......... 40 40 (160) (160) 39 39
Hedges of net investment in
foreign subsidiaries........ -- -- 23 23 (47) (47)
Income tax benefit
(expense)................... -- -- (8) (8) 16 16
Reclassification adjustment
for disposition of
investments in foreign
subsidiaries................ -- -- -- -- (11) (11)
----------- ----------- -----------
Balance December 31............. (82) (122) 23
----------- ----------- -----------
ADDITIONAL MINIMUM PENSION
LIABILITY ADJUSTMENT
Balance January 1............... -- -- --
Additional minimum pension
liability adjustment........ (15) (15) -- -- -- --
Income tax benefit
(expense)................... 6 6 -- -- -- --
----------- ----------- -----------
Balance December 31............. (9) -- --
----------- ----------- -----------
Balance December 31............... $ (91) $ (122) $ 23
============= ============= =============
----------- ----------- -----------
Other comprehensive income
(loss).......................... 31 (145) (3)
----------- ----------- -----------
COMPREHENSIVE INCOME.............. $ 286 $ 170 $ 407
============= ============= =============
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements of comprehensive income.
F-7
<PAGE> 162
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
Consolidation and Presentation
The financial statements of Tenneco Automotive Inc. and consolidated
subsidiaries ("Tenneco") include all majority-owned subsidiaries. Investments in
20% to 50% owned companies where Tenneco has the ability to exert significant
influence over operating and financial policies are carried at cost plus equity
in undistributed earnings since the date of acquisition and cumulative
translation adjustments. Tenneco has no investments in 20% to 50% owned
companies where it does not carry the investment at cost plus equity in
undistributed earnings. All significant intercompany transactions have been
eliminated.
Prior to November 1999, Tenneco was known as Tenneco Inc. Tenneco changed
its name to Tenneco Automotive Inc. following the spin-off of its packaging
business in November 1999. This transaction is more fully described in Note 2.
In December 1996, Tenneco was spun-off from the company then known as Tenneco
Inc. ("Old Tenneco") in a series of transactions (the "Transaction"), which
included distributions (the "Distributions") to Old Tenneco shareowners and a
subsequent merger (the "Merger"). Following the Transaction, Tenneco owned the
automotive parts ("Automotive"), packaging ("Specialty Packaging" and
"Paperboard Packaging") and administrative services ("Tenneco Business
Services") businesses of Old Tenneco. These transactions and their accounting
treatment are described in more detail in Note 2, "Discontinued Operations,
Disposition of Assets, and Extraordinary Loss."
Beginning in January 1999, Tenneco began a series of transactions that
ultimately resulted in the discontinuance of its Paperboard Packaging operations
in June 1999 and its Specialty Packaging operations in August 1999. See Note 2
for information regarding these transactions.
For purposes of these financial statements, "Tenneco" or the "Company"
refers to (1) Old Tenneco and its subsidiaries before the Transaction; (2)
Tenneco Inc., formerly known as New Tenneco Inc. ("New Tenneco"), and its
subsidiaries for the period after the Transaction through the spin-off; and (3)
Tenneco Automotive Inc. and its subsidiaries for all periods following the
spin-off.
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. This statement
cannot be applied retroactively and is effective for all fiscal years beginning
after June 15, 2000. Tenneco is currently evaluating the new standard but has
not yet determined the impact it will have on its financial position or results
of operations.
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. Prior to January 1, 1999,
Tenneco capitalized certain costs related to start-up activities, primarily
engineering costs for new automobile original equipment platforms. Tenneco
expects to record an after-tax charge for
F-8
<PAGE> 163
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the cumulative effect of this change in accounting principle upon adoption of
approximately $100 million. Tenneco will adopt this new accounting principle in
the first quarter of 1999.
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 will be applied prospectively and
is effective for fiscal years beginning after December 15, 1998. The impact of
this new standard will not have a significant effect on Tenneco's financial
position or results of operations.
Tenneco adopted FAS No. 131, "Disclosure about Segments of an Enterprise
and Related Information," and FAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," in 1998. Disclosures required by
these statements for earlier periods presented have been restated on a
comparative basis.
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," Tenneco recorded an after-tax charge of $46 million ($.27 per
common share on both the basic and diluted bases), net of a tax benefit of $28
million, in the fourth quarter of 1997. EITF 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.
Inventories
At December 31, 1998 and 1997, inventory by major classification was as
follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
(MILLIONS)
<S> <C> <C>
Finished goods.............................................. $221 $187
Work in process............................................. 79 72
Raw materials............................................... 73 76
Materials and supplies...................................... 41 43
---- ----
$414 $378
==== ====
</TABLE>
Inventories are stated at the lower of cost or market. A portion of total
inventories (28% and 31% at December 31, 1998 and 1997, respectively) is valued
using the "last-in, first-out" method. All other 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 Tenneco for all inventories,
inventories would have been $15 million and $16 million higher at December 31,
1998 and 1997, respectively.
Customer Acquisition Costs
Tenneco capitalizes certain costs it incurs in connection with the
acquisition of new customer contracts to sell its automotive aftermarket
products. These new customer acquisition costs are incurred in exchange for
contracts in which the aftermarket customer agrees to purchase Tenneco's
automotive aftermarket products exclusively for periods of time ranging up to
three years. These costs are amortized over the initial contract period. At
December 31, 1998 and 1997, the net capitalized costs related to these
activities was $54 million and $47 million, respectively.
F-9
<PAGE> 164
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.................................................... $487 $497
Other intangible assets..................................... 12 8
---- ----
$499 $505
==== ====
</TABLE>
Goodwill is being amortized on a straight-line basis over periods ranging
from 20 years to 40 years. Such amortization amounted to $16 million, $14
million, and $7 million for 1998, 1997, and 1996, respectively, and is included
in the statements of income caption "Depreciation and amortization."
Tenneco 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 $2
million, $6 million, and $2 million in 1998, 1997, and 1996, respectively, and
is included in the 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........................... $ 341 $ 265
Machinery and equipment..................................... 1,395 1,320
Other, including construction in progress................... 208 182
------ ------
$1,944 $1,767
====== ======
</TABLE>
Depreciation of Tenneco'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.
Notes Receivable and Allowance for Doubtful Accounts
Short and long-term notes receivable of $36 million and $37 million were
outstanding at December 31, 1998 and 1997, respectively.
At December 31, 1998 and 1997, the short and long-term allowance for
doubtful accounts on accounts and notes receivable was $39 million and $20
million, respectively.
Other Long-Term Assets
Tenneco capitalizes certain costs related to start-up activities, primarily
engineering costs for new automobile original equipment platforms, which are
included in the balance sheet caption "Other assets -- Other." The platform
engineering costs are amortized over the life of the underlying supply
agreements and other start-up costs are amortized over the periods benefited,
generally two years. Start-up costs capitalized, net of amortization, at
December 31, 1998 and 1997, were $111 million and $79 million,
F-10
<PAGE> 165
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
respectively, for continuing operations and $41 million and $20 million,
respectively, for discontinued operations. Tenneco will adopt a new accounting
standard in the first quarter of 1999, which will require these costs to be
expensed. Refer to "Changes in Accounting Principles" discussed previously in
this footnote.
Tenneco 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, at December 31, 1998 and 1997, were $67
million and $47 million, respectively, for continuing operations and $140
million and $104 million, respectively, for discontinued operations. As
described previously in this footnote, Tenneco will adopt SOP 98-1 regarding
software cost capitalization. The impact of this new standard will not have a
significant effect on Tenneco'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 financial statements. For further information on this subject,
refer to Note 13, "Commitments and Contingencies."
Income Taxes
Tenneco 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 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.
Tenneco does not provide for U.S. 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 $755 million for continuing operations
and $95 million for discontinued operations at December 31, 1998. It is not
practicable to determine the amount of U.S. income taxes that would be payable
upon remittance of the assets that represent those earnings.
F-11
<PAGE> 166
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Earnings Per Share
According to the requirements of FAS No. 128, "Earnings Per Share," basic
earnings per share are computed by dividing income available to common
shareowners by the weighted-average number of common shares outstanding. The
computation of diluted earnings per share is similar to the computation of basic
earnings per share except that the weighted-average number of shares outstanding
is adjusted to include estimates of additional shares that would be issued if
potentially dilutive common shares had been issued. In addition, income
available to common shareowners is adjusted to include any changes in income or
loss that would result from the assumed issuance of the dilutive common shares.
In 1996, Tenneco's preferred stock outstanding before the Merger was
converted into El Paso Natural Gas Company ("El Paso") common stock as part of
the Merger; therefore, preferred stock dividends have been deducted from income
from discontinued operations in determining earnings per share. For more
information regarding the Merger, see Note 2, "Discontinued Operations,
Disposition of Assets, and Extraordinary Loss."
Allocation of Corporate Debt and Interest Expense
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 has been
allocated to discontinued operations based upon the ratio of the discontinued
operations' net assets to Tenneco's consolidated net assets plus debt. Interest
expense, net of tax, has been allocated to Tenneco's discontinued operations
based on the same allocation methodology. See Note 2, "Discontinued Operations,
Disposition of Assets, and Extraordinary Loss," for further discussion.
Research and Development
Research and development costs are expensed as incurred. Research and
development expenses were $30 million, $19 million, and $36 million for 1998,
1997, and 1996, respectively, and are included in the income statement caption
"Engineering, research, and development expenses."
Realignment Charges
In 1996, the Company recorded charges to income from continuing operations
of approximately $64 million in connection with the realignment of Automotive's:
(i) Walker exhaust system original equipment and aftermarket manufacturing
operations in Europe, (ii) Walker aftermarket operations in North America, and
(iii) Monroe ride control product line. All actions related to the realignment
plan have been completed.
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 balance sheet caption "Accumulated other comprehensive income
(loss)."
Risk Management Activities
Tenneco 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. Tenneco's primary
exposure to changes in foreign currency rates results from intercompany loans
made between Tenneco affiliates to minimize the need for borrowings from third
parties. Net gains or
F-12
<PAGE> 167
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
losses on these foreign currency exchange contracts that are designated as
hedges are recognized in the income statement to offset the foreign currency
gain or loss on the underlying transaction. Additionally, Tenneco 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. Since these anticipated transactions are not firm commitments, Tenneco
marks these forward contracts to market each period and records any gain or loss
in the income statement. Tenneco 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
balance sheet caption "Accumulated other comprehensive income (loss)." 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.
Tenneco 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 Tenneco's assets,
liabilities, revenues, and expenses. Reference is made to the "Income Taxes" and
"Environmental Liabilities" sections of this footnote and Notes 11 and 13 for
additional information on significant estimates included in Tenneco's financial
statements.
Reclassifications
Prior years' financial statements have been reclassified where appropriate
to conform to 1998 presentations.
2. DISCONTINUED OPERATIONS, DISPOSITION OF ASSETS, AND EXTRAORDINARY LOSS
Strategic Alternatives Analysis
In July 1998, Tenneco's Board of Directors authorized management to develop
a broad range of strategic alternatives to separate the automotive,
containerboard packaging, and specialty packaging businesses. Subsequently,
Tenneco completed 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 of the containerboard assets 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 operations, 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 specialty packaging
businesses into two separate, independent companies. The spin-off and
related transactions described in this Note 2 were subsequently
completed in November 1999. See Note 15, "Subsequent Events."
The separation of the automotive and packaging businesses will be
accomplished by the spin-off of the common stock of Tenneco Packaging Inc.
("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.
F-13
<PAGE> 168
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 with 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 will be tax-free for U.S.
federal income tax purposes, and the successful completion of the debt
realignment and the 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.
Discontinued Operations
The Specialty Packaging Business
In April 1999, Tenneco Automotive Inc.'s Board of Directors approved the
separation of its automotive and specialty packaging businesses into two
separate, independent companies. This separation will be accomplished by the
Spin-off, contingent upon, among other things, 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. 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
has restated its financial statements to reflect its specialty packaging segment
as a discontinued operation. Since Tenneco would not have proceeded with the
Spin-off absent the receipt of a determination that the Spin-off would be
tax-free, the establishment of a measurement date for discontinued operations
did not occur until that determination was received.
Net assets as of December 31, 1998, 1997, and 1996, and results of
operations for the years then ended for the specialty packaging business were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(MILLIONS)
<S> <C> <C> <C>
Net assets at December 31................................... $1,373 $1,348 $1,424
====== ====== ======
Net sales and operating revenues............................ $2,791 $2,563 $1,987
====== ====== ======
Income before income taxes and interest allocation.......... 280 302 231
Income tax (expense) benefit................................ (113) (118) (103)
------ ------ ------
Income before interest allocation........................... 167 184 128
Allocated interest expense, net of income tax (Note)........ (85) (78) (63)
------ ------ ------
Income from discontinued operations......................... $ 82 $ 106 $ 65
====== ====== ======
</TABLE>
- ---------------
Note: Reference is made to Note 1, "Summary of Accounting Policies -- Allocation
of Corporate Debt and Interest Expense," for a discussion of the
allocation of corporate debt and interest expense to discontinued
operations.
The Paperboard Packaging Business
In connection with the containerboard transaction, in April 1999, Tenneco
received consideration of cash and debt assumption totaling approximately $2
billion and a 45 percent 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 the 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,
Tenneco
F-14
<PAGE> 169
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Packaging borrowed approximately $1.8 billion and used approximately $1.2
billion 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,
Tenneco 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 April 1999, Tenneco reached an agreement to sell the paperboard
packaging segment's other assets, its folding carton operations, to Caraustar
Industries. This transaction closed in June 1999.
Net assets as of December 31, 1998, 1997, and 1996, and results of
operations for the years then ended for the paperboard packaging business were
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(MILLIONS)
<S> <C> <C> <C>
Net assets at December 31................................... $ 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: Reference is made to Note 1, "Summary of Accounting Policies -- Allocation
of Corporate Debt and Interest Expense," for a discussion of the
allocation of corporate debt and interest expense to discontinued
operations.
The Energy Business and Shipbuilding Business
Tenneco Automotive Inc. was spun-off from Old Tenneco on December 11, 1996,
following a series of transactions undertaken to realign the assets,
liabilities, and operations of Old Tenneco such that Automotive, Specialty
Packaging, Paperboard Packaging, and Tenneco Business Services were owned by New
Tenneco and the shipbuilding business was owned by Newport News Shipbuilding
Inc. ("Newport News"). On December 11, 1996, Old Tenneco distributed the shares
of New Tenneco and Newport News to its shareowners. On December 12, 1996, Old
Tenneco, which then consisted primarily of the energy business and certain
previously discontinued operations of Old Tenneco, merged with a subsidiary of
El Paso.
Although the separation of Tenneco Automotive Inc. from Old Tenneco was
structured as a spin-off for legal, tax, and other reasons, Tenneco Automotive
Inc. kept certain important aspects of Old Tenneco, including its executive
management, Board of Directors, and headquarters. Most importantly, the combined
assets, revenues, and operating income of Automotive, Specialty Packaging and
Paperboard Packaging represented more than half the assets, revenues, and
operating income of Old Tenneco before the Distributions and Merger.
Consequently, Tenneco Automotive Inc.'s financial statements for periods before
the Distributions and Merger present the net assets and results of operations of
Old Tenneco's shipbuilding and energy businesses, as well as its farm and
construction equipment business which was disposed of before the Distributions
and Merger, as discontinued operations.
F-15
<PAGE> 170
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the Distributions, one share of New Tenneco common stock
($.01 par value) was issued for each share of Old Tenneco common stock ($5.00
par value) and one share of Newport News common stock was issued for each five
shares of Old Tenneco common stock. Also, in connection with the Merger, Old
Tenneco shareowners received shares of El Paso common stock valued at
approximately $914 million in the aggregate in exchange for their shares of Old
Tenneco common and preferred stock. The treasury shares held by Old Tenneco did
not participate in the Merger and Distributions and were retained by Old Tenneco
in the Merger. Subsequent to the Transaction, the common equity of Tenneco
Automotive Inc. relates solely to the shares of New Tenneco common stock issued
in the Distributions. In connection with the Transaction, the retained earnings
(accumulated deficit) of Old Tenneco was eliminated. Retained earnings
(accumulated deficit) shown on the balance sheets represents net earnings
(losses) accumulated after the date of the Transaction. The effects of the
issuance of New Tenneco common stock in the Distributions, the retention of
treasury shares by Old Tenneco, and the elimination of Old Tenneco's retained
earnings (accumulated deficit) have been reflected in the statements of changes
in shareowners' equity as "Recapitalization of New Tenneco."
Results of operations for the year ended December 31, 1996, for the energy
business were as follows:
<TABLE>
<CAPTION>
(MILLIONS)
<S> <C>
Net sales and operating revenues............................ $2,512
======
Income before income taxes and interest allocation.......... $ 291
Income tax expense.......................................... (78)
------
Income before interest allocation........................... 213
Allocated interest expense, net of income tax (Note)........ (86)
------
Income from discontinued operations before transaction
costs..................................................... $ 127
======
</TABLE>
- -------------------------
Note: Reference is made to Note 1, "Summary of Accounting Policies -- Allocation
of Corporate Debt and Interest Expense," for a discussion of the
allocation of corporate debt and interest expense to discontinued
operations.
On December 11, 1996, one day before the Merger, Old Tenneco completed the
distribution of the common stock of Newport News to the holders of Old Tenneco
common stock. As part of the Distributions, Newport News retained the net assets
of the shipbuilding business, including approximately $600 million of debt that
had been issued during November 1996.
Results of operations for the year ended December 31, 1996, for the
shipbuilding business were as follows:
<TABLE>
<CAPTION>
(MILLIONS)
<S> <C>
Net sales and operating revenues............................ $1,822
======
Income before income taxes and interest allocation.......... $ 133
Income tax expense.......................................... (43)
------
Income before interest allocation........................... 90
Allocated interest expense, net of income tax (Note)........ (20)
------
Income from discontinued operations before transaction
costs..................................................... $ 70
======
</TABLE>
- -------------------------
Note: Reference is made to Note 1, "Summary of Accounting Policies -- Allocation
of Corporate Debt and Interest Expense," for a discussion of the
allocation of corporate debt and interest expense to discontinued
operations.
The costs incurred to complete the Transaction, consisting primarily of
financial advisory, legal, accounting, printing, and other costs, of
approximately $108 million, net of a $17 million income tax benefit, were
recorded as a component of 1996 income from discontinued operations.
F-16
<PAGE> 171
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Farm and Construction Equipment Operations
In June 1994, Tenneco completed an initial public offering ("IPO") of
approximately 29% of the common stock of Case Corporation ("Case"), the holder
of Tenneco's farm and construction equipment segment. In November 1994, a
secondary offering of Case common stock reduced Tenneco's ownership interest in
Case to approximately 44%. Combined proceeds from the two transactions was $694
million, net of commissions and offering expenses. The combined gain on the
transactions was $36 million, including a $7 million tax benefit. In an August
1995 public offering, Tenneco sold an additional 16.1 million shares of Case
common stock for net proceeds of approximately $540 million. The sale resulted
in a gain of $101 million and reduced Tenneco's ownership in Case from 44% to
21%. In December 1995, Tenneco sold to a third party a subordinated note
receivable due from Case, which was received as part of the reorganization
preceding the Case IPO, for net proceeds of $298 million and recognized a gain
of $32 million. In March 1996, Tenneco sold its remaining 15.2 million shares of
common stock of Case in a public offering. Net proceeds of approximately $788
million were received, resulting in a gain of $340 million, net of $83 million
in income tax expense.
Results of operations for the year ended December 31, 1996, for the farm
and construction equipment segment were as follows:
<TABLE>
<CAPTION>
(MILLIONS)
<S> <C>
Net sales and operating revenues............................ $ --
====
Income before income taxes and interest allocation.......... $ 1
Income tax benefit.......................................... --
----
Income before interest allocation........................... 1
Allocated interest expense, net of income tax (Note)........ (2)
----
Loss from operations........................................ (1)
----
Gain on disposition......................................... 423
Income tax expense from disposition......................... (83)
----
Net gain on disposition..................................... 340
----
Income from discontinued operations......................... $339
====
</TABLE>
- -------------------------
Note: Reference is made to Note 1, "Summary of Accounting Policies -- Allocation
of Corporate Debt and Interest Expense," for a discussion of the
allocation of corporate debt and interest expense to discontinued
operations.
Disposition of Assets
Gains and losses on the sale of businesses and assets have been included in
the caption "Other income, net" in the accompanying statements of income.
Extraordinary Loss
In preparation for the Transaction, Old Tenneco realigned $3.8 billion of
indebtedness (the "1996 Debt Realignment") through various cash tender offers,
debt exchanges, defeasances, and other retirements. The cash funding required to
consummate the 1996 Debt Realignment was financed through internally generated
cash, borrowings under new credit facilities of both Old Tenneco and New
Tenneco, borrowings under a new credit facility and other financings at Newport
News, and proceeds from the issuance of 8 1/4% cumulative junior preferred stock
("NPS Preferred Stock"), which was retained by Old Tenneco in the Merger. As a
result of the Merger, El Paso indirectly acquired approximately $2.8 billion of
debt and preferred stock obligations as well as certain liabilities related to
operations previously discontinued by Old Tenneco.
As a result of the 1996 Debt Realignment, Tenneco recognized an
extraordinary loss of approximately $236 million, net of a tax benefit of
approximately $126 million. This extraordinary loss consists principally
F-17
<PAGE> 172
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
of the fair value paid in the cash tender offers and the fair value of debt
exchanged in the debt exchange offers in excess of the historical net carrying
value for the debt tendered and exchanged.
3. RESTRUCTURING AND OTHER CHARGES
On July 21, 1998, Tenneco announced its intention to initiate a
restructuring plan designed to reduce administrative and operational overhead
costs in every part of Tenneco's business. In the fourth quarter of 1998,
Tenneco's Board of Directors approved an extensive restructuring plan to
accomplish the overhead reduction goals as well as to consolidate the
manufacturing and distribution operations of Automotive's North American
aftermarket business. Tenneco recorded a pre-tax charge to income from
continuing operations of $53 million, $34 million after-tax or $.20 per share,
in the fourth quarter of 1998 related to this restructuring plan. Of the pre-tax
charge, for operational restructuring plans, $36 million is related to the
Automotive aftermarket restructuring. A staff and related cost reduction plan,
which covers staff reductions at the Automotive operating unit and corporate
operations, is expected to cost $17 million.
The Automotive aftermarket restructuring involves closing two plant
locations and five distribution centers and the elimination of 302 positions at
those locations. The staff and related cost reduction plan involves the
elimination of 454 administrative positions.
The fixed assets at the locations to be closed were written down to their
fair value, less costs to sell, in the fourth quarter of 1998. As a result of
the single-purpose nature of the assets, fair value was estimated at scrap value
less cost to dispose. 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 2000. The effect of suspending depreciation for these
impaired assets is a reduction in depreciation and amortization of approximately
$2 million on an annual basis.
As of December 31, 1998, approximately 350 employees had been terminated.
Amounts related to the restructuring plan are shown in the following table:
<TABLE>
<CAPTION>
FOURTH
1998 QUARTER CHARGED BALANCE AT
RESTRUCTURING 1998 TO ASSET DECEMBER 31,
CHARGE PAYMENTS ACCOUNTS 1998
------------- -------- -------- ------------
(MILLIONS)
<S> <C> <C> <C> <C>
Severance.................................. $19 $ 4 $-- $15
Asset impairments.......................... 33 -- 33 --
Facility exit costs........................ 1 -- -- 1
--- --- --- ---
$53 $ 4 $33 $16
=== === === ===
</TABLE>
4. ACQUISITIONS
In 1998, Tenneco made one acquisition in the Automotive business for
approximately $3 million. During 1997, Tenneco completed acquisitions or
investments in the Automotive business for total consideration of approximately
$29 million.
In June 1996, Tenneco entered into agreements to acquire Clevite for $328
million. Clevite makes suspension bushings and other elastomeric parts for cars
and trucks. Upon completion of the Clevite acquisition in July 1996, Clevite's
operations became part of Automotive. Also during 1996, Tenneco completed the
acquisitions of or investments in various other businesses and joint ventures in
the automotive parts industry for total consideration of approximately $96
million.
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
F-18
<PAGE> 173
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
excess of the purchase price over the fair value of the net assets acquired is
included in the balance sheet caption "Goodwill and intangibles, net."
5. LONG-TERM DEBT, SHORT-TERM DEBT, AND FINANCING ARRANGEMENTS
Long-Term Debt
A summary of long-term debt obligations of Tenneco at December 31, 1998 and
1997, is set forth in the following table:
<TABLE>
<CAPTION>
1998 1997
------ ------
(MILLIONS)
<S> <C> <C>
Tenneco Automotive Inc. --
Debentures due 2008 through 2027, average effective
interest rate 7.5% in 1998 and in 1997 (net of $64
million in 1998 and $68 million in 1997 of unamortized
premium)............................................... $1,213 $1,217
Notes due 1999 through 2007, average effective interest
rate 6.7% in 1998 and in 1997 (net of $33 million in
1998 and $47 million in 1997 of unamortized premium)... 1,344 1,358
Other subsidiaries --
Notes due 1999 through 2016, average effective interest
rate 10.7% in 1998 and 11.2% in 1997 (net of $22
million in 1998 and $24 million in 1997 of unamortized
discount).............................................. 53 64
------ ------
2,610 2,639
Less -- current maturities.................................. 250 6
------ ------
Total long-term debt........................................ 2,360 2,633
Less -- long-term corporate debt allocated to net assets of
discontinued operations................................... 1,689 1,920
------ ------
Total long-term debt, net of allocation to net assets of
discontinued operations................................... $ 671 $ 713
====== ======
</TABLE>
The aggregate maturities and sinking fund requirements applicable to the
issues outstanding at December 31, 1998, are $250 million, $10 million, $187
million, $498 million, and $7 million for 1999, 2000, 2001, 2002, and 2003,
respectively.
F-19
<PAGE> 174
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Short-Term Debt
Tenneco uses commercial paper, lines of credit, and overnight borrowings to
finance 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
------------------------- -------------------------
COMMERCIAL CREDIT COMMERCIAL CREDIT
PAPER AGREEMENTS* PAPER AGREEMENTS*
---------- ----------- ---------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Outstanding borrowings at end of year........... $576 $245 $203 $ 69
Weighted average interest rate on outstanding
borrowings at end of year..................... 5.8% 6.3% 5.9% 6.7%
Approximate maximum month-end outstanding
borrowings during year........................ $576 $245 $613 $123
Approximate average month-end outstanding
borrowings during year........................ $447 $157 $372 $ 52
Weighted average interest rate on approximate
average month-end outstanding borrowings
during year................................... 5.8% 6.9% 5.7% 8.4%
</TABLE>
- -------------------------
* Includes borrowings under both committed credit facilities and uncommitted
lines of credit and similar arrangements.
Short-Term Corporate Debt Allocation
<TABLE>
<CAPTION>
1998 1997
------ ------
(MILLIONS)
<S> <C> <C>
Current maturities on long-term debt........................ $ 250 $ 6
Commercial paper............................................ 576 203
Credit agreements........................................... 245 69
------ ------
Total short-term debt....................................... 1,071 278
Less -- short-term corporate debt allocated to net assets of
discontinued operations................................... 767 203
------ ------
Total short-term debt, net of allocation to discontinued
operations................................................ $ 304 $ 75
====== ======
</TABLE>
Financing Arrangements
<TABLE>
<CAPTION>
COMMITTED CREDIT FACILITIES(A)
-------------------------------------------------
TERM COMMITMENTS UTILIZED AVAILABLE
------- ----------- -------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
Tenneco Inc. credit agreements....................... 2001 $1,750 $576(b) $1,174
Subsidiaries' credit agreements...................... Various 131 123 8
------ ---- ------
$1,881 $699 $1,182
====== ==== ======
</TABLE>
- -------------------------
Notes: (a) Tenneco and its subsidiaries generally are required to pay commitment
fees on the unused portion of the total commitment and facility fees
on the total commitment.
(b) Tenneco's committed long-term credit facilities support its
commercial paper borrowings; consequently, the amount available under
the committed long-term credit facilities is reduced by outstanding
commercial paper borrowings.
F-20
<PAGE> 175
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1998, Tenneco's principal credit facility, which expires in
2001, was a $1.75 billion committed financing arrangement with a syndicate of
banks and other financial institutions. Committed borrowings under this credit
facility bear interest at an annual rate equal to, at the borrower's option,
either (i) a rate consisting of the higher of Morgan Guaranty Trust Company of
New York's prime rate or the federal funds rate plus 50 basis points; (ii) a
rate of LIBOR plus a margin determined based on the credit rating of Tenneco's
long-term debt; or (iii) a rate based on money market rates pursuant to
competitive bids by the syndicate banks.
The credit facility requires that the Company's consolidated ratio of debt
to total capitalization, as defined in the credit facility, not exceed 70%.
Compliance with this requirement is a condition for any incremental borrowings
under the credit facility and failure to meet the requirement enables the
syndicate banks to require repayment of any outstanding loans after a 30-day
cure period. At December 31, 1998, Tenneco's ratio of debt to total
capitalization as defined in the credit facility was 57.9%. In addition, the
credit facility imposes certain other restrictions, none of which are expected
to limit the Company's ability to operate its business in the ordinary course.
Before the Spin-off, Tenneco will realign substantially all of its debt and
enter into a new credit facility. See Note 2, "Discontinued Operations,
Dispositions of Assets, and Extraordinary Loss," for further discussion.
6. FINANCIAL INSTRUMENTS
The carrying and estimated fair values of Tenneco's financial instruments
by class at December 31, 1998 and 1997, were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
(MILLIONS)
ASSETS (LIABILITIES)
<S> <C> <C> <C> <C>
Long-term debt (including current maturities) (Note).... $(2,610) $(2,606) $(2,639) $(2,606)
Instruments With Off-Balance-Sheet Risk
Foreign currency contracts............................ 1 1 2 2
Financial guarantees.................................. -- (13) -- (15)
</TABLE>
- -------------------------
Note: The carrying amounts and estimated fair value of long-term debt are before
allocation of corporate debt to discontinued operations. Reference is made
to Note 1 for information concerning corporate debt allocated to
discontinued operations.
Asset and Liability Instruments
The fair value of cash and temporary cash investments, short and long-term
receivables, accounts payable, and short-term debt was considered to be the same
as or was not determined to be materially different from the carrying amount.
Long-term debt -- The fair value of fixed-rate long-term debt was based on
the market value of debt with similar maturities and interest rates.
Instruments With Off-Balance-Sheet Risk
Foreign Currency Contracts -- Note 1, "Summary of Accounting Policies --
Risk Management Activities" describes Tenneco's use of and accounting for
foreign currency exchange contracts. The
F-21
<PAGE> 176
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
following table summarizes by major currency the contractual amounts of foreign
currency contracts utilized by Tenneco:
<TABLE>
<CAPTION>
NOTIONAL AMOUNT
------------------------------------
DECEMBER 31, DECEMBER 31,
1998 1997
---------------- ----------------
PURCHASE SELL PURCHASE SELL
-------- ---- -------- ----
(MILLIONS)
<S> <C> <C> <C> <C>
Foreign currency contracts (in US$):
Belgian Francs............................................ $ 17 $ 19 $ 24 $ 6
British Pounds............................................ 163 252 156 257
Canadian Dollars.......................................... 73 115 58 16
French Francs............................................. 89 17 52 1
German Marks.............................................. 2 33 4 121
Spanish Pesetas........................................... 32 2 12 1
U.S. Dollars.............................................. 105 33 92 --
Other..................................................... 40 49 61 55
---- ---- ---- ----
$521 $520 $459 $457
==== ==== ==== ====
</TABLE>
Based on exchange rates at December 31, 1998 and 1997, the cost of
replacing these contracts in the event of non-performance by the counterparties
would not have been material.
Guarantees -- Tenneco had guaranteed payment and performance of
approximately $13 million and $15 million at December 31, 1998 and 1997,
respectively, primarily with respect to letters of credit and other guarantees
supporting various financing and operating activities.
7. 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............................. $(65) $ 91 $ 21
Foreign income before income taxes.......................... 223 246 161
---- ---- ----
Income before income taxes.................................. $158 $337 $182
==== ==== ====
</TABLE>
F-22
<PAGE> 177
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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. ..................................................... $ 72 $(5) $14
State and local........................................... (21) -- 2
Foreign................................................... 38 54 53
----- --- ---
89 49 69
----- --- ---
Deferred --
U.S. ..................................................... (109) 13 3
Foreign, state and other.................................. 33 18 7
----- --- ---
(76) 31 10
----- --- ---
Income tax expense.......................................... $ 13 $80 $79
===== === ===
</TABLE>
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 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.................................................... $ 55 $118 $64
Increases (reductions) in income tax expense resulting from:
Foreign income taxed at different rates and foreign losses
with no tax benefit.................................... (12) (25) 8
State and local taxes on income, net of U.S. federal
income tax benefit..................................... (8) 4 (1)
Recognition of previously unbenefited loss
carryforwards.......................................... (5) (11) --
Amortization of nondeductible goodwill.................... 3 2 3
Other..................................................... (20) (8) 5
---- ---- ---
Income tax expense.......................................... $ 13 $ 80 $79
==== ==== ===
</TABLE>
F-23
<PAGE> 178
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The components of Tenneco'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. .................................................. $104 $ 55
State.................................................. 7 --
Foreign................................................ 58 77
Postretirement benefits other than pensions............... 32 26
Other..................................................... 26 7
Valuation allowance....................................... (30) (25)
---- ----
Net deferred tax asset............................... 197 140
---- ----
Deferred tax liabilities --
Tax over book depreciation................................ 113 91
Pensions.................................................. 27 23
Other..................................................... 77 115
---- ----
Total deferred tax liability......................... 217 229
---- ----
Net deferred tax liability................................ $ 20 $ 89
==== ====
</TABLE>
As reflected by the valuation allowance in the table above, Tenneco had
potential tax benefits of $30 million and $25 million at December 31, 1998 and
1997, respectively, which were not recognized in the 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 $298 million of U.S. tax loss carryforwards which exist at December
31, 1998, $139 million expire in 2012 and $159 million expire in 2018. The $82
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 $142 million
of foreign tax loss carryforwards which exist at December 31, 1998, $118 million
do not expire and the remainder expires in varying amounts over the period from
1999 to 2008.
In connection with the 1996 corporate reorganization transactions discussed
in Note 2, "Discontinued Operations, Disposition of Assets, and Extraordinary
Loss," Tenneco entered into a tax sharing agreement with Newport News, Old
Tenneco, and El Paso. The tax sharing agreement provides, among other things,
for the allocation among the parties of tax liabilities arising before, as a
result of, and after the Distributions. For periods after the Distributions,
Tenneco will be liable for taxes imposed on its businesses, Old Tenneco will be
liable for taxes imposed on the energy business, and Newport News will be liable
for taxes imposed on the shipbuilding business. In the case of federal income
taxes imposed on the activities of the Old Tenneco consolidated group before the
Distributions, Tenneco and Newport News are generally liable to Old Tenneco for
federal income taxes attributable to their respective businesses, and those
entities have been allocated an agreed-upon share of estimated tax payments made
by Old Tenneco.
8. COMMON STOCK
Tenneco Inc. has authorized 350 million shares ($.01 par value) of common
stock, of which 173,670,197 shares and 172,569,889 shares were issued at
December 31, 1998 and 1997, respectively. Tenneco Inc. held 6,757,678 shares and
2,928,189 shares of treasury stock at December 31, 1998 and 1997, respectively.
F-24
<PAGE> 179
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Stock Repurchase Plans
During 1997, Tenneco initiated a common stock repurchase program to acquire
up to 8.5 million shares. Approximately 7.5 million shares have been acquired
under this program at a total cost of approximately $289 million. All purchases
executed through this program were in the open market or negotiated purchases.
Reserved
The total number of shares of Tenneco Automotive Inc. common stock reserved
at December 31, 1998 and 1997, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
ORIGINAL ISSUE SHARES 1998 1997
--------------------- ---------- ----------
<S> <C> <C>
Thrift Plan............................................ 74,576 167,223
Restricted Stock Plans................................. -- 33,796
Stock Ownership Plan................................... 16,199,114 16,556,126
Employee Stock Purchase Plan........................... 1,642,037 2,255,232
---------- ----------
17,915,727 19,012,377
========== ==========
TREASURY STOCK
- -------------------------------------------------------
Thrift Plan............................................ 201,541 42,434
========== ==========
</TABLE>
Stock Plans
Tenneco Automotive Inc. Stock Ownership Plan -- 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 shares, stock
appreciation rights ("SARs"), and stock options to directors, officers, and
employees of Tenneco. Tenneco can issue up to 17,000,000 shares of common stock
under the 1996 Stock Ownership Plan, which will terminate December 31, 2001. All
Old Tenneco stock options granted to New Tenneco employees before the
Distributions were, in connection with the Distributions, cancelled and replaced
with options to purchase New Tenneco common stock according to the provisions of
the 1996 Stock Ownership Plan. The options were replaced with the appropriate
number of New Tenneco options so that the aggregate option value immediately
after the Distributions equaled the aggregate value immediately before the
Distributions. The 1994 Stock Ownership Plan was terminated effective as of
December 11, 1996.
Restricted Stock and Performance Shares -- Tenneco has granted restricted
stock and restricted units under the 1996 Stock Ownership Plan to certain key
employees. These awards generally require, among other things, that the employee
remain an employee of Tenneco during the restriction period. Tenneco has also
granted performance shares to certain key employees which will vest based upon
the attainment of specified performance goals within four years from the date of
grant. During 1998, 1997, and 1996, Tenneco granted 640,810, 494,350, and
465,075 shares and units, respectively, with a weighted average fair value based
on the price of Tenneco's stock on the grant date of $38.03, $43.08, and $48.54
per share, respectively. Any restricted stock and performance shares awarded
after the Distributions are issued under the 1996 Stock Ownership Plan. At
December 31, 1998, 351,220 restricted shares at an average price of $37.76 per
share, 562,145 performance shares at an average price of $41.35 per share, and
31,000 restricted units at an average price of $37.72 per unit were outstanding
under this plan.
Under another arrangement, restricted stock or restricted units are issued
annually to each member of the Board of Directors who is not also an officer of
Tenneco. From January 1, 1996, through October 31,
F-25
<PAGE> 180
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1996, 3,300 restricted shares were issued with a weighted average fair value
based on the price of Tenneco's stock on the grant date of $48.25 per share. On
November 1, 1996, all outstanding restricted shares were vested. In December
1996, Tenneco adopted a new restricted stock and unit plan for each member of
the Board of Directors who is not also an officer of Tenneco. During 1998, 1997,
and 1996, 1,700, 5,040, and 23,464 restricted shares and units, respectively,
were issued under the new plan at a weighted average fair value of Tenneco
Automotive Inc.'s stock on the grant date of $37.31, $45.19, and $45.31 per
share, respectively. At December 31, 1998, 27,696 restricted shares at an
average price of $44.80 per share and 300 restricted units at an average price
of $45.19 per unit were outstanding under the new plan.
In conjunction with the Transaction, all outstanding restricted shares and
performance shares as of November 1, 1996, were vested and Tenneco recognized an
after-tax compensation expense of $18 million, of which approximately $7 million
related to restricted stock and performance shares awarded to employees of the
energy business and shipbuilding business.
Employee Stock Purchase Plan -- In June 1992, Tenneco initiated an Employee
Stock Purchase Plan (the "1992 ESPP"). The 1992 ESPP was terminated as of the
date of the Distributions. Effective April 1, 1997, Tenneco adopted a new ESPP
with provisions similar to the 1992 ESPP. The ESPP allows U.S. and Canadian
Tenneco employees to purchase Tenneco Automotive Inc. common stock at a 15%
discount. Each year employees participating in the ESPP may purchase shares with
a discounted value not to exceed $21,250. Under the respective ESPPs, Tenneco
sold 613,195, 244,768, and 657,936 shares to employees in 1998, 1997, and 1996,
respectively. 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, $11.16, and $10.84 in 1998, 1997, and
1996, respectively.
Stock Options -- The following table reflects the status and activity for
all stock options issued by Tenneco Automotive Inc., including those outside the
option plans discussed above, for the periods indicated:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
SHARES AVG. SHARES AVG. SHARES AVG.
UNDER EXERCISE UNDER EXERCISE UNDER EXERCISE
STOCK OPTIONS OPTION PRICES OPTION PRICES OPTION PRICES
------------- ---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year.... 11,924,072 $43.42 10,877,758 $43.41 3,019,116 $46.99
Granted -- Options.............. 1,745,480 37.30 2,928,669 42.91 8,178,600 46.17
Exercised -- Options............ (122,609) 38.58 (312,979) 39.64 (817,212) 45.29
-- SARs.............. -- -- -- -- (25,741) 36.23
Issuance of New Tenneco
options...................... -- -- -- -- 5,015,258 41.19
Cancelled....................... (1,123,639) 43.53 (1,569,376) 43.19 (4,492,263) 46.01
---------- ---------- ----------
Outstanding, end of year.......... 12,423,304 $42.58 11,924,072 $43.42 10,877,758 $43.41
========== ========== ==========
Options exercisable at end of
year............................ 7,522,654 $42.84 2,703,948 $40.84 1,809,596 $41.67
Weighted average fair value of
options granted during the
year............................ $ 10.82 $ 12.62 $ 11.37
</TABLE>
The fair value of each option granted 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: (i) risk-free interest rates of 5.7%, 6.6%, and 5.9%; (ii)
expected lives of 9.9, 7.5, and 5.0 years; (iii) expected volatility 25.6%,
25.6%, and 25.1%; and (iv) dividend yield of 3.2%, 2.8%, and 3.4%.
F-26
<PAGE> 181
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table reflects summarized information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- ----------------------
WEIGHTED AVG. WEIGHTED WEIGHTED
NUMBER REMAINING AVG. NUMBER AVG.
OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
RANGE OF EXERCISE PRICE AT 12/31/98 LIFE PRICE AT 12/31/98 PRICE
----------------------- ----------- ------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$31 to $38............................... 2,525,490 13.8 years $36.40 1,323,014 $35.82
$38 to $44............................... 2,771,004 11.7 40.91 1,638,084 41.10
$44 to $51............................... 7,126,810 11.9 45.42 4,561,556 45.51
---------- ---------
12,423,304 7,522,654
========== =========
</TABLE>
Tenneco applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," to account for its stock-based compensation plans.
Tenneco recognized after-tax stock-based compensation expense in 1998 of $3
million, in 1997 of $5 million, and in 1996 of $27 million, of which $3 million,
$4 million, and $24 million, respectively, related to restricted stock and
performance shares awarded to employees of its discontinued operations. Had
compensation costs for Tenneco'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 the awards under those plans, Tenneco's
pro forma net income to common stock and earnings per share of common stock for
the years ended December 31, 1998, 1997, and 1996, would have been lower by $33
million or $.19 per both basic and diluted common share, $34 million or $.20 per
both basic and diluted common share, and $14 million or $.08 per both basic and
diluted common share, respectively. The increase in compensation expense for
1997 versus 1996 was primarily the result of stock options issued subsequent to
the Transaction.
Stock Employee Compensation Trust (SECT)
In November 1992, Tenneco established the SECT to fund a portion of its
obligations arising from its various employee compensation and benefit plans.
Tenneco issued 12 million shares of treasury stock to the SECT in exchange for a
promissory note of $432 million that accrued interest at the rate of 7.8% per
annum. At December 31, 1996, all shares had been utilized.
Grantor Trust
In August 1998, Tenneco established a grantor trust and issued 1.9 million
shares of common stock to the trust. This grantor trust is a so-called "rabbi
trust" designed to assure the payment of deferred compensation and supplemental
pension benefits. The trust is consolidated in Tenneco's financial statements
and the shares are reflected in the financial statements as treasury stock.
Consequently, the shares of common stock issued to the trust are not considered
to be outstanding in the computation of earnings per share.
Qualified Offer Rights Plan
On September 9, 1998, Tenneco adopted a Qualified Offer Rights Plan and
established an independent Board committee to review it every three years. The
Qualified Offer Rights Plan was adopted to deter coercive takeover tactics and
to prevent a potential acquiror from gaining control of Tenneco in a transaction
which is not in the best interests of Tenneco shareholders. Generally, under the
Qualified Offer Rights Plan, if a person becomes the beneficial owner of 20
percent or more of Tenneco's outstanding common stock, other than pursuant to a
"qualified offer", each right will entitle its holder to purchase, at the
right's exercise price, a number of shares of common stock of Tenneco or, under
certain
F-27
<PAGE> 182
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
circumstances, of the acquiring person having a market value of twice the
right's exercise price. Rights held by the 20 percent or more holder will become
void and will not be exercisable.
The rights will not become exercisable in connection with a "qualified
offer," which is an all-cash tender offer for all outstanding common stock that
is fully financed, remains open for a period of at least 60 business days,
results in the offeror owning at least 85% of the common stock after
consummation of the offer, assures a prompt second-step acquisition of shares
not purchased in the initial offer, at the same price as the initial offer, and
meets certain other requirements.
In connection with the adoption of the Qualified Offer Rights Plan, the
Board of Directors also adopted a three-year independent director evaluation
("TIDE") mechanism. Under the TIDE mechanism, an independent Board committee
will review, on an ongoing basis, the Qualified Offer Rights Plan and
developments in rights plans generally, and, if it deems appropriate, recommend
modification or termination of the Qualified Offer Rights Plan. The independent
committee will report to Tenneco's Board at least every three years as to
whether the Qualified Offer Rights Plan continues to be in the best interests of
Tenneco's shareholders.
Dividend Reinvestment and Stock Purchase Plan
Under the Tenneco Automotive Inc. Dividend Reinvestment and Stock Purchase
Plan, holders of Tenneco Automotive Inc. common stock may apply their cash
dividends and optional cash investments to the purchase of additional shares of
Tenneco Automotive Inc. common stock.
F-28
<PAGE> 183
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Earnings Per Share
Earnings per share of common stock outstanding were computed in the
following table. Following the spin-off, Tenneco executed a one-for-five reverse
stock split. All share and per share amounts in these financial statements
reflect this reverse stock split.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
(MILLIONS EXCEPT SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Basic Earnings Per Share --
Income from continuing operations(a)................... $ 116 $ 234 $ 82
========== ========== ==========
Average shares of common stock outstanding(b).......... 33,701,115 34,052,946 33,921,875
========== ========== ==========
Earnings from continuing operations per average share
of common stock..................................... $ 3.45 $ 6.87 $ 2.45
========== ========== ==========
Diluted Earnings Per Share --
Income from continuing operations(a)................... $ 116 $ 234 $ 82
========== ========== ==========
Average shares of common stock outstanding(b).......... 33,701,115 34,052,946 33,921,875
Effect of dilutive securities:
Restricted stock.................................. 10,586 -- 103,267
Stock options..................................... 17,647 90,573 80,081
Performance shares................................ 37,558 16,808 --
---------- ---------- ----------
Average shares of common stock outstanding including
dilutive securities................................. 33,766,906 34,160,327 34,105,223
========== ========== ==========
Earnings from continuing operations per average share
of common stock..................................... $ 3.44 $ 6.85 $ 2.43
========== ========== ==========
</TABLE>
- -------------------------
Notes: (a) All preferred stock outstanding before the Merger was acquired by El
Paso. Therefore, preferred stock dividends were included in the
computation of earnings per share from discontinued operations for
1996. There was no preferred stock outstanding in 1998 or 1997.
(b) In 1992, 12 million shares of common stock were issued to the SECT.
Shares of common stock issued to a related trust are not considered
to be outstanding in the computation of average shares until the
shares are used to fund the obligations of the trust. During the year
ended December 31, 1996, the SECT used 4,358,084 shares. At December
31, 1996, all shares were used. Stock repurchase plans also affect
common stock outstanding. Refer to "Stock Employee Compensation Trust
(SECT)" and "Stock Repurchase Plans" discussed previously in this
footnote.
9. PREFERRED STOCK
Tenneco had 50 million shares of preferred stock ($.01 par value)
authorized at December 31, 1998 and 1997. No shares of preferred stock were
outstanding at the respective dates. Tenneco has designated and reserved 2.0
million shares of the preferred stock as junior preferred stock for the
Qualified Offer Rights Plan.
As part of the Merger, Tenneco's $7.40 and $4.50 preferred stock (the
"Preferred Stock") was acquired by El Paso in exchange for El Paso common stock.
Consequently, Preferred Stock dividends have been subtracted from discontinued
operations to compute basic and diluted earnings per share. Before the Merger,
Tenneco made periodic accretions of the excess of the redemption value over the
fair value of the Preferred Stock at the date of issue. Such accretions have
been included in the statements of income
F-29
<PAGE> 184
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
caption, "Preferred stock dividends" as a reduction of net income to arrive at
net income to common stock.
In connection with the Transaction and as part of the 1996 Debt
Realignment, Old Tenneco issued the NPS Preferred Stock in November 1996 for
proceeds of approximately $296 million. The proceeds from the issuance were used
to fund a portion of the cash tender offers made in connection with the 1996
Debt Realignment and other cash requirements preceding the Merger. As a result
of the Merger, the obligations relating to the NPS Preferred Stock remained with
Old Tenneco.
Changes in Preferred Stock with Mandatory Redemption Provisions
<TABLE>
<CAPTION>
1996
-----------------------
SHARES AMOUNT
---------- ------
(MILLIONS EXCEPT SHARE
AMOUNTS)
<S> <C> <C>
Balance January 1........................................... 1,390,993 $ 130
Shares redeemed........................................... (195,751) (20)
Merger of energy business................................. (1,195,242) (113)
Accretion of excess of redemption value over fair value at
date of issue.......................................... -- 3
---------- -----
Balance December 31......................................... -- $ --
========== =====
</TABLE>
10. MINORITY INTEREST
At December 31, 1998 and 1997, Tenneco reported minority interest in the
balance sheet of $407 million and $408 million, respectively. At December 31,
1998, $394 million of minority interest resulted from the December 1994 and
December 1997 sales of preferred stock ($300 million and $100 million,
respectively) of Tenneco International Holding Corp. ("TIHC") to a financial
investor. Subsequent to each sale, the investor had approximately a 25% interest
in TIHC, consisting of 100% of the issued and outstanding variable rate voting
preferred stock of TIHC. Tenneco and certain of its subsidiaries hold 100% of
the issued and outstanding $8.00 junior preferred stock and common stock of
TIHC. TIHC holds certain assets including the capital stock of Tenneco Canada
Inc., S.A. Monroe Europe N.V., Monroe Australia Proprietary Limited, Walker
France S.A., and other subsidiaries. For financial reporting purposes, the
assets, liabilities, and earnings of TIHC and its subsidiaries are consolidated
in Tenneco's financial statements, and the investor's preferred stock interest
has been recorded as "Minority interest" in the balance sheet.
As of December 31, 1998, dividends on the TIHC preferred stock are based on
the aggregate issue price of $400 million times a rate per annum equal to .92%
over LIBOR and are payable quarterly in arrears on the last business day of each
quarter. The weighted average rate paid on TIHC preferred stock was 6.66%,
6.92%, and 6.83% for 1998, 1997, and 1996, respectively. Additionally, the
holder of the preferred stock is entitled to receive, when and if declared by
the Board of Directors of TIHC, participating dividends based on the operating
income growth rate of TIHC and its subsidiaries. For financial reporting
purposes, dividends paid by TIHC to its financial investor have been recorded in
Tenneco's statements of income as "Minority interest."
11. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Tenneco has various defined benefit 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. Tenneco's funding policies
are to contribute to the plans amounts necessary to satisfy the funding
F-30
<PAGE> 185
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
requirement of federal laws and regulations. Plan assets consist principally of
listed equity and fixed income securities. Certain employees of Tenneco
participate in the Tenneco Retirement Plan.
Tenneco has postretirement health care and life insurance plans that cover
a majority of its domestic employees. For salaried employees, the plans cover
employees retiring from Tenneco on or after attaining age 55 who have had at
least 10 years service with Tenneco after attaining age 45. For hourly
employees, the postretirement benefit plans generally cover employees who retire
according to one of Tenneco's hourly employee retirement plans. All of these
benefits may be subject to deductibles, copayment provisions, and other
limitations, and Tenneco has reserved the right to change these benefits.
Tenneco's postretirement benefit plans are not funded.
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
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 obligation:
Benefit obligation at September 30 of the previous year... $491 $444 $ 105 $ 100
Service cost.............................................. 13 12 3 4
Interest cost............................................. 36 33 8 7
Plan amendments........................................... 1 -- -- --
Actuarial loss (gain)..................................... 41 29 7 --
Benefits paid............................................. (30) (27) (8) (6)
---- ---- ----- -----
Benefit obligation at September 30........................ $552 $491 $ 115 $ 105
==== ==== ===== =====
Change in plan assets:
Fair value at September 30 of the previous year........... $593 $493 $ -- $ --
Currency rate conversion.................................. (1) -- -- --
Actual return on plan assets.............................. 13 121 -- --
Employer contributions.................................... 7 6 8 6
Participants' contributions............................... 1 -- -- --
Benefits paid............................................. (30) (27) (8) (6)
---- ---- ----- -----
Fair value at September 30................................ $583 $593 $ -- $ --
==== ==== ===== =====
Development of net amount recognized:
Funded status at September 30............................. $ 31 $102 $(115) $(105)
Contributions during the fourth quarter................... 1 1 2 2
Unrecognized cost:
Actuarial loss (gain).................................. 20 (55) 27 22
Prior service cost..................................... 12 14 (1) (3)
Transition liability (asset)........................... (7) (11) -- --
---- ---- ----- -----
Net amount recognized at December 31...................... $ 57 $ 51 $ (87) $ (84)
==== ==== ===== =====
Amounts recognized in the statement of financial position:
Prepaid benefit cost...................................... $ 81 $ 80 $ -- $ --
Accrued benefit cost...................................... (39) (33) (87) (84)
Intangible asset.......................................... 4 4 -- --
Accumulated other comprehensive income.................... 11 -- -- --
---- ---- ----- -----
Net amount recognized..................................... $ 57 $ 51 $ (87) $ (84)
==== ==== ===== =====
</TABLE>
- -------------------------
Notes: 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-31
<PAGE> 186
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Amounts included in the above table reflect the participation of
Automotive employees in the Tenneco Retirement Plan ("TRP"), however,
Automotive employees will not accrue additional benefits under the TRP
following the Spin-off. The prepaid pension costs related to the TRP will
be transferred to Packaging in connection with the corporate
restructuring transactions. Packaging will become the sponsor of the TRP.
Amounts in the table are for continuing operations only. Amounts
recognized in the statement of financial position for discontinued
operations include the following:
<TABLE>
<CAPTION>
PENSION POSTRETIREMENT
----------- ---------------
1998 1997 1998 1997
---- ---- ------ ------
<S> <C> <C> <C> <C>
Net assets of discontinued operations....................... $630 $585 $(61) $(63)
Accumulated other comprehensive income...................... 4 -- -- --
---- ---- ---- ----
$634 $585 $(61) $(63)
==== ==== ==== ====
</TABLE>
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............. $ 13 $ 12 $ 11
Interest on prior year's projected benefit obligation....... 36 33 22
Expected return on plan assets.............................. (48) (45) (30)
Net amortization:
Actuarial loss (gain)..................................... 1 -- --
Prior service cost........................................ 1 1 1
Transition liability (asset).............................. (2) (2) (2)
---- ---- ----
Net pension costs (income).................................. $ 1 $ (1) $ 2
==== ==== ====
</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 $114 million, $108 million, and $68 million,
respectively, as of September 30, 1998, and $40 million, $39 million, and $9
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 6.9%, 7.6%, and 7.7%, respectively. The rate of
increase in future compensation was 4.7%, 5.0%, and 5.2%, for 1998, 1997, and
1996, respectively. The weighted average expected long-term rate of return on
plan assets for 1998, 1997, and 1996 was 9.8%, 9.9%, and 9.9%, respectively.
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 $ 4 $ 3
Interest on accumulated postretirement benefit obligation... 8 7 6
Net amortization of actuarial loss (gain)................... 1 -- 1
--- --- ---
Net periodic postretirement benefit cost.................... $11 $11 $10
=== === ===
</TABLE>
F-32
<PAGE> 187
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 $13 million, $12 million, and $11 million,
respectively, and would increase the aggregate of the service cost and interest
cost components of the net periodic postretirement benefit cost by approximately
$2 million each year for 1998, 1997, and 1996.
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 $12 million and would decrease the aggregate of
service cost and interest cost components of the net periodic postretirement
benefit cost by $2 million.
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.
12. SEGMENT AND GEOGRAPHIC AREA INFORMATION
Tenneco is a global manufacturer with a single operating segment:
Automotive -- Manufacture and sale of exhaust and ride control systems
for both the original equipment and replacement markets.
The accounting policies of the segments are the same as those described in
Note 1, "Summary of Accounting Policies." Tenneco 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 Tenneco's external
customer and intersegment 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>
AUTOMOTIVE
Exhaust systems products.................................. $1,814 $1,753 $1,699
Ride control products..................................... 1,423 1,473 1,281
------ ------ ------
Consolidated........................................... $3,237 $3,226 $2,980
====== ====== ======
</TABLE>
During 1998, sales to two major customers comprised approximately 12.8% and
10.9% of consolidated net sales and operating revenues. During 1997, sales to
one major customer comprised 13.2% of consolidated net sales and operating
revenues. During 1996, sales to two major customers comprised approximately
11.5% and 9.6% of consolidated net sales and operating revenues.
F-33
<PAGE> 188
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following tables summarize certain Tenneco segment and geographic
information:
<TABLE>
<CAPTION>
SEGMENT RECLASS
------------------- &
AUTOMOTIVE OTHER ELIMS CONSOLIDATED
---------- ------ ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1998, AND FOR THE YEAR THEN ENDED
Revenues from external customers............................ $3,237 $ -- $ -- $3,237
Interest income............................................. 5 -- -- 5
Depreciation and amortization............................... 150 -- -- 150
Income before interest, income taxes, and minority
interest.................................................. 248 (21) -- 227
Extraordinary loss.......................................... -- -- -- --
Cumulative effect of change in accounting principle......... -- -- -- --
Total assets (Note)......................................... 2,827 1,976 (44) 4,759
Net assets of discontinued operations....................... -- 1,739 -- 1,739
Investment in affiliated companies.......................... 1 -- -- 1
Capital expenditures for continuing operations.............. 195 -- -- 195
Noncash items other than depreciation, depletion, and
amortization.............................................. (13) 20 -- 7
AT DECEMBER 31, 1997, AND FOR THE YEAR THEN ENDED
Revenues from external customers............................ $3,226 $ -- $ -- $3,226
Interest income............................................. 3 -- -- 3
Depreciation and amortization............................... 110 -- -- 110
Income before interest, income taxes, and minority
interest.................................................. 407 (12) -- 395
Extraordinary loss.......................................... -- -- -- --
Cumulative effect of change in accounting principle......... (7) (39) -- (46)
Total assets (Note)......................................... 2,754 1,997 (69) 4,682
Net assets of discontinued operations....................... -- 1,771 -- 1,771
Investment in affiliated companies.......................... 2 -- -- 2
Capital expenditures for continuing operations.............. 211 10 -- 221
Noncash items other than depreciation, depletion, and
amortization.............................................. (23) 17 -- (6)
AT DECEMBER 31, 1996, AND FOR THE YEAR THEN ENDED
Revenues from external customers............................ $2,980 $ -- $ -- $2,980
Interest income............................................. 3 4 -- 7
Depreciation and amortization............................... 94 -- -- 94
Income before interest, income taxes, and minority
interest.................................................. 249 (7) -- 242
Extraordinary loss.......................................... -- (236) -- (236)
Cumulative effect of change in accounting principle......... -- -- -- --
Total assets (Note)......................................... 2,557 2,098 (2) 4,653
Net assets of discontinued operations....................... -- 1,883 -- 1,883
Investment in affiliated companies.......................... 2 -- -- 2
Capital expenditures for continuing operations.............. 177 11 -- 188
Noncash items other than depreciation, depletion, and
amortization.............................................. (3) (5) -- (8)
</TABLE>
- -------------------------
Note: The Other segment's total assets include the net assets of discontinued
operations.
F-34
<PAGE> 189
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
GEOGRAPHIC AREA
-------------------
UNITED RECLASS &
STATES FOREIGN(A) ELIMS CONSOLIDATED
------ ---------- --------- ------------
(MILLIONS)
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1998, AND FOR THE YEAR THEN ENDED
Revenues from external customers(b)................... $1,432 $1,805 $ -- $3,237
Long-lived assets(c).................................. 648 770 -- 1,418
Total assets.......................................... 2,733 2,070 (44) 4,759
AT DECEMBER 31, 1997, AND FOR THE YEAR THEN ENDED
Revenues from external customers(b)................... $1,502 $1,724 $ -- $3,226
Long-lived assets(c).................................. 634 667 -- 1,301
Total assets.......................................... 2,982 1,740 (40) 4,682
AT DECEMBER 31, 1996, AND FOR THE YEAR THEN ENDED
Revenues from external customers(b)................... $1,344 $1,636 $ -- $2,980
Long-lived assets(c).................................. 545 658 -- 1,203
Total assets.......................................... 3,103 1,617 (67) 4,653
</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.
13. COMMITMENTS AND CONTINGENCIES
Capital Commitments
Tenneco estimates that expenditures aggregating approximately $231 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. Of this amount, $121 million is in support of continuing
operations and $110 million is in support of discontinued operations.
Lease Commitments
Tenneco 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 $15 million, $17 million, $16
million, $14 million, and $12 million for the years 1999, 2000, 2001, 2002, and
2003, respectively, and $58 million for subsequent years.
Commitments under capital leases were not significant to the accompanying
financial statements. Total rental expense for continuing operations for the
years 1998, 1997, and 1996, was $31 million, $30 million, and $35 million,
respectively, including minimum rentals under non-cancelable operating leases of
$16 million, $29 million, and $11 million for the corresponding periods.
Litigation
Tenneco Automotive Inc. and Newport News have received letters from the
Defense Contract Audit Agency (the "DCAA"), inquiring about certain aspects of
the Distributions, including the disposition of the Tenneco Automotive Inc.
Retirement Plan ("TRP"), which covers salaried employees of Newport News and
other Tenneco divisions and the 1986 asset valuation for the TRP and its cost
accounting treatment. On January 15, 1999, Newport News entered into a
settlement agreement with the Federal
F-35
<PAGE> 190
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Government regarding the TRP. Tenneco agreed to pay Newport News $14.5 million
with respect to this and other matters. This payment had no material impact on
Tenneco's financial position or results of operations.
Tenneco Automotive Inc. and its subsidiaries are parties to various other
legal proceedings arising from their operations. Tenneco 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 Tenneco
Automotive Inc. and its subsidiaries.
Environmental Matters
Tenneco Automotive Inc. and its subsidiaries are subject to a variety of
environmental and pollution control laws and regulations in all jurisdictions in
which they operate. Tenneco has provided reserves for compliance with these laws
and regulations where it is probable that a liability exists and where Tenneco
can make a reasonable estimate of the liability. The estimated liabilities
recorded are subject to change as more information becomes available regarding
the magnitude of possible clean-up costs and the timing, varying costs, and
effectiveness of alternative clean-up technologies. However, Tenneco believes
that any additional costs which arise as more information becomes available will
not have a material effect on the financial condition or results of operations
of Tenneco.
14. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Basis of Presentation
Tenneco is offering $500,000,000 in aggregate principal amount of Senior
Subordinated Notes Due 2009 (the Notes) as a component of a plan to realign its
debt prior to the Spin-off. See Note 2, "Discontinued Operations, Disposition of
Assets, and Extraordinary Loss" for further discussion of the Spin-off and debt
realignment. Effective upon the Spin-off, all of Tenneco's then existing and
future material domestic wholly owned subsidiaries (the Guarantor Subsidiaries)
will fully and unconditionally guarantee the Notes on a joint and several basis.
Separate financial statements of the Guarantor Subsidiaries are not presented
because the Guarantor Subsidiaries are jointly, severally, and unconditionally
liable under the guarantees, and Tenneco believes the condensed consolidating
financial statements presented are more meaningful in understanding the
financial position of the Guarantor Subsidiaries.
Included in the financial information of the Guarantor Subsidiaries for
each period presented are the financial position and results of operations of a
domestic subsidiary, Tenneco International Holding Corp., which has issued
preferred stock to a third party (See Note 10, "Minority Interest"). Prior to
the Spin-off, Tenneco will acquire the subsidiary preferred stock outstanding,
following which such subsidiary will become a Guarantor Subsidiary.
These condensed consolidating financial statements are presented on the
equity method. Under this method, investments are recorded at cost and adjusted
for a company's ownership share of a subsidiary's cumulative results of
operations, capital contributions and distributions, and other equity changes.
The balance sheet caption "Investment in affiliated companies" includes
investments in continuing and discontinued subsidiaries. The condensed
consolidating financial statements of the Guarantor Subsidiaries should be read
in connection with the financial statements of Tenneco Inc. and Consolidated
Subsidiaries and notes thereto of which this note is an integral part.
F-36
<PAGE> 191
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Distributions
There are no significant restrictions on the ability of the Guarantor
Subsidiaries to make distributions to Tenneco Inc.
F-37
<PAGE> 192
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------------------------
TENNECO INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ ------------ ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
REVENUES
Net sales and operating revenues --
External......................... $1,429 $1,804 $ 4 $ -- $3,237
Affiliated companies............. 90 74 -- (164) --
Other income, net................... (25) (1) 1 -- (25)
------ ------ ------ ------ ------
1,494 1,877 5 (164) 3,212
------ ------ ------ ------ ------
COSTS AND EXPENSES
Costs of sales (exclusive of
depreciation shown below)........ 1,086 1,408 2 (164) 2,332
Engineering, research, and
development...................... 19 12 -- -- 31
Selling, general, and
administrative................... 276 195 1 -- 472
Depreciation and amortization....... 79 71 -- -- 150
------ ------ ------ ------ ------
1,460 1,686 3 (164) 2,985
------ ------ ------ ------ ------
INCOME FROM CONTINUING OPERATIONS
BEFORE INTEREST EXPENSE, INCOME
TAXES, MINORITY INTEREST, AND EQUITY
IN NET INCOME FROM CONTINUING
OPERATIONS OF AFFILIATED
COMPANIES........................... 34 191 2 -- 227
Interest expense --
External (net of interest
capitalized)................... 2 17 50 -- 69
Affiliated companies (net of
interest income)............ 58 4 (62) -- --
Income tax expense (benefit)..... (35) 50 (2) -- 13
Minority interest................ -- 1 -- 28 29
------ ------ ------ ------ ------
9 119 16 (28) 116
Equity in net income from
continuing operations of
affiliated companies........... 97 -- 100 (197) --
------ ------ ------ ------ ------
INCOME FROM CONTINUING OPERATIONS..... 106 119 116 (225) 116
Income from discontinued operations,
net of income tax................... 24 269 139 (293) 139
------ ------ ------ ------ ------
Income before extraordinary loss...... 130 388 255 (518) 255
Extraordinary loss, net of income
tax................................. -- -- -- -- --
------ ------ ------ ------ ------
Income before cumulative effect of
change in accounting principle...... 130 388 255 (518) 255
Cumulative effect of change in
accounting principle, net of income
tax................................. -- -- -- -- --
------ ------ ------ ------ ------
NET INCOME............................ 130 388 255 (518) 255
Preferred stock dividends............. 28 -- -- (28) --
------ ------ ------ ------ ------
NET INCOME TO COMMON STOCK............ $ 102 $ 388 $ 255 $ (490) $ 255
====== ====== ====== ====== ======
</TABLE>
F-38
<PAGE> 193
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------------------------
TENNECO INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ ------------ ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
REVENUES
Net sales and operating revenues --
External.......................... $1,492 $1,723 $ 11 $ -- $3,226
Affiliated companies.............. 97 97 -- (194) --
Other income, net.................... 7 30 -- -- 37
------ ------ ----- ----- ------
1,596 1,850 11 (194) 3,263
------ ------ ----- ----- ------
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)......... 1,130 1,359 8 (194) 2,303
Engineering, research, and
development....................... 19 15 -- -- 34
Selling, general, and
administrative.................... 226 194 1 -- 421
Depreciation and amortization........ 64 46 -- -- 110
------ ------ ----- ----- ------
1,439 1,614 9 (194) 2,868
------ ------ ----- ----- ------
INCOME FROM CONTINUING OPERATIONS
BEFORE INTEREST EXPENSE, INCOME
TAXES, MINORITY INTEREST, AND EQUITY
IN NET INCOME FROM CONTINUING
OPERATIONS OF AFFILIATED COMPANIES... 157 236 2 -- 395
Interest expense -- External (net
of interest capitalized)........ (3) 14 47 -- 58
Affiliated companies (net of
interest income)............. (31) (10) 41 -- --
Income tax expense (benefit)...... 65 58 (43) -- 80
Minority interest................. -- 2 -- 21 23
------ ------ ----- ----- ------
126 172 (43) (21) 234
Equity in net income from
continuing operations of
affiliated companies............ 100 -- 277 (377) --
------ ------ ----- ----- ------
INCOME FROM CONTINUING OPERATIONS...... 226 172 234 (398) 234
Income from discontinued operations,
net of income tax.................... 16 229 127 (245) 127
------ ------ ----- ----- ------
Income before extraordinary loss....... 242 401 361 (643) 361
Extraordinary loss, net of income
tax.................................. -- -- -- -- --
------ ------ ----- ----- ------
Income before cumulative effect of
change in accounting principle....... 242 401 361 (643) 361
Cumulative effect of change in
accounting principle, net of income
tax.................................. (7) (41) (46) 48 (46)
------ ------ ----- ----- ------
NET INCOME............................. 235 360 315 (595) 315
Preferred stock dividends.............. 21 -- -- (21) --
------ ------ ----- ----- ------
NET INCOME TO COMMON STOCK............. $ 214 $ 360 $ 315 $(574) $ 315
====== ====== ===== ===== ======
</TABLE>
F-39
<PAGE> 194
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------------------
TENNECO INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ ------------ ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
REVENUES
Net sales and operating revenues --
External......................... $1,344 $1,636 $ -- $ -- $2,980
Affiliated companies............. 78 82 -- (160) --
Other income, net................... (63) 40 1 -- (22)
------ ------ ----- ----- ------
1,359 1,758 1 (160) 2,958
------ ------ ----- ----- ------
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)........ 1,005 1,295 -- (160) 2,140
Engineering, research, and
development...................... 28 42 -- -- 70
Selling, general, and
administrative................... 227 185 -- -- 412
Depreciation and amortization....... 42 52 -- -- 94
------ ------ ----- ----- ------
1,302 1,574 -- (160) 2,716
------ ------ ----- ----- ------
INCOME FROM CONTINUING OPERATIONS
BEFORE INTEREST EXPENSE, INCOME
TAXES, MINORITY INTEREST, AND EQUITY
IN NET INCOME FROM CONTINUING
OPERATIONS OF AFFILIATED
COMPANIES........................... 57 184 1 -- 242
Interest expense --
External (net of interest
capitalized)................ 4 2 54 -- 60
Affiliated companies (net of
interest income)............ (12) -- 12 -- --
Income tax expense (benefit)..... 41 56 (18) -- 79
Minority interest................ -- -- -- 21 21
------ ------ ----- ----- ------
24 126 (47) (21) 82
Equity in net income from
continuing operations of
affiliated companies........... 18 -- 129 (147) --
------ ------ ----- ----- ------
INCOME FROM CONTINUING OPERATIONS 42 126 82 (168) 82
Income from discontinued operations,
net of income tax................... 5 555 564 (560) 564
------ ------ ----- ----- ------
Income before extraordinary loss...... 47 681 646 (728) 646
Extraordinary loss, net of income
tax................................. -- -- (236) -- (236)
------ ------ ----- ----- ------
Income before cumulative effect of
change in accounting principle...... 47 681 410 (728) 410
Cumulative effect of change in
accounting principle, net of income
tax................................. -- -- -- -- --
------ ------ ----- ----- ------
NET INCOME............................ 47 681 410 (728) 410
Preferred stock dividends............. 21 -- 12 (21) 12
------ ------ ----- ----- ------
NET INCOME TO COMMON STOCK............ $ 26 $ 681 $ 398 $(707) $ 398
====== ====== ===== ===== ======
</TABLE>
F-40
<PAGE> 195
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------------------------
TENNECO INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ ------------ ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments............ $ 1 $ 25 $ 3 $ -- $ 29
Receivables.................................... 277 307 32 (173) 443
Inventories.................................... 149 265 -- -- 414
Deferred income taxes.......................... 48 (9) -- -- 39
Prepayments and other.......................... 94 45 -- -- 139
------ ------ ------- ------- ------
569 633 35 (173) 1,064
------ ------ ------- ------- ------
Other assets:
Investment in affiliated companies............. 733 -- 5,387 (6,120) --
Notes and advances receivable from
affiliates................................... 635 -- 2,772 (3,407) --
Long-term notes receivable, net................ 12 9 2 -- 23
Goodwill and intangibles, net.................. 348 151 -- -- 499
Deferred income taxes.......................... -- 39 -- -- 39
Pension assets................................. 83 18 -- -- 101
Other.......................................... 89 106 6 -- 201
------ ------ ------- ------- ------
1,900 323 8,167 (9,527) 863
------ ------ ------- ------- ------
Plant, property, and equipment, at cost.......... 875 1,069 -- -- 1,944
Less -- Reserves for depreciation and
amortization................................. 419 432 -- -- 851
------ ------ ------- ------- ------
456 637 -- -- 1,093
------ ------ ------- ------- ------
Net assets of discontinued operations............ 1,649 3,119 (3,029) -- 1,739
------ ------ ------- ------- ------
$4,574 $4,712 $ 5,173 $(9,700) $4,759
====== ====== ======= ======= ======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt (including current maturities
on long-term debt)........................... $ 26 $ 124 $ 229 $ (75) $ 304
Trade payables................................. 148 258 10 (79) 337
Taxes accrued.................................. (3) 34 -- -- 31
Other.......................................... 130 71 36 -- 237
------ ------ ------- ------- ------
301 487 275 (154) 909
Long-term debt................................... 1,571 25 2,480 (3,405) 671
Deferred income taxes............................ 137 47 (86) -- 98
Postretirement benefits and other liabilities.... 126 44 -- -- 170
Commitments and contingencies
Minority interest................................ -- 13 -- 394 407
Preferred stock with mandatory redemption
provisions..................................... 394 -- -- (394) --
Shareowners' equity.............................. 2,045 4,096 2,504 (6,141) 2,504
------ ------ ------- ------- ------
$4,574 $4,712 $ 5,173 $(9,700) $4,759
====== ====== ======= ======= ======
</TABLE>
F-41
<PAGE> 196
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------------------------
TENNECO INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ ------------ ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments..... $ 3 $ 26 $ -- $ -- $ 29
Receivables............................. 231 290 102 (179) 444
Inventories............................. 153 223 2 -- 378
Deferred income taxes................... (8) (13) 42 -- 21
Prepayments and other................... 118 60 -- -- 178
------ ------ ------- ------- ------
497 586 146 (179) 1,050
------ ------ ------- ------- ------
Other assets:
Investment in affiliated companies...... 752 -- 5,486 (6,238) --
Notes and advances receivable
from affiliates....................... 757 92 1,949 (2,798) --
Long-term notes receivable, net......... 12 10 4 -- 26
Goodwill and intangibles, net........... 354 151 -- -- 505
Deferred income taxes................... -- 55 -- -- 55
Pension assets.......................... 76 17 -- -- 93
Other................................... 93 54 6 -- 153
------ ------ ------- ------- ------
2,044 379 7,445 (9,036) 832
------ ------ ------- ------- ------
Plant, property, and equipment, at cost... 816 951 -- -- 1,767
Less -- Reserves for depreciation and
amortization.......................... 369 369 -- -- 738
------ ------ ------- ------- ------
447 582 -- -- 1,029
------ ------ ------- ------- ------
Net assets of discontinued operations..... 1,582 2,939 (2,750) -- 1,771
------ ------ ------- ------- ------
$4,570 $4,486 $ 4,841 $(9,215) $4,682
====== ====== ======= ======= ======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt (including current
maturities on long-term debt)......... $ 26 $ 109 $ 43 $ (103) $ 75
Trade payables.......................... 118 220 22 (74) 286
Taxes accrued........................... 10 59 4 -- 73
Other................................... 124 97 36 -- 257
------ ------ ------- ------- ------
278 485 105 (177) 691
Long-term debt............................ 1,255 43 2,209 (2,794) 713
Deferred income taxes..................... 131 35 (1) -- 165
Postretirement benefits and other
liabilities............................. 127 50 -- -- 177
Commitments and contingencies
Minority interest......................... -- 16 -- 392 408
Preferred stock with mandatory redemption
provisions.............................. 392 -- -- (392) --
Shareowners' equity....................... 2,387 3,857 2,528 (6,244) 2,528
------ ------ ------- ------- ------
$4,570 $4,486 $ 4,841 $(9,215) $4,682
====== ====== ======= ======= ======
</TABLE>
F-42
<PAGE> 197
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------------------------------------
TENNECO INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ ------------ ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided (used) by operating activities...... $ 238 $ 577 $(255) $ (28) $ 532
----- ----- ----- ----- -----
INVESTING ACTIVITIES
Net proceeds related to the sale of discontinued
operations.......................................... -- 22 -- -- 22
Net proceeds from sale of businesses and assets....... 7 3 -- -- 10
Expenditures for plant, property, and equipment....... (82) (113) -- -- (195)
Acquisitions of businesses............................ -- (3) -- -- (3)
Expenditures for plant, property, and equipment and
businesses acquisitions -- discontinued
operations.......................................... -- (498) -- -- (498)
Investments and other................................. (49) (43) 2 -- (90)
----- ----- ----- ----- -----
Net cash provided (used) by investing activities...... (124) (632) 2 -- (754)
----- ----- ----- ----- -----
FINANCING ACTIVITIES
Issuance of common and treasury shares................ -- -- 50 -- 50
Purchase of common stock.............................. -- -- (154) -- (154)
Issuance of long-term debt............................ -- 4 -- -- 4
Retirement of long-term debt.......................... (1) (20) -- -- (21)
Net increase (decrease) in short-term debt excluding
current maturities on long-term debt................ -- 115 425 -- 540
Intercompany dividends and net increase (decrease) in
intercompany obligations............................ (87) (51) 138 -- --
Dividends (common and preferred)...................... (28) -- (203) 28 (203)
----- ----- ----- ----- -----
Net cash provided (used) by financing activities...... (116) 48 256 28 216
----- ----- ----- ----- -----
Effect of foreign exchange rate changes on cash and
temporary cash investments.......................... -- 6 -- -- 6
----- ----- ----- ----- -----
Increase (decrease) in cash and temporary cash
investments......................................... (2) (1) 3 -- --
Cash and temporary cash investments, January 1........ 3 26 -- -- 29
----- ----- ----- ----- -----
Cash and temporary cash investments, December 31
(Note).............................................. $ 1 $ 25 $ 3 $ -- $ 29
===== ===== ===== ===== =====
</TABLE>
- ---------------
Note: Cash and temporary cash investments include highly liquid investments with
a maturity of three months or less at the date of purchase.
F-43
<PAGE> 198
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------
TENNECO INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ ------------ ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided (used) by operating activities..... $ 22 $ 552 $ (34) $ (21) $ 519
----- ----- ----- ----- -----
INVESTING ACTIVITIES
Net proceeds related to the sale of discontinued
operations......................................... -- 24 -- -- 24
Net proceeds from the sale of businesses and
assets............................................. -- 5 -- -- 5
Expenditures for plant, property, and equipment...... (69) (152) -- -- (221)
Acquisitions of businesses........................... (7) (22) -- -- (29)
Expenditures for plant, property, and equipment and
business acquisitions -- discontinued operations... -- (622) -- -- (622)
Investments and other................................ (11) (51) 18 -- (44)
----- ----- ----- ----- -----
Net cash provided (used) by investing activities..... (87) (818) 18 -- (887)
----- ----- ----- ----- -----
FINANCING ACTIVITIES
Issuance of common and treasury shares............... -- -- 48 -- 48
Purchase of common stock............................. -- -- (132) -- (132)
Issuance of equity securities by a subsidiary........ 99 -- -- -- 99
Issuance of long-term debt........................... -- 7 590 -- 597
Retirement of long-term debt......................... (1) (22) -- -- (23)
Net increase (decrease) in short-term debt excluding
current maturities on long-term debt............... 25 (74) 18 -- (31)
Intercompany dividends and net increase (decrease) in
intercompany obligations........................... (40) 344 (304) -- --
Dividends (common and preferred)..................... (21) -- (204) 21 (204)
----- ----- ----- ----- -----
Net cash provided (used) by financing activities..... 62 255 16 21 354
----- ----- ----- ----- -----
Effect of foreign exchange rate changes on cash and
temporary cash investments......................... -- 3 -- -- 3
----- ----- ----- ----- -----
Increase (decrease) in cash and temporary cash
investments........................................ (3) (8) -- -- (11)
Cash and temporary cash investments, January 1....... 6 34 -- -- 40
----- ----- ----- ----- -----
Cash and temporary cash investments, December 31
(Note)............................................. $ 3 $ 26 $ -- $ -- $ 29
===== ===== ===== ===== =====
</TABLE>
- ---------------
Note: Cash and temporary cash investments include highly liquid investments with
a maturity of three months or less at the date of purchase.
F-44
<PAGE> 199
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------
TENNECO INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ ------------ ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided (used) by operating activities........ $ 16 $ (796) $ 1,054 $(21) $ 253
----- ------- ------- ---- -------
INVESTING ACTIVITIES
Net proceeds related to the sale of discontinued
operations............................................ -- 658 539 -- 1,197
Net proceeds from sale of businesses and assets......... -- 3 -- -- 3
Expenditures for plant, property, and equipment......... (75) (113) -- -- (188)
Acquisitions of businesses.............................. (347) (78) -- -- (425)
Expenditures for plant, property, and equipment and
business acquisitions -- discontinued operations...... -- (1,106) -- -- (1,106)
Investments and other................................... (29) (42) (95) -- (166)
----- ------- ------- ---- -------
Net cash provided (used) by investing activities........ (451) (678) 444 -- (685)
----- ------- ------- ---- -------
FINANCING ACTIVITIES
Issuance of common, treasury, and SECT shares........... -- -- 164 -- 164
Purchase of common stock................................ -- -- (172) -- (172)
Issuance of NPS Preferred Stock......................... -- -- 296 -- 296
Redemption of preferred stock........................... -- -- (20) -- (20)
Issuance of long-term debt.............................. -- 636 2,164 -- 2,800
Retirement of long-term debt............................ -- (1,759) (529) -- (2,288)
Net increase (decrease) in short-term debt excluding
current maturities on long-term debt.................. -- 58 (279) -- (221)
Cash transferred in Merger and Distributions............ -- -- (99) -- (99)
Intercompany dividends and net increase (decrease) in
intercompany obligations.............................. 437 2,273 (2,710) -- --
Dividends (common and preferred)........................ (21) -- (313) 21 (313)
----- ------- ------- ---- -------
Net cash provided (used) by financing activities........ 416 1,208 (1,498) 21 147
----- ------- ------- ---- -------
Effect of foreign exchange rate changes on cash and
temporary cash investments............................ -- 1 -- -- 1
----- ------- ------- ---- -------
Increase (decrease) in cash and temporary cash
investments........................................... (19) (265) -- -- (284)
Cash and temporary cash investments, January 1.......... 24 300 -- -- 324
----- ------- ------- ---- -------
Cash and temporary cash investments, December 31
(Note)................................................ $ 5 $ 35 $ -- $ -- $ 40
===== ======= ======= ==== =======
</TABLE>
- ---------------
Note: Cash and temporary cash investments include highly liquid investments with
a maturity of three months at the date of purchase.
F-45
<PAGE> 200
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
15. SUBSEQUENT EVENTS
On November 4, 1999 Tenneco completed the spin-off of the common stock of
Tenneco Packaging, Inc., now known as "Pactiv", to the Tenneco shareowners. At
the time of the spin-off, Packaging included Tenneco's specialty packaging
business, the remaining interest in the containerboard joint venture and
Tenneco's administrative service operations. The morning after the spin-off,
Tenneco changed its name from "Tenneco Inc." to "Tenneco Automotive Inc." and
effected a reverse stock split whereby every five shares of Tenneco common stock
were converted into one share of Tenneco's new common stock.
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
INCOME (LOSS)
INCOME BEFORE BEFORE CUMULATIVE
NET SALES INTEREST EXPENSE, CUMULATIVE EFFECT OF
AND INCOME TAXES, INCOME FROM INCOME FROM EFFECT OF CHANGE CHANGE IN
OPERATING AND MINORITY CONTINUING DISCONTINUED IN ACCOUNTING ACCOUNTING NET INCOME
QUARTER REVENUES INTEREST OPERATIONS OPERATIONS PRINCIPLE PRINCIPLE (LOSS)
- ------- --------- ----------------- ----------- ------------ ---------------- ---------- ----------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
1998
1st................ $ 800 $ 83 $ 43 $ 32 $ 75 $ -- $ 75
2nd................ 864 124 63 74 137 -- 137
3rd................ 804 81 63 40 103 -- 103
4th................ 769 (61) (53) (7) (60) -- (60)
------ ---- ---- ---- ---- ---- ----
$3,237 $227 $116 $139 $255 $ -- $255
====== ==== ==== ==== ==== ==== ====
1997
1st................ $ 778 $ 80 $ 54 $ 22 $ 76 $ -- $ 76
2nd................ 873 134 84 20 104 -- 104
3rd................ 785 114 62 43 105 -- 105
4th................ 790 67 34 42 76 (46) 30
------ ---- ---- ---- ---- ---- ----
$3,226 $395 $234 $127 $361 $(46) $315
====== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
BASIC EARNINGS (LOSS) PER SHARE OF COMMON STOCK
----------------------------------------------------------------------
BEFORE CUMULATIVE
CUMULATIVE EFFECT OF
FROM FROM EFFECT OF CHANGE CHANGE IN
CONTINUING DISCONTINUED IN ACCOUNTING ACCOUNTING NET INCOME
QUARTER OPERATIONS OPERATIONS PRINCIPLE PRINCIPLE (LOSS)
- ------- ---------- ------------ ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1998
1st............................... $ 1.26 $ .95 $ 2.21 $ -- $ 2.21
2nd............................... 1.88 2.16 4.04 -- 4.04
3rd............................... 1.85 1.24 3.09 -- 3.08
4th............................... (1.57) (.23) (1.80) -- (1.80)
------ ----- ------ ------ ------
$ 3.45 $4.13 $ 7.58 $ -- $ 7.58
====== ===== ====== ====== ======
1997
1st............................... $ 1.59 $ .63 $ 2.22 $ -- $ 2.22
2nd............................... 2.45 .61 3.06 -- 3.06
3rd............................... 1.84 1.27 3.11 -- 3.11
4th............................... 1.00 1.22 .87 (1.35) .87
------ ----- ------ ------ ------
$ 6.87 $3.73 $10.60 $(1.35) $ 9.25
====== ===== ====== ====== ======
</TABLE>
F-46
<PAGE> 201
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DILUTED EARNINGS (LOSS) PER SHARE OF COMMON STOCK
---------------------------------------------------------------------------
BEFORE CUMULATIVE
CUMULATIVE EFFECT EFFECT OF
FROM FROM OF CHANGE CHANGE IN
CONTINUING DISCONTINUED IN ACCOUNTING ACCOUNTING NET INCOME
QUARTER OPERATIONS OPERATIONS PRINCIPLE PRINCIPLE (LOSS)
------- ---------- ------------ ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1998
1st.............................. $ 1.26 $ .94 $ 2.20 $ -- $ 2.20
2nd.............................. 1.88 2.15 4.03 -- 4.03
3rd.............................. 1.84 1.24 3.08 -- 3.08
4th.............................. (1.57) (.23) (1.80) -- (1.80)
------ ----- ------ ------ ------
$ 3.44 $4.12 $ 7.56 $ -- $ 7.56
====== ===== ====== ====== ======
1997
1st.............................. $ 1.59 $ .63 $ 2.22 $ -- $ 2.22
2nd.............................. 2.44 .61 3.05 -- 3.05
3rd.............................. 1.82 1.27 3.09 -- 3.09
4th.............................. 1.00 1.22 2.22 (1.35) .87
------ ----- ------ ------ ------
$ 6.85 $3.72 $10.57 $(1.35) $ 9.22
====== ===== ====== ====== ======
</TABLE>
- -------------------------
Note: Reference is made to Notes 1, 2, 3, 4 and 8 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 financial
statements.)
F-47
<PAGE> 202
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1999 1998
------------ ------------
(MILLIONS EXCEPT SHARE AND
PER SHARE AMOUNTS)
<S> <C> <C>
REVENUES
Net sales and operating revenues........................ $ 2,473 $ 2,468
Other income --
Gain (loss) on sale of businesses and assets,
net.............................................. (5) (14)
Other income, net.................................. 15 26
----------- -----------
2,483 2,480
----------- -----------
COSTS AND EXPENSES
Cost of sales (exclusive of depreciation shown below)... 1,812 1,731
Engineering, research, and development.................. 39 18
Selling, general, and administrative.................... 303 333
Depreciation and amortization........................... 110 110
----------- -----------
2,264 2,192
----------- -----------
INCOME BEFORE INTEREST EXPENSE, INCOME TAXES, AND MINORITY
INTEREST.................................................. 219 288
Interest expense........................................ 58 49
Income tax expense (benefit)............................ 60 48
Minority interest....................................... 21 22
----------- -----------
INCOME FROM CONTINUING OPERATIONS........................... 80 169
Income (loss) from discontinued operations, net of income
tax....................................................... (99) 146
----------- -----------
Income (loss) before extraordinary loss..................... (19) 315
Extraordinary loss, net of income tax....................... (7) --
----------- -----------
Income (loss) before cumulative effect of change in
accounting principle...................................... (26) 315
Cumulative effect of change in accounting principle, net of
income tax................................................ (134) --
----------- -----------
NET INCOME (LOSS)........................................... $ (160) $ 315
=========== ===========
EARNINGS (LOSS) PER SHARE
Average shares of common stock outstanding --
Basic................................................... 33,423,014 33,785,955
Diluted................................................. 33,491,690 33,876,785
Basic earnings (loss) per share of common stock --
Continuing operations................................... $ 2.40 $ 4.99
Discontinued operations................................. (2.98) 4.35
Extraordinary loss...................................... (.20) --
Cumulative effect of change in accounting principle..... (4.00) --
----------- -----------
$ (4.78) $ 9.34
=========== ===========
Diluted earnings (loss) per share of common stock --
Continuing operations................................... $ 2.40 $ 4.97
Discontinued operations................................. (2.98) 4.34
Extraordinary loss...................................... (.20) --
Cumulative effect of change in accounting principle..... (4.00) --
----------- -----------
$ (4.78) $ 9.31
=========== ===========
Cash dividends per share of common stock.................... $ 4.50 $ 4.50
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements of income (loss).
F-48
<PAGE> 203
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1999 1998
-------- ------
(MILLIONS)
<S> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations........................... $ 80 $ 169
Adjustments to reconcile income from continuing operations
to cash provided (used) by operating activities --
Depreciation and amortization.......................... 110 110
Deferred income taxes.................................. 44 27
(Gain) loss on sale of businesses and assets, net...... 5 14
Changes in components of working capital --
(Increase) decrease in receivables................ (244) (179)
(Increase) decrease in inventories................ (7) (16)
(Increase) decrease in prepayments and other
current assets................................... 15 (7)
Increase (decrease) in payables................... 44 7
Increase (decrease) in taxes accrued.............. (74) (18)
Increase (decrease) in interest accrued........... 39 30
Increase (decrease) in other current
liabilities...................................... (62) (43)
Other.................................................. (50) (61)
------- -----
Cash provided (used) by continuing operations............... (100) 33
Cash provided (used) by discontinued operations............. (66) 332
------- -----
Net cash provided (used) by operating activities............ (166) 365
------- -----
INVESTING ACTIVITIES
Net proceeds related to the sale of discontinued
operations................................................ 342 13
Net proceeds from sale of assets............................ 8 10
Expenditures for plant, property, and equipment............. (104) (121)
Acquisition of businesses................................... (36) --
Expenditures for plant, property, and equipment and business
acquisitions -- discontinued operations................... (1,249) (301)
Investments and other....................................... (29) (70)
------- -----
Net cash provided (used) by investing activities............ (1,068) (469)
------- -----
FINANCING ACTIVITIES
Issuance of common and treasury shares...................... 28 39
Purchase of common stock.................................... (4) (104)
Issuance of long-term debt.................................. 1,761 3
Retirement of long-term debt................................ (30) (18)
Net increase (decrease) in short-term debt excluding current
maturities on long-term debt.............................. (360) 328
Dividends (common).......................................... (151) (152)
------- -----
Net cash provided (used) by financing activities............ 1,244 96
------- -----
Effect of foreign exchange rate changes on cash and
temporary cash investments................................ 3 3
------- -----
Increase (decrease) in cash and temporary cash
investments............................................... 13 (5)
Cash and temporary cash investments, January 1.............. 29 29
------- -----
Cash and temporary cash investments, September 30 (Note).... $ 42 $ 24
======= =====
Cash paid during the period for interest.................... $ 150 $ 162
Cash paid during the period for income taxes (net of
refunds).................................................. $ 77 $ 25
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 financial statements are an integral part of these
statements of cash flows.
F-49
<PAGE> 204
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- ------------
1999 1998
------------- ------------
(MILLIONS)
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments..................... $ 42 $ 29
Receivables --
Customer notes and accounts, net................... 657 430
Income taxes....................................... -- 3
Other.............................................. 23 10
Inventories --
Finished goods..................................... 209 221
Work in process.................................... 84 79
Raw materials...................................... 72 73
Materials and supplies............................. 38 41
Deferred income taxes................................... 28 39
Prepayments and other................................... 63 139
------ ------
1,216 1,064
------ ------
Other assets:
Long-term notes receivable, net......................... 30 23
Goodwill and intangibles, net........................... 505 499
Deferred income taxes................................... -- 39
Pension assets.......................................... 99 101
Other................................................... 106 201
------ ------
740 863
------ ------
Plant, property, and equipment, at cost..................... 1,936 1,944
Less -- Reserves for depreciation and amortization...... 881 851
------ ------
1,055 1,093
------ ------
Net assets of discontinued operations....................... 1,483 1,739
------ ------
$4,494 $4,759
====== ======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt (including current maturities on
long-term debt)........................................ $ 237 $ 304
Trade payables.......................................... 365 337
Taxes accrued........................................... 46 31
Accrued liabilities..................................... 194 161
Other................................................... 46 76
------ ------
888 909
------ ------
Long-term debt.............................................. 796 671
------ ------
Deferred income taxes....................................... 104 98
------ ------
Postretirement benefits..................................... 136 139
------ ------
Deferred credits and other liabilities...................... 19 31
------ ------
Commitments and contingencies
Minority interest........................................... 411 407
------ ------
Shareowners' equity:
Common stock............................................ -- --
Premium on common stock and other capital surplus....... 2,723 2,712
Accumulated other comprehensive income (loss)........... (174) (91)
Retained earnings (accumulated deficit)................. (168) 142
------ ------
2,381 2,763
Less -- Shares held as treasury stock, at cost.......... 241 259
------ ------
2,140 2,504
------ ------
$4,494 $4,759
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-50
<PAGE> 205
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------
1999 1998
------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------ ---------- ------
(MILLIONS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C>
COMMON STOCK
Balance January 1.................................... 34,734,039 $ -- 34,513,978 $ --
Issued pursuant to benefit plans................ 109,004 -- 183,742 --
---------- ------ ---------- ------
Balance September 30................................. 34,843,043 -- 34,697,720 --
========== ------ ========== ------
PREMIUM ON COMMON STOCK AND OTHER CAPITAL SURPLUS
Balance January 1.................................... 2,712 2,681
Premium on common stock issued pursuant to
benefit plans................................. 11 25
------ ------
Balance September 30................................. 2,723 2,706
------ ------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance January 1.................................... (91) (122)
Other comprehensive income (loss)............... (83) 38
------ ------
Balance September 30................................. (174) (84)
------ ------
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Balance January 1.................................... 142 89
Net income (loss)............................... (160) 315
Dividends on common stock....................... (150) (151)
------ ------
Balance September 30................................. (168) 253
------ ------
LESS -- COMMON STOCK HELD AS TREASURY STOCK, AT COST
Balance January 1.................................... 1,351,536 259 585,638 120
Shares acquired................................. 34,669 5 553,162 107
Shares issued pursuant to benefit and dividend
reinvestment plans............................ (118,166) (23) (80,584) (16)
---------- ------ ---------- ------
Balance September 30................................. 1,268,039 241 1,058,216 211
========== ------ ========== ------
Total........................................... $2,140 $2,664
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements of changes in shareowners' equity.
F-51
<PAGE> 206
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------
1999 1998
----------------------------- -----------------------------
ACCUMULATED ACCUMULATED
OTHER OTHER
COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE COMPREHENSIVE
INCOME INCOME INCOME INCOME
------------- ------------- ------------- -------------
(MILLIONS)
<S> <C> <C> <C> <C>
NET INCOME (LOSS)........................ $(160) $315
----- ----
ACCUMULATED OTHER COMPREHENSIVE INCOME
(LOSS)
CUMULATIVE TRANSLATION ADJUSTMENT
Balance January 1...................... $ (82) $(122)
Translation of foreign currency
statements........................ (83) (83) 38 38
----- -----
Balance September 30................... (165) (84)
----- -----
ADDITIONAL MINIMUM PENSION LIABILITY
ADJUSTMENT
Balance January 1...................... (9) --
Additional minimum pension liability
adjustment........................ -- -- -- --
----- -----
Balance September 30................... (9) --
----- -----
Balance September 30..................... $(174) $ (84)
===== =====
----- ----
Other comprehensive income (loss)........ (83) 38
----- ----
COMPREHENSIVE INCOME (LOSS).............. $(243) $353
===== ====
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements of comprehensive income (loss).
F-52
<PAGE> 207
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) Tenneco Automotive Inc. was known as Tenneco Inc. before the spin-off
on November 4, 1999 of Tenneco Inc.'s packaging business, as described in Note
2. In these notes, discussions of Tenneco refer to Tenneco Inc. and its
subsidiaries before the spin-off and to Tenneco Automotive Inc. and its
subsidiaries after the spin-off.
In the opinion of Tenneco, the accompanying unaudited financial statements
contain all adjustments (consisting of normal recurring adjustments) necessary
to present fairly the financial position, results of operations, cash flows,
changes in shareowners' equity, and comprehensive income for the periods
indicated. The unaudited interim consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles. The consolidated
financial statements of Tenneco include all majority-owned subsidiaries.
Investments in 20% to 50% owned companies where Tenneco has the ability to exert
significant influence over operating and financial policies are carried at cost
plus equity in undistributed earnings and cumulative translation adjustments
since date of acquisition. Tenneco has no investments in 20% to 50% owned
companies where it does not carry the investment at cost plus equity in
undistributed earnings.
Prior year's financial statements have been reclassified where appropriate
to conform to 1999 presentations.
(2) In July 1998, Tenneco's Board of Directors authorized management to
develop a broad range of strategic alternatives to separate the automotive,
paperboard packaging and specialty packaging businesses. Subsequently, Tenneco
completed the following actions:
- In January 1999, Tenneco announced an agreement to contribute its
containerboard business to a new joint venture with an affiliate of
Madison Dearborn Partners. The proceeds from the transaction, including
debt assumed by the new joint venture, were approximately $2 billion. The
transaction closed in April 1999. Tenneco retained a 43% percent interest
in the joint venture.
- In April 1999, Tenneco announced an agreement to sell its folding carton
operations to Caraustar Industries. This transaction closed in June 1999.
The folding carton operations and the containerboard business together
represented Tenneco's paperboard packaging operating segment.
- On November 4, 1999, Tenneco completed the spin-off of Tenneco Packaging
Inc., now known as Pactiv Corporation ("Packaging"). The morning
following the spin-off, Tenneco changed its name from "Tenneco Inc. " to
"Tenneco Automotive Inc." and effected a reverse stock split whereby
every five shares of Tenneco common stock were converted into one share
of Tenneco's new common stock.
The separation of the automotive and packaging businesses was accomplished
by the spin-off of the common stock of Packaging to Tenneco shareowners. At the
time of the spin-off, Packaging included Tenneco's specialty packaging business,
the remaining interest in the containerboard joint venture and Tenneco's
administrative services operations. In August 1999, Tenneco received a letter
ruling from the Internal Revenue Service that the spin-off would be tax-free for
U.S. federal income tax purposes to Tenneco and its shareowners.
Before the spin-off, Tenneco realigned substantially all of its existing
debt through a combination of tender offers, exchange offers, and other
refinancings. The company's debt realignment was financed by borrowings by
Tenneco under new credit facilities, the issuance by Tenneco of subordinated
debt, and borrowings by Packaging under new credit facilities, and the issuance
by Packaging of its new publicly-traded debt in exchange for certain series of
the publicly-traded debt of Tenneco that was outstanding
F-53
<PAGE> 208
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
before the spin-off and debt realignment. The debt of Packaging was rated
investment grade and the debt of Tenneco was rated non-investment grade by both
Standard & Poor's and Moodys debt rating agencies.
As a result of these transactions, Tenneco's former specialty and
paperboard packaging operating segments are presented as discontinued operations
in the accompanying financial statements. Tenneco's sole continuing operation is
its automotive segment. Refer to Note 3 for further information related to
discontinued operations.
(3) Revenues and income for the paperboard packaging discontinued
operations are shown in the following table:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
--------------
1999 1998
----- ------
(MILLIONS)
<S> <C> <C>
Net sales and operating revenues............................ $ 445 $1,185
===== ======
Income before income taxes and interest allocation.......... $ 30 $ 101
Income tax (expense) benefit................................ (11) (38)
----- ------
Income before interest allocation........................... 19 63
Allocated interest expense, net of income tax............... (5) (20)
----- ------
Income from discontinued operations before disposition...... 14 43
Gain (loss) on disposition, net of income tax............... (169) 19
----- ------
Income (loss) from discontinued operations.................. $(155) $ 62
===== ======
</TABLE>
Revenues and income for the specialty packaging discontinued operations are
shown in the following table:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
---------------
1999 1998
------ ------
(MILLIONS)
<S> <C> <C>
Net sales and operating revenues............................ $2,158 $2,067
====== ======
Income before income taxes and interest allocation.......... $ 213 $ 247
Income tax (expense) benefit................................ (87) (96)
------ ------
Income before interest allocation........................... 126 151
Allocated interest expense, net of income tax............... (70) (67)
------ ------
Income (loss) from discontinued operations.................. $ 56 $ 84
====== ======
</TABLE>
Net assets of discontinued operations includes $1,985 million and $2,456
million of debt allocated to discontinued operations as of September 30, 1999,
and December 31, 1998, respectively.
(4) In the fourth quarter of 1998, Tenneco's Board of Directors approved an
extensive restructuring plan designed to reduce administrative and operational
overhead costs. Tenneco recorded a pre-tax charge to income from continuing
operations of $53 million, $34 million after-tax, or $1.02 per diluted common
share. Of the pre-tax charge, for operational restructuring plans, $36 million
related to the consolidation of the manufacturing and distribution operations of
the North American automotive aftermarket business. A staff and related cost
reduction plan, which covers employees in both the operating units and corporate
operations, is expected to cost $17 million.
F-54
<PAGE> 209
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
The automotive aftermarket restructuring involves closing two plant
locations and five distribution centers, resulting in the elimination of 302
positions. The staff and related cost reduction plan involves the elimination of
454 administrative positions.
The fixed assets at the locations to be closed were written down to their
fair value, less costs to sell, in the fourth quarter of 1998. As a result of
the single-purpose nature of the assets, fair value was estimated at scrap value
less cost to dispose. 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 2000. The effect of suspending depreciation for these
impaired assets is a reduction in depreciation and amortization of approximately
$2 million on an annual basis.
As of September 30, 1999, approximately 670 employees have been terminated.
To address customer service and production transfer issues, the closure of one
plant location and one aftermarket distribution center has been delayed until
the first and second quarters of 2000, respectively. All other restructuring
actions, with the exception of the final disposal of certain assets, are being
executed according to the initial plan and are expected to be complete by the
fourth quarter of 1999. During the nine months ended September 30, 1999, the
automotive aftermarket business closed one plant location and four distribution
centers.
Amounts related to the restructuring plan are shown in the following table:
<TABLE>
<CAPTION>
CASH
PAYMENTS
NINE MONTHS
DECEMBER 31, 1998 ENDED BALANCE AT
RESTRUCTURING SEPTEMBER 30, SEPTEMBER 30,
CHARGE BALANCE 1999 1999
----------------- ------------- -------------
(MILLIONS)
<S> <C> <C> <C>
Severance........................................... $15 $ 6 $ 9
Facility exit costs................................. 1 1 --
--- --- ---
$16 $ 7 $ 9
=== === ===
</TABLE>
(5) Tenneco is a party to various legal proceedings arising from its
operations. Tenneco believes that the outcome of these proceedings, individually
and in the aggregate, will not have a material adverse effect on its financial
position or results of operations.
(6) Tenneco is subject to a variety of environmental and pollution control
laws and regulations in all jurisdictions in which it operates. Tenneco has
provided reserves for compliance with these laws and regulations where it is
probable that a liability exists and where Tenneco can make a reasonable
estimate of the liability. The estimated liabilities recorded are subject to
change as more information becomes available regarding the magnitude of possible
cleanup costs and the timing, varying costs, and effectiveness of alternative
cleanup technologies. However, Tenneco believes that any additional costs which
may arise as more information becomes available will not have a material adverse
effect on its financial position or results of operations.
(7) In the first quarter of 1999, Tenneco recorded an extraordinary loss
for extinguishment of debt of $7 million (net of a $3 million income tax
benefit), or $.20 per diluted common share. The loss related to early retirement
of debt in connection with the sale of the containerboard assets.
(8) 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
F-55
<PAGE> 210
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
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. Tenneco is
currently evaluating the new standard but has not yet determined the impact it
will have on its financial position or results of operations.
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. Prior to January 1, 1999,
Tenneco capitalized certain costs related to start-up activities, primarily
engineering costs for new automobile original equipment platforms. Tenneco
adopted SOP 98-5 on January 1, 1999, and recorded an after-tax charge for the
cumulative effect of this change in accounting principle of $102 million (net of
a $50 million tax benefit), or $3.05 per diluted common share. The change in
accounting principle decreased income from continuing operations by $11 million
(net of a $8 million tax benefit), or $.33 per diluted common share for the nine
months ended September 30, 1999. If the new accounting method had been applied
retroactively, income from continuing operations for the nine months ended
September 30, 1998, would have been lower by $10 million (net of a $7 million
tax benefit), or $.30 per diluted common share. For the three months ended
September 30, 1999, the change in accounting principle decreased income from
continuing operations by $6 million (net of a $4 million tax benefit), or $.18
per diluted common share. If the new accounting method had been applied
retroactively, income from continuing operations for the three months ended
September 30, 1998, would have been lower by $5 million (net of a $3 million tax
benefit), or $.15 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. Tenneco adopted SOP 98-1 on
January 1, 1999. The impact of this new standard did not have a significant
effect on Tenneco's financial position or results of operations.
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 connection with Tenneco's decision to separate its automotive and
specialty packaging businesses into independent public companies, Tenneco
determined that a change to an expense-as-incurred method of accounting for
automotive aftermarket customer acquisition costs was preferable in order to
permit improved comparability of stand-alone financial results with its
aftermarket industry competitors. Tenneco recorded an after-tax charge for the
cumulative effect of this change in accounting principle of $32 million (net of
a $22 million tax benefit), or $.95 per diluted common share. The change in
accounting principle increased income from continuing operations by $8 million
(net of $5 million in income tax expense), or $.24 per diluted common share for
the nine months ended September 30, 1999. If the new accounting principle had
been applied retroactively, income from continuing operations for the nine
months ended September 30, 1998, would have been higher by $1 million (net of $1
million in income tax expense), or $.03 per diluted common share. For the three
months ended September 30, 1999, the change in accounting principle increased
F-56
<PAGE> 211
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
income from continuing operations by $3 million (net of $1 million in income tax
expense), or $.09 per diluted common share. If the new accounting principle had
been applied retroactively, income from continuing operations for the three
months ended September 30, 1998, would have been higher by $3 million (net of $2
million in income tax expense), or $.09 per diluted common share.
(9) In October 1999, Tenneco's shareowners approved an amendment to the
Certificate of Incorporation providing for a one-for-five reverse stock split of
Tenneco's common stock. The reverse stock split is reflected for all periods
presented in the accompanying financial statements, other footnotes, and this
computation of earnings from continuing operations per share of common stock
outstanding.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1999 1998
------------ ------------
(MILLIONS EXCEPT SHARE AND
PER SHARE AMOUNTS)
<S> <C> <C>
Basic Earnings Per Share --
Income from continuing operations...................... $ 80 $ 169
========== ==========
Average shares of common stock outstanding............. 33,423,014 33,785,955
========== ==========
Earnings from continuing operations per average share
of common stock...................................... $ 2.40 $ 4.99
========== ==========
Diluted Earnings Per Share --
Income from continuing operations...................... $ 80 $ 169
========== ==========
Average shares of common stock outstanding............. 33,423,014 33,785,955
Effect of dilutive securities:
Restricted stock.................................. 9,973 8,888
Stock options..................................... -- 32,984
Performance shares................................ 58,703 48,958
---------- ----------
Average shares of common stock outstanding including
dilutive securities.................................. 33,491,690 33,876,785
========== ==========
Earnings from continuing operations per average share
of common stock...................................... $ 2.40 $ 4.97
========== ==========
</TABLE>
(10) Tenneco is a global manufacturer with a single operating segment:
Automotive -- Manufacture and sale of exhaust and ride control systems
for both the original equipment market and the aftermarket.
Tenneco evaluates business segment operating performance based primarily on
income before interest expense, income taxes, and minority interest, exclusive
of restructuring charges and other unusual items. Individual operating segments
have not been aggregated within this reportable segment.
F-57
<PAGE> 212
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
The following table summarizes certain Tenneco segment information:
<TABLE>
<CAPTION>
SEGMENT
------------------- RECLASS
AUTOMOTIVE OTHER & ELIMS CONSOLIDATED
---------- ------ ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C>
AT SEPTEMBER 30, 1999, AND FOR THE NINE MONTHS THEN
ENDED
Revenues from external customers...................... $2,473 $ -- $ -- $2,473
Income (loss) before interest, income taxes, and
minority interest................................... 223 (4) -- 219
Extraordinary loss.................................... -- (7) -- (7)
Cumulative effect of change in accounting principle... (33) (101) -- (134)
Total assets (Note)................................... 2,977 1,548 (31) 4,494
Net assets of discontinued operations................. -- 1,483 -- 1,483
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
Revenues from external customers...................... $2,468 $ -- $ -- $2,468
Income (loss) before interest, income taxes, and
minority interest................................... 305 (17) -- 288
</TABLE>
- ---------------
Note: The Other segment's total assets include the net assets of discontinued
operations.
(11) Some of Tenneco's subsidiaries have guaranteed Tenneco debt.
Supplemental guarantor condensed consolidating financial statements are
presented below.
Basis of Presentation
On October 14, 1999, Tenneco issued $500,000,000 in aggregate principal
amount of Senior Subordinated Notes Due 2009 ("the Notes") as a component of a
plan to realign its debt prior to the spin-off. See Note 2 for further
discussion of the spin-off and debt realignment. Effective upon the spin-off,
all of Tenneco's then existing and future material domestic wholly owned
subsidiaries (the Guarantor Subsidiaries) fully and unconditionally guaranteed
the Notes on a joint and several basis. Additionally, the Guarantor Subsidiaries
fully and unconditionally guarantee Tenneco's senior secured credit facility.
Separate financial statements of the Guarantor Subsidiaries are not presented
because the Guarantor Subsidiaries are jointly, severally, and unconditionally
liable under the guarantees, and Tenneco believes the condensed consolidating
financial statements presented are more meaningful in understanding the
financial position of the Guarantor Subsidiaries.
These condensed consolidating financial statements are presented on the
equity method. Under this method, investments are recorded at cost and adjusted
for a company's ownership share of a subsidiary's cumulative results of
operations, capital contributions and distributions, and other equity changes.
The balance sheet caption "Investment in affiliated companies" includes
investments in continuing and discontinued subsidiaries. The condensed
consolidating financial statements of the Guarantor Subsidiaries should be read
in connection with the financial statements of Tenneco Automotive Inc. and
Consolidated Subsidiaries and notes thereto of which this note is an integral
part.
Distributions
There are no significant restrictions on the ability of the Guarantor
Subsidiaries to make distributions to Tenneco Automotive Inc.
F-58
<PAGE> 213
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
REVENUES
Net sales and operating revenues --
External.......................... $1,089 $1,383 $ 1 $ -- $2,473
Affiliated companies.............. 61 52 -- (113) --
Other income, net.................... 9 2 -- (1) 10
------ ------ ----- ----- ------
1,159 1,437 1 (114) 2,483
------ ------ ----- ----- ------
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)......... 821 1,104 1 (114) 1,812
Engineering, research, and
development....................... 21 18 -- -- 39
Selling, general, and
administrative.................... 160 142 1 -- 303
Depreciation and amortization........ 54 56 -- -- 110
------ ------ ----- ----- ------
1,056 1,320 2 (114) 2,264
------ ------ ----- ----- ------
INCOME FROM CONTINUING OPERATIONS
BEFORE INTEREST EXPENSE, INCOME
TAXES, MINORITY INTEREST, AND EQUITY
IN NET INCOME FROM CONTINUING
OPERATIONS OF AFFILIATED COMPANIES... 103 117 (1) -- 219
Interest expense --
External (net of interest
capitalized)................. 2 13 42 1 58
Affiliated companies (net of
interest income)............. 56 6 (62) -- --
Income tax expense (benefit)...... 45 14 12 (11) 60
Minority interest................. -- 1 -- 20 21
------ ------ ----- ----- ------
-- 83 7 (10) 80
Equity in net income from
continuing operations of
affiliated companies............ 52 -- 73 (125) --
------ ------ ----- ----- ------
INCOME FROM CONTINUING OPERATIONS...... 52 83 80 (135) 80
Income (loss) from discontinued
operations, net of income tax........ 1 9 (99) (10) (99)
------ ------ ----- ----- ------
Income (loss) before extraordinary
loss................................. 53 92 (19) (145) (19)
Extraordinary loss, net of income
tax.................................. -- (7) (7) 7 (7)
------ ------ ----- ----- ------
Income (loss) before cumulative effect
of change in accounting principle.... 53 85 (26) (138) (26)
Cumulative effect of change in
accounting principle, net of income
tax.................................. (64) (70) (134) 134 (134)
------ ------ ----- ----- ------
NET INCOME (LOSS)...................... (11) 15 (160) (4) (160)
Preferred stock dividends.............. 20 -- -- (20) --
------ ------ ----- ----- ------
NET INCOME (LOSS) TO COMMON STOCK...... $ (31) $ 15 $(160) $ 16 $ (160)
====== ====== ===== ===== ======
</TABLE>
F-59
<PAGE> 214
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Net sales and operating revenues --
External.......................... $1,099 $1,366 $ 3 $ -- $2,468
Affiliated companies.............. 70 57 -- (127) --
Other income, net.................... 21 (9) -- -- 12
------ ------ ---- ----- ------
1,190 1,414 3 (127) 2,480
------ ------ ---- ----- ------
COSTS AND EXPENSES
Cost of sales (exclusive of
depreciation shown below)......... 812 1,044 2 (127) 1,731
Engineering, research, and
development....................... 11 7 -- -- 18
Selling, general, and
administrative.................... 198 134 1 -- 333
Depreciation and amortization........ 58 52 -- -- 110
------ ------ ---- ----- ------
1,079 1,237 3 (127) 2,192
------ ------ ---- ----- ------
INCOME FROM CONTINUING OPERATIONS
BEFORE INTEREST EXPENSE, INCOME
TAXES, MINORITY INTEREST, AND EQUITY
IN NET INCOME FROM CONTINUING
OPERATIONS OF AFFILIATED COMPANIES... 111 177 -- -- 288
Interest expense --
External (net of interest
capitalized)................. 2 11 36 -- 49
Affiliated companies (net of
interest income)............. 37 4 (41) -- --
Income tax expense (benefit)...... 5 46 14 (17) 48
Minority interest................. -- 1 -- 21 22
------ ------ ---- ----- ------
67 115 (9) (4) 169
Equity in net income from
continuing operations of
affiliated companies............ 84 -- 178 (262) --
------ ------ ---- ----- ------
INCOME FROM CONTINUING OPERATIONS...... 151 115 169 (266) 169
Income from discontinued operations,
net of income tax.................... 18 220 146 (238) 146
------ ------ ---- ----- ------
Income before extraordinary loss....... 169 335 315 (504) 315
Extraordinary loss, net of income
tax.................................. -- -- -- -- --
------ ------ ---- ----- ------
Income before cumulative effect of
change in accounting principle....... 169 335 315 (504) 315
Cumulative effect of change in
accounting principle, net of income
tax.................................. -- -- -- -- --
------ ------ ---- ----- ------
NET INCOME............................. 169 335 315 (504) 315
Preferred stock dividends.............. 21 -- -- (21) --
------ ------ ---- ----- ------
NET INCOME TO COMMON STOCK............. $ 148 $ 335 $315 $(483) $ 315
====== ====== ==== ===== ======
</TABLE>
F-60
<PAGE> 215
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided (used) by operating
activities............................. $(148) $ 85 $ (83) $(20) $ (166)
----- ------- ----- ---- -------
INVESTING ACTIVITIES
Net proceeds related to the sale of
discontinued operations................ -- 342 -- -- 342
Net proceeds from sale of businesses and
assets................................. 6 2 -- -- 8
Expenditures for plant, property, and
equipment.............................. (39) (65) -- -- (104)
Acquisitions of businesses............... (2) (34) -- -- (36)
Expenditures for plant, property, and
equipment and business acquisitions --
discontinued operations................ -- (1,249) -- -- (1,249)
Investments and other.................... (8) (24) 3 -- (29)
----- ------- ----- ---- -------
Net cash provided (used) by investing
activities............................. (43) (1,028) 3 -- (1,068)
----- ------- ----- ---- -------
FINANCING ACTIVITIES
Issuance of common and treasury shares... -- -- 28 -- 28
Purchase of common stock................. -- -- (4) -- (4)
Issuance of long-term debt............... -- 1,761 -- -- 1,761
Retirement of long-term debt............. (1) (35) 6 -- (30)
Net increase (decrease) in short-term
debt excluding current maturities on
long-term debt......................... (25) (48) (287) -- (360)
Intercompany dividends and net increase
(decrease) in intercompany
obligations............................ 236 (742) 506 -- --
Dividends (common and preferred)......... (20) -- (151) 20 (151)
----- ------- ----- ---- -------
Net cash provided (used) by financing
activities............................. 190 936 98 20 1,244
----- ------- ----- ---- -------
Effect of foreign exchange rate changes
on cash and temporary cash
investments............................ -- 3 -- -- 3
----- ------- ----- ---- -------
Increase (decrease) in cash and temporary
cash investments....................... (1) (4) 18 -- 13
Cash and temporary cash investments,
January 1.............................. 3 26 -- -- 29
----- ------- ----- ---- -------
Cash and temporary cash investments,
September 30 (Note).................... $ 2 $ 22 $ 18 $ -- $ 42
===== ======= ===== ==== =======
NON-CASH INVESTING AND FINANCING
ACTIVITIES
Common equity interest received related
to the sale of containerboard
operations............................. $ -- $ 194 $ -- $ -- $ 194
Principal amount of long-term debt
assumed by buyers of containerboard
operations............................. $ -- $(1,760) $ -- $ -- $(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.
F-61
<PAGE> 216
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided (used) by operating
activities.......................... $ 54 $ 428 $ (97) $(20) $ 365
---- ----- ----- ---- -----
INVESTING ACTIVITIES
Net proceeds related to the sale of
discontinued operations............. -- 13 -- -- 13
Net proceeds from sale of businesses
and assets.......................... 6 4 -- -- 10
Expenditures for plant, property, and
equipment........................... (52) (69) -- -- (121)
Acquisitions of businesses............ -- -- -- -- --
Expenditures for plant, property, and
equipment and business
acquisitions -- discontinued
operations.......................... -- (301) -- -- (301)
Investments and other................. (33) (38) 1 -- (70)
---- ----- ----- ---- -----
Net cash provided (used) by investing
activities.......................... (79) (391) 1 -- (469)
---- ----- ----- ---- -----
FINANCING ACTIVITIES
Issuance of common and treasury
shares.............................. -- -- 39 -- 39
Purchase of common stock.............. -- -- (104) -- (104)
Issuance of long-term debt............ -- 3 -- -- 3
Retirement of long-term debt.......... (1) (17) -- -- (18)
Net increase (decrease) in short-term
debt excluding current maturities on
long-term debt...................... -- 57 271 -- 328
Intercompany dividends and net
increase (decrease) in intercompany
obligations......................... 44 (91) 47 -- --
Dividends (common and preferred)...... (20) -- (152) 20 (152)
---- ----- ----- ---- -----
Net cash provided (used) by financing
activities.......................... 23 (48) 101 20 96
---- ----- ----- ---- -----
Effect of foreign exchange rate
changes on cash and temporary cash
investments......................... -- 3 -- -- 3
---- ----- ----- ---- -----
Increase (decrease) in cash and
temporary cash investments.......... (2) (8) 5 -- (5)
Cash and temporary cash investments,
January 1........................... 3 26 -- -- 29
---- ----- ----- ---- -----
Cash and temporary cash investments,
September 30 (Note)................. $ 1 $ 18 $ 5 $ -- $ 24
==== ===== ===== ==== =====
</TABLE>
- ---------------
Note: Cash and temporary cash investments include highly liquid investments with
a maturity of three months or less at the date of purchase.
F-62
<PAGE> 217
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- -------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments..... $ 2 $ 22 $ 18 $ -- $ 42
Receivables............................. 363 374 28 (85) 680
Inventories............................. 151 252 -- -- 403
Deferred income taxes................... 39 (11) -- -- 28
Prepayments and other................... 27 36 -- -- 63
------ ------ ------- -------- ------
582 673 46 (85) 1,216
------ ------ ------- -------- ------
Other assets:
Investment in affiliated companies...... 351 -- 4,935 (5,286) --
Notes and advances receivable from
affiliates............................ 2,417 9 3,334 (5,760) --
Long-term notes receivable, net......... 13 17 -- -- 30
Goodwill and intangibles, net........... 334 171 -- -- 505
Pension assets.......................... 92 7 -- -- 99
Other................................... 43 54 9 -- 106
------ ------ ------- -------- ------
3,250 258 8,278 (11,046) 740
------ ------ ------- -------- ------
Plant, property, and equipment, at cost..... 888 1,047 1 -- 1,936
Less -- Reserves for depreciation and
amortization.......................... 433 448 -- -- 881
------ ------ ------- -------- ------
455 599 1 -- 1,055
------ ------ ------- -------- ------
Net assets of discontinued operations....... 27 2,812 (1,356) -- 1,483
------ ------ ------- -------- ------
$4,314 $4,342 $ 6,969 $(11,131) $4,494
====== ====== ======= ======== ======
LIABILITIES AND SHAREOWNERS'
EQUITY
Current liabilities:
Short-term debt (including current
maturities on long-term debt)......... $ 1 $ 537 $ 420 $ (721) $ 237
Trade payables.......................... 160 276 11 (82) 365
Taxes accrued........................... (1) 28 130 (111) 46
Other................................... 100 67 73 -- 240
------ ------ ------- -------- ------
260 908 634 (914) 888
Long-term debt.............................. 1,558 24 4,262 (5,048) 796
Deferred income taxes....................... (27) 18 (67) 180 104
Postretirement benefits and other
liabilities............................... 132 23 -- -- 155
Commitments and contingencies
Minority interest........................... -- 16 -- 395 411
Preferred stock with mandatory redemption
provisions................................ 395 -- -- (395) --
Shareowners' equity......................... 1,996 3,353 2,140 (5,349) 2,140
------ ------ ------- -------- ------
$4,314 $4,342 $ 6,969 $(11,131) $4,494
====== ====== ======= ======== ======
</TABLE>
F-63
<PAGE> 218
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------------------------------------
TENNECO
AUTOMOTIVE INC.
GUARANTOR NONGUARANTOR (PARENT RECLASS
SUBSIDIARIES SUBSIDIARIES COMPANY) & ELIMS CONSOLIDATED
------------ ------------ --------------- ------- ------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments...... $ 1 $ 25 $ 3 $ -- $ 29
Receivables.............................. 277 307 32 (173) 443
Inventories.............................. 149 265 -- -- 414
Deferred income taxes.................... 48 (9) -- -- 39
Prepayments and other.................... 94 45 -- -- 139
------ ------ ------- ------- ------
569 633 35 (173) 1,064
------ ------ ------- ------- ------
Other assets:
Investment in affiliated companies....... 733 -- 5,387 (6,120) --
Notes and advances receivable from
affiliates............................. 635 -- 2,772 (3,407) --
Long-term notes receivable, net.......... 12 9 2 -- 23
Goodwill and intangibles, net............ 348 151 -- -- 499
Deferred income taxes.................... -- 39 -- -- 39
Pension assets........................... 83 18 -- -- 101
Other.................................... 89 106 6 -- 201
------ ------ ------- ------- ------
1,900 323 8,167 (9,527) 863
------ ------ ------- ------- ------
Plant, property, and equipment, at cost...... 875 1,069 -- -- 1,944
Less -- Reserves for depreciation and
amortization........................... 419 432 -- -- 851
------ ------ ------- ------- ------
456 637 -- -- 1,093
------ ------ ------- ------- ------
Net assets of discontinued operations........ 1,649 3,119 (3,029) -- 1,739
------ ------ ------- ------- ------
$4,574 $4,712 $ 5,173 $(9,700) $4,759
====== ====== ======= ======= ======
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt (including current
maturities on long-term debt).......... $ 26 $ 124 $ 229 $ (75) $ 304
Trade payables........................... 148 258 10 (79) 337
Taxes accrued............................ (3) 34 -- -- 31
Other.................................... 130 71 36 -- 237
------ ------ ------- ------- ------
301 487 275 (154) 909
Long-term debt............................... 1,571 25 2,480 (3,405) 671
Deferred income taxes........................ 137 47 (86) -- 98
Postretirement benefits and other
liabilities................................ 126 44 -- -- 170
Commitments and contingencies
Minority interest............................ -- 13 -- 394 407
Preferred stock with mandatory redemption
provisions................................. 394 -- -- (394) --
Shareowners' equity.......................... 2,045 4,096 2,504 (6,141) 2,504
------ ------ ------- ------- ------
$4,574 $4,712 $ 5,173 $(9,700) $4,759
====== ====== ======= ======= ======
</TABLE>
F-64
<PAGE> 219
SCHEDULE II
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(MILLIONS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------- --------- -------------------- ---------- --------
ADDITIONS
--------------------
BALANCE CHARGED CHARGED
AT TO TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
- ------------------------------------------- --------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts and Notes
Deducted from Assets to Which it Applies:
Year Ended December 31, 1998.......... $20 $20 $ 5 $ 6 $39
=== === === === ===
Year Ended December 31, 1997.......... $10 $ 6 $ 4 $-- $20
=== === === === ===
Year Ended December 31, 1996.......... $10 $ 1 $-- $ 1 $10
=== === === === ===
</TABLE>
S-1
<PAGE> 220
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$500,000,000
TENNECO AUTOMOTIVE INC.
(FORMERLY KNOWN AS TENNECO INC.)
11 5/8% SENIOR SUBORDINATED NOTES DUE 2009
EXCHANGE OFFER
[TENNECO LOGO]
------------------------
PROSPECTUS
,
------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 221
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Tenneco's restated certificate of incorporation provides that a director of
Tenneco will not be liable to Tenneco 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 Tenneco will not be personally liable to Tenneco 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 Tenneco 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, Tenneco'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 Tenneco's
certificate of incorporation described above apply to an officer of Tenneco only
if he or she is a director of Tenneco and is acting in his or her capacity as
director. They do not apply to officers of Tenneco who are not directors.
Tenneco's by-laws 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
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
II-1
<PAGE> 222
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."
Tenneco has purchased insurance which purports to insure Tenneco 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 Tenneco 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 Pactiv has agreed to indemnify
the directors and officers of Tenneco 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.
The by-laws of Tenneco Automotive Operating Company Inc. ("Operating
Company"), Clevite Industries Inc. ("Clevite"), Tenneco Global Holdings Inc.
("Tenneco Global"), Tenneco International Holding Corp. ("TIHC") and TMC Texas
Inc. ("TMC Texas") provide that Operating Company, Clevite, Tenneco Global, TIHC
and TMC Texas shall indemnify their directors and officers to the maximum extent
permitted from time to time by the DGCL. The by-laws of The Pullman Company
("Pullman") provide that Pullman shall indemnify its directors and officers if
they acted in good faith and in a manner reasonably believed to be in the best
interests of Pullman, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe that their conduct was unlawful. Such
indemnification includes expenses and attorneys' fees incurred in connection
with any claim. Expenses (including attorneys' fees) are to be paid by Pullman
in advance of the final disposition of any action upon receipt of an undertaking
by or on behalf of any director or officer to repay the advanced amount if it is
determined that such officer or director is not entitled to be indemnified.
II-2
<PAGE> 223
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1 -- None.
2 -- Distribution Agreement by and between Tenneco Inc. (the
"registrant") and Tenneco Packaging Inc. dated November
3, 1999 (incorporated herein by reference to Exhibit 2 to
the registrant's Current Report on Form 8-K dated
November 4, 1999, File No. 1-12387).
3.1(a) -- Restated Certificate of Incorporation of the registrant
dated December 11, 1996 (incorporated herein by reference
from Exhibit 3.1(a) of the registrant's Annual Report on
Form 10-K for the year ended December 31, 1997, File No.
1-12387).
3.1(b) -- Certificate of Amendment, dated December 11, 1996
(incorporated herein by reference from Exhibit 3.1(c) of
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1997, File No. 1-12387).
3.1(c) -- Certificate of Ownership and Merger, dated July 8, 1997
(incorporated herein by reference from Exhibit 3.1(d) of
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1997, File No. 1-12387).
3.1(d) -- Certificate of Designation of Series B Junior
Participating Preferred Stock dated September 9, 1998
(incorporated herein by reference from Exhibit 3.1(d) of
the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998, File No. 1-12387).
3.1(e) -- Certificate of Elimination of the Series A Participating
Junior Preferred Stock of the registrant dated September
11, 1998 (incorporated herein by reference from Exhibit
3.1(e) of the registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998, File No.
1-12387).
3.1(f) -- Certificate of Amendment to Restated Certificate of
Incorporation of the registrant dated November 5, 1999
(incorporated herein by reference from Exhibit 3.1(f) of
the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-12387).
3.1(g) -- Certificate of Amendment to Restated Certificate of
Incorporation of the registrant dated November 5, 1999
(incorporated herein by reference from Exhibit 3.1(g) of
the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-12387).
3.1(h) -- Certificate of Ownership and Merger merging Tenneco
Automotive Merger Sub Inc. with and into the registrant,
dated November 5, 1999 (incorporated herein by reference
from Exhibit 3.1(h) of the registrant's Quarterly Report
for the quarter ended September 30, 1999, File No.
1-12387).
3.2(a) -- By-Laws of the registrant, as amended December 1, 1999.
3.3 -- Certificate of Incorporation of Tenneco Global Holdings
Inc. ("Global"), as amended.
3.4 -- By-laws of Global.
3.5 -- Certificate of Incorporation of TMC Texas Inc. ("TMC").
3.6 -- By-laws of TMC.
3.7 -- Amended and Restated Certificate of Incorporation of
Tenneco International Holding Corp. ("TIHC").
3.8 -- Amended and Restated By-laws of TIHC.
</TABLE>
II-3
<PAGE> 224
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.9 -- Certificate of Incorporation of Clevite Industries Inc.
("Clevite"), as amended.
3.10 -- By-laws of Clevite.
3.11 -- Amended and Restated Certificate of Incorporation of the
Pullman Company ("Pullman").
3.12 -- By-laws of Pullman.
3.13 -- Certificate of Incorporation of Tenneco Automotive
Operating Company Inc. ("Operating").
3.14 -- By-laws of Operating.
4.1 -- Qualified Offer Plan Rights Agreement dated as of
September 8, 1998, by and between the registrant and
First Chicago Trust Company of New York, as Rights Agent
(incorporated herein by reference from Exhibit 4.1 of the
registrant's Current Report on Form 8-K dated September
24, 1999, File No. 1-12387).
4.2(a) -- Indenture, dated as of November 1, 1996, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.1 of the
registrant's Form S-4 Registration No. 333-14003).
4.2(b) -- First Supplemental Indenture dated as of December 11,
1996 to Indenture dated as of November 1, 1996 between
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(b) of
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
4.2(c) -- Second Supplemental Indenture dated as of December 11,
1996 to Indenture dated as of November 1, 1996 between
the registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(c) of
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
4.2(d) -- Third Supplemental Indenture dated as of December 11,
1996 to Indenture dated as of November 1, 1996 between
the registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(d) of
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
4.2(e) -- Fourth Supplemental Indenture dated as of December 11,
1996 to Indenture dated as of November 1, 1996 between
the registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(e) of
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
4.2(f) -- Fifth Supplemental Indenture dated as of December 11,
1996 to Indenture dated as of November 1, 1996 between
the registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(f) of
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
4.2(g) -- Sixth Supplemental Indenture dated as of December 11,
1996 to Indenture dated as of November 1, 1996 between
the registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(g) of
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
</TABLE>
II-4
<PAGE> 225
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.2(h) -- Seventh Supplemental Indenture dated as of December 11,
1996 to Indenture dated as of November 1, 1996 between
the registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.3(h) of
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
4.2(i) -- Eighth Supplemental Indenture, dated as of April 28,
1997, to Indenture, dated as of November 1, 1996 between
the registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.1 of the
registrant's Current Report on Form 8-K dated April 23,
1997, File No. 1-12387).
4.2(j) -- Ninth Supplemental Indenture, dated as of April 28, 1997,
to Indenture, dated as of November 1, 1996, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.2 of the
registrant's Current Report on Form 8-K dated April 23,
1997, File No. 1-12387).
4.2(k) -- Tenth Supplemental Indenture, dated as of July 16, 1997,
to Indenture, dated as of November 1, 1996, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference from Exhibit 4.1 of the
registrant's Current Report on Form 8-K dated June 11,
1997, File No. 1-12387).
4.2(l) -- Eleventh Supplemental Indenture, dated October 21, 1999,
to Indenture dated November 1, 1996 between The Chase
Manhattan Bank, as Trustee, and the registrant
(incorporated herein by reference from Exhibit 4.2(l) of
the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-12387).
4.3 -- Specimen stock certificate for Tenneco Automotive Inc.
common stock (incorporated herein by reference from
Exhibit 4.3 of the registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999, File No.
1-12387).
4.4(a) -- Indenture dated October 14, 1999 by and between the
registrant and The Bank of New York, as trustee
(incorporated herein by reference from Exhibit 4.4(a) of
the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-12387).
4.4(b) -- Supplemental Indenture dated November 4, 1999 among
Tenneco Automotive Operating Subsidiary Inc. (formerly
Tenneco Automotive Inc.), Tenneco International Holding
Corp., Tenneco Global Holdings Inc., the Pullman Company
and Clevite Industries Inc. in favor of The Bank of New
York, as trustee (incorporated herein by reference from
Exhibit 4.4(b) of the registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, File
No. 1-12387).
4.5(a) -- Credit Agreement, dated as of September 30, 1999, among
the registrant, the Lenders named therein, Commerzbank
and Bank of America, N.A., Citicorp USA, Inc. and The
Chase Manhattan Bank (incorporated herein by reference
from Exhibit 4.5(a) of the registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999,
File No. 1-12387).
5 -- Opinion of Jenner & Block.*
8 -- Opinion of Jenner & Block regarding tax matters.*
9 -- None.
</TABLE>
II-5
<PAGE> 226
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.1 -- Distribution Agreement, dated November 1, 1996, by and
among El Paso Tennessee Pipeline Co. (formerly Tenneco
Inc.) the registrant, and Newport News Shipbuilding Inc.
(incorporated herein by reference from Exhibit 2 of the
registrant's Form 10, File No. 1-12387).
10.2 -- Amendment No. 1 to Distribution Agreement, dated as of
December 11, 1996, by and among El Paso Tennessee
Pipeline Co. (formerly Tenneco Inc.), the registrant, and
Newport News Shipbuilding Inc. (incorporated herein by
reference from Exhibit 10.2 of the registrant's Annual
Report on Form 10-K for the year ended December 31, 1996,
File No. 1-12387).
10.3 -- Debt and Cash Allocation Agreement, dated December 11,
1996, by and among El Paso Tennessee Pipeline Co.
(formerly Tenneco Inc.), the registrant, and Newport News
Shipbuilding Inc. (incorporated herein by reference from
Exhibit 10.3 of the registrant's Annual Report on Form
10-K for the year ended December 31, 1996, File No.
1-12387).
10.4 -- Benefits Agreement, dated December 11, 1996, by and among
El Paso Tennessee Pipeline Co. (formerly Tenneco Inc.),
the registrant, and Newport News Shipbuilding Inc.
(incorporated herein by reference from Exhibit 10.4 of
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
10.5 -- Insurance Agreement, dated December 11, 1996, by and
among El Paso Tennessee Pipeline Co. (formerly Tenneco
Inc.), the registrant, and Newport News Shipbuilding Inc.
(incorporated herein by reference from Exhibit 10.5 of
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-12387).
10.6 -- Tax Sharing Agreement, dated December 11, 1996, by and
among El Paso Tennessee Pipeline Co. (formerly Tenneco
Inc.), Newport News Shipbuilding Inc., the registrant,
and El Paso Natural Gas Company (incorporated herein by
reference from Exhibit 10.6 of the registrant's Annual
Report on Form 10-K for the year ended December 31, 1996,
File No. 1-12387.
10.7 -- First Amendment to Tax Sharing Agreement, dated as of
December 11, 1996, among El Paso Tennessee Pipeline Co.
(formerly Tenneco Inc.), the registrant and Newport News
Shipbuilding Inc. (incorporated herein by reference from
Exhibit 10.7 of the registrant's Annual Report on Form
10-K for the year ended December 31, 1996, File No.
1-12387).
10.8 -- Tenneco Automotive Inc. Executive Incentive Compensation
Plan (incorporated herein by reference from Exhibit 10.8
of the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-12387).
10.9 -- Agreement, dated September 9, 1992 between Theodore R.
Tetzlaff and the registrant (incorporated herein by
reference from Exhibit 10.21 of the registrant's Form 10,
File No. 1-12387).
10.10 -- Letter Agreement dated September 24, 1998 between Robert
T. Blakely and the registrant. (incorporated herein by
reference from Exhibit 10.23 of the registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998, File No. 1-12387).
10.11 -- Letter Agreement dated September 24, 1998 between John J.
Castellani and the registrant (incorporated herein by
reference from Exhibit 10.28 of the registrant's Annual
Report on Form 10-K for the year ended December 31, 1998,
File No. 1-12387).
</TABLE>
II-6
<PAGE> 227
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.12 -- Agreement, dated as of April 12, 1999, among the
registrant Tenneco Management Company, Tenneco Packaging
Inc., and Paul T. Stecko (incorporated herein by
reference from Exhibit 10.30 of the registrant's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1999, File No. 1-12387).
10.13 -- Tenneco Automotive Inc. Change of Control Severance
Benefits Plan for Key Executives (incorporated herein by
reference from Exhibit 10.13 of the registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, File No. 1-12387).
10.14 -- Tenneco Automotive Inc. Stock Ownership Plan
(incorporated herein by reference from Exhibit 10.14 of
the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-12387).
10.15 -- Tenneco Automotive Inc. Key Executive Pension Plan
(incorporated herein by reference from Exhibit 10.15 of
the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-12387).
10.16 -- Tenneco Automotive Inc. Deferred Compensation Plan
(incorporated herein by reference from Exhibit 10.16 of
the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-12387).
10.17 -- Tenneco Automotive Inc., Supplemental Executive
Retirement Plan (incorporated herein by reference from
Exhibit 10.17 of the registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, File
No. 1-12387).
10.18 -- Release Agreement dated as of October 18, 1999 by and
between Dana G. Mead and Tenneco Management Company and
Modification of Release Agreement dated as of October 18,
1999 among Dana G. Mead, Tenneco Automotive Inc. and
Tenneco Management Company (incorporated herein by
reference from Exhibit 10.18 of the registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, File No. 1-12387).
10.19 -- Human Resources Agreement by and between Tenneco
Automotive Inc. and Tenneco Packaging Inc. dated November
4, 1999 (incorporated herein by reference to Exhibit 99.1
to the registrant's Current Report on Form 8-K dated
November 4, 1999, File No. 1-12387).
10.20 -- Tax Sharing Agreement by and between Tenneco Automotive
Inc. and Tenneco Packaging Inc. dated November 3, 1999
(incorporated herein by reference to Exhibit 99.2 to the
registrant's Current Report on Form 8-K dated November 4,
1999, File No. 1-12387).
10.21 -- Amended and Restated Transition Services Agreement by and
between Tenneco Automotive Inc. and Tenneco Packaging
Inc. dated as of November 4, 1999 (incorporated herein by
reference from Exhibit 10.21 of the registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, File No. 1-12387).
10.22 -- Purchase Agreement among Salomon Smith Barney Inc., the
other Initial Purchasers as named therein and Tenneco
Inc. dated October 8, 1999.
10.23 -- Registration Rights Agreement among Tenneco Inc., the
Guarantors named therein, Salomon Smith Barney Inc. and
the other Initial Purchasers named therein dated October
14, 1999.
</TABLE>
II-7
<PAGE> 228
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.24 -- Assumption Agreement among Tenneco Automotive Operating
Company Inc., Tenneco International Holding Corp.,
Tenneco Global Holdings Inc., The Pullman Company,
Clevite Industries Inc., TMC Texas Inc., Salomon Smith
Barney Inc. and the other Initial Purchasers listed in
the Purchase Agreement dated as of November 4, 1999.
11 -- None.
12.1 -- Statement of Ratio of Earnings to Fixed
Charges -- September 30, 1999 and 1998.
12.2 -- Statement of Ratio of Earnings to Fixed
Charges -- December 31, 1998, 1997, 1996, 1995 and 1994.
13 -- None.
15 -- None.
16 -- None.
21 -- List of Subsidiaries of the registrant.
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 Mark P. Frissora, Mark A. McCollum,
Kenneth R. Trammell, Dana G. Mead, Sir David Plastow, M.
Kathryn Eickhoff, Mark Andrews, Roger B. Porter, Paul T.
Stecko, David B. Price, Jr. and Timothy R. Donovan.
25 -- Statement of Eligibility of Trustee.
26 -- None.
27.1 -- Financial Data Schedule -- Period ended September 30,
1999 (incorporated herein by reference from Exhibit 27.1
of the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-12387).
27.2 -- Financial Data Schedule -- Period ended September 30,
1998 (incorporated herein by reference from Exhibit 27.2
of the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-12387).
99.1 -- Form of Letter of 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 Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* To be filed by amendment.
(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
II-8
<PAGE> 229
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 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-9
<PAGE> 230
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this 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 29th day of December, 1999.
TENNECO AUTOMOTIVE INC.
By: /s/ MARK P. FRISSORA*
----------------------------------
Mark P. Frissora
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 29, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARK P. FRISSORA* Chief Executive Officer and Director
- --------------------------------------------- (principal executive officer)
Mark P. Frissora
/s/ MARK A. MCCOLLUM* Senior Vice President and Chief Financial
- --------------------------------------------- Officer
Mark A. McCollum (principal financial officer)
/s/ KENNETH R. TRAMMELL* Vice President and Controller
- --------------------------------------------- (principal accounting officer)
Kenneth R. Trammell
/s/ DANA G. MEAD* Director
- ---------------------------------------------
Dana G. Mead
/s/ SIR DAVID PLASTOW* Director
- ---------------------------------------------
Sir David Plastow
/s/ M. KATHRYN EICKHOFF* Director
- ---------------------------------------------
M. Kathryn Eickhoff
/s/ MARK ANDREWS* Director
- ---------------------------------------------
Mark Andrews
/s/ ROGER B. PORTER* Director
- ---------------------------------------------
Roger B. Porter
/s/ PAUL T. STECKO* Director
- ---------------------------------------------
Paul T. Stecko
/s/ DAVID B. PRICE, JR.* Director
- ---------------------------------------------
David B. Price, Jr.
</TABLE>
*By: /s/ TIMOTHY R. DONOVAN
-------------------------------
Timothy R. Donovan
Attorney-in-fact
II-10
<PAGE> 231
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this 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 29th day of December, 1999.
TENNECO AUTOMOTIVE OPERATING COMPANY
INC.
By: /s/ MARK P. FRISSORA*
----------------------------------
Mark P. Frissora
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 29, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARK P. FRISSORA* President and Director
- --------------------------------------------- (principal executive officer)
Mark P. Frissora
/s/ MARK A. MCCOLLUM* Vice President and Chief Financial Officer
- --------------------------------------------- (principal financial officer)
Mark A. McCollum
/s/ KENNETH R. TRAMMELL* Vice President and Controller
- --------------------------------------------- (principal accounting officer)
Kenneth R. Trammell
/s/ DANA G. MEAD* Director
- ---------------------------------------------
Dana G. Mead
</TABLE>
*By: /s/ TIMOTHY R. DONOVAN
-------------------------------
Timothy R. Donovan
Attorney-in-fact
II-11
<PAGE> 232
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this 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 29th day of December, 1999.
CLEVITE INDUSTRIES INC.
By: /s/ MARK P. FRISSORA*
----------------------------------
Mark P. Frissora
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 29, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARK P. FRISSORA* President and Director
- --------------------------------------------- (principal executive officer)
Mark P. Frissora
/s/ MARK. A. MCCOLLUM* Vice President and Chief Financial Officer
- --------------------------------------------- (principal financial officer)
Mark A. McCollum
/s/ KENNETH R. TRAMMELL* Controller
- --------------------------------------------- (principal accounting officer)
Kenneth R. Trammell
</TABLE>
*By: /s/ TIMOTHY R. DONOVAN
-------------------------------
Timothy R. Donovan
Attorney-in-fact
II-12
<PAGE> 233
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this 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 29th day of December, 1999.
THE PULLMAN COMPANY
By: /s/ MARK P. FRISSORA*
----------------------------------
Mark P. Frissora
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 29, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARK P. FRISSORA President and Director
- --------------------------------------------- (principal executive officer)
Mark P. Frissora
/s/ MARK A. MCCOLLUM Vice President and Chief Financial Officer
- --------------------------------------------- (principal financial officer)
Mark A. McCollum
/s/ KENNETH R. TRAMMELL Controller
- --------------------------------------------- (principal accounting officer)
Kenneth R. Trammell
</TABLE>
*By: /s/ TIMOTHY R. DONOVAN
-------------------------------
Timothy R. Donovan
Attorney-in-fact
II-13
<PAGE> 234
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this 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 29th day of December, 1999.
TENNECO GLOBAL HOLDINGS INC.
By: /s/ MARK A. MCCOLLUM*
----------------------------------
Mark A. McCollum
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 29, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARK A. MCCOLLUM* President, Controller and Director
- --------------------------------------------- (principal executive, financial and
Mark A. McCollum accounting officer)
</TABLE>
*By: /s/ TIMOTHY R. DONOVAN
-------------------------------
Timothy R. Donovan
Attorney-in-fact
II-14
<PAGE> 235
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this 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 29th day of December, 1999.
TENNECO INTERNATIONAL HOLDING CORP.
By: /s/ MARK P. FRISSORA*
-------------------------------------
Mark P. Frissora
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 29, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARK P. FRISSORA* President
- --------------------------------------------- (principal executive officer)
Mark P. Frissora
/s/ MARK A. MCCOLLUM* Vice President
- --------------------------------------------- (principal financial officer)
Mark A. McCollum
/s/ KENNETH R. TRAMMELL* Controller
- --------------------------------------------- (principal accounting officer)
Kenneth R. Trammell
/s/ TIMOTHY R. DONOVAN Director
- ---------------------------------------------
Timothy R. Donovan
</TABLE>
*By: /s/ TIMOTHY R. DONOVAN
-------------------------------
Timothy R. Donovan
Attorney-in-fact
II-15
<PAGE> 236
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this 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 29th day of December, 1999.
TMC TEXAS INC.
By: /s/ MARK P. FRISSORA*
----------------------------------
Mark P. Frissora
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on December 29, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARK P. FRISSORA* President
- --------------------------------------------- (principal executive officer)
Mark P. Frissora
/s/ MARK A. MCCOLLUM* Vice President
- --------------------------------------------- (principal financial officer)
Mark A. McCollum
/s/ KENNETH R. TRAMMELL* Controller
- --------------------------------------------- (principal accounting officer)
Kenneth R. Trammell
/s/ TIMOTHY R. DONOVAN Director
- ---------------------------------------------
Timothy R. Donovan
</TABLE>
*By: /s/ TIMOTHY R. DONOVAN
-------------------------------
Timothy R. Donovan
Attorney-in-fact
II-16
<PAGE> 1
EXHIBIT 3.2(a)
BY-LAWS
OF
TENNECO AUTOMOTIVE INC.
AS AMENDED DECEMBER 1, 1999
ARTICLE I
PLACE OF STOCKHOLDER MEETINGS
Section 1. All meetings of the stockholders of the corporation shall be
held at such place or places, within or without the State of Delaware, as may
from time to time be fixed by the Board of Directors of the corporation (the
"Board"), or as shall be specified or fixed in the respective notices or waivers
of notice thereof.
ANNUAL MEETING
Section 2. The Annual Meeting of Stockholders shall be held on such date
and at such time as may be fixed by the Board and stated in the notice thereof,
for the purposes of electing directors and for the transaction of only such
other business as is properly brought before the meeting in accordance with
these By-Laws.
SPECIAL MEETING
Section 3. Subject to the rights of the holders of any series of preferred
stock, par value $.01 per share, of the corporation (the "Preferred Stock") to
elect additional directors under specified circumstances, special meetings of
the stockholders shall be called by the Board. The business transacted at a
special meeting shall be confined to the purposes specified in the notice
thereof. Special meetings shall be held at such date and at such time as the
Board may designate.
NOTICE OF MEETING
Section 4. Written notice of each meeting of stockholders, stating the
place, date and hour of the meeting, and the purpose or purposes thereof, shall
be mailed not less than ten nor more than sixty days before the date of such
meeting to each stockholder entitled to vote thereat.
QUORUM
Section 5. Unless otherwise provided by statute, the holders of shares of
stock entitled to cast a majority of votes at a meeting, present either in
person or by proxy, shall constitute a quorom at such meeting. The Secretary of
the corporation or in his absence an Assistant Secretary or an appointee of the
presiding officer of the meeting shall act as the Secretary of the meeting.
VOTING
Section 6. Except as otherwise provided by law or the Restated Certificate
of Incorporation, each stockholder entitled to vote at any meeting shall be
entitled to one vote, in person of by proxy, for each share held of record on
the record date fixed as provided in Section 4 of Article V of these By-Laws for
determining the stockholder entitled to vote at such meeting. At all meetings of
stockholders for the election of directors, a plurality of the votes cast shall
be sufficient to elect. All other elections and questions shall, unless
otherwise provided by the Restated Certificate of Incorporation, these By-Laws,
the rules or regulations of any stock exchange applicable to the corporation, or
applicable law or pursuant to any regulation applicable to the corporation or
its securities, be decided by the affirmative vote of the holders of a majority
in voting power of the shares of stock of the corporation which are present in
person or by proxy and entitled to vote thereon.
<PAGE> 2
Elections of directors need not be by written ballot; provided, however,
that by resolution duly adopted, a vote by written ballot may be required.
PROXIES
Section 7. Each stockholder entitled to vote at a meeting of stockholders
or to express consent or dissent to corporate action in writing without a
meeting may authorize another person or persons to act for him by proxy, but no
such proxy shall be voted or acted upon after three years from its date, unless
the proxy provides for a longer period. A proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A stockholder
may revoke any proxy which is not irrevocable by attending the meeting and
voting in person or by filing an instrument revoking the proxy or by delivering
a proxy in accordance with applicable law bearing a later date to the Secretary
of the corporation. In order to be exercised at a meeting of stockholders,
proxies shall be delivered to the Secretary of the corporation or his
representative at or before the time of such meeting.
INSPECTORS
Section 8. At each meeting of the stockholders the polls shall be opened
and closed; the proxies and ballots shall be received and be taken in charge,
and all questions touching the qualification of voters and the validity of
proxies and the acceptance or rejection of votes shall be decided by three
Inspectors, two of whom shall have power to make a decision. Such Inspectors
shall be appointed by the Board before the meeting, or in default thereof by
the presiding officer at the meeting, and shall be sworn to the faithful
performance of their duties. If any of the Inspectors previously appointed
shall fail to attend or refuse or be unable to serve, substitutes shall be
appointed by the presiding officer.
CONDUCT OF MEETINGS
Section 9. The date and time of the opening and the closing of the polls
for each matter upon which the stockholders will vote at a meeting shall be
announced at the meeting by the chairman of the meeting. The Board may adopt by
resolution such rules and regulations for the conduct of the meeting of
stockholders as it shall deem appropriate. Except to the extent inconsistent
with such rules and regulations as adopted by the Board, the chairman of any
meeting of stockholders shall have the right and authority to prescribe such
rules, regulations and procedures and to do all such acts as, in the judgment
of such chairman, are appropriate for the proper conduct of the meeting. Such
rules, regulations or procedures, whether adopted by the Board or prescribed by
the chairman of the meeting, may include, without limitation, the following:
(i) the establishment of an agenda or order of business for the meeting, (ii)
rules and procedures for maintaining order at the meeting and the safety of
those present, (iii) limitations on attendance at or participation in the
meeting to stockholders of record of the corporation, their duly authorized and
constituted proxies or such other persons as the chairman of the meeting shall
determine; (iv) restrictions on entry to the meeting after the time fixed for
the commencement thereof, and (v) limitations on the time allotted to questions
or comments by participants. Unless and to the extent determined by the Board
or the chairman of the meeting, meetings of stockholders shall not be required
to be held in accordance with the rules of parliamentary procedure.
ADVANCE NOTICE
Section 10. (A)(1) Nominations of persons for election to the Board and
the proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders only (a) pursuant to the corporation's notice of
meeting (or any supplement thereto), (b) by or at the direction of the Board or
(c) by any stockholder of the corporation who was a stockholder of record of
the corporation at the time the notice provided for in this Section 10 is
delivered to the Secretary of the corporation, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this Section
10.
(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause(c) of paragraph (A)(1) of
this Section 10, the stockholder must
<PAGE> 3
have given timely notice thereof in writing to the Secretary of the corporation
and any such proposed business other than the nominations of persons for
election to the Board must constitute a proper matter for stockholder action. To
be timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the ninetieth day nor earlier than the close of business on the one
hundred twentieth day prior to the first anniversary of the preceding year's
annual meeting (provided, however, that in the event that the date of the annual
meeting is more than thirty days before or more than seventy days after such
anniversary date, notice by the stockholder must be so delivered not earlier
than the close of business on the one hundred twentieth day prior to such annual
meeting and not later than the close of business on the later of the ninetieth
day prior to such annual meeting or the tenth day following the day on which
public announcement of the date of such meeting is first made by the
corporation). In no event shall the public announcement of an adjournment or
postponement of an annual meeting commence a new time period (or extend any time
period) for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth: (a) as to each person whom the
stockholders purposes to nominate for election as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulations 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder (and
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the text of the proposal or
business (including the text of any resolutions proposed for consideration and
in the event that such business includes a proposal to amend the By-Laws of the
corporation, the language of the proposed amendment), the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the corporation's books, and of
such beneficial owner, (ii) the class and number of shares of capital stock of
the corporation which are owned beneficially and of record by such stockholder
and such beneficial owner, (iii) a representation that the stockholder is a
holder of record of stock of the corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to propose such
business or nomination, and (iv) a representation whether the stockholder or the
beneficial owner, if any, intends or is part of a group which intends (a) to
deliver a proxy statement and/or form of proxy to holders of at least the
percentage of the corporation's outstanding capital stock required to approve or
adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies
from stockholders in support of such proposal or nomination. The corporation may
require any proposed nominee to furnish such other information as it may
reasonably require to determine the eligibility of such proposed nominee to
serve as a director of the corporation.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Section 10 to the contrary, in the event that the number of
directors to be elected to the Board of the corporation at an annual meeting is
increased and there is no public announcement by the corporation naming
the nominees for the additional directorships at least one hundred days prior
to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 10 shall also be considered
timely, but only with respect to nominees for the additional directorships, if
it shall be delivered to the Secretary at the principal executive offices of
the corporation not later than the close of business on the tenth day following
the day on which such public announcement is first made by the corporation.
(B) Only such business shall be conducted at a special meeting of stockholders
as shall have been brought before the meeting pursuant to the corporation's
notice of meeting. Nominations of persons for election to the Board may be made
at a special meeting of stockholders at which directors are to be elected
pursuant to the corporation's notice of meeting (1) by or at the direction of
the Board or (2) provided that the Board has determined that directors shall be
elected at such meeting, by any stockholder of the corporation who is a
stockholder of record at the time the notice provided for in this Section 10 is
delivered to the Secretary of the corporation, who is entitled to vote at the
meeting and upon such election and who complies with the notice procedures set
forth in this Section 10. In the event the corporation calls a special meeting
of stockholders for the purpose of electing one or more directors to the Board,
any such stockholder entitled to vote in such election of directors may nominate
a person or persons (as the case may
<PAGE> 4
be) for election to such position(s) as specified in the corporation's notice
of meeting, if the stockholder's notice required by paragraph (A)(2) of this
Section 10 shall be delivered to the Secretary at the principal executive
offices of the corporation not earlier than the close of business on the one
hundred twentieth day prior to such special meeting and not later than the
close of business on the later of the ninetieth day prior to such special
meeting or the tenth day following the day on which public announcement is
first made of the date of the special meeting and of the nominees proposed by
the Board to be elected at such meeting. In no event shall the public
announcement of an adjournment or postponement of a special meeting commence a
new time period (or extend any time period) for the giving of a stockholder's
notice as described above.
(C)(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section 10 shall be eligible to be elected an
annual or special meeting of stockholders of the corporation to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 10. Except as otherwise provided by
law, the chairman of the meeting shall have the power and duty (a) to determine
whether a nomination or any business proposed to be brought before the meeting
was made or proposed, as the case may be, in accordance with the procedures set
forth in this Section 10 (including whether the stockholder or beneficial
owner, if any, on whose behalf the nomination or proposal is made solicited (or
is part of a group which solicited) or did not so solicit, as the case may be,
proxies in support of such stockholder's nominee or proposal in compliance
with such stockholder's representation as required by clause (A)(2)(c)(iv) of
this Section 10) and (b) if any proposed nomination or business was not made or
proposed in compliance with this Section 10, to declare that such nomination
shall be disregarded or that such proposed business shall not be transacted.
Notwithstanding the foregoing provisions of this Section 10, if the stockholder
(or a qualified representative of the stockholder) does not appear at the
annual or special meeting of stockholders of the corporation to present a
nomination or business, such nomination shall be disregarded and such proposed
business shall not be transacted, notwithstanding that proxies in respect of
such vote have been received by the corporation.
(2) For purposes of this Section 10, "public announcement" shall
include disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant
to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 10, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 10. Nothing in this Section 10 shall be deemed to affect
any rights (a) of stockholders to request inclusion of proposals in the
corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(b) of the holders of any series of Preferred Stock to elect directors pursuant
to any applicable provisions of the Restated Certificate of Incorporation.
ARTICLE II
BOARD OF DIRECTORS
NUMBERS; METHOD OF ELECTION;
TERMS OF OFFICE AND QUALIFICATION
Section 1. The business and affairs of the corporation shall be managed
under the direction of the Board. The number of directors which shall constitute
the entire Board shall not be less the eight nor more than sixteen and shall be
determined from time to time by resolution adopted by a majority of the entire
Board.
<PAGE> 5
MEETINGS
Section 2. The Board may hold its meetings and have an office in such place
or places within or without the State of Delaware as the Board by resolution
from time to time may determine.
The Board may in its discretion provide for regular or stated meetings of
the Board. Notice of regular or stated meetings need not be given. Special
meetings of the Board shall be held whenever called by direction of the Chief
Executive Officer, the President or any two of the directors.
Notice of any special meeting shall be given by the Secretary to each
director either by mail or by telegram, facsimile, telephone or other electronic
communication or transmission. If mailed, such notice shall be deemed adequately
delivered when deposited in the United States mails so addressed, with postage
thereon prepaid, at least three days before such meeting. If by telegram, such
notice shall be deemed adequately delivered when the telegram is delivered to
the telegraph corporation at least twenty-four hours before such meeting. If by
facsimile, telephone, or other electronic communication or transmission, such
notice shall be transmitted at least twenty-four hours before such meeting.
Unless otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting.
Except as otherwise provided by applicable law, at any meeting at which
every director shall be present, even though without notice, any business may be
transacted. No notice of any adjourned meeting need be given.
The Board shall meet immediately after election, following the Annual
Meeting of Stockholders, for the purpose of organizing, for the election of
corporate officers as hereinafter specified, and for the transaction of any
other business which may come before it. No notice of such meeting shall be
necessary.
QUORUM
Section 3. Except as otherwise expressly required by these By-Laws or by
statue, a majority of the directors then in office (but not less than one-third
of the total number of directors constituting the entire Board) shall be present
at any meeting of the Board in order to constitute a quorum for the transaction
of business at such meeting, and the vote of a majority of the directors present
at any such meeting at which quorum is present shall be necessary for the
passage of any resolution or for an act to be the act of the Board. In the
absence of a quorum, a majority of the directors present may adjourn such
meeting from time to time until a quorum shall be present. Notice of any
adjourned meeting need not be given.
COMPENSATION OF BOARD OF DIRECTORS
Section 4. Each director (other than a director who is a salaried officer
of the corporation or of any subsidiary of the corporation), in consideration of
his serving as such, shall be entitled to receive from the corporation such
amount per annum and such fees for attendance at meetings of the Board or of any
committee of the Board (a "Committee"), or both, as the Board shall from time to
time determine. The Board may likewise provide that the corporation shall
reimburse each director or member of a Committee for any expenses incurred by
him on account of his attendance at any such meeting. Nothing contained in this
Section shall be construed to preclude any director from serving the corporation
in any other capacity and receiving compensation therefor.
ARTICLE III
COMMITTEES OF THE BOARD
COMMITTEES
Section 1. The Board shall elect from the directors an Executive Committee,
an Audit Committee and any other Committee which the Board may be resolution
prescribe. Any such Committee shall be comprised of such persons and shall
possess such authority as shall be set forth in such resolution.
<PAGE> 6
PROCEDURE
Section 2. (1) Each Committee shall fix its own rules of procedure and
shall meet where and as provided by such rules. Unless otherwise stated in these
By-Laws, a majority of a Committee shall constitute a quorum.
(2) In the absence or disqualification of a member of any Committee, the
members of such Committee present at any meeting, and not disqualified from
voting, whether or not they constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member. Fees in connection with such appointments shall be
established by the Board.
REPORTS TO THE BOARD
Section 3. All completed actions by the Audit Committee shall be reported
to the Board at the next succeeding Board meeting and shall be subject to
revision and alteration by the Board, provided, that no acts or rights of third
parties shall be affected by any such revision or alteration.
EXECUTIVE COMMITTEE
Section 4. The Board shall elect an Executive Committee comprised of the
Chief Executive Officer and not less than four additional members of the Board.
During the interval between the meetings of the Board, the Executive Committee
shall possess and may exercise all the powers of the Board in the management and
direction of all the business and affairs of the corporation including, without
limitation, the power and authority to declare dividends and to authorize the
issuance of stock, in such manner as the Executive Committee shall deem best for
the interests of the corporation in all cases which specific directions shall
not have been given by the Board.
AUDIT COMMITTEE
Section 5. The Board shall elect from among its members an Audit Committee
consisting of at least three members. The Board shall appoint a chairman of said
Committee who shall be one of its members. The Audit Committee shall have
such authority and duties as the Board by resolution shall prescribe. In no
event shall a director who is also an officer or employee of the corporation of
any of its subsidiary companies serve as a member of such Committee. The Chief
Executive Officer shall have the right to attend (but not vote at) each meeting
of such Committee.
ARTICLE IV
OFFICERS
GENERAL PROVISIONS
Section 1. The corporate officers of the corporation shall consist of a
Chief Executive Officer, a Secretary and a Treasurer and such other officers as
the Board may from time to time designate, including but not limited to the
following: a Chairman who shall be chosen from the Board; one or more Vice
Chairmen who shall be chosen from the Board, a President, one or more Executive
Vice Presidents, Senior Vice Presidents, Vice Presidents and Assistant Vice
Presidents, a General Counsel, one or more Assistant Secretaries, one or more
Assistant Treasurers, or a Controller. Insofar as permitted by statute, the same
person may hold two or more offices. All officers chosen by the Board shall each
have such powers and duties as generally pertain to their respective offices,
subject to the specific provisions of this Article IV.
The Chief Executive Officer, the Secretary, the Treasurer and any other
officers of the corporation shall be elected by the Board. Each such officer
shall hold office and his successor is elected or appointed and qualified or
until his earlier death, resignation or removal.
<PAGE> 7
Any officer may be removed; with or without cause, at any time by the
Board.
A vacancy in any office may be filled for the unexpired portion of the term
in the same manner as provided in these By-Laws for election or appointment to
such office.
POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER
Section 2. The Chief Executive Officer shall have general charge and
management of the affairs, property and business of the corporation, subject to
the Board, the Executive Committee and the provisions of these By-Laws. The
Chief Executive Officer or in his absence such other individual as the Board
may select, shall preside at all meetings of the stockholders. He shall also
preside at meetings of the Board and the Executive Committee, and in his
absence the Board or the Executive Committee, as the case may be, shall appoint
one of their number to preside.
The Chief Executive Officer shall perform all duties assigned to him in
these By-Laws and such other duties as may from time to time be assigned to him
by the Board. He shall have the power to appoint and remove, with or without
cause, such officers, other than those elected by the Board as provided for in
these By-Laws, as in his judgment may be necessary or proper for the
transaction of the business of the corporation, and shall determine their
duties, all subject to ratification by the Board.
POWERS AND DUTIES OF OTHER OFFICERS
Section 3. The Chairman, if any, shall perform such duties as may from
time to time be assigned to him by the Board, the Executive Committee or the
Chief Executive Officer.
Section 4. Each Vice Chairman, if any, shall perform such duties as may
from time to time be assigned to him by the Board, the Executive Committee or
the Chief Executive Officer.
Section 5. The President, if any, shall perform such duties as may from
time to time be assigned to him by the Board, the Executive Committee or the
Chief Executive Officer.
Section 6. Each Executive Vice President, if any, shall perform such
duties as may from time to time be assigned to him by the Board, the Executive
Committee or the Chief Executive Officer.
Section 7. Each Senior Vice President, if any, shall perform such duties
as may from time to time be assigned to him by the Board, the Executive
Committee, or the Chief Executive Officer.
Section 8. Each Vice President and Assistant Vice President, if any,
shall perform such duties as may from time to time be assigned to him by the
Board, the Executive Committee or the Chief Executive Officer or an Executive
Vice President.
Section 9. The General Counsel, if any, shall have general supervision
and control of all of the corporation's legal business. He shall perform such
duties as may from time to time be assigned to him by the Board, the Executive
Committee or the Chief Executive Officer.
Section 10. The Secretary or an Assistant Secretary, if any, shall record
the proceedings of all meetings of the Board, the Executive Committee of the
Board and the stockholders, in books kept for that purpose. The Secretary shall
be the custodian of the corporate seal, and he or an Assistant Secretary shall
affix the same to and countersign papers requiring such acts; and he and the
Assistant Secretaries shall perform such other duties as may be required by the
Board, the Executive Committee or the Chief Executive Officer.
Section 11. The Treasurer and Assistant Treasurers, if any, shall have
care and custody of all funds of the corporation and disburse and administer
the same under the direction of the Board, the Executive Committee or the Chief
Executive Officer and shall perform such other duties as the Board, the
Executive Committee or the Chief Executive Officer shall assign to them.
<PAGE> 8
Section 12. The Controller, if any, shall maintain adequate records of all
assets, liabilities and transactions of the corporation and see that audits
thereof are currently and regularly made, and he shall perform such other duties
as may be required by the Board, the Executive Committee or the Chief Executive
Officer.
SALARIES AND APPOINTMENTS
Section 13. The salaries of corporate officers shall be fixed by the
Executive Committee provided for in Section 5 of Article III hereof, except
that the fixing of salaries below certain levels, determinable from time to
time by the Executive Committee, may in the discretion of the Committee be
delegated to the Chief Executive Officer, subject to the approval of the Board.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
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 of 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 in 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 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 an 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.
<PAGE> 9
(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 as authorized by appropriate corporate
action.
ARTICLE V
CAPITAL STOCK
CERTIFICATES OF STOCK
Section 1. Certificates of stock certifying the number of shares owned
shall be issued to each stockholder in such form not inconsistent with the
Restated Certificate of Incorporation as shall be approved by the Board. Such
certificates of stock shall be numbered and registered in the order in which
they are issued and shall be signed by the Chief Executive Officer or any of the
Chairman or the President or any Vice President, and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary. Any and all of
the signatures on the certificates may be a facsimile.
TRANSFER OF SHARES
Section 2. Transfers of shares shall be made only upon the books of the
corporation by the holder, in person, or by power of attorney duly executed and
filed with the Secretary of the corporation, and on the surrender of the
certificate or certificates of such shares, properly assigned. The corporation
may, if and whenever the Board shall so determine, maintain one or more offices
or agencies, each in charge of an agent designated by the Board, where the
shares of the capital stock of the corporation shall be transferred and/or
registered. The Board may also make such additional rules and regulations as it
may deem expedient concerning the issue, transfer and registration of
certificates for shares of the capital stock of the corporation.
LOST, STOLEN OR DESTROYED CERTIFICATES
Section 3. The corporation may issue a new certificate of capital stock of
the corporation in place of any certificate theretofore issued by the
corporation, alleged to have been lost, stolen or destroyed, and the corporation
may, but shall not be obligated to, require the owner of the alleged lost,
stolen or destroyed certificate, or his legal representatives, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate, as the officers of the
corporation may, in their discretion, require.
FIXING OF RECORD DATE
Section 4. In order that the corporation may determine the stockholders
entitled to notice of or to vote at the meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting or entitled to receive payment of any dividend or other
distribution of allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board, and which record date: (1) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty nor
less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without meeting, shall not be more than ten days from the date upon
which the resolution fixing the record date is adopted by the Board; and (3) in
the case of any other action, shall not be more than sixty days prior to such
other action. If no record date is fixed by the Board: (1) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meetings is held; (2) the record
date for determining stockholders entitled to express consent to corporate
action in writing without a meeting shall be determined in accordance with
Article VI of these By-Laws; and (3) the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the
<PAGE> 10
Board adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board may fix a
new record date for the adjourned meeting.
ARTICLE VI
CONSENTS TO CORPORATE ACTION
RECORD DATE
Section 1. The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting shall be as fixed by
the Board or as otherwise established under this Section. Any person seeking to
have the stockholders authorize or take corporate action by written consent
without a meeting shall by written notice addressed to the Secretary and
delivered to the corporation, request that a record date be fixed for such
purpose. The Board may fix a record date for such purpose which shall be no more
than 10 days after the date upon which the resolution is adopted. If the Board
fails within 10 days after the corporation receives such notice to fix a record
date for such purpose, the record date shall be the day on which the first
written consent is delivered to the corporation in the manner described in
Section 2 below unless prior action by the Board is required under the General
Corporation Law of Delaware, in which event the record date shall be at the
close of business on the day on which the Board adopts the resolution taking
such prior action.
PROCEDURES
Section 2. Every written consent purporting to take or authorizing the
taking of corporate action and/or related revocations (each such written consent
and related revocation is referred to in this Article VI as a "Consent") shall
bear the date of signature of each stockholder who signs the Consent, and no
Consent shall be effective to take the corporate action referred to therein
unless, within 60 days of the earliest dated Consent delivered in the manner
required by this Section 2, Consents signed by a sufficient number of
stockholders to take such action are delivered to the corporation.
A Consent shall be delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery to the
corporation's registered office shall be made by hand or by certified or
registered mail, return receipt requested.
In the event of the delivery of the corporation of a Consent, the Secretary
of the corporation shall provide for the safe-keeping of such Consent and shall
promptly conduct such ministerial review of the sufficiency of the Consents and
of the validity of the action to be taken by shareholder consent as he deems
necessary or appropriate, including, without limitation, whether the holders of
a number of shares having the requisite voting power to authorize or take the
action specified in the Consent have given consent; provided, however, that if
the corporate action to which the Consent relates is the removal or replacement
of one or more members of the Board, the Secretary of the corporation shall
promptly designate two persons, who shall not be members of the Board, to serve
as Inspectors with respect to such Consent and such Inspectors shall discharge
the functions of the Secretary of the corporation under this Section 2. If after
such investigation the Secretary or the Inspectors (as the case may be) shall
determine that the Consent is valid and that the action therein specified has
been validly authorized, that fact shall forthwith be certified on the records
of the corporation kept for the purpose of recording the proceedings of meetings
or stockholders, and the Consent shall be filed in such records, at which time
the Consent shall become effective as stockholder action. In conducting the
investigation required by Section 2, the Secretary or the Inspectors (as the
case may be) may, at the expense of the corporation, retain special legal
counsel and any other necessary or appropriate professional advisors, and such
other personnel as they may deem necessary or appropriate to assist them, and
shall be fully protected in relying in good faith upon the opinion of such
counsel of advisors.
ARTICLE VII
MISCELLANEOUS
DIVIDENDS AND RESERVES
<PAGE> 11
Section 1. Dividends upon the capital stock of the corporation may be
declared as permitted by law by the Board or the Executive Committee at any
regular or special meeting. Before payment of any dividend or making any
distribution of profits, there may be set aside out of the surplus or net
profits of the corporation such sum or sums as the Board or the Executive
Committee, from time to time, in their absolute discretion, think proper as
a reserve fund to meet contingencies, or for such other purposes as the Board or
Executive Committee shall think conducive to the interests of the corporation,
and any reserve so established may be abolished and restored to the surplus
account by like action of the Board or the Executive Committee.
SEAL
Section 2. The seal of the corporation shall bear the corporate name of
the corporation, the year of its incorporation and the words "Corporate Seal,
Delaware".
WAIVER
Section 3. Whenever any notice whatever is required to be given by statute
or under the provisions of the Restated Certificate of Incorporation or these
By-Laws, a waiver thereof in writing signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Neither the business to be transacted at, nor the purpose
of, any annual or special meeting of the stockholders or the Board, as the case
may be, need be specified in any waiver of notice of such meeting.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall begin with January
first and end with December thirty-first.
CONTRACTS
Section 5. Except as otherwise required by law, the Restated Certificate
of Incorporation or these By-Laws, any contracts or other instruments may be
executed and delivered in the name and on the behalf of the corporation by such
officer or officers of the corporation as the Board may from time to time
direct. Such authority may be general or confined to specific instances as the
Board may determine. The Chief Executive Officer or any of the Chairman or the
President and any Vice President may execute bonds, contracts, deeds, leases and
other instruments to be made or executed for or on behalf of the corporation.
Subject to any restrictions imposed by the Board, the Chief Executive Officer or
any of the Chairman or the President or any Vice President of the corporation
may delegate contractual powers to others under his jurisdiction, it being
understood, however, that any such delegation of power shall nor relieve such
officer of responsibility with respect to the exercise of such delegated power.
PROXIES
Section 6. Unless otherwise provided by resolution adopted by the Board,
the Chief Executive Officer or any of the Chairman or the President and any
Vice President may from time to time appoint an attorney or attorneys or agent
or agents of the corporation, in the name and on behalf of the corporation, to
cast the votes which the corporation may be entitled to cast as the holder of
stock or other securities in any other corporation or other entity, any of whose
stock or other securities may be held by the corporation, at meetings of the
holders of the stock or other securities of such other corporation or other
entity, or to consent in writing, in the name of the corporation as such holder,
to any action by such other corporation or other entity, and may instruct the
person or persons so appointed as to the manner of casting such votes or giving
such consent, and may execute or cause to be executed in the name and on behalf
of the corporation and under its corporate seal or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
<PAGE> 12
AMENDMENTS
Section 7. The Board from time to time shall have the power to make, alter,
amend or repeal any and all of these By-Laws, but any By-Laws so made altered or
repealed by the board may be amended, altered or repealed by the stockholders.
<PAGE> 1
Exhibit 3.3
CERTIFICATE OF INCORPORATION
OF
TENNECO ESPANA HOLDINGS, INC.
*****
FIRST: The name of the corporation is Tenneco Espana Holdings, Inc.
SECOND: The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
corporation shall be authorized to issue is 350,000 shares, divided into two
classes of stock: 35,000 shares of Preferred Stock, $0.01 par value (herein
called "Preferred Stock"), and 315,000 shares of Common Stock, $0.01 par value
(herein called "Common Stock"). The number of authorized shares of any such
class may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority in
voting power of the stock of the corporation entitled to vote, irrespective of
Section 242(b)(2) of the General Corporation Law of the State of Delaware (or
any successor provision).
The Board of Directors of the corporation is expressly authorized to
adopt, from time to time, a resolution or resolutions providing for the issue
of shares of the Preferred Stock in one or more series, to fix the number of
shares constituting each such series and to fix the designations and the voting
powers, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations and restrictions thereof, of each
such series.
FIFTH: The Board of Directors is authorized to make, amend, alter,
change, add to or repeal By-Laws for the corporation, without any action on the
part of the stockholders.
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Elections of directors need not be by written ballot unless
otherwise provided in the By-Laws of the corporation.
EIGHTH: Meetings of stockholders may be held within or without the State
of Delaware, as the By-Laws may provide. The books of the corporation may be
kept (subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the corporation.
1
<PAGE> 2
NINTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
TENTH: The name and mailing address of the sole incorporator is the
following:
Name Mailing Address
---- ---------------
M.W. Meyer 1010 Milam St.
Houston, Texas 77002
ELEVENTH: The name and mailing address of each person, who is to serve as
a director until the first annual meeting of the stockholders or until a
successor is elected and qualified, is as follows:
Name Mailing Address
---- ---------------
E.J. Milan 1010 Milam St.
Houston, Texas 77002
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 7th day of September, 1994.
/s/ M.W. Meyer
-----------------------
M.W. Meyer
-2-
<PAGE> 3
TENNECO ESPANA HOLDINGS, INC.
Certificate of Designation, Preferences
and Rights of Preferred Stock
by Resolution of the Board of Directors Providing
for an Issue of
35,000 Shares of Preferred Stock Designated
"8% Cumulative Preferred Stock"
We, Robert G. Simpson, Vice President, and Karl A. Stewart, Secretary, of
Tenneco Espana Holdings, Inc. (hereinafter referred to as the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 151 thereof, do
HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said Corporation, as amended (hereinafter
referred to as the "Certificate of Incorporation"), said Board of Directors, by
unanimous written consent, pursuant to Section 141(f) of the General
Corporation Law of the State of Delaware, dated as of September 7, 1994,
adopted a resolution providing for the issuance of a series of Preferred Stock,
to be designated "8% Cumulative Preferred Stock", which resolution is as
follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the Board
of Directors does hereby provide for the issuance of a series of Second
Preferred Stock, $0.01 par value, of the Corporation, to be designated "8%
Cumulative Preferred Stock" (hereinafter referred to as the "8% Preferred
Stock"), consisting of 35,000 shares, and to the extent that the
designations, powers, preferences and relative and other special rights and
the qualifications, limitations and restrictions of the 8% Preferred Stock
are not stated and expressed in the Certificate of Incorporation, does
hereby fix and herein state and express such designations, powers,
preferences and relative and other special rights and the qualifications,
limitations and restrictions thereof, as follows (all terms used herein
which are defined in the Certificate of Incorporation shall be deemed to
have the meanings provided therein):
(1)(a) The dividend rate on the 8% Preferred Stock shall be $16.00 per
annum (i.e. 8% of the $200.00 stated value per share of said 8%
Preferred Stock), payable by the Corporation on each 16th day of
August commencing in the year 1995 (each annual dividend payment
date is hereinafter referred to as an "Annual Dividend Payment
Date") so long as any shares of the 8% Preferred Stock are
-3-
<PAGE> 4
outstanding, in cash in United States dollars to each holder of
record of such shares.
(b) The holder of record of any share of the 8% Preferred Stock
entitled to receive a dividend payment pursuant to the provisions
of clause (1)(a) above shall be the holder of record of such
shares as of the close of business on the first day of August in
the year such dividend payment is to be made, as shown on the
stockholder records of the Corporation.
(2) Dividends on shares of the 8% Preferred Stock shall accrue from, and
as if issued on, August 16, 1994, except that if the number of shares
of 8% Preferred Stock shall hereafter be increased by further
resolution of the Board of Directors, dividends on such additional
shares shall accrue from such other date or dates as may be fixed by
the Board of Directors in such resolution.
(3) The amounts which the holders of the 8% Preferred Stock shall be
entitled to receive in the event of a liquidation, dissolution, or
winding-up of the affairs of the Corporation shall be $200.00 per
share, plus in each case a sum equal to accrued and unpaid dividends
to the date of payment.
(4) (a) The 8% Preferred Stock shall be redeemable in whole or in part at
any time or from time to time at the option of the Corporation at
$200.00 per share plus accrued and unpaid dividends.
(b) In the event of the redemption of only part of the 8% Preferred
Stock at the time outstanding, the shares to be redeemed shall be
selected pro rata.
(5) At least 30 days' prior notice of any redemption of the 8% Preferred
Stock pursuant to clause (4) above shall be mailed, addressed to the
holders of record of the shares to be redeemed at their respective
addresses as the same shall appear on the books of the Corporation.
(6) Any shares of the 8% Preferred Stock which shall have been redeemed or
otherwise acquired by the Corporation shall assume the status of
authorized
-4-
<PAGE> 5
but unissued Preferred Stock and shall not be reissued as shares of
the 8% Preferred Stock.
(7) The number of shares of 8% Preferred Stock may, to the extent of the
Corporation's authorized and unissued Preferred Stock, be increased by
further resolution duly adopted by the Board of Directors and the
filing and recording of a certificate pursuant to the provisions of
the General Corporation Law of the State of Delaware stating that such
increase has been so authorized.
(8) The holders of the 8% Preferred Stock shall not be entitled to vote on
any matter on which the holders of any voting securities of the
Corporation shall be entitled to vote, except as may be required by
law or hereunder.
IN WITNESS WHEREOF, said Tenneco Espana Holdings, Inc. has caused this
Certificate to be signed by Robert G. Simpson, as Vice President, and its
corporate seal to be hereunto affixed and attested by Karl A. Stewart, as
Secretary, this 12th day of October, 1994.
TENNECO ESPANA HOLDINGS, INC.
By: /s/ Robert G. Simpson
--------------------------
Robert G. Simpson
Vice President
ATTEST:
/s/ Karl A. Stewart
- -------------------------
Karl A. Stewart
Secretary
-5-
<PAGE> 6
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
TENNECO ESPANA HOLDINGS, INC.
TENNECO ESPANA HOLDINGS, INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Company"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Company, by Unanimous Written
Consent dated as of June 9, 1998, adopted a resolution setting forth a proposed
Amendment to the Certificate of Incorporation of the Company, declaring said
Amendment to be advisable. The resolution setting forth the proposed Amendment
is as follows:
RESOLVED, that the Certificate of Incorporation of the Company be
amended by deleting in its entirety Article 1 thereof, and by
inserting in lieu thereof the provision hereinafter set forth so that
the said Article 1 shall be and read as follows:
"1. The name of the corporation is
Tenneco Global Holdings Inc."
SECOND: That thereafter, said Amendment has been consented to and
authorized by the holder of all the issued and outstanding stock entitled to
vote thereon by a written Consent given in accordance with the provisions of
Section 228 of the General Corporation Law of the State of Delaware and filed
with the Company on June 9, 1998.
THIRD: That said Amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
-6-
<PAGE> 7
IN WITNESS WHEREOF, said TENNECO ESPANA HOLDINGS, INC. has caused this
Certificate to be signed by its President, and its corporate seal to be
hereunto affixed and attested by the Assistant Secretary, this 9th day of June,
1998.
TENNECO ESPANA HOLDINGS, INC.
By: /s/ Mark A. McCollum
---------------------------
President, Mark A. McCollum
ATTEST:
By: /s/ James D. Gaughan
-------------------------------------
Assistant Secretary, James D. Gaughan
-7-
<PAGE> 1
EXHIBIT 3.4
TENNECO GLOBAL HOLDINGS INC.
(a Delaware Corporation)
By-Laws
Adopted: SEPTEMBER 7, 1994
<PAGE> 2
--ooOoo--
BY-LAWS
--ooOoo--
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the state of incorporation as the Board of Directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Houston, State of Texas, at
1
<PAGE> 3
such place as may be fixed from time to time by the Board of Directors.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the state of incorporation, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, shall be held on such date
and at such times as may be fixed by the Board for the purpose of electing a
Board of Directors and for the transaction of other business as may properly be
brought before the meeting.
Section 3. Written notice of the Annual Meeting shall be given to each
stockholder entitled to vote thereat not less than ten nor more than fifty days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, during ordinary business hours, for a
2
<PAGE> 4
period of at least ten days prior to the election, either at a place within the
city, town or village where the election is to be held and which place shall be
specified in the notice of the meeting, or, if not specified, at the place
where said meeting is to be held, and the list shall be produced and kept at the
time and place of election during the whole time thereof, and subject to the
inspection of any stockholder who may be present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting of stockholders, stating
the time, place and object thereof, shall be given to each stockholder entitled
to vote thereat, not less than ten nor more than fifty days before the date
fixed for the meeting.
3
<PAGE> 5
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the certificate of
<PAGE> 6
incorporation, a different vote is required in which case such express
provision shall govern and control the decision of such question.
Section 10. Each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after eleven months from its date, unless the proxy provides for a longer
period, and, except where the transfer books of the corporation have been closed
or a date has been fixed as a record date for the determination of its
stockholders entitled to vote.
Section 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by
any provisions of the statutes or of the certificate of incorporation, the
notice of meeting, the meeting and vote of stockholders may be dispensed with,
if the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted shall sign a
consent in writing, setting forth the action so taken. Prompt notice of such
action by written consent shall be
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given to those stockholders who have not consented in writing to such corporate
action.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be not less than one nor more than nine. Within the limits above
specified, the term "whole Board" as used in these By-Laws shall mean the
number of directors elected and holding office at any time. The directors shall
be elected at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until
his successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced.
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Section 3. The business of the corporation shall be managed by its
Board of Directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the state of
incorporation.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly
elected Board of Directors, or in the event such meeting is not held at the
time and place so fixed by the stockholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special
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meetings of the Board of Directors, or as shall be specified in a written
waiver signed by all of the Directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 7. The Secretary shall give notice of any special meeting by
mailing the same at least three days, or by telegraphing, telexing,
telecopying, telephoning or personally delivering the same at least one day,
before the meeting to each director; but such notice may be waived by any
director. When notice is given to a director by telephone, it shall be
effective in accordance with Article IV, Section 1 of these By-Laws.
Section 8. The number of Directors that shall constitute a quorum
shall be not less than one-third of the whole Board of Directors nor less than
two Directors and the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors, except
as may be otherwise specifically provided by statute or by the certificate of
incorporation; provided, however, that when the whole Board is comprised of only
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one director, then one director shall constitute a quorum and the vote of such
director shall constitute the act of the Board of Directors. If a quorum shall
not be present at any meeting of the Board of Directors, the Directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if a written consent thereto is signed by all members of the
Board or of such committee as the case may be, and such written consent is
filed with the Minutes of proceeding of the Board or Committee.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of two or more of the directors of the corporation, which, to the
extent provided in the resolution, shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of the
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corporation and may authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 12. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
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ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing and
delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram, telex, telecopy or telephone;
provided, that when telephone notice is given, such notice shall be effective
substantially concurrently with one other method of giving notice.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The corporate officers of the Company may consist of a Chairman
of the Board, and may include a Vice Chairman of the Board (both the Chairman
and the Vice Chairman shall be
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chosen from the Board of Directors), a President, one or more Vice Presidents,
a Secretary, one or more Assistant Secretaries, a Treasurer, one or more
Assistant Treasurers, a Controller, and such other officers as the Board of
Directors may from time to time appoint (none of whom need be a member of the
Board). In so far as permitted by law, any two offices may be held by the same
person. The foregoing officers shall be elected by the Board of Directors at
the first meeting after the stockholders' Annual Meeting in each year.
Notwithstanding any of the provisions of this Article V, the holders of a
majority of the outstanding shares of capital stock of the corporation entitled
to vote for the election of Directors, may (i) by written consent at any time,
or (ii) by vote at any special or annual meeting of stockholders, elect,
replace, remove (or consent to such election, replacement or removal) any one
or more officers of the corporation.
Section 2. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
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Section 3. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
CHAIRMAN OF THE BOARD
Section 5. The Chairman of the Board may be elected by the Board of
Directors at the first meeting after the Annual Meeting of Stockholders in each
year. The Chairman of the Board shall preside at all meetings of stockholders
and of the Board of Directors, shall be ex-officio a member of all standing
committees, and shall perform such other duties as may from time to time be
requested of him by the Board of Directors.
VICE CHAIRMAN OF THE BOARD
Section 5a. The Vice Chairman of the Board shall preside at meetings of
the Board of Directors in the absence of the Chairman of
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the Board, and shall perform such other duties as may from time to time be
requested of him by the Board of Directors.
THE PRESIDENT
Section 6. The president shall have the powers and perform the duties
usually incidental to the office of the president. He shall have the general
and actual management of the business of the corporation under the Chairman of
the Board, and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 8. The vice president, or if there shall be more than one, the
vice presidents in the order determined by the Board of Directors, shall, in the
absence or disability of the president, perform
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the duties and exercise the powers of the president and shall perform such
other duties and have such other powers as the Board of Directors may from time
to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall keep in safe custody
the seal of the corporation and, when authorized by the Board of Directors,
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of an assistant secretary.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors, shall
in the absence or disability of the secretary, perform
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the duties and exercise the powers of the secretary and shall perform such
other duties and have such other powers as the Board of Directors may from time
to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation in such depositories as may
be designated by the Board of Directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of
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his office and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his
control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the Board of Directors,
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
THE CONTROLLER
Section 15. The controller, following his appointment shall maintain
adequate records of all assets, liabilities and transactions of the corporation
and see that audits thereof are currently and regularly made; and he shall
perform such other duties as may be required by the Board of Directors, the
President or designated Vice President.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 16. Each person who is or was a director or officer of the
corporation, or who serves or may have served at the request of
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the corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise (including the heirs, executors,
administrators or estate of such person) and who was or is a party or is
threatened to be made a party to any threatened, pending or completed claim,
action, suit or proceeding, whether criminal, civil, administrative or
investigative, including appeals, shall be indemnified by the corporation as a
matter of right to the full extent permitted or authorized by the Corporation
Law of the state of incorporation of the corporation, as it may from time to
time be amended, against any expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by him
in his capacity as a director or officer, or arising out of his status as a
director or officer. Each person who is or was an employee or agent of the
corporation, or who serves or may have served at the request of the corporation
as an employee or agent of another corporation, partnership, joint venture,
trust or other enterprise (including the heirs, executors, administrators or
estate of such person) may, at the discretion of the Board, be indemnified by
the corporation to the same extent as provided herein with respect to directors
and officers of the corporation.
The corporation may, but shall not be obligated to, maintain insurance at
its expense, to protect itself and any person who is or
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was a director, officer, employee or agent of the corporation, or is or was
serving as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such. The corporation may, but shall not be obligated to, pay
expenses incurred in defending a civil or criminal action, suit or proceeding
in advance of the final disposition of such action, suit or proceeding.
The indemnification provided by this Section 16 shall not be exclusive of
any other rights to which those seeking indemnification may be entitled as a
matter of law or under any agreement, vote of stockholders or disinterested
directors or otherwise.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
president or a vice president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation.
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Section 2. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent or (2) by a transfer clerk acting on behalf of the
corporation and a registrar, the signature of any such president, vice
president, treasurer, assistant treasurer, secretary or assistant secretary may
be a facsimile. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or
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destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost or destroyed certificate
or certificates, or his legal representative, to advertise the same in such
manner as it shall require and/or give the corporation a bond in such sum as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost or
destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to cancel the old certificate and record the
transaction upon its books.
FIXING THE DATE FOR DETERMINATION OF
STOCKHOLDERS OF RECORD
Section 5. The Board of Directors may close the stock transfer books of
the corporation for a period not more than forty nor less than ten days
preceding the date of any meeting of stockholders, nor more than forty days
prior to the date of any other
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action, such as the date for payment of any dividend or the date for the
allotment of rights or the date when any change or conversion or exchange of
capital stock shall go into effect or for a period not exceeding forty days in
connection with obtaining the consent of stockholders for any purpose. In lieu
of closing the stock transfer books as aforesaid, the Board of Directors may fix
in advance a date, not more than forty nor less than ten days preceding the date
of any meeting of stockholders, nor more than forty days prior to the date of
any other action, such as the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, or to give such consent and in
such case such stockholders and only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting and any adjournment thereof, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights, or
to
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given such consent, as the case may be notwithstanding any transfer of any
stock on the books of the corporation after any such record date fixed as
aforesaid.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
the state of incorporation.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in
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property, or in shares of the capital stock subject to the provisions of the
certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual
meeting, and at any special meeting of stockholders when called for by vote of
the stockholders, a full and clear statement of the business and condition of
the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such
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other person or persons as the Board of Directors may from time to time
designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal"
and the state of incorporation. The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered or repealed at any meeting of
the stockholders or of the Board of Directors if notice of such alteration or
repeal be contained in the notice of such meeting. No change of the time or
place of the meeting for the election of directors shall be made within sixty
days next before the day on which such meeting is to be held, and in case of
any change of such
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time or place, notice thereof shall be given to each stockholder in person or
by letter mailed to his last known post office address at least twenty days
before the meeting is held.
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Exhibit 3.5
CERTIFICATE OF INCORPORATION
OF
TMC TEXAS INC.
1. The name of the corporation is:
TMC Texas Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is two hundred (200) and the par value of each of such shares
is five dollars ($5.00) amounting in the aggregate to one thousand dollars
($1,000).
5. The board of directors is authorized to make, alter or repeal the
by-laws of the corporation. Election of directors need not be written ballot.
6. The name and mailing address of the incorporator is:
Name Mailing Address
---- ---------------
Bonnie E. Heacock c/o Jenner & Block
One IBM Plus, Suite 3700
Chicago, IL 60611
7. The name and mailing address of each person who is to serve as a
director until the first annual meeting of the stockholders or until a successor
is elected and qualified, is as follows:
Name Mailing Address
---- ---------------
Matthew W. Appel 8401 New Trails Drive
The Woodlands, TX 77387
<PAGE> 2
8. The corporation is to have perpetual existence.
9. Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation.
10. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of
Delaware, do make this certificate, hereby declaring and certifying that this is
my act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this 20th day of November, 1996.
/s/ Bonnie E. Heacock
-----------------------------------
Incorporator Bonnie E. Heacock
-2-
<PAGE> 1
Exhibit 3.6
TMC TEXAS INC.
BY-LAWS
Adopted: NOVEMBER 20, 1996
<PAGE> 2
--ooOoo--
B Y - L A W S
--ooOoo--
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the state of incorporation as the Board of Directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Greenwich, State of Connecticut, at such
place as may be fixed from time to time by the Board of Directors. Meetings of
stockholders for any other purpose may be held at such time and place, within
or without the state of incorporation, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
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Section 2. Annual meetings of stockholders, shall be held on such date
and at such times as may be fixed by the Board for the purpose of electing a
Board of Directors and for the transaction of other business as may properly be
brought before the meeting.
Section 3. Written notice of the Annual Meeting shall be given to each
stockholder entitled to vote thereat not less than ten nor more than fifty days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, during ordinary business hours, for a
period of at least ten days prior to the election, either at a place within the
city, town or village where the election is to be held and which place shall be
specified in the notice of the meeting, or, if not specified, at the place
where said meeting is to be held, and the list shall be produced and kept at
the time and place of election during the whole time thereof,
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and subject to the inspection of any stockholder who may be present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting of stockholders,
stating the time, place and object thereof, shall be given to each stockholder
entitled to vote thereat, not less than ten nor more than fifty days before the
date fixed for the meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
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Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
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Section 10. Each stockholder shall at every meeting of the stockholders
be entitled to one vote in person or by proxy for each share of the capital
stock having voting power held by such stockholder, but no proxy shall be voted
on after eleven months from its date, unless the proxy provides for a longer
period, and, except where the transfer books of the corporation have been
closed or a date has been fixed as a record date for the determination of its
stockholders entitled to vote.
Section 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by
any provisions of the statutes or of the certificate of incorporation, the
notice of meeting, the meeting and vote of stockholders may be dispensed with,
if the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted shall sign a
consent in writing, setting forth the action so taken. Prompt notice of such
action by written consent shall be given to those stockholders who have not
consented in writing to such corporate action.
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ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be not less than one nor more than nine. Within the limits above
specified, the term "whole Board" as used in these By-Laws shall mean the number
of directors elected and holding office at any time. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this Article, and each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, and the directors
so chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced.
Section 3. The business of the corporation shall be managed by its
Board of Directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the certificate of
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incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the state of
incorporation.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly
elected Board of Directors, or in the event such meeting is not held at the
time and place so fixed by the stockholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the Directors.
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<PAGE> 9
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 7. The Secretary shall give notice of any special meeting by
mailing the same at least three days, or by telegraphing, telexing,
telecopying, telephoning or personally delivering the same at least one day,
before the meeting to each director; but such notice may be waived by any
director. When notice is given to a director by telephone, it shall be
effective in accordance with Article IV, Section 1 of these By-Laws.
Section 8. The number of Directors that shall constitute a quorum
shall be not less than one-third of the whole Board of Directors nor less than
two Directors and the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors, except
as may be otherwise specifically provided by statute or by the certificate of
incorporation; provided, however, that when the whole Board is comprised of
only one director, then one director shall constitute a quorum and the vote of
such director shall constitute the act of the Board of Directors. If a quorum
shall not be present at any meeting of the Board of Directors, the Directors
present thereat may
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<PAGE> 10
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if a written consent thereto is signed by all members of the
Board or of such committee as the case may be, and such written consent is
filed with the Minutes of proceeding of the Board or Committee.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of two or more of the directors of the corporation, which, to the
extent provided in the resolution, shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of the
corporation and may authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors.
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Section 11. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 12. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing and
delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram, telex, telecopy or telephone;
provided, that when telephone notice is given,
10
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such notice shall be effective substantially concurrently with one other method
of giving notice.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The corporate officers of the Company may consist of a Chairman
of the Board, and may include a Vice Chairman of the Board (both the Chairman
and the Vice Chairman shall be chosen from the Board of Directors), a
President, one or more Vice Presidents, a Secretary, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers, a Controller, and
such other officers as the Board of Directors may from time to time appoint
(none of whom need be a member of the Board). In so far as permitted by law,
any two offices may be held by the same person. The foregoing officers shall be
elected by the Board of Directors at the first meeting after the stockholders'
Annual Meeting in each year.
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Notwithstanding any of the provisions of this Article V, the holders of a
majority of the outstanding shares of capital stock of the corporation entitled
to vote for the election of Directors, may (i) by written consent at any time,
or (ii) by vote at any special or annual meeting of stockholders, elect,
replace, remove (or consent to such election, replacement or removal) of any one
or more officers of the corporation.
Any officer elected or appointed by the Board of Directors may be removed
at any time by the affirmative vote of a majority of the whole Board of
Directors.
Section 2. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 3. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of
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the Board of Directors. Any vacancy occurring in any office of the corporation
shall be filled by the Board of Directors.
CHAIRMAN OF THE BOARD
Section 5. The Chairman of the Board may be elected by the Board of
Directors at the first meeting after the Annual Meeting of Stockholders in each
year. The Chairman of the Board shall preside at all meetings of stockholders
and of the Board of Directors, shall be ex-officio a member of all standing
committees, and shall perform such other duties as may from time to time be
requested of him by the Board of Directors.
VICE CHAIRMAN OF THE BOARD
Section 5a. The Vice Chairman of the Board shall preside at meetings of
the Board of Directors in the absence of the Chairman of the Board, and shall
perform such other duties as may from time to time be requested of him by the
Board of Directors.
THE PRESIDENT
Section 6. The president shall have the powers and perform the duties
usually incidental to the office of the president. He shall have the general
and actual management of the business of the corporation under the Chairman of
the
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Board, and shall see that all orders and resolutions of the Board of Directors
are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 8. The vice president, or if there shall be more than one, the
vice presidents in the order determined by the Board of Directors, shall, in
the absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the Board of Directors in a book to
be
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kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall keep in safe custody
the seal of the corporation and, when authorized by the Board of Directors,
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of an assistant secretary.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors, shall
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books
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belonging to the corporation in such depositories as may be designated by the
Board of Directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other property
of whatever kind in his possession or under his control belonging to the
corporation.
Section 14. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the Board of
Directors, shall, in the absence
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or disability of the treasurer, perform the duties and exercise the powers of
the treasurer and shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
THE CONTROLLER
Section 15. The controller, following his appointment shall maintain
adequate records of all assets, liabilities and transactions of the corporation
and see that audits thereof are currently and regularly made; and he shall
perform such other duties as may be required by the Board of Directors, the
President or designated Vice President.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 16. Each person who is or was a director or officer of the
corporation, or who serves or may have served at the request of the corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise (including the heirs, executors, administrators or
estate of such person) and who was or is a party or is threatened to be made a
party to any threatened, pending or completed claim, action, suit or
proceeding, whether criminal, civil, administrative or investigative, including
appeals, shall be indemnified by the corporation as a matter of right to the
full extent permitted or authorized by the
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Corporation Law of the state of incorporation of the corporation, as it may
from time to time be amended, against any expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in his capacity as a director or officer, or arising out of his
status as a director or officer. Each person who is or was an employee or agent
of the corporation, or who serves or may have served at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including the heirs, executors,
administrators or estate of such person) may, at the discretion of the Board,
be indemnified by the corporation to the same extent as provided herein with
respect to directors and officers of the corporation.
The corporation may, but shall not be obligated to, maintain insurance at
its expense, to protect itself and any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such.
The corporation may, but shall not be obligated to, pay expenses incurred in
defending a civil or criminal action, suit or
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<PAGE> 20
proceeding in advance of the final disposition of such action, suit or
proceeding.
The indemnification provided by this Section 16 shall not be exclusive of
any other rights to which those seeking indemnification may be entitled as a
matter of law or under any agreement, vote of stockholders or disinterested
directors or otherwise.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
president or a vice president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation.
Section 2. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent or (2) by a transfer clerk acting on behalf of the
corporation and a registrar, the signature of any such president, vice
president, treasurer, assistant treasurer, secretary or assistant secretary may
be facsimile. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
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<PAGE> 21
certificates shall cease to be such officer or officers of the corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity against any claim
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that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to cancel the old certificate and record the transaction
upon its books.
FIXING THE DATE FOR DETERMINATION OF
STOCKHOLDERS OF RECORD
Section 5. The Board of Directors may close the stock transfer books of
the corporation for a period not more than forty nor less than ten days
preceding the date of any meeting of stockholders, nor more than forty days
prior to the date of any other action, such as the date for payment of any
dividend or the date for the allotment of rights or the date when any change or
conversion or exchange of capital stock shall go into effect or for a period of
not exceeding forty days in connection with obtaining the consent of
stockholders for any purpose. In lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not more than forty
nor less than ten days preceding the date of any meeting of stockholders, nor
more
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than forty days prior to the date of any other action, such as the date for the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
or a date in connection with obtaining such consent, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting, and any adjournment thereof, or entitled to receive payment of any
such dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to give
such consent and in such case such stockholders and only such stockholders as
shall be stockholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be
notwithstanding any transfer of any stock on the books of the corporation after
any such record date fixed as aforesaid.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to
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vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the state of
incorporation.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of
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the corporation, or for such other purpose as the directors shall think
conducive to the interest of the corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual meeting,
and at any special meeting of stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by resolution
of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal" and
the state of
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incorporation. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered or repealed at any meeting of the
stockholders or of the Board of Directors if notice of such alteration or
repeal be contained in the notice of such meeting. No change of the time or
place of the meeting for the election of directors shall be made within sixty
days next before the day on which such meeting is to be held, and in case of
any change of such time or place, notice thereof shall be given to each
stockholder in person or by letter mailed to his last known post office address
at least twenty days before the meeting is held.
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Exhibit 3.7
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
TENNECO INTERNATIONAL HOLDING CORP.
TENNECO INTERNATIONAL HOLDING CORP., a corporation duly organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify:
1. The first sentence of Article FOURTH of the Restated Certificate of
Incorporation of the Corporation is hereby amended to read as follows:
The total number of shares of all classes of stock which the
corporation shall have authority to issue is 91,000,000, divided into
40,000,000 shares of Preferred Stock, par value $0.01 per share (herein
called "Preferred Stock"), 1,000,000 shares of Junior Preferred
Stock, par value $0.01 per share (herein called "Junior Preferred
Stock") and 50,000,000 shares of Common Stock, par value $0.01
per share (herein called "Common Stock").
2. The Restated Certificate of Incorporation of the Corporation is hereby
amended by amending the Certificate of Designation for the Variable Rate Voting
Participating Preferred Stock of the Corporation to read in its entirety as set
forth in Exhibit A attached hereto.
3. The foregoing amendments were duly adopted in accordance with the
provisions of Section 242 and 228 of the General Corporation Law of the
State of Delaware.
<PAGE> 2
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by its duly authorized officer as of the 10th day of December, 1997.
TENNECO INTERNATIONAL HOLDING CORP.
By: /s/ Robert G. Simpson
----------------------------------
Name: Robert G. Simpson
Office: President
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EXHIBIT A TO CERTIFICATE OF AMENDMENT
TENNECO INTERNATIONAL HOLDING CORP.
Amended Certificate of Designation, Preferences and Rights
of Preferred Stock by Resolution of the Board of Directors
Providing for an Issue of 16,000,000 Shares of
Preferred Stock Designated "Variable Rate
Voting Participating Preferred Stock"
Tenneco International Holding Corp. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "DGCL"), in accordance with the provisions of the DGCL, DOES
HEREBY CERTIFY:
(i) That pursuant to authority conferred upon the Board of Directors by
the Restated Certificate of Incorporation of the Corporation, as amended
(hereinafter referred to as the "Certificate of Incorporation"), the Board of
Directors, pursuant to the Corporation's Certificate of Designation, Preferences
and Rights of Preferred Stock by Resolution of the Board of Directors providing
for an issue of 12,000,000 Shares of Preferred Stock Designated "Variable Rate
Voting Preferred Stock", dated December 29, 1994, (the "Existing Certificate of
Designation"), has previously authorized the creation and issuance of a series
of Preferred Stock, par value $0.01 per share, of the Corporation, designated
"Variable Rate Voting Participating Preferred Stock" (hereinafter referred to
as the "Original Voting Preferred Stock") and the Corporation has issued such
12,000,000 shares of Voting Preferred Stock and;
(ii) That the Board of Directors has adopted the immediately following
resolution:
RESOLVED, that pursuant to the authority vested in the Board of
Directors by the Certificate of Incorporation, 4,000,000 additional shares
of Voting Preferred Stock (the "Additional Voting Preferred Stock"; and
together with the Original Voting Preferred Stock, the "Voting Preferred
Stock") are hereby authorized for issuance and the Voting Preferred Stock
shall consist of 16,000,000 shares, which number may from time to time be
increased (but not above the total number of authorized shares of Preferred
Stock) by the Board of Directors of the Corporation, and to the extent that
the designations, powers, preferences and relative and other special rights
and the qualifications, limitations and restrictions of the Voting
Preferred Stock are not stated and expressed in the Certificate of
Incorporation, such designations, powers, preferences and relative and
other special rights
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<PAGE> 4
and the qualifications, limitations and restrictions thereof, are hereby
fixed and stated to be as follows:
1. Ranking. The Voting Preferred Stock shall, with respect to dividends
and distributions upon the liquidation, winding up or dissolution of the
Corporation, rank senior to all classes of common stock of the Corporation and,
subject to the following sentence, senior to each other class and series of
capital stock hereafter created which does not expressly provide that it ranks
senior to or on a parity with the Voting Preferred Stock as to dividends and
distributions upon the liquidation, winding up or dissolution of the Corporation
(such common stock and each such other class and series of capital stock being
referred to hereafter as "Junior Stock"). The Voting Preferred Stock shall, with
respect to dividends and distributions upon the liquidation, winding up or
dissolution of the Corporation, rank on a parity with all other series of
preferred stock and any other class or series of capital stock hereafter
created which expressly provides that it ranks on a parity with the Voting
Preferred Stock as to dividends and distributions upon the liquidation,
winding up or dissolution of the Corporation (such other series of preferred
stock and such other class or series of capital stock being referred to
hereafter as "Parity Stock").
2. Preferred Dividends. (a) Beginning on the date of issuance of each share
of Voting Preferred Stock (each such date being an "Issue Date"), each holder of
outstanding shares of the Voting Preferred Stock (the "Holders") issued on such
Issue Date shall be entitled to receive, when, as and if declared by the Board
of Directors out of funds legally available therefor, cash dividends ("Preferred
Dividends") on each such share of Voting Preferred Stock, based on the Issue
Price thereof, at a rate per annum equal at all times during each Dividend
Period to the Preferred Dividend Rate for such Dividend Period, payable in
arrears on the Effective Date and the last day of such Dividend Period.
Preferred Dividends shall be paid to Holders of record at the close of business
on the date specified by the Board of Directors of the Corporation at the time
such dividend is declared; provided, however, that, except for Preferred
Dividends payable on the Effective Date, such date shall not be more than 60
days nor less than 10 days prior to the last day of the respective Dividend
Period. The Company shall establish the Effective Date by providing written
notice to Holders of Voting Preferred Stock by 12:00 noon (New York City time)
three Business Days prior thereto.
(b) Upon the occurrence and during the continuance of an Adjustment Event,
the Preferred Dividend Rate shall be increased to a rate per annum equal at all
times to 2% per annum above the Preferred Dividend Rate otherwise in effect from
time to time pursuant to this Section 2.
(c) Upon the receipt by the Corporation of written notice, signed by the
Holders of at least a majority of the outstanding shares of Voting Preferred
Stock, to require the Corporation to file a registration statement for the
Voting Preferred Stock pursuant to
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<PAGE> 5
Section 5.1 of the Stock Purchase Agreement, the Preferred Dividend Rate shall
be increased to a rate per annum equal at all times to 2% per annum above the
Preferred Dividend Rate otherwise in effect from time to time pursuant to this
Section 2.
(d) Preferred Dividends shall accrue on a daily basis and be cumulative
from the Issue Date whether or not they have been declared and whether or not
there have been profits, surplus or other funds of the Corporation legally
available for the payment of dividends. No interest shall be payable in respect
of any Preferred Dividends which may be in arrears.
(e) All Preferred Dividends paid with respect to shares of Voting Preferred
Stock pursuant to this Section 2 shall be paid pro rata to the Holders entitled
thereto.
(f) Nothing contained in this Section 2 shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Corporation to pay or set apart for payment, any Preferred
Dividends on shares of the Voting Preferred Stock at any time.
3. Participating Dividends. (a) On June 28, 1996, and on the last Business
Day of each June thereafter so long as any shares of the Voting Preferred Stock
are outstanding (each, a "Participating Dividend Payment Date"), the Holders
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available therefor, cash dividends ("Participating
Dividends") on each share of Voting Preferred Stock in an amount equal to the
Participating Dividend as of such Participating Dividend Payment Date;
provided, however, that with respect to each share of Additional Preferred
Stock, any Participating Dividend which the Holder thereof is entitled to
receive hereunder in respect of such share of Additional Preferred Stock on the
last Business Day of June 1998 shall be computed by multiplying the formula
described below by a fraction the numerator of which shall be the number of days
from and including the Issue Date for such shares of Additional Preferred Stock
to but excluding December 31, 1997 and the denominator of which shall be 365.
Participating Dividends shall be paid to Holders of record at the close of
business on the date specified by the Board of Directors of the Corporation at
the time such dividend is declared; provided, however, that such date shall not
be more than 60 days nor less than 10 days prior to the respective Participating
Dividend Payment Date.
(b) The Participating Dividend as of any Participating Dividend Payment
Date shall be equal to the amount determined under the following formula:
If the Operating Income Growth Rate as Its Annual Participating Dividend
of such Participating Dividend Payment per share as of such Participating
Date is: Dividend Payment Date is:
- -------------------------------------- ----------------------------------
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Less than or equal to 5% No Participating Dividend Payable
Greater than 5% but not greater than 10% $0.008333
Greater than 10% but not greater than $0.012500
15%
Greater than 15% but not greater than $0.025000
20%
Greater than 20% but not greater than $0.041667
25%
Greater than 25% $0.041667 plus (i) 0.25%
multiplied by the excess, if any,
of (x) the average Operating
Income for the three fiscal years
ending immediately prior to the
applicable Participating
Dividend Payment Date over (y)
125% multiplied by the average
Operating Income for the three
years ending immediately prior to
the next on preceding
Participating Dividend Payment
Date, or for the first such
Participating Dividend Payment
Date on June 28, 1996, the average
Operating Income for the fiscal
years ended December 31, 1992,
1993 and 1994, divided by (ii)
12,000,000.
- -------------------------------------------------------------------------------
(c) For purposes of this Section 3, the following terms have the following
meanings:
"Opening Income" means Operating Revenue less Operating
Expenses as reflected on the Corporation's financial statements.
"Operating Revenue" means the Corporation's consolidated revenues,
determined in accordance with generally accepted accounting principles,
generated from ongoing business activities as determined by the Corporation's
management, excluding any interest income, non-recurring gains, revenue from
discontinued operations, or gains from unusual items.
"Operating Expenses" means the Corporation's consolidated expenses,
determined to accordance with generally accepted accounting principles, incurred
in connection with ongoing business activities as determined by the
Corporation's
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<PAGE> 7
management, excluding any interest expense, non-recurring losses, losses
from discontinued operations, or losses from unusual items.
"Operating Income Growth Rate" means the percentage increase of (i)
the average Operating Income for the three fiscal years ending immediately
prior to the applicable Participating Dividend Payment Date over (ii) the
average Operating Income for the three fiscal years ending immediately
prior to the next preceding Participating Dividend Payment Date or for the
first such Participating Dividend Payment Date on June 28, 1996, the
average Operating Income for the fiscal years ended December 31, 1992,
1993 and 1994.
(d) Calculations of Participating Dividends under this Section 3
shall be based on the consolidated operating results of the Corporation and (i)
for all Dividend Periods ending on and before December 31, 1997, the Initial
Subsidiaries listed in clause (a) of the definition of Initial Subsidiaries in
the Stock Purchase Agreement and (ii) for all Dividend Periods ending
thereafter, all Initial Subsidiaries; provided, however, that the Corporation
may include in the computation of Participating Dividends as of any
Participating Dividend Payment Date and subsequent Participating Dividend
Payment Dates a Subsidiary of the Corporation that is not an Initial Subsidiary
if the Corporation's consolidated Operating Income for the four fiscal years
ending prior to such Participating Dividend Payment Date is restated to include
the operations of such Subsidiary. The election to include a Subsidiary in the
computation of Participating Dividends as of any Participating Dividend Payment
Date shall be made by the Board of Directors and written notice thereof shall be
given to the Holders on or before the Participating Dividend Payment Date. Any
Subsidiary included in the computation of Participating Dividends as of any
Participating Dividend Payment Date may not thereafter be excluded from the
computation of Participating Dividends as of any subsequent Participating
Dividend Payment Date without the affirmative vote or consent of Holders of at
least a majority of the outstanding shares of Voting Preferred Stock, voting as
a class.
(e) Participating Dividends, if payable as of any Participating
Dividend Payment Date pursuant to this Section 3, shall accrue and be
cumulative, whether or not they have been declared and whether or not there
have been profits, surplus or other funds of the Corporation legally available
for the payment of dividends. No interest shall be payable in respect of any
Participating Dividends which may be in arrears.
(f) Nothing contained in this Section 3 shall in any way or under
any circumstances be construed or deemed to require the Board of Directors to
declare, or the Corporation to pay or set apart for payment, any Participating
Dividends on shares of the Voting Preferred Stock at any time.
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<PAGE> 8
4. Liquidation Preference. (a) The amount which the Holders shall
be entitled to receive in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation shall
be $25 per share of Voting Preferred Stock, plus an amount in cash equal to all
accrued and unpaid Preferred Dividends and Participating Dividends on such
shares to the date fixed for liquidation, dissolution or winding up, plus an
amount equal to the Optional Redemption Premium, if any, if paid on a date
other than a Dividend Payment Date, plus an amount equal to the Early
Redemption Premium, if any, which, in each case, would be applicable with
respect to such shares under Section 6 of this Certificate Designation if such
shares were being redeemed in accordance with Section 6 on the date fixed for
such liquidation, dissolution or winding up, and no more, before any payment
shall be made or any assets distributed to the holders of any Junior Stock.
(b) In the event the assets of the Corporation available for
distribution to the Holders upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, shall be insufficient to pay
in full all amounts to which the Holders are entitled pursuant to clause (a)
above, no such distribution shall be made on account of any shares of Parity
Stock upon such liquidation, dissolution or winding up unless proportionate
distributive amounts shall be paid on account of the shares of Voting Preferred
Stock, ratably, in proportion to the full distributable amounts for which the
Holders and the holders of such shares of Parity Stock are respectively
entitled upon such liquidation, dissolution or winding up.
(c) For the purpose of this Section 4, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Corporation nor the consolidation or merger of the Corporation with or into
one or more corporations shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation.
5. Mandatory Redemption. (a) Commencing on March 31, 2003 and on
each Dividend Payment Date thereafter so long as any shares of Voting Preferred
Stock remain outstanding (each such date, a "Mandatory Redemption Date"), the
Corporation shall redeem, out of funds legally available therefor, a number of
shares equal to 5% of the number of shares of Voting Preferred Stock
outstanding as of the initial Mandatory Redemption Date (or, if at any
Mandatory Redemption Date, fewer than 5% of such number of shares are then
outstanding, the number of shares then outstanding), at a redemption price (the
"Mandatory Redemption Amount") equal to the aggregate of $25 per share for the
shares to be redeemed, plus any accrued and unpaid Preferred Dividends with
respect to the shares to be redeemed, plus any accrued and unpaid Participating
Dividends with respect to the shares to be redeemed.
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<PAGE> 9
(b) The Mandatory Redemption Dates may be extended at the request of
the Corporation and with the consent of the Holders of at least a majority of
the outstanding shares of Voting Preferred Stock, provided that such request is
made at least six months prior to March 31, 2003, and provided further that the
final Mandatory Redemption Date (determined in accordance with the redemption
procedure in clause (a) above) shall in no event be later than December 31,
2017 and all outstanding shares of Voting Preferred Stock shall be redeemed on
the final Mandatory Redemption Date to the extent of funds legally available
therefor.
6. Optional Redemption. On and after the earliest of (a) January 1,
1999, (b) the date on which the Holders' rights pursuant to Section 5.2 of the
Stock Purchase Agreement are exercised and (c) the date on which the Holders'
rights pursuant to Section 5.1 of the Stock Purchase Agreement are exercised,
the Corporation shall have the right, at the option of the Board of Directors
on any date fixed by the Board of Directors, to redeem, out of funds legally
available therefor, shares of Voting Preferred Stock, at any time or from time
to time in whole or in part, for an amount (the "Optional Redemption Amount")
equal to the aggregate of $25 per share for the shares to be redeemed, plus the
amount of any accrued and unpaid Preferred Dividends with respect to the shares
to be redeemed, plus, if such Optional Redemption occurs on any date other than
a Dividend Payment Date, the Optional Redemption Premium, plus a redemption
premium (the "Early Redemption Premium") with respect to each of the shares to
be redeemed equal to a percentage of the Issue Price determined as follows:
If Redeemed During 12-Month Early Redemption
Period Ending on: Premium is:
--------------------------- ----------------
December 31, 1998 2.0%
December 31, 1999 2.0
December 31, 2000 1.5
December 31, 2001 1.0
December 31, 2002 0.5
Thereafter 0.0;
plus any accrued and unpaid Participating Dividends with respect to the shares
to be redeemed, provided that, with respect to any optional redemption of
Voting Preferred Stock following the date described in clause (c) above, the
Optional Redemption Amount shall not include an Early Redemption Premium.
7. Redemption Procedure. (a) In the event that fewer than all of
the outstanding shares of Voting Preferred Stock are to be redeemed on any
Redemption Date, the number of shares to be redeemed shall be determined by the
Board of Directors (subject to Section 5(a)) and the shares to be redeemed shall
be selected by lot or pro rate (with
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<PAGE> 10
adjustments to avoid the redemption of fractional shares) or by any other
equitable method determined by the Board of Directors.
(b) At least 10 days and not more than 60 days prior to any
Redemption Date, the Corporation shall provide notice of redemption (a "Notice
of Redemption") in writing (including telecopy or telex communication) and
mailed (by first class mail, postage prepaid), telecopied, telexed or
delivered, to each Holder of record of shares of the Voting Preferred Stock to
be redeemed, at the address of such Holder appearing in the stock register of
the Corporation, provided that failure to give such notice or any deficiency
therein shall not affect the validity of the procedure for redemption of any
shares of Voting Preferred Stock to be redeemed except as to the Holder or
Holders to whom the Corporation has failed to give such notice was defective.
Each Notice of Redemption shall state:
(i) whether the redemption is pursuant to Section 5 or 6 hereof;
(ii) whether all or less than all the outstanding shares of Voting
Preferred Stock redeemable under such Section are to be redeemed and the
total number of shares of Voting Preferred Stock being redeemed;
(iii) the number of shares of Voting Preferred Stock held, as of the
appropriate record date, by such Holder that the Corporation intends to
redeem and the Redemption Amount to be paid in respect of such shares;
(iv) the Redemption Date and the place for surrender of certificates
for the shares of Voting Preferred Stock to be redeemed; and
(v) that dividends on the shares of the Voting Preferred Stock to
be redeemed shall cease to accumulate on such Redemption Date if the
Corporation has provided for the payment of the Redemption Amount with
respect to such shares on such date.
(c) Each Holder shall surrender to the Corporation the certificate
or certificates representing the shares of Voting Preferred Stock to be
redeemed, duly endorsed, in the manner and at the place designated in the
Notice of Redemption, and, on the Redemption Date, the full Redemption Amount
for each share shall be payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and such surrendered
certificate or certificates shall be canceled and retired. In the event that
less than all of the shares represented by any such certificate are redeemed,
a new certificate shall be issued representing the unredeemed shares.
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<PAGE> 11
(d) If a Notice of Redemption shall have been given as provided in
clause (b) above and the Corporation shall have provided monies at the time and
place specified for the payment of the Redemption Amount pursuant to such
notice, then from and after the Redemption Date, dividends on the shares of
Voting Preferred Stock so called for redemption shall cease to accumulate, such
shares shall no longer be deemed to be outstanding, and all rights of the
Holders thereof as stockholders of the Corporation (except the right to receive
from the Corporation the Redemption Amount without interest) shall cease.
8. Voting Rights. (a) The Holders, except as set forth in the
Certificate of Incorporation or as otherwise required under Delaware law or as
set forth in this Section 8, shall not be entitled or permitted to vote on any
matter required or permitted to be voted upon by the stockholders of the
Corporation.
(b) The Holders, voting as a class, shall have full voting power at
all times to elect a number of directors to the Board of Directors equal to the
smallest whole number that is at least 25% of the number of directors fixed by
or in accordance with the Corporation's Bylaws or Certificate of Incorporation
to serve on the Board of Directors at such time. Any director elected by the
Holders may be removed without cause only by the affirmative vote of at least a
majority of the outstanding shares of the Voting Preferred Stock. Any vacancy
in the Board of Directors occurring by reason of the resignation, death,
removal or disqualification of any member thereof elected by the Holders shall
be filled by the vote of the Holders and, if not so filled, shall be filled by
the remaining member or members of the board of Directors elected by the
Holders.
(c) So long as shares of the Voting Preferred Stock are outstanding,
the Corporation shall not, without the affirmative vote or written consent of
the Holders of at least a majority of the outstanding shares of Voting
Preferred Stock, voting as a class, authorize, create or issue to any person
other than the Holders any Parity Stock or increase the number of shares of any
Parity Stock or authorize, create or issue any obligation or security
convertible into shares of Parity Stock, provided that the Corporation may
authorize, create and issue Parity Stock to a person other than the Holders if
all of the following conditions are satisfied: (A) such Parity Stock is
nonvoting (other than as required by law), (B) such Parity Stock is issued for
cash, (C) the Corporation holds at the time of, and after giving effect to, any
such authorization or issuance an aggregate value of Qualified Investments at
least equal to the Issuance Equity Investment Profile and (D) at the time of,
and after giving effect to, any such authorization, creation or issuance, no
Adjustment Event shall have occurred and be continuing, and provided further
that prior to the issuance and sale of any such Parity Stock to a person other
than the Holders, (x) the Corporation shall deliver to the Holders, at least 45
days prior to the proposed date of issuance of such Parity Stock to any such
other person (the "Proposed Issue Date"), a written offer to issue and sell to
the Holders any or all of such Parity Stock to be issued on the Proposed Issue
Date, such
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<PAGE> 12
offer to include a description of the relative rights and preferences, the
number of shares being issued, the per share and aggregate issue price, the
Proposed Issue Date and other relevant terms of such proposed issuance of such
Parity Stock and (y) the Holders thereafter shall have the exclusive right,
until and including the date which is 30 days prior to the Proposed Issue Date
(after which date the Corporation may offer and sell such Parity Stock or any
part thereof not purchased or committed to be purchased by one or more Holders
(or their designees) pursuant hereto to a person other than the Holders (or
their designees) for a period of 90 days following the Proposed Issue Date on
terms no more favorable to the buyer than those set forth in the Corporation's
written offer to the Holders), to deliver to the Corporation written notice of
each Holder's respective intention to purchase (or to designate a Person to
purchase) all or a specified number of shares of such Parity Stock, and on the
Proposed Issue Date, the Corporation shall issue and sell to such Holder (or
such Holder's designee), and such Holder (or such Holder's designee) shall
purchase all or such specified number of shares of such parity Stock at the
aggregate issue price thereof and on the other terms specified in the
Corporation's written offer to the Holders; provided, however, that if the
Holders deliver written notice of their respective intention to purchase, in the
aggregate, more than the total number of shares of such Parity Stock proposed to
be issued, the Corporation shall issue and sell to each Holder a number of
shares equal to the product of (1) a fraction, the numerator of which is the
number of shares offered to be purchased by such Holder and the denominator of
which is the number of shares offered to be purchased by all such Holders
electing to purchase Parity Stock, multiplied by (2) the total number of shares
of such Parity Stock to be issued and sold on the Proposed Issue Date.
(d) So long as shares of the Voting Preferred Stock are outstanding,
the Corporation shall not, without the affirmative vote or written consent of
the Holders of at least a majority (or, in the case of Section 8(d)(vi), all)
of the outstanding shares of Voting Preferred Stock, voting as a class, take
any of the following actions:
(i) Merge or consolidate with or into any Person, or permit any of
its Subsidiaries to do so, except that any Subsidiary of the Corporation
may merge or consolidate with any Person other than as set forth in
Section 4.4 or 4.5 of the Stock Purchase Agreement; provided, however,
that in each case immediately after giving effect thereto, (A) no Major
Shareholder Default, Adjustment Event or Incipient Event shall have
occurred and be continuing and (B) the surviving corporation, if a
Subsidiary, shall not be engaged in or own or control any assets
constituting a Prohibited Business Activity;
(ii) Declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on any shares
of any Junior Stock or Parity Stock, or purchase, redeem or otherwise
acquire for value (or permit any of its Subsidiaries to do so) any such
shares, now or hereafter outstanding, (A) if, after giving effect thereto,
the aggregate Issue Price of all shares of Voting Preferred Stock
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<PAGE> 13
then outstanding would exceed 30% of the Value of the Corporation's
Permitted Investments or (B) if at the time of, and after giving effect
to, such declaration, payment, purchase, redemption or other acquisition,
an Adjustment Event or an Incipient Event shall have occurred and be
continuing;
(iii) Alter or change the rights, power or preferences of the Voting
Preferred Stock so as to affect them adversely;
(iv) Authorize, create or issue any Voting Preferred Stock;
(v) Commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to the
Corporation or its debt under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seek the appointment of a trustee,
receiver, liquidator, custodian or other similar official of the
Corporation or of any substantial part of the Corporation's property or
consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against it, or make a general assignment for the benefit of creditors;
(vi) Authorize, create, increase the number of shares of or issue
(A) any class or series of capital stock which expressly provides that
such class or series of capital stock ranks senior to the Voting Preferred
Stock as to dividends or distributions upon the liquidation, winding up or
dissolution of the Corporation (such class or series of capital stock being
referred to hereafter as "Senior Stock"); or (B) any obligation or security
convertible into, or any rights or options entitling the holder thereof to
purchase, shares of Senior Stock;
(vii) Authorize, create, increase the number of shares of or issue
(A) any class or series of capital stock (other than Common Stock) with
voting rights (other than as required by law) (such class or series of
capital stock being referred to hereafter as "Additional Voting Stock") or
(B) any obligation or security convertible into, or any rights or options
entitling the holder thereof to purchase, shares of Additional Voting
Stock;
(viii) Increase the number of directors to more than eight or amend
or otherwise modify the first sentence of Article FIFTH of the Certificate
of Incorporation;
(ix) Amend the Certificate of Incorporation or the By-Laws of the
Corporation to provide that the directors of the Corporation elected by the
holders of the Common Stock be divided into classes as provided in the
first sentence of Section 141(d) of the DGCL; or
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<PAGE> 14
(x) Amend the Certificate of Incorporation or the By-Laws of the
Corporation so as to limit, restrict or in any way regulate the right of
stockholders to act by written consent in lieu of a meeting.
(e) In any case in which the Holders shall be entitled to vote
pursuant to this Section 8 or pursuant to Delaware law, each Holder shall have
one vote per share of Voting Preferred Stock held.
9. Conversion. Immediately prior to a Sale of the Voting Preferred
Stock pursuant to Section 7.1 of the Stock Purchase Agreement, each outstanding
share of Voting Preferred Stock shall automatically and without further action
convert into one share of a new series of Preferred Stock of the Corporation,
such new series to contain such covenants and other terms, including, but not
limited to, the dividend rate, as are determined by the Board of Directors of
the Corporation, with the advice of an investment bank or banks of national
reputation, to be reasonably necessary to effect such Sale, in light of the
then prevailing market conditions, at a price such that the Holders shall
receive, after deducting all underwriting discounts and commissions and all
expenses of the Holders in connection with such Sale and the registration
thereof, net proceeds per share equal to the Issue Price plus an amount equal
to accrued but unpaid Preferred Dividends and Participating Dividends plus an
amount equal to the Optional Redemption Premium, if any, and the Early
Redemption Premium, if any, that would be applicable with respect to such
shares under Section 6 of this Certificate of Designation if such shares were
being redeemed in accordance with Section 6 on the date of conversion.
10. Payments and Computations. (a) If any payment or redemption
shall be required by the terms hereof to be made on a day that is not a
Business Day, such payment or redemption shall be made on the next preceding
Business Day.
(b) Each payment to be made hereunder by the Corporation shall be
made not later than 12:00 P.M. (New York City time) on the day when due in
United States dollars to an account or accounts specified in writing by each
Holder not less than five Business Days prior to the date of such payment in
immediately available funds.
(c) All computations of Preferred Dividends payable with respect to
any Dividend Period based on the Adjusted LIBO Rate or the Federal Funds Rate
shall be made on the basis of a year of 360 days and all computations of
Preferred Dividends payable with respect to any Dividend Period based on the
Base Rate shall be made on the basis of a year of 365 or 366 days, as the case
may be, in each case above for the actual number of days (including the first
day but excluding the last day) occurring in such Dividend Period.
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<PAGE> 15
11. Documents. All documents referred to herein shall be made
available by the Corporation to any stockholder upon written request therefore
delivered to the Corporation addressed to the Secretary of the Corporation.
12. Powers of Directors. Upon the occurrence and during the
continuation of a Financial Condition Transition Event, without limiting, in
any way, the rights of Holders of the Voting Preferred Stock upon the
occurrence of a Market Failure Transition Event or a Major Shareholder Default,
or the powers under Delaware law of any directors elected by such Holders
following any such event, the Board of Directors shall (to the fullest extent
permitted by Delaware law) have the power and authority (i) to recommend
dissolution and/or liquidation of the Corporation and (ii) to exercise the
right of Optional Redemption subject to and in accordance with this Certificate
of Designation.
13. Definitions.
Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings given such terms in the Stock Purchase Agreement.
"Adjusted LIBO Rate" means, for any Dividend Period or other period,
the Eurodollar Rate for such Dividend Period or such other period, as the
case may be.
"Base Rate" means a fluctuating interest rate per annum in effect
from time to time, which rate per annum shall at all times be equal to
the highest of:
(a) the rate of interest announced publicly by Citibank, N.A. in
New York, New York, from time to time, as Citibank, N.A.'s base rate;
and
(b) 1/2 of one percent per annum above the Federal Funds Rate.
"Business Day" means a day of the year on which banks are not required
or authorized to close in New York City and, if the applicable Business Day
related to Voting Preferred Stock entitled to receive dividends based on
the Adjusted LIBO Rate, on which dealings are carried on in the London
interbank market.
"Certificate of Designation" means this Amended and Restated Tenneco
International Holding Corp. Certificate of Designation, Preferences and
Rights of Preferred Stock by Resolution of the Board of Directors Providing
for an Issue of 16,000,000 Shares of Preferred Stock Designated "Variable
Rate Voting Participating Preferred Stock."
"Dividend Period" means (i) the period commencing on September 30,
1997 and ending on the Effective Date, (ii) the period commencing on the
Effective Date
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<PAGE> 16
and ending on December 31, 1997 and (iii) thereafter, the period
commencing on the last Business Day of the next preceding Dividend Period
and ending on the last Business Day of each March, June, September and
December.
"Effective Date" means the date of issuance of the Additional Voting
Preferred Stock.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
"Eurodollar Rate" means (a) for the Dividend Period commencing on
September 30, 1997 through the effective Date, an interest rate per annum
equal to the rate per annum obtained by dividing (i) 5.71875% per annum by
(ii) a percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage for such Dividend Period, (b) for the period commencing on the
Effective Date through December 31, 1997, an interest rate per annum equal
to the rate per annum obtained by dividing (i) the product of (A) if the
Effective Date occurs on or before November 30, 1997, (1) the rate which
appears on Telerate Screen Page 3750 (or any successor page) as the
two-month Fixed USD Rate in effect at 11:00 A.M. (London time) two Business
Days before the Effective Date, provided that in the event such offered
rate is not readily available from such Telerate page, "Eurodollar Rate"
shall mean the rate per annum at which deposits in U.S. dollars are offered
by the principal office of Citibank, N.A. in London, England to prime banks
in the London interbank market at 11:00 A.M. (London time) two Business
Days before the Effective Date, in an amount substantially equal to the
aggregate Issue Price of the Shares of Voting Preferred Stock outstanding
at such time, for a two-month period, multiplied by (2) the difference
between (X) 100% minus (Y) 10% of the Eurodollar Rate Reserve Percentage
for such period, or (B) if the Effective Date occurs after November 30,
1997, (1) the rate which appears on Telerate Screen Page 3750 (or any
successor page) as the one-month Fixed USD Rate in effect at 11:00 A.M.
(London time) two Business Days before the Effective Date, provided that in
the event such offered rate is not readily available from such Telerate
Page, "Eurodollar Rate" shall mean the rate per annum at which deposits in
U.S. dollars are offered by the principal office of Citibank, N.A. in
London, England to prime banks in the London interbank market at 11:00 A.M.
(London time) two Business Days before the Effective Date, in an amount
substantially equal to the aggregate Issue Price of the Shares of Voting
Preferred Stock outstanding at such time, for a one-month period,
multiplied by (2) the difference between (X) 100% minus (Y) 10% of the
Eurodollar Rate Reserve Percentage for such period by (ii) a percentage
equal to 100% minus the Eurodollar Rate Reserve Percentage for such period,
as the case may be and (c) for any dividend Period or other period
thereafter, an interest rate per annum equal to the rate per
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<PAGE> 17
annum obtained by dividing (i) the product of (1) the rate which appears
from time to time on Telerate Screen Page 3750 (or any successor page) as
the Fixed USD Rate in effect at 11:00 A.M. (London time) two Business Days
before the first day of such Dividend Period or such other period, as the
case may be, for a period equal (or substantially equal) to such Dividend
Period or such other period, as the case may be, provided that in the event
such offered rate is not readily available from such Telerate Page,
"Eurodollar Rate" shall mean the rate per annum at which deposits in U.S.
dollars are offered by the principal office of Citibank, N.A. in London,
England to prime banks in the London interbank market at 11:00 A.M. (London
time) two Business Days before the first day of such Dividend Period or
such other period, as the case may be, in an amount substantially equal to
the aggregate Issue Price of the shares of Voting Preferred Stock
outstanding at such time and for a period equal to such Dividend Period or
such other period, as the case may be, multiplied by (2) the difference
between (X) 100% minus (Y) 10% of the Eurodollar Rate Reserve Percentage
for such Dividend Period or such other period, as the case may be, by (ii)
a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for
such Dividend Period or such other period, as the case may be.
"Eurodollar Rate Reserve Percentage" means, for any Dividend Period or
other period, the reserve percentage applicable two Business Days before
the first day of such Dividend Period or such other period, as the case may
be, under regulations issued from time to time by the Board of Governors of
the Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank of
the Federal Reserve System in New York City with respect to any other
category of liabilities that includes deposits by reference to which the
Preferred Dividend Rate on Voting Preferred Stock entitled to dividends
based on the Adjusted LIBO Rate is determined) having a term equal to such
Dividend Period or such other period, as the case may be.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the rate which
appears from time to time on Telerate Screen Page 118 (or any successor
page) as the Federal Funds Effective Rate in effect on such day.
"Issue Price" shall mean, with respect to shares of Voting Preferred
Stock, twenty five dollars ($25) per share.
"Optional Redemption Premium" means, with respect to any redemption
(or liquidation, dissolution or winding up payment pursuant to Section 4 or
conversion pursuant to Section 9) on any date other than a Dividend Payment
Date of Voting
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<PAGE> 18
Preferred Stock entitled to dividends based on the Adjusted LIBO Rate, the
amount calculated in accordance with the following formula:
A x [(Old LIBOR New LIBOR)/360] x Number of Days Remaining
Where:
A = The aggregate Issue Price of the shares of Voting
Preferred Stock to be redeemed.
New LIBOR = Adjusted LIBO Rate determined in respect of such Voting
Preferred Stock for the Number of Days Remaining.
Old LIBOR = Adjusted LIBO Rate in effect with respect to such Voting
Preferred Stock immediately prior to the Redemption Date.
Number of Days
Remaining = Number of days remaining in the Dividend Period
applicable to such Voting Preferred Stock as of the
Redemption Date.
provided, however, that if such amount is a negative number, the Optional
Redemption Premium shall be zero.
"Preferred Dividend Rate" means a rate per annum equal to (i) for the
period commencing on September 30, 1997 and ending on the Effective Date,
1.120% over the Adjusted LIBO Rate (ii) for the period commencing on the
Effective Date through December 31, 1997, 0.920% over the Adjusted LIBO
Rate, or if adequate and fair means do not exist to enable the
determination of the Adjusted LIBO Rate, 0.368% over the Base Rate and
(iii) thereafter, 0.920% over the Adjusted LIBO Rate, which rate shall be
adjusted for each Dividend Period, or if adequate and fair means do not
exist to enable the determination of the Adjusted LIBO Rate, 0.368% over
the Base Rate.
"Redemption Amount" means, with respect to any redemption of Voting
Preferred Stock, the Optional Redemption Amount or the Mandatory Redemption
Amount, as the case may be.
"Redemption Date" means any Mandatory Redemption Date and any date
fixed by the Board of Directors to redeem Voting Preferred Stock under
Section 6.
-18-
<PAGE> 19
"Stock Purchase Agreement" means the Amended and Restated Preferred
Stock Purchase Agreement, dated as of November 19, 1997 between the
Corporation and MW Investors L.L.C., as the same may be modified or
amended from time to time.
-19-
<PAGE> 20
TENNECO INTERNATIONAL HOLDING CORP.
Certificate of Designation, Preferences and Rights of
Preferred Stock by Resolution of the Board of Directors
Providing for an Issue of 100,000 shares of Junior
Preferred Stock Designated "$8.00 Junior Preferred Stock"
I, Robert G. Simpson, Vice President of Tenneco International Holding Corp.
(hereinafter referred to as the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 151 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Restated Certificate of Incorporation (hereinafter referred to as the
"Certificate of Incorporation"), the Board of Directors is authorized to issue
up to 1,000,000 shares of Junior Preferred Stock of the Corporation in one or
more series and the Board of Directors (i) has authorized the issuance of the
series of Junior Preferred Stock hereinafter provided for and (ii) has adopted
the immediately following resolution creating a series of 100,000 shares of
Junior Preferred Stock, par value $0.01, designated as $8.00 Junior Preferred
Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the Board
of Directors does hereby provide for the issue of a series of Junior
Preferred Stock, par value $0.01, of the Corporation, to be designated
"$8.00 Junior Preferred Stock" (hereinafter referred to as the "$8.00
Junior Preferred Stock"), consisting of 100,000 shares, and to the extent
that the designations, powers, preferences and relative and other special
rights and the qualifications, limitations and restrictions of the Junior
Preferred Stock are not stated and expressed in the Certificate of
Incorporation, does hereby fix and herein state and express such
designations, powers, preferences and relative and other special rights and
the qualifications, limitations and restrictions thereof, as follows:
(1)(a) The dividend rate, on the $8.00 Junior Preferred Stock
shall be $8.00 per annum, payable by the Corporation on the
31st day of March commencing in the year 1995 (each annual
dividend payment date is hereinafter referred to as an
"Annual Payment Date") so
-20-
<PAGE> 21
long as any shares of the $8.00 Junior Preferred Stock are
outstanding, in cash in United States dollars to each holder
of record of such shares.
(b) The holder of record of any share of the $8.00 Junior
Preferred Stock entitled to receive a dividend payment
pursuant to the provisions of clause (1)(a) above shall be
holder of record of such shares as of the close of business
of the first day of March in the year such dividend payment
is to be made, as shown on the stockholder records of the
Corporation.
(2) Dividends on the shares of the $8.00 Junior Preferred
Stock shall accrue from, and as if issued on, December 22,
1994, except that if the number of shares of $8.00 Junior
Preferred Stock shall hereafter be increased by further
resolution of the Board of Directors, dividends on such
additional shares shall accrue from such other date as may be
fixed by the Board of Directors in such resolution.
(3) The amounts which the holders of the $8.00 Junior
Preferred Stock shall be entitled to receive in the event of
a liquidation, dissolution, or winding-up of the affairs of
the Corporation shall be $100.00 per share, plus in each case
an amount equal to accrued and unpaid dividends to the date
of payment.
(4)(a) The $8.00 Junior Preferred Stock shall be redeemable
in whole or in part at any time or from time to time at the
option of the Corporation at $100.00 per share plus accrued
and unpaid dividends.
(b) in the event of the redemption of only part of the $8.00
Junior Preferred Stock at the time outstanding, the shares to
be redeemed shall be selected pro rata, by lot, or by any
other equitable method determined by the Board of Directors.
(5) At least 30 days' prior notice of any redemption of the
$8.00 Junior Preferred Stock pursuant to clause (4) above
shall be mailed, addressed to the holders of record of
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<PAGE> 22
the shares to be redeemed at their respective addresses as
the same shall appear on the books of the Corporation.
(6) Any shares of the $8.00 Junior Preferred Stock which
shall have been redeemed or otherwise acquired by the
Corporation shall be retired and assume the status of
authorized but unissued shares of Junior Preferred Stock
without designation as to series and shall not be reissued as
shares of $8.00 Junior Preferred Stock.
(7) The number of shares of $8.00 Junior Preferred Stock,
may, to the extent of the corporation's authorized and
unissued Junior Preferred Stock, be increased by further
resolution duly adopted by the Board of Directors and the
filing and recording of a certificate pursuant to the
provisions of the General Corporation Law of the State of
Delaware stating that such increase has been so authorized.
IN WITNESS WHEREOF, said Tenneco International Holding Corp. has caused
this Certificate to be signed by Robert G. Simpson as Vice President this 29th
day of December, 1994.
TENNECO INTERNATIONAL HOLDING CORP.
By: /s/ Robert G. Simpson
-------------------------------
Robert G. Simpson
Vice President
-22-
<PAGE> 23
TENNECO INTERNATIONAL HOLDING CORP.
Certificate of Designation, Preferences and Rights
Of Preferred Stock by Resolution of the Board of Directors
Providing for an Issue of 12,000,000 Shares of
Preferred Stock Designated "Variable Rate
Voting Participating Preferred Stock"
I, Robert G. Simpson, Vice President of Tenneco International Holding
Corp. (the "Corporation"), a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "DGCL"), in accordance
with the provisions of Section 151 thereof, DO HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Restated Certificate of Incorporation of the Corporation, as amended
(hereinafter referred to as the "Certificate of Incorporation"), the Board of
Directors is authorized to issue up to 30,000,000 shares of Preferred Stock of
the Corporation in one or more series and the Board of Directors (i) has
authorized the issuance of the series of Preferred Stock hereinafter provided
for and (ii) has adopted the immediately following resolution creating a series
of 12,000,000 shares of Preferred Stock, par value $0.01 per share, designated
as Variable Rate Voting Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors by the Certificate of Incorporation, a series of Preferred Stock, par
value $0.01 per share, of the Corporation be, and hereby is, created, to be
designated "Variable Rate Voting Participating Preferred Stock" (hereinafter
referred to as the "Voting Preferred Stock"), consisting of 12,000,000 shares,
which number may from time to time to be increased (but not above the total
number of authorized shares of Preferred Stock) by the Board of Directors of the
Corporation, and to the extent date the designations, powers, preferences and
relative and other special rights and the qualifications, limitations and
restrictions of the Voting Preferred Stock are not stated and expressed in the
Certificate of Incorporation. such designations, powers, preferences and
relative and other special rights and the qualifications, limitations and
restrictions thereof, are hereby fixed and stated to be as follows:
1. Ranking. The Voting Preferred Stock shall, with respect to dividends
and distributions upon the liquidation, winding up or dissolution of the
Corporation, rank senior to all classes of common stock of the Corporation and,
subject to the following sentence, senior to each other class and series of
capital stock hereafter created which does not expressly provide that it ranks
senior to or on a parity with the Voting Preferred Stock as to dividends and
distributions upon the liquidation, winding up or dissolution of the Corporation
(such common stock and each such other class and series of capital stock being
referred to hereafter as "Junior Stock"). The Voting Preferred Stock shall,
with respect to dividends and distributions upon the liquidation, winding up or
dissolution of the Corporation, rank on a parity with all other series of
Preferred Stock and any other class or series of capital stock hereafter created
which expressly provides that it ranks on a parity with the Voting Preferred
-23-
<PAGE> 24
Stock as to dividends and distributions upon the liquidation, winding up or
dissolution of the Corporation (such other class or series of capital stock
being referred to hereafter as "Parity Stock").
2. Preferred Dividends. (a) Beginning on the date of issuance of the
Voting Preferred Stock (the "Issue Date"), the holders of the outstanding shares
of the Voting Preferred Stock (the "Holders") shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available therefor, cash dividends ("Preferred Dividends") on each share of
Voting Preferred Stock, based on the Issue Price thereof, at a rate per annum
equal to the Preferred Dividend Rate in effect during each Dividend Period,
payable quarterly in arrears on the last Business Day of each March, June,
September and December (each, a "Dividend Payment Date"), commencing March 31,
1995. Preferred Dividends shall be paid to Holders of record at the close of
business on the date specified by the Board of Directors of the Corporation at
the time such dividend is declared; provided, however, that such date shall not
be more than 60 days nor less than 10 days prior to the respective Dividend
Payment Date.
(b) Upon the occurrence and during the continuance of an Adjustment
Event, the Preferred Dividend Rate shall be increased to a rate per annum equal
at all times to 2% per annum above the Preferred Dividend Rate otherwise in
effect from time to time pursuant to this Section 2.
(c) Upon the receipt by the Corporation of written notice signed by the
Holders of at least a majority of the outstanding shares of Voting Preferred
Stock, to require the Corporation to file a registration statement for the
Voting Preferred Stock pursuant to Section 5.1 of the Stock Purchase Agreement,
the Preferred Dividend Rate shall be increased to a rate per annum equal at all
times to 2% per annum above the Preferred Dividend Rate otherwise in effect from
time to time pursuant to this Section 2.
(d) Preferred Dividends shall accrue on a daily basis and be cumulative
from the Issue Date whether or not they have been declared and whether or not
there have been profits, surplus or other funds of the Corporation legally
available for the payment of dividends. No interest shall be payable in respect
of any Preferred Dividends which may be in arrears.
(e) All Preferred Dividends paid with respect to shares of Voting Preferred
Stock pursuant to this Section 2 shall be paid to the Holders entitled thereto.
(f) Nothing contained in this Section 2 shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Corporation to pay or set apart for payment, any Preferred
Dividends on shares of the Voting Preferred Stock at any time.
-24-
<PAGE> 25
3. Participating Dividends. (a) On June 28, 1996, and on the last
Business Day of each June thereafter so long as any shares of the Voting
Preferred Stock are outstanding (each, a "Participating Dividend Payment Date"),
the Holders shall be entitled to receive, when, as and if declared by the Board
of Directors out of funds legally available therefor, cash dividends
("Participating Dividends") on each share of Voting Preferred Stock in an amount
equal to the Participating Dividend as of such Participating Dividend Payment
Date. Participating Dividends shall be paid to Holders of record at the close of
business on the date specified by the Board of Directors of the Corporation at
the time such dividend is declared; provided, however, that such date shall not
be more than 60 days nor less than 10 days prior to the respective Participating
Dividend Payment Date.
(b) The Participating Dividend as of any Participating Dividend Payment
Date shall be equal to the amount determined under the following formula:
<TABLE>
<CAPTION>
If the Operating Income Growth Rate as The Annual Participating Dividend per
of such Participating Dividend Payment share as of such Participating Dividend
Date is: Payment Date is:
- -------------------------------------- ---------------------------------------
<S> <C>
Less than or equal to 5% No Participating Dividend Payable
Greater than 5% but not greater than 10% $0.008333
Greater than 10% but not greater than 15% $0.012500
Greater than 15% but not greater than 20% $0.025000
Greater than 20% but not greater than 25% $0.041667
Greater than 25% $0.041667 plus (i) 0.25% multiplied by
the excess, if any, of (x) the average
Operating Income for the three fiscal
years ending immediately prior to the
applicable Participating Dividend
Payment Date over (y) 125% multiplied by
the average Operating Income for the
three years ending immediately prior to
the next preceding Participating
Dividend Payment Date, or for the first
such Participating Dividend Payment Date
on June 28, 1996, the average Operating
Income for the fiscal years ended
December 31, 1992, 1993 and 1994, divided
by (ii) 12,000.000.
- -------------------------------------------------------------------------------------------
</TABLE>
-25-
<PAGE> 26
(c) For purposes of this Section 3, the following terms have the following
meanings:
"Operating Income" means Operating Revenue less Operating Expenses as
reflected on the Company's financial statements.
"Operating Revenue" means the Company's consolidated revenues,
determined in accordance with generally accepted accounting principles,
generated from ongoing business activities as determined by the Company's
management, excluding any interest income, non-recurring gains, revenue
from discontinued operations, or gains from unusual items.
"Operating Expenses" means the Company's consolidated expenses,
determined in accordance with generally accepted accounting principles,
incurred in connection with ongoing business activities as determined by
the Company's management, excluding any interest expense, non-recurring
losses, losses from operations, or losses from unusual items.
"Operating Income Growth Rate" means the percentage increase of (i) the
average Operating Income for the three fiscal years ending immediately
prior to the applicable Participating Dividend Payment Date over (ii) the
average Operating Income for the three fiscal years ending immediately
prior to the next preceding Participating Dividend Payment Date or for the
first such Participating Dividend Payment Date on June 28, 1996, the
average Operating Income for the fiscal years ended December 31, 1992, 1993
and 1994.
(d) All calculations of Participating Dividends under this Section 3 shall
be based on the consolidated operating results of the Company and the Initial
Subsidiaries; provided, however, that the Company may include in the computation
of Participating Dividends as of any Participating Dividend Payment Date and
subsequent Participating Dividend Payment Dates a Subsidiary of the Company that
is not an Initial Subsidiary if the Company's consolidated Operating Income for
the four fiscal years ending prior to such Participating Dividend Payment Date
is restated to include the operations of such Subsidiary. The election to
include a Subsidiary in the computation of Participating Dividends as of any
Participating Dividend Payment Date shall be made by the Board of Directors and
written notice thereof shall be given to the Holders on or before the
Participating Dividend Payment Date. Any Subsidiary included in the computation
of Participating Dividends as of any Participating Dividend Payment Date may not
thereafter be excluded from the computation of Participating Dividends as of any
subsequent Participating Dividend Payment Date without the affirmative vote or
consent of Holders of at least a majority of the Outstanding shares of Voting
Preferred Stock, voting as a class.
(e) Participating Dividends, if payable as of any Participating Dividend
Payment Date pursuant to this Section 3, shall accrue and be cumulative, whether
or not they have
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<PAGE> 27
been declared and whether or not there have been profits, surplus or other funds
of the Corporation legally available for the payment of dividends. No interest
shall be payable in respect of any Participating Dividends which may be in
arrears.
(f) Nothing continued in this Section 3 shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Corporation to pay or set apart for Payment, any Participating
Dividends on shares of the Voting Preferred Stock at any time.
4. Liquidation Preference. (a) The amount which the Holders shall be
entitled to receive in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation shall be $25 per
share of Voting Preferred Stock, plus an amount in cash equal to all accrued and
unpaid Preferred Dividends and Participating Dividends on such shares to the
date fixed for liquidation, dissolution or winding up, plus an amount equal to
the Optional Redemption Premium, if any, if paid on a date other than a Dividend
Payment Date, plus an amount equal to the Early Redemption Premium, if any,
which, in each case, would be applicable with respect to such shares under
Section 6 of this Certificate of Designation if such shares were being redeemed
in accordance with Section 6 on the date fixed for such liquidation, dissolution
or winding up, and no more, before any payment shall be made or any assets
distributed to the holders of any Junior Stock.
(b) In the event the assets of the Corporation available for distribution
to the Holders upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, shall be insufficient to pay in
full all amounts to which the Holders are entitled pursuant to clause (a) above,
no such distribution shall be made on account of any shares of Parity Stock upon
such liquidation, dissolution or winding up unless proportionate distributive
amounts shall be paid on account of the shares of Voting Preferred Stock,
ratably, in proportion to the full distributable amounts for which the Holders
and the holders of such shares of Parity Stock are respectively entitled upon
such liquidation, dissolution or winding up.
(c) For the Purpose of this Section 4, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Corporation nor the consolidation or merger of the Corporation with or into out
or more corporations shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation.
5. Mandatory Redemption. (a) Commencing on March 31, 2000 and on each
Dividend Payment Date thereafter so long as any shares of Voting Preferred Stock
remain outstanding (each such date, a "Mandatory Redemption Date"), the
Corporation shall redeem, out of funds legally available therefor, a number of
shares equal to 5% of the number of shares of Voting Preferred Stock outstanding
as of the initial Mandatory Redemption Date (or, if at any Mandatory Redemption
Date, fewer than 5% of such number of shares are then outstanding, the number of
shares then outstanding), at a redemption price
-27-
<PAGE> 28
(the "Mandatory Redemption Amount") equal to the aggregate of $25 per share for
the shares to be redeemed, plus any accrued and unpaid Preferred Dividends with
respect to the shares to be redeemed, plus any accrued and unpaid Participating
Dividends with respect to the shares to be redeemed.
(b) The mandatory Redemption Dates may be extended at the request of the
Corporation and with the consent of the Holders of at least a majority of the
outstanding shares of Voting Preferred Stock, provided that such request is made
at least six months prior to March 31, 2000, and provided further that the final
Mandatory Redemption Date (determined in accordance with the redemption
procedure in clause (a) above) shall in no event be later than December 31, 2014
and all outstanding shares of Voting Preferred Stock shall be redeemed on the
final Mandatory Redemption Date to the extent of funds legally available
therefor.
6. Optional Redemption. On and after the earliest of (a) January 1, 1996,
(b) the date on which the Holders' rights pursuant to Section 5.2 of the Stock
Purchase Agreement are exercised and (c) the date on which the Holders rights
pursuant to Section 5.1 of the Stock Purchase Agreement are exercised, the
Corporation shall have the right, at the option of the Board of Directors on any
date fixed by the Board of Directors, to redeem, out of funds legally available
therefor, shares of Voting Preferred Stock, at any time or from time to time in
whole or in part, for an amount (the "Optional Redemption Amount") equal to the
aggregate of $25 per share for the shares to be redeemed, plus the amount of any
accrued and unpaid Preferred Dividends with respect to the shares to be
redeemed, plus, if such Optional Redemption occurs on any date other than a
Dividend Payment Date, the Optional Redemption Premium, plus a redemption
premium (the "Early Redemption Premium") with respect to each of the shares to
be redeemed equal to a percentage of the Issue Price determined as follows:
If Redeemed During 12-Month Early Redemption
Period Ending on: Premium is:
--------------------------- ----------------
December 31, 1995 2.0%
December 31, 1996 2.0
December 31, 1997 1.5
December 31. 1998 1.0
December 31, 1999 0.5
Thereafter 0.0;
plus any accrued and unpaid Participating Dividends with respect to the shares
to be redeemed, provided that, with respect to any optional redemption of Voting
Preferred Stock following the date described in clause (c) above, the Optional
Redemption Amount shall not include an Early Redemption Premium.
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<PAGE> 29
7. Redemption Procedure. (a) In the event that fewer than all of the
outstanding shares of Voting Preferred Stock are to be redeemed on any
Redemption Date, the number of shares to be redeemed shall be determined by the
Board of Directors (subject to Section 5(a)) and the shares to be redeemed shall
be selected by lot or pro rata (with adjustments to avoid the redemption of
fractional shares) or by any other equitable method determined by the Board of
Directors.
(b) At least 10 days and not more than 60 days prior to any Redemption
Date, the Corporation shall provide notice of redemption (a "Notice of
Redemption") in writing (including telecopy or telex communication) and mailed
(by first class mail, postage prepaid), telecopied, telexed or delivered, to
each Holder of record of shares of the Voting Preferred Stock to be redeemed, at
the address of such Holder appearing in the stock register of the Corporation,
provided that failure to give such notice or any deficiency therein shall not
affect the validity of the procedure for redemption of any shares of Voting
Preferred Stock to be redeemed except as to the Holder or Holders to whom the
Corporation has failed to give such notice or to whom such notice was defective.
Each Notice of Redemption shall state:
(i) whether the redemption is pursuant to Section 5 or 6 hereof;
(ii) whether all or less than all the outstanding shares of Voting
Preferred Stock redeemable under such Section are to be redeemed and the
total number of shares of Voting Preferred Stock being redeemed;
(iii) the number of shares of Voting Preferred Stock held, as of the
appropriate record date, by such Holder that the Corporation intends to
redeem and the Redemption Amount to be paid in respect of such shares;
(iv) the Redemption Date and the place for surrender of certificates
for the shares of Voting Preferred Stock to be redeemed; and
(v) that dividends on the shares of the Voting Preferred Stock to be
redeemed shall cease to accumulate on such Redemption Date if the
Corporation has Provided for the payment of the Redemption Amount with
respect to such shares on such date.
(c) Each Holder shall surrender to the Corporation the certificate or
certificates representing the shares of Voting Preferred Stock to be redeemed,
duly endorsed, in the manner and at the place designated in the Notice of
Redemption, and, on the Redemption Date, the full Redemption Amount for each
share shall be payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and such surrendered
certificate or certificates shall be canceled and retired. In the event that
less than all of the shares represented by any such certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares.
-29-
<PAGE> 30
(d) If a Notice of Redemption shall have been given as provided in clause
(b) above and the Corporation shall have provided monies at the time and place
specified for the payment of the Redemption Amount pursuant to such notice, then
from and after the Redemption Date, dividends on the shares of Voting Preferred
Stock so called for redemption shall cease to accumulate, such shares shall no
longer be deemed to be outstanding, and all rights of the Holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the Redemption Amount without interest) shall cease.
8. Voting Rights. (a) The Holders, except as set forth in the Certificate
of Incorporation or as otherwise required under Delaware law or as set forth in
this Section 8, shall not, be entitled or permitted to vote on any matter
required or permitted to be voted upon by the stockholders of the Corporation.
(b) The Holders, voting as a class, shall have full voting power at all
times to elect a number of directors to the Board of Directors equal to the
smallest number that is at least 25% of the number of directors fixed by or in
accordance with the Corporation's Bylaws or Certificate of Incorporation to
serve on the Board of Directors at such time. Any director elected by the
Holders may be removed without cause only by the affirmative vote of at least a
majority of the outstanding shares of the Voting Preferred Stock. Any vacancy in
the Board of Directors occurring by reason of the resignation, death, removal or
disqualification of any member thereof elected by the Holders shall be filled by
the vote of the Holders and, if not so filled, shall be filled by the remaining
member or members of the Board of Directors elected by the Holders.
(c) So long as shares of the Voting Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote or written consent of the
Holders of at least a majority of the outstanding shares of Voting Preferred
Stock, voting as a class, authorize, create or issue to any person other than
the Holders any Parity Stock or increase the number of shares of any Parity
Stock or authorize, create or issue any obligation or security convertible into
shares of Parity Stock, provided that the Corporation may authorize, create and
issue Parity Stock to a person other than the Holders if all of the following
conditions are satisfied: (A) such Parity Stock is nonvoting (other than as
required by law), (B) such Parity Stock is issued for cash, (C) the Corporation
holds at the time of, and after giving effect to, any such authorization or
issuance an aggregate value of Qualified Investments at least equal to the
Issuance Equity Investment Profile and (D) at the time of, and after giving
effect to, any such authorization, creation or issuance, no Adjustment Event
shall have occurred and be continuing, and provided further that prior to the
issuance and sale of any such Parity Stock to a person other than the Holders,
(x) the Corporation shall deliver to the Holders, at least 45 days prior to the
proposed date of issuance of such Parity Stock to any such other person (the
"Proposed Issue Date"), a written offer to issue and sell to the Holders any or
all of such Parity Stock to be issued on the Proposed Issue Date, such offer to
include a description of the relative rights and preferences, the number of
shares being issued, the per share and aggregate issue price, the Proposed Issue
Date and other relevant terms of such proposed issuance of such Parity Stock and
(y) the Holders thereafter
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<PAGE> 31
shall have the exclusive right, until and including the date which is 30 days
prior to the Proposed Issue Date (after which date the Corporation may offer and
sell such Parity Stock or any part thereof not purchased or committed to be
purchased by one or more Holders (or their designees) pursuant hereto to a
person other than the Holders (or their designees) for a period of 90 days
following the Proposed Issue Date on terms no more favorable to the buyer than
those set forth in the Corporation's written offer to the Holders), to deliver
to the Corporation written notice of each Holder's respective intention to
purchase (or to designate a Person to purchase) all or a specified number of
shares of such Parity Stock, and on the Proposed Issue Date, the corporation
shall issue and sell such Holder (or such Holder's designee), and such Holder
(or such Holder's designee) shall purchase all or such specified number of
shares of such Parity Stock at the aggregate issue price thereof and on the
other terms specified in the Corporation's written offer to the Holders;
provided, however, that if the Holders deliver written notice of their
respective intention to purchase, in the aggregate, more than the total number
of shares of such Parity Stock proposed to be issued, the Corporation shall
issue and sell to each Holder a number of shares equal to the product of (1) a
fraction, the numerator of which is the number of shares offered to be purchased
by such Holder and the denominator of which is the number of shares offered to
be purchased by all such Holders electing to purchase Parity Stock, multiplied
by (2) the total number of shares of such Parity Stock to be issued and sold on
the Proposed Issue Date.
(d) So long as shares of the Voting Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote or written consent of the
Holders of at least a majority (or, in the case of Section 8(d)(vi), all) of the
outstanding shares of Voting Preferred Stock, voting as a class, take any of the
following actions:
(i) Merge or consolidate with or into any Person, or permit any of its
Subsidiaries to do so, except that any Subsidiary of the Corporation may
merge or consolidate; with any Person other than as set forth in Section
4.4 or 4.5 of the Stock Purchase Agreement; provided, however, that in each
case immediately after giving effect thereto, (A) no Major Shareholder
Default, Adjustment Event or Incipient Event shall have occurred and be
continuing and (B) the surviving corporation, if a Subsidiary, shall not be
engaged in or own or control any assets constituting a Prohibited Business
Activity;
(ii) Declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on any shares
of any Junior Stock or Parity Stock, or purchase, redeem or otherwise
acquire for value (or permit any of its Subsidiaries to do so) any such
shares, now or hereafter outstanding, (A) if, after giving effect thereto,
the aggregate Issue Price of all shares of Voting Preferred Stock then
outstanding would exceed 30% of the Value of the Company's Permitted
Investments or (B) if at the time of, and after giving effect to, such
declaration, payment, purchase, redemption or other acquisition, an
Adjustment Event or an Incipient Event shall have occurred and be
continuing;
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(iii) Amend, alter or repeal any of the provisions of the Certificate
of Incorporation, including but not limited to this Certificate of
Designation, so as to affect adversely the rights, powers or preferences of
the Voting Preferred Stock or the Holders thereof;
(iv) Authorize, create or issue any Voting Preferred Stock;
(v) Commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to the Corporation or its debt
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seek the appointment of a trustee, receiver, liquidator,
custodian or other similar official of the Corporation or of any
substantial part of the Corporation's property or consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or make a
general assignment for the benefit of creditors;
(vi) Authorize, create, increase the number of shares of or issue (A)
any class or series of capital stock which expressly provides that such
class or series of capital stock ranks senior to the Voting Preferred Stock
as to dividends or distributions upon the liquidation, winding up or
dissolution of the Corporation (such class or series of capital stock being
referred to hereafter as "Senior Stock"); or (B) any obligation or security
convertible into, or any rights or options entitling the holder thereof to
purchase, shares of Senior Stock;
(vii) Authorize, create, increase the number of shares of or issue (A)
any class or series of capital stock (other than Common Stock) with voting
rights (other than as required by law) (such class or series of capital
stock being referred to hereafter as "Additional Voting Stock") or (B) any
obligation or security convertible into, or any rights or options entitling
the holder thereof to purchase, shares of Additional Voting Stock;
(viii) Increase the number of directors to more than eight or amend or
otherwise modify the first sentence of Article FIFTH of the Certificate of
Incorporation;
(ix) Amend the Certificate of Incorporation or the By-Laws of the
Corporation to provide that the directors of the Corporation elected by the
holders of the Common Stock be divided into classes as provided in the
first sentence of Section 141(d) of the DGCL; or
(x) Amend the Certificate of Incorporation or the By-Laws of the
Corporation, so as to limit, restrict or in any way regulate the right of
stockholders to act by written consent in lieu of a meeting.
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(e) in any case in which the Holders shall be entitled to vote pursuant to
this Section 8 or pursuant to Delaware law, each Holder shall have one vote per
share of Voting Preferred Stock held.
9. Conversion. Immediately prior to a Sale of the Voting Preferred Stock
pursuant to Section 7.1 of the Stock Purchase Agreement, each outstanding share
of Voting Preferred Stock shall automatically and without further action convert
into one share of a new series of Preferred Stock of the Corporation, such new
series to contain such covenants and other terms, including, but not limited to,
the dividend rate, as are determined by the Board of Directors of the
Corporation, with the advice of an investment bank or banks of national
reputation, to be reasonably necessary to effect such Sale, in light of the then
prevailing market conditions, at a price such that the Holders shall receive,
after deducting all underwriting discounts and commissions and all expenses of
the Holders in connection with such Sale and the registration thereof, net
proceeds per share equal to the Issue Price plus an amount equal to all accrued
but unpaid Preferred Dividends and Participating Dividends plus an amount equal
to the Optional Redemption Premium, if any, and the Early Redemption Premium, if
any, that would be applicable with respect to such shares under Section 6 of
this Certificate of Designation if such shares were being redeemed in accordance
with Section 6 on the date of conversion.
10. Payments and Computations. (a) If any payment or redemption shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment or redemption shall be made on the next preceding Business Day.
(b) Each payment to be made hereunder by the Corporation shall be made not
later than 12:00 P.M. (New York City time) on the day when due in United States
dollars to an account or accounts specified in writing by each Holder not less
than five Business Days prior to the date of such payment in immediately
available funds.
(c) All computations of Preferred Dividends payable with respect to any
Dividend Period based on the Adjusted LIBO Rate or the Federal Funds Rate shall
be made on the basis of a year of 360 days, in each case for the actual number
of days (including the first day but excluding the last day) occurring in such
Dividend Period. All computations of Preferred Dividends payable with respect to
any Dividend Period based on the Base Rate shall be made on the basis of a year
of 365 or 366 days, as the case may be.
11. Documents. All documents referred to herein shall be made available by
the Corporation to any stockholder upon written request therefor delivered to
the Corporation addressed to the Secretary of the Corporation.
12. Powers of Directors. Upon the occurrence and during the continuation of
a Financial Condition Transition Event, without limiting, in any way, the rights
of Holders of the Voting Preferred Stock upon the occurrence of a Market Failure
Transition Event or a Major Shareholder Default, or the powers under Delaware
law of any directors elected by
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such Holders following any such event, the Board of Directors shall (to the
fullest extent permitted by Delaware law) have the power and authority (i) to
recommend dissolution and/or liquidation of the Company and (ii) to exercise the
right of Optional Redemption subject to and in accordance with this Certificate
of Designation.
13. Definitions.
Unless otherwise defined herein, all capitalized terms used herein shall
have the meanings given such terms in the Stock Purchase Agreement.
"Adjusted LIBO Rate" means, for any Dividend Period or other period, the
Eurodollar Rate for such Dividend Period or such other period, as the case may
be.
"Base Rate" means a fluctuating interest rate per annum in effect from time
to time, which rate per annum shall at all times be equal to the highest of:
(a) the rate of interest announced publicly by Citibank, N.A. in New York,
New York, from time to time, as Citibank, N.A.'s base rate; and
(b) 1/2 of one percent per annum above the Federal Funds Rate.
"Business Day" means a day of the year on which banks are not required or
authorized to close in New York City and, if the applicable Business Day relates
to Voting Preferred Stock entitled to receive dividends based on the Adjusted
LIBO Rate, on which dealings are carried on in the London interbank market.
"Certificate of Designation" means this Tenneco International Holding Corp.
Certificate of Designation. Preferences and Rights of Preferred Stock by
Resolution of the Board of Directors Providing for an Issue of 12,000,000 Shares
of Preferred Stock Designated "Variable Rate Voting Participating Preferred
Stock."
"Dividend Period" means the period commencing on each Dividend Payment Date
and ending on the immediately succeeding Dividend Payment Date, provided that,
in the case of the initial Preferred Dividend payable on March 31, 1995,
"Dividend Period" means each of the successive periods: (i) commencing on the
Issue Date and ending on January 31, 1995, (ii) commencing on January 31, 1995
and ending on February 28, 1995 and (iii) commencing on February 28, 1995 and
ending on March 31, 1995.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Rate" means, for any Dividend Period or other period, an
interest rate per annum equal to the rate per annum obtained by dividing (a) the
rate which appears from time to time on Telerate Screen Page 3750 (or any
successor page) as the Fixed USD Rate in
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effect at 11:00 A.M. (London time) two Business Days before the first day of
such Dividend Period or such other period, as the case may be, for a period
equal (or substantially equal) to such Dividend Period or such other period, as
the case may be, provided that in the event such offered rate is not readily
available from such Telerate Page, "Eurodollar Rate" shall mean, the rate per
annum at which deposits in U.S. dollars are offered by the principal office of
Citibank, N.A. in London. England to prime banks in the London interbank market
at 11:00 A.M. (London time) two Business Days before the first day of such
Dividend Period or such other period, as the case may be, in an amount
substantially equal to the aggregate Issue Price of the shares of Voting
Preferred Stock outstanding at such time and for a period equal to such Dividend
Period or such other period, as the case may be, by (b) a percentage equal to
100% minus the Eurodollar Rate Reserve Percentage for such Dividend Period or
such other period, as the case may be.
"Eurodollar Rate Reserve Percentage" means, for any Dividend Period or
other period, the reserve percentage applicable two Business Days before the
first day of such Dividend Period or such other period, as the case may be,
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of liabilities
that includes deposits by reference to which the Preferred Dividend Rate on
Preferred Stock entitled to dividends based on the Adjusted LIBO Rate is
determined) having a term equal to such Dividend Period or such other period, as
the case may be.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the rate which appears from time
to time on Telerate Screen Page 118 (or any successor page) as the Federal Funds
Effective Rate in effect on such day.
"Issue Price" shall mean, with respect to shares of Voting Preferred Stock,
twenty five dollars ($25) per share.
"Optional Redemption Premium" means, with respect to any redemption (or
liquidation, dissolution or winding up payment pursuant to Section 4 or
conversion pursuant to Section 9) on any date other than a Dividend Payment Date
of Voting Preferred Stock entitled to dividends based on the Adjusted LIBO Rate,
the amount calculated in accordance with the following formula:
A x [(Old LIBOR - New LIBOR)/360] x Number of Days Remaining
Where:
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A = The aggregate Issue Price of the shares of Voting
Preferred Stock to be redeemed.
New LIBOR = Adjusted LIBO Rate determined in respect of such Voting
Preferred Stock for the Number of Days Remaining.
Old LIBOR = Adjusted LIBO Rate in effect with respect to such Voting
Preferred Stock immediately prior to the Redemption Date.
Number of Days
Remaining = Number of days remaining in the Dividend Period
applicable to such Voting Preferred Stock as of the
Redemption Date.
provided, however, that if such amount is a negative number, the Optional
Redemption Premium shall be zero.
"Preferred Dividend Rate" means a rate per annum equal to (i) 1.120% over
the Adjusted LIBO Rate, which rate shall be adjusted for each Dividend Period or
(ii) if adequate and fair means do not exist to enable the determination of the
Adjusted LIBO, Rate, 0.395% over the Base Rate.
"Redemption Amount" means, with respect to any redemption of Voting
Preferred Stock, the Optional Redemption Amount or the Mandatory Redemption
Amount, as the case may be.
"Redemption Date" means any Mandatory Redemption Date and any date fixed by
the Board of Directors to redeem Voting Preferred Stock under Section 6.
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"Stock Purchase Agreement" means the Stock Purchase Agreement, dated as Of
December 29, 1994, between, the Corporation and MW Investors L.L.C., as the same
may be modified or amended from time to time.
IN WITNESS WHEREOF, said Tenneco International Holding Corp. has caused
this Certificate of Designation to be signed by Robert G. Simpson, as Vice
President, this 29th day of December, 1994.
TENNECO INTERNATIONAL HOLDING CORP.
By: /s/ Robert G. Simpson
----------------------------------
Robert G. Simpson, Vice President
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<PAGE> 38
RESTATED
CERTIFICATE OF INCORPORATION
OF
TENNECO INTERNATIONAL HOLDING CORP.
(Originally incorporated as
Tenneco Norge Inc.
on
October 19, 1979)
This Restated Certificate of Incorporation, which restates and amends the
original Certificate of Incorporation of Tenneco International Holding Corp. as
heretofore amended, was duly adopted by action of the Board of Directors of the
corporation and by written consent of the sole stockholder of the corporation
pursuant to the provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware.
FIRST: The name of the corporation is Tenneco International Holding Corp.
SECOND: The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted
by the corporation is to engage in the following activities:
(a) to own, hold, acquire, sell and otherwise deal from time to time
with the capital stock of any company which may become a subsidiary
of the corporation;
(b) to enter into and exercise and perform its rights and
obligations under (i) a Preferred Stock Purchase Agreement (as
amended or otherwise modified from time to time, the "Preferred
Stock Agreement") with MW Investors L.L.C., a Delaware limited
liability company, (ii) a Voting Trust Agreement (as amended or
modified from time to time, the "Voting Trust Agreement"), among
Wilmington Trust Company, as Voting Trustee, and one or more holders
of capital stock of the corporation, (iii) a Stockholders Agreement
(as amended or otherwise modified from time to time, the
"Stockholders Agreement"), with MW Investors L.L.C. and one or more
holders of capital stock of the corporation, (iv) a Put Agreement
(as amended or otherwise modified from time to time, the "Tenneco
Put"), with Tenneco Inc., a Delaware corporation, and (v) a
Liquidity Facility (as amended or otherwise modified from time to
time, the "Liquidity Facility") with either of Tenneco Inc., Tenneco
Credit Corporation, a Delaware corporation, another
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direct or indirect wholly owned subsidiary of Tenneco or one or more
financial institutions (the Preferred Stock Agreement the Voting
Trust Agreement, the Stockholders Agreement, the Tenneco Put and the
Liquidity Facility being hereinafter collectively referred to as
the "Operative Agreements");
(c) to execute, deliver and perform all agreements, documents,
instruments or certificates, including without limitation the
issuance of stock certificates, evidencing, necessitated by or in
connection with, any or all of the Operative Agreements or any or
all of the activities and powers referred to herein or in clause (d)
or (e) below;
(d) to engage in any activity and to exercise any power permitted to
corporations under the laws of the State of Delaware to the extent
the corporation is required to do so or not prohibited from doing so
under the Operative Agreements; and
(e) to engage in any activity and to exercise any powers permitted
to corporations under the laws of the State of Delaware that are
related or incidental to the foregoing and necessary, convenient or
advisable to accomplish the foregoing.
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is 81,000,000 shares, divided into
30,000,000 shares of Preferred Stock, par value $0.01 per share (herein called
"Preferred Stock"), 1,000,000 shares of Junior Preferred Stock, par value $0.01
per share (herein called "Junior Preferred Stock") and 50,000,000 shares of
Common Stock, par value of each of $0.01 per share (herein called "Common
Stock").
The following is a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, of the classes of stock of the corporation:
I.
1. The Preferred Stock may be issued in one or more series. The
designations, preferences and relative, participating, optional, or other
special rights, and the qualifications, limitations or restrictions thereof, of
the Preferred Stock of each series shall be such as are stated and expressed
herein and, to the extent not stated and expressed herein, shall be such as may
be fixed by the Board of Directors (authority so to do being hereby expressly
granted) and stated and expressed in a resolution or resolutions adopted by the
Board of Directors providing for the issue of Preferred Stock of such series.
Such resolution or resolutions shall (a) specify the series to which such
Preferred Stock shall belong, (b) fix the dividend rate or rates, if any,
therefor, (c) fix the amount, if any, which the holders of
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the Preferred Stock of such series shall be entitled to be paid in the event of
a voluntary or involuntary liquidation, dissolution or winding up of the
corporation, (d) state whether or not the Preferred Stock of such series shall
be redeemable and at what times and under what conditions and the amount or
amounts payable thereon in the event of redemption; and may, in a manner not
inconsistent with the provisions of this Article FOURTH, (i) limit the number of
shares of such series which way be issued, (ii) provide for a sinking fund for
the purchase or redemption, or a purchase fund for the purchase, of shares of
such series and the terms and provisions governing the operation of any such
fund and the status as to reissuance of shares of Preferred Stock of such series
purchased or otherwise reacquired or redeemed or retired through the operation
thereof, and that so long as the corporation is in default as to such sinking or
purchase fund the corporation shall not (with such exceptions, if any, as may be
provided) pay any dividends upon or purchase or redeem shares of capital stock
ranking junior to the Preferred Stock with respect to dividends or distributions
of assets upon liquidation (referred to in this Part I of Article FOURTH as
"stock ranking junior to the Preferred Stock"), (iii) grant voting rights to the
holders of shares of such series in addition to and not inconsistent with those
granted by this Part I of Article FOURTH to the holders of Preferred Stock, and
in the absence of such grant the holders of such series of Preferred Stock shall
have no such additional voting rights, (iv) impose conditions or restrictions
upon the creation of indebtedness of the corporation or upon the issue of
additional Preferred Stock or other capital stock ranking junior thereto or on a
parity therewith or prior thereto with respect to dividends or distribution of
assets upon liquidation, (v) impose conditions or restrictions upon the payment
of dividends upon, or the making of other distributions to, or the redemption,
repurchase or other acquisition of, stock ranking junior to or on a parity with
the Preferred Stock, (vi) grant to the holders of the Preferred Stock of such
series the right to convert such stock into shares of stock ranking on a parity
with or junior to the Preferred Stock, and (vii) grant such other special rights
to the holders of shares of such series as the Board of Directors may determine
and as shall not be inconsistent with the provisions of this Article FOURTH. The
term "fixed for such series" and similar terms as used in this Part I of Article
FOURTH shall mean stated and expressed in this Part I of Article FOURTH or in a
resolution or resolutions adopted by the Board of Directors providing for the
issue of Preferred Stock of the series referred to therein.
2. The holders of the Preferred Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any funds legally available
therefor, cumulative preferential dividends in cash, at the rate or rates, if
any, fixed for such series, payable as specified in the resolution or
resolutions of the Board of Directors providing for the issuance of the series
of Preferred Stock. Dividends, if any, on shares of the Preferred Stock of any
series shall accrue from the date of issuance, or from such other date or dates
as may be fixed by the Board of Directors for any series, and shall be
cumulative. Each share of Preferred Stock shall rank on a parity with each other
share of Preferred Stock, irrespective of series, with respect to preferential
dividends at the respective rates, if any, fixed for such series, and no
dividend shall be declared or paid or set apart for payment for the Preferred
Stock of any series unless at the same time a dividend in like proportion to the
dividends, if any, accrued upon the Preferred Stock of each other series shall
be declared or paid or set
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apart for payment, as the case may be, on Preferred Stock of each other series
then outstanding.
3. So long as any shares of Preferred Stock shall remain outstanding, in no
event shall any dividends whatsoever, whether in cash, stock, or otherwise, be
paid or declared, or any distribution be made, on any class of stock ranking
junior to the Preferred Stock, nor shall any share of stock ranking junior to
the Preferred Stock be redeemed, purchased, retired or otherwise acquired for a
valuable consideration (or any monies be paid or made available for a sinking
fund for the purchase or redemption, or a purchase fund for the purchase, of
such shares) by the corporation or any subsidiary thereof, unless all dividends
on the Preferred Stock for all past periods shall have been paid, or declared
and a sum sufficient for the payment thereof set apart. In addition, except as
hereinafter provided, no dividends shall be declared or paid or set apart for
payment on any class or series of stock ranking on a parity with any series of
the Preferred Stock for any period unless full cumulative dividends have been or
contemporaneously are declared and paid on such series for all past dividend
periods. When such dividends are not paid in full upon the shares of such series
and any other class or series of stock ranking on a parity as to dividends with
such series, all dividends declared upon the shares of such series and any other
class or series of stock ranking on a parity as to dividends with such series
shall be declared pro rata so that the amount of dividends declared per share on
such series and such other class or series shall in all cases bear to each other
the same ratio that accrued dividends per share on the shares of such series and
such other class or series bear to each other.
4. So long as any shares of Preferred Stock are outstanding the corporation
shall not, without the consent of the holders of at least a majority of the
number of shares of Preferred Stock at the time outstanding, given in person or
by proxy, either in writing or by vote at an annual meeting or a special meeting
called for the purpose, amend any of the provisions of this Restated Certificate
of Incorporation if the amendment would increase or decrease the aggregate
number of authorized shares of Preferred Stock, increase or decrease the par
value of the shares of Preferred Stock or alter or change the powers,
preferences or special rights of the shares of Preferred Stock so as to affect
them adversely. If any proposed amendment to this Restated Certificate of
Incorporation would alter or change the powers, preferences, or special rights
of one or more series of Preferred Stock so as to affect them adversely, but
shall not so affect the entire class, then only the shares of the series so
affected by the amendment shall be considered a separate class for the purposes
of this paragraph.
5. In the event of any liquidation, dissolution or winding up of the
affairs of the corporation, then, before any distribution or payment shall be
made to the holders of any class of stock of the corporation ranking junior to
the Preferred Stock, the holders of the Preferred Stock of the respective series
shall be entitled to be paid in full the respective amounts, if any, fixed for
such series. Each share of Preferred Stock shall rank on a parity with each
other share of Preferred Stock, irrespective of series, with respect to
distributions in the event of any liquidation, dissolution or winding up of the
affairs of the corporation.
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After such payment shall have been made in full to the holders of the Preferred
Stock, the remaining assets and funds of the corporation shall be distributed
among the holders of the stock of the corporation ranking junior to the
Preferred Stock according to their respective rights. In the event that the
assets of the corporation available for distribution to holders of Preferred
Stock shall not be sufficient to make the payment herein required to be made in
full, such assets, shall be distributed to the holders of the respective shares
of Preferred Stock pro rata in proportion to the amounts payable hereunder upon
each share thereof.
6. Except as otherwise provided in any resolution of the Board of Directors
providing for the issuance of any particular series of Preferred Stock,
Preferred Stock redeemed or otherwise acquired by the corporation shall be
retired and assume the status of authorized but unissued Preferred Stock without
designation as to series and may thereafter, subject to the provisions of this
Part I of Article FOURTH and of any restrictions contained in any resolution of
the Board of Directors providing for the issue of any particular series of
Preferred Stock, be reissued in the same manner as other authorized but unissued
Preferred Stock.
II.
1. The Junior Preferred Stock may be issued in one or more series. The
Junior Preferred Stock shall rank junior to the Preferred Stock in all respects,
including, but not limited to, dividends and distributions upon the liquidation,
dissolution or winding up of the corporation. The designations, preferences and
relative, participating, optional, or other special rights, and the
qualifications, limitations or restrictions thereof, of the Junior Preferred
Stock of each series shall be such as are stated and expressed herein and, to
the extent not stated and expressed herein, shall be such as may be fixed by the
Board of Directors (authority so to do being hereby expressly granted) and
stated and expressed in a resolution or resolutions adopted by the Board of
Directors providing for the issue of Junior Preferred Stock of such series. Such
resolution or resolutions shall (a) specify the series to which such Junior
Preferred Stock shall belong, (b) fix the dividend rate or rates, if any,
therefor, (c) fix the amount, if any, which the holders of the Junior Preferred
Stock of such series shall be entitled to be paid in the event of a voluntary or
involuntary liquidation, dissolution or winding up of the corporation, (d) state
whether or not the Junior Preferred Stock of such series shall be redeemable and
at what times and under what conditions and the amount or amounts payable
thereon in the event of redemption; and may, in a manner not inconsistent with
the provisions of this Article FOURTH, (i) limit the number of shares of such
series which may be issued, (ii) provide for a sinking fund for the purchase or
redemption, or a purchase fund for the purchase, of shares of such series and
the terms and provisions governing the operation of any such fund and the status
as to reissuance of shares of Junior Preferred Stock of such series purchased or
otherwise reacquired or redeemed or retired through the operation thereof, and
that so long as the corporation is in default as to such sinking or purchase
fund the corporation shall not (with such exceptions, if any, as may be
provided) pay any dividends upon or purchase or redeem shares of capital stock
ranking
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junior to the Junior Preferred Stock with respect to dividends or distributions
of assets upon liquidation (referred to in this Part II of Article FOURTH as
"stock ranking junior to the Junior Preferred Stock"), (iii) impose conditions
or restrictions upon the creation of indebtedness of the corporation or upon the
issue of additional Junior Preferred Stork or other capital stock ranking on a
parity therewith or prior thereto with respect to dividends or distribution of
assets upon liquidation, (iv) impose conditions or restrictions upon the payment
of dividends upon or the making of other distributions to, or the acquisition
of, stock ranking junior to the Junior Preferred Stock, (v) grant to the holders
of the Junior Preferred Stock of such series the right to convert such stock
into shares of stock ranking on a parity with or junior to the Junior Preferred
Stock, and (vi) grant such other special rights to the holders of shares of such
series as the Board of Directors may determine and as shall not be inconsistent
with the provisions of this Article FOURTH or the prior rights of the holders of
Preferred Stock as set forth in Part I of this Article FOURTH; provided,
however, that the Junior Preferred Stock shall have no voting power whatsoever
except as required by law and except as set forth in Article FOURTH II.3. The
term "fixed for such series" and similar terms as used in this Part II of
Article FOURTH shall mean stated and expressed in this Part II of Article FOURTH
or in a resolution or resolutions adopted by the Board of Directors providing
for the issue of Junior Preferred Stock of the series referred to therein.
2. So long as any shares of Junior Preferred Stock shall remain
outstanding, in no event shall any dividends whatsoever, whether in cash, stock,
or otherwise, be paid or declared, or any distribution be made, on any class of
stock ranking junior to the Junior Preferred Stock, nor shall any shares of
stock ranking junior to the Junior Preferred Stock be purchased, retired or
otherwise acquired for a valuable consideration by the corporation, unless all
dividends on the Junior Preferred Stock for all past periods shall have been
paid, or declared and a sum sufficient for the payment thereof set apart.
3. (A) So long as any shares of Junior Preferred Stock are outstanding the
corporation shall not, without the consent of the holders of at least a majority
of the number of shares of Junior Preferred Stock at the time outstanding, given
in person or by proxy, either in writing or by vote at an annual meeting or a
special meeting called for the purpose, amend any of the provisions of this
Restated Certificate of Incorporation if the amendment would increase or
decrease the aggregate number of authorized shares of Junior Preferred Stock,
increase or decrease the par value of the shares of Junior Preferred Stock or
alter or change the powers, preferences or special rights of the shares of
Junior Preferred Stock so as to affect them adversely. If any proposed amendment
to this Restated Certificate of Incorporation would alter or change the powers,
preferences, or special rights of one or more series of Junior Preferred Stock
so as to affect them adversely, but shall not so affect the entire class, then
only the shares of the series so affected by the amendment shall be considered a
separate class for the purposes of this paragraph.
(B) So long as any shares of Junior Preferred Stock are outstanding the
corporation shall not, without the consent of the holders of at least a majority
of the number of shares of Junior Preferred Stock at the time outstanding, given
in person or by proxy, either in writing
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or by vote at an annual meeting or a special meeting called for that purpose,
create or authorize any class of stock (other than the Preferred Stock) ranking
prior to the Junior Preferred Stock in respect of dividends or distribution of
assets on liquidation; or create or authorize any obligation or security
convertible into shares of stock of any class of stock (other than the Preferred
Stock) ranking prior to the Junior Preferred Stock in respect of dividends or
distribution of assets on liquidation.
(C) So long as any shares of Junior Preferred Stock are outstanding the
corporation shall not, without the consent of the holders of at least a majority
of the number of shares of Junior Preferred Stock at the time outstanding, given
in person or by proxy, either in writing or by vote at an annual meeting or a
special meeting called for the purpose:
(a) create or authorize any class of stock ranking on a parity with
the Junior Preferred Stock in respect of dividends or distribution of
assets on liquidation; or
(b) increase the authorized amount of the Junior Preferred Stock or
of any class of stock ranking on a parity with the Junior Preferred Stock
in respect of dividends or distributions of assets on liquidation: or
(c) create or authorize any obligation or security convertible into
shares of stock of any class ranking on a parity with the Junior Preferred
Stock in respect of dividends or distribution of assets on liquidation.
(D) So long as any shares of Junior Preferred Stock are outstanding the
corporation shall not purchase, redeem or otherwise acquire for value any shares
of Junior Preferred Stock or of any other stock ranking on a parity with the
Junior Preferred Stock in respect of dividends or distribution of assets on
liquidation during the continuance of any default in the payment of dividends on
the Junior Preferred Stock without the consent, given in person or by proxy,
either in writing or by vote at an annual meeting or a special meeting called
for the purpose, of the holders of at least a majority of the number of shares
of Junior Preferred Stock present in person or by proxy at such meeting,
provided that a quorum, consisting of at least a majority of the then
outstanding shares of Junior Preferred Stock, is present.
(E) Any action specified in this subdivision 3 as requiring the consent of
the holders of at least a specified proportion of the number of shares of Junior
Preferred Stock or of any particular series thereof at the time outstanding or
represented at a meeting may be taken with such consent and with such additional
vote or consent, if any, of stockholders as may be from time to time required by
this Certificate of Incorporation, as amended from time to time, or by law.
4. In the event of any liquidation, dissolution or winding up of the
affairs of the corporation, then, before any distribution or payment shall be
made to the holders of any class of stock of the corporation ranking junior to
the Junior Preferred Stock, the holders of
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the Junior Preferred Stock of the respective series (subject to the rights of
the Preferred Stock) shall be entitled to be paid in full the respective
amounts, if any, fixed for such series. After such payment shall have been made
in full to the holders of the Junior Preferred Stock, the remaining assets and
funds of the corporation shall be distributed among the holders of the stock of
the corporation ranking junior to the Junior Preferred Stock according to their
respective rights. In the event that the assets of the corporation available for
distribution to holders of Junior Preferred Stock shall not be sufficient to
make the payment herein required to be made in full, such assets shall be
distributed to the holders of the respective shares of Junior Preferred Stock
pro rata in proportion to the amounts payable hereunder upon each share thereof.
5. Except as otherwise provided in any resolution of the Board of Directors
providing for the issuance of any particular series of Junior Preferred Stock,
shares of Junior Preferred Stock redeemed or otherwise acquired by the
corporation shall be retired and assume the status of authorized but unissued
Junior Preferred Stock without designation as to series and may thereafter,
subject to the provisions of this Part II of Article FOURTH and of any
restrictions contained in any resolution of the Board of Directors providing for
the issue of any particular series of Preferred Stock, be reissued in the same
manner as other authorized but unissued Junior Preferred Stock.
III.
Subject to the prior and superior rights of the Preferred Stock and the
Junior Preferred Stock, and on the conditions set forth in the foregoing Parts I
and II of this Article FOURTH or in any resolution of the Board of Directors
providing for the issuance of any particular series of Preferred Stock or Junior
Preferred Stock, and not otherwise, such dividends (payable in cash, stock or
otherwise) as may be determined by the Board of Directors may be declared and
paid on the Common Stock from time to time out of any funds legally available
therefor.
Subject to the provisions of Parts I and II of this Article FOURTH, the
holders of the Common Stock shall be entitled to one vote for each share held at
all meetings of the stockholders of the corporation.
After payment shall have been made in full to the holders of the Preferred
Stock and the Junior Preferred Stock in the event of any liquidation,
dissolution or winding up of the affairs of the corporation, the remaining
assets and funds of the corporation shall be distributed among the holders of
the Common Stock according to their respective shares.
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IV.
Subject to the rights of the holders of any series of Preferred Stock or
Junior Preferred Stock as provided for in a resolution or resolutions adopted by
the Board of Directors providing for the issue thereof, ownership of shares of
any class of the capital stock of the corporation shall not entitle the holders
thereof to any preemptive right to subscribe for or purchase or to have offered
to them for subscription or purchase any additional shares of capital stock of
any class of the corporation or any securities convertible into any class of
capital stock of the corporation, however acquired, issued or sold by the
corporation, it being the purpose and intent that the Board of Directors shall
have full right, power and authority, subject to the rights of the holders of
any series of Preferred Stock or Junior Preferred Stock as provided for in a
resolution or resolutions adopted by the Board of Directors providing for the
issue thereof, to offer for subscription or sell or to make any disposal of any
or all unissued shares of the capital stock of the corporation or any securities
convertible into stock or any or all shares of stock or convertible securities
issued and thereafter acquired by the corporation, for such consideration, not
less than the par value of shares having a par value, in money or property, as
the Board of Directors shall determine.
FIFTH: The business and affairs of the corporation shall be managed by or
under the direction of a Board of Directors consisting of not less than one nor
more than eight directors, the exact number of directors to be fixed as set
forth in, or in the manner provided in, the By-Laws of the corporation. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office. Subject to the rights of the holders of any series of
Preferred Stock or Junior Preferred Stock as provided for in a resolution or
resolutions adopted by the Board of Directors providing for the issue thereof,
any vacancy or newly created directorship on the Board of Directors may be
filled by a majority of the directors then in office, even if less than a
quorum, or by a sole remaining director. Any director elected to fill a vacancy
not resulting from an increase in the number of directors shall have the same
remaining term as that of his predecessor.
(B) In furtherance and not in limitation of the powers which are now or may
hereafter be conferred by statute or the By-Laws of the corporation, the Board
of Directors is expressly authorized:
(a) To fix, determine and vary from time to time the amount to be
maintained as surplus and the amount or amounts to be set apart as
working capital.
(b) To set apart out of any of the funds of the corporation
available for dividends a reserve or reserves for any proper
purposes and/or to abolish any such reserve in the manner in which
it was created.
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(c) To make, amend, alter, change, add to or repeal By-Laws for the
corporation, without any action on the part of the stockholders.
(d) To authorize and cause to be executed mortgages and liens,
without limit as to amount, upon the real and personal property of
the corporation.
(e) From time to time to determine whether and to what extent, at
what time and place, and under what conditions and regulations the
accounts and books of the corporation or any of them, shall be open
to the inspection of any stockholder, and no stockholder shall have
any right to inspect any account or book or document of the
corporation except as conferred by statute or the By-Laws or as
authorized by a resolution of the Board of Directors.
(f) To authorize the payment of compensation to the directors for
services to the corporation, including fees for attendance at
meetings of the Board of Directors, and of any committees, and to
determine the amount of such compensation and fees.
(g) To designate by resolution or resolutions passed by a majority
of the whole Board of Directors one or more committees, each
committee to consist of one or more of the directors of the
corporation, which to the extent provided in said resolution or
resolutions or in the By-Laws of the corporation shall have and may
exercise the powers of the Board of Directors in the management of
the business and affairs of the corporation and may have power to
authorize the seal of the corporation to be affixed to all papers
which may require it.
(h) Subject to Article FOURTH and to the rights of the holders of
any series of Preferred Stock or Junior Preferred Stock as provided
for in a resolution or resolutions adopted by the Board of Directors
providing for the issue thereof, at any time or from time to time
(without any action by the stockholders of the corporation) to
create and issue, whether or not in connection with the issue and
sale of any shares of stock or other securities of the corporation,
rights or options entitling the holders thereof to purchase from the
corporation any shares of its capital stock of any class or classes
or of any series of any class or classes, such rights or options to
be evidenced by or in such instrument or instruments as shall be
approved by the Board of Directors. The terms upon which, the time
or times, which may be limited or unlimited in duration, at or
within which, and the price or prices at which any such shares may
be purchased from the corporation upon the exercise of any such
right or option shall be such as shall be fixed and stated in the
resolution or resolutions adopted by the Board of Directors
providing for the creation and issue of such rights or options and,
in every case, set forth or incorporated by reference in the
instrument or instruments evidencing such rights or options.
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SIXTH: The corporation is to have perpetual existence.
SEVENTH: A director of this corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter by amended. Any amendment,
modification or repeal of the foregoing sentence by the stockholders of the
corporation shall not adversely affect any right or protection of a director of
the corporation in respect of any act or omission occurring prior to the time of
such amendment, modification or repeal.
EIGHTH: Elections of directors need not be by written ballot unless
otherwise provided in the By-Laws of the corporation.
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IN WITNESS WHEREOF, said TENNECO INTERNATIONAL HOLDING CORP. has caused
this Restated Certificate of Incorporation to be signed by its Vice President
this 29th day of December, 1994.
TENNECO INTERNATIONAL HOLDING CORP.
By: /s/ Robert G. Simpson
-------------------------------------
Vice President
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Exhibit 3.8
TENNECO INTERNATIONAL HOLDING CORP.
(a Delaware corporation)
AMENDED AND RESTATED
BY-LAWS
Adopted: December 29, 1994
<PAGE> 2
--oo0oo--
B Y - L A W S
--oo0oo--
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the state of incorporation as the Board of Directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such place as may be fixed from time to time by the
Board of Directors. Meetings of stockholders for any other purpose may be held
at such time and place, within or without the state of incorporation, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual meetings of stockholders shall be held on such date
and at such times as may be fixed by the Board for the purpose of electing a
Board of Directors and for the transaction of other business as may properly be
brought before the meeting.
Section 3. Written notice of the Annual Meeting shall be given to each
stockholder entitled to vote thereat not less than ten nor more than sixty days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, during ordinary business hours, for a
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period of at least ten days prior to the election, either at a place within the
city, town or village where the election is to be held and which place shall be
specified in the notice of the meeting, or, if not specified, at the place
where said meeting is to be held, and the list shall be produced and kept at
the time and place of election during the whole time thereof, and subject to
the inspection of any stockholder who may be present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting of stockholders, stating
the time, place and object thereof, shall be given to each stockholder entitled
to vote thereat, not less than ten nor more than sixty days before the date
fixed for the meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 9. When a quorum is present at any meeting, the affirmative
vote of the holders of a majority of the stock having voting power thereon,
present in person or represented by proxy, shall decide any question brought
before such meeting, unless the question is one upon which, by express provision
of the statutes or of the certificate of incorporation, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
Section 10. Except as otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
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Section 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by any
provisions of the statutes or of the certificate of incorporation, the notice
of meeting, the meeting and vote of stockholders may be dispensed with if the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and vote shall sign a consent
in writing setting forth the action so taken. Prompt notice of such action by
written consent shall be given to those stockholders who have not consented in
writing to such corporate action.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be determined from time to time by resolution of the Board of
Directors, provided that such number shall not be less than one nor more than
eight. The directors shall be elected at the annual meeting of the stockholders,
except as provided in Section 2 of this Article, and each director elected shall
hold office until his successor is elected and qualified. Directors need not be
stockholders. Directors shall be elected by a plurality of the votes cast.
Section 2. Except as otherwise provided in the certificate of
incorporation, vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced.
Section 3. The business of the corporation shall be managed by its
Board of Directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the state of incorporation.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of
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the failure of the stockholders to fix the time or place of such first meeting
of the newly elected Board of Directors, or in the event such meeting is not
held at the time and place so fixed by the stockholders, the meeting may be held
at such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the Directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 7. Special meetings of the Board of Directors may be called by
the Chairman of the Board or the President and shall be called at the request of
three directors. The Secretary shall give notice of any special meeting by
mailing the same at least three days, or by telegraphing, telexing, telecopying,
telephoning or personally delivering the same at least one day, before the
meeting to each director; but such notice may be waived by any director. When
notice is given to a director by telephone, it shall be effective in accordance
with Article IV, Section 1 of these By-Laws.
Section 8. The number of Directors that shall constitute a quorum shall
be not less than one-third of the whole Board of Directors nor less than two
Directors and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation; provided, however, that when the whole Board is comprised of only
one director, then one director shall constitute a quorum and the vote of such
director shall constitute the act of the Board of Directors. If a quorum shall
not be present at any meeting of the Board of Directors, the Directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if a written consent thereto is signed by all members of the
Board or of such committee as the case may be, and such written consent is filed
with the Minutes of proceedings of the Board or Committee.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board of
Directors.
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Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 12. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing
and delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram, telex, telecopy or telephone; provided,
that when telephone notice is given, such notice shall be effective only if
confirmed substantially concurrently with one other method of giving notice.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The corporate officers of the Company may consist of a
Chairman of the Board, and may include a Vice Chairman of the Board (both the
Chairman and the Vice Chairman shall be chosen from the Board of Directors), a
President, one or more Vice Presidents, a Secretary, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers, a Controller, and
such other officers as the Board of Directors may from time to time appoint
(none of whom need be a member of the Board). In so far as permitted by law, any
two offices may be held by the same person. The foregoing officers
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shall be elected by the Board of Directors at the first meeting after the
stockholders' Annual Meeting in each year.
Notwithstanding any of the provisions of this Article V, the holders of
a majority of the outstanding shares of capital stock of the corporation
entitled to vote for the election of Directors may (i) by written consent at any
time or (ii) by vote at any special or annual meeting of stockholders, elect,
replace, remove (or consent to such election, replacement or removal of) any one
or more officers of the corporation.
Section 2. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 3. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
CHAIRMAN OF THE BOARD
Section 5. The Chairman of the Board may be elected by the Board of
Directors at the first meeting after the Annual Meeting of Stockholders in each
year. The Chairman of the Board shall preside at all meetings of stockholders
and of the Board of Directors, shall be ex-officio a member of all standing
committees, and shall perform such other duties as may from time to time be
requested of him by the Board of Directors.
VICE CHAIRMAN OF THE BOARD
Section 5a. The Vice Chairman of the Board shall preside at meetings of
the Board of Directors in the absence of the Chairman of the Board and shall
perform such other duties as may from time to time be requested of him by the
Board of Directors.
THE PRESIDENT
Section 6. The president shall have the powers and perform the duties
usually incidental to the office of the president. He shall have the general and
actual management of the business of the corporation under the Chairman of the
Board, and shall see that all orders and resolutions of the Board of Directors
are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise
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signed and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation.
THE VICE PRESIDENTS
Section 8. The vice president, or if there shall be more than one, the
vice presidents in the order determined by the Board of Directors, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the stockholders and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall keep in safe custody
the seal of the corporation and, when authorized by the Board of Directors,
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of an assistant secretary.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors, shall
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation in such depositories as may
be designated by the Board of Directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties
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as shall be satisfactory to the Board of Directors for the faithful performance
of the duties of his office and for the restoration to the corporation, in case
of his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession
or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the Board of Directors,
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
THE CONTROLLER
Section 15. The controller following his appointment shall maintain
adequate records of all assets, liabilities and transactions of the corporation
and see that audits thereof are currently and regularly made; and he shall
perform such other duties as may be required by the Board of Directors, the
President or designated Vice President.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 16. Each person who is or was a director or officer of the
corporation, or who serves or may have served at the request of the corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise (including the heirs, executors, administrators or
estate of such person) and who was or is a party or is threatened to be made a
party to any threatened, pending or completed claim, action, suit or proceeding,
whether criminal, civil, administrative or investigative, including appeals,
shall be indemnified by the corporation as a matter of right to the full extent
permitted or authorized by the Corporation Law of the state of incorporation of
the corporation, as it may from time to time be amended, against any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him in his capacity as a director or
officer, or arising out of his status as a director or officer. Each person who
is or was an employee or agent of the corporation, or who serves or may have
served at the request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (including
the heirs, executors, administrators or estate of such person) may, at the
discretion of the Board, be indemnified by the corporation to the same extent as
provided herein with respect to directors and officers of the corporation.
The corporation may, but shall not be obligated to, maintain insurance
at its expense, to protect itself and any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such.
The corporation may, but shall not be obligated to, pay expenses incurred in
defending a
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civil or criminal action, suit or proceeding in advance of the final
disposition of such action, suit or proceeding.
The indemnification provided by this Section 16 shall not be exclusive
of any other rights to which those seeking indemnification may be entitled as a
matter of law or under any agreement, vote of stockholders or disinterested
directors or otherwise.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
president or a vice president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary, of the corporation, certifying the
number of shares owned by him in the corporation.
Section 2. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent or (2) by a transfer clerk acting on behalf of the
corporation and a registrar, the signature of any such president, vice
president, treasurer, assistant treasurer, secretary or assistant secretary may
be facsimile. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, the Board of Directors
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or give the corporation a bond in such sum as it may direct or indemnify
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost or destroyed.
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<PAGE> 11
TRANSFERS OF STOCK
Section 4. Subject to any applicable transfer restriction conspicuously
noted thereon, upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to cancel the old certificate and record the transaction
upon its books.
FIXING THE DATE FOR DETERMINATION OF
STOCKHOLDERS OF RECORD
Section 5. The Board of Directors may fix in advance a date, not more
than sixty nor less than ten days preceding the date of any meeting of
stockholders, nor more than sixty days prior to the date of any other action,
such as the date for the payment of any dividend, or the date for the allotment
of rights, or the date when any change or conversion or exchange of capital
stock shall go into effect, or a date in connection with obtaining such
consent, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting, and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, or to give such consent, and in such case such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting and any adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such rights, or to give such
consent, as the case may be notwithstanding any transfer of any stock on the
books of the corporation after any such record date fixed as aforesaid.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
the state of incorporation.
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ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual meeting,
and at any special meeting of stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal" and
the state of incorporation. The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
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ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered or repealed at any meeting of
the stockholders or of the Board of Directors if notice of such alteration or
repeal be contained in the notice of such meeting. No change of the time or
place of the meeting for the election of directors shall be made within sixty
days next before the day on which such meeting is to be held, and in case of
any change of such time or place, notice thereof shall be given to each
stockholder in person or by letter mailed to his last known post office address
at least twenty days before the meeting is held.
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<PAGE> 1
EXHIBIT 3.9
CERTIFICATE OF INCORPORATION
OF
CLEVITE INDUSTRIES INC.
FIRST: The name of the Corporation is Clevite Industries Inc.
SECOND: The Corporation's registered office in the State of
Delaware is at Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is the Corporation Trust Company.
THIRD: The nature of the business of the Corporation and its
purpose is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, par value $.01
per share.
FIFTH: The name and mailing address of the incorporator is as
follows:
C. Lynn Tomayko
c/o Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
SIXTH: The following provisions are inserted for the management
of the business and for the conduct of the affairs of the Corporation and for
the purpose of creating, defining, limiting and regulating the powers of the
Corporation and its directors and stockholders.
(a) The number of directors of the Corporation shall be fixed and
may be altered from time to time in the manner provided in the By-Laws,
and vacancies in the Board of Directors and newly created directorships
resulting from any increase in the authorized number of directors may
be filled, and directors may be removed, as provided in the By-Laws.
(b) The election of directors may be conducted in any manner
approved by the stockholders at the
<PAGE> 2
time when the election is held and need not be by ballot.
(c) All corporate powers and authority of the Corporation (except
as at the time otherwise provided by law, by this Certificate of
Incorporation or by the By-laws) shall be vested in and exercised by
the Board of Directors.
(d) The Board of Directors shall have the power without the
assent or vote of the stockholders to adopt, amend, alter or repeal the
By-Laws of the Corporation, except to the extent that the By-Laws or
this Certificate of Incorporation otherwise provide.
SEVENTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of his or her
fiduciary duty as a director, provided that nothing contained in this Article
shall eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, (iii) under Section 174 of the General Corporation
Law of the State of Delaware or (iv) for any transaction from which the director
derived an improper personal benefit. This ARTICLE SEVENTH may not be amended or
modified to increase the liability of a director, or repealed, except upon the
affirmative vote of the holders of 75% or more of the outstanding shares of the
Common Stock of the Corporation. No such amendment, modification or repeal shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment, modification or repeal.
EIGHT: The Corporation reserves the right to amend or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by the laws of the State of Delaware, and all rights
herein conferred upon stockholders or directors are granted subject to this
reservation.
IN WITNESS WHEREOF, I, the undersigned, being the incorporator
hereinabove named, for the purpose of forming a corporation pursuant to the
General Corporation
2
<PAGE> 3
Law of the State of Delaware, do make and file this Certificate, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand and seal, this 2nd day of October, 1987.
/s/ C. Lynn Tomayko
------------------------------
C. Lynn Tomayko
3
<PAGE> 4
CERTIFICATE OF CHANGE OF LOCATION OF REGISTERED OFFICE
AND OF REGISTERED AGENT
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"corporation") is Clevite Industries Inc.
2. The registered office of the corporation within the
State of Delaware is hereby changed to 229 South State
Street, City of Dover 19901, County of Kent.
3. The registered agent of the corporation within the
State of Delaware is hereby changed to The
Prentice-Hall Corporation System, Inc., the business
office of which is identical with the registered office
of the corporation as hereby changed.
4. The corporation has authorized the changes
hereinbefore set forth by resolution of its Board of
Directors.
Signed on March 28, 1988.
/s/ David A. Jenkins
-------------------------------
David A. Jenkins, Vice-President
Attest:
/s/ Patricia A. Meyer
- --------------------------------------
Patricia A. Meyer, Assistant Secretary
<PAGE> 5
CERTIFICATE OF CHANGE OF REGISTERED AGENT
AND
REGISTERED OFFICE
* * * * *
CLEVITE INDUSTRIES, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
The present registered agent of the corporation is The
Prentice-Hall Corporation System, Inc. and the present registered office
of the Corporation is in the County of New Castle.
The Board of Directors of CLEVITE INDUSTRIES, INC. adopted the
following resolution as of the 1st day of July, 1996.
RESOLVED, that the location of the registered office of the
Company in Delaware be, and the same hereby is, 1209 Orange
Street, Wilmington, New Castle County, Delaware; and it is further
RESOLVED, that The Corporation Trust Company be, and it
hereby is, appointed as Registered Agent for and on behalf of the
Company; and it is further
RESOLVED, that the officers of the Company be, and they
hereby are, instructed to certify to and file a copy of this
resolution in the office of the Secretary of State of Delaware,
and with other governmental agencies as may be required by law to
effect such change of location of principal office and registered
agent.
IN WITNESS WHEREOF, CLEVITE INDUSTRIES INC. has caused this statement to
be signed by James D. Gaughan, its Assistant Secretary, this 30th day of June,
1997.
CLEVITE INDUSTRIES, INC.
By: /s/ James D. Gaughan
-----------------------------
James D. Gaughan
Assistant Secretary
<PAGE> 1
Exhibit 3.10
CLEVITE INDUSTRIES INC.
BY-LAWS
Adopted: JULY 1, 1996
<PAGE> 2
-----------------
B Y - L A W S
-----------------
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of Wilmington, County
of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the state of incorporation as the Board of Directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held in the City of Greenwich, State of Connecticut, at such place as
may be fixed from time to time by the Board of Directors. Meetings of
stockholders for any other purpose may be held at such time and place, within
or without the state of incorporation, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
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Section 2. Annual meetings of stockholders, shall be held on such date and
at such times as may be fixed by the Board for the purpose of electing a Board
of Directors and for the transaction of other business as may properly be
brought before the meeting.
Section 3. Written notice of the Annual Meeting shall be given to each
stockholder entitled to vote thereat not less than ten nor more than fifty days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, during ordinary business hours, for a
period of at least ten days prior to the election, either at a place within the
city, town or village where the election is to be held and which place shall be
specified in the notice of the meeting, or, if not specified, at the place
where said meeting is to be held, and the list shall be produced and kept at
the time and place of election during the whole time thereof,
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and subject to the inspection of any stockholder who may be present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting of stockholders, stating
the time, place and object thereof, shall be given to each stockholder entitled
to vote thereat, not less than ten nor more than fifty days before the date
fixed for the meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
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<PAGE> 5
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
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<PAGE> 6
Section 10. Each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after eleven months from its date, unless the proxy provides for a longer
period, and, except where the transfer books of the corporation have been
closed or a date has been fixed as a record date for the determination of its
stockholders entitled to vote.
Section 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by
any provisions of the statutes or of the certificate of incorporation, the
notice of meeting, the meeting and vote of stockholders may be dispensed with,
if the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted shall sign a
consent in writing, setting forth the action so taken. Prompt notice of such
action by written consent shall be given to those stockholders who have not
consented in writing to such corporate action.
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ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be not less than one nor more than nine. Within the limits above
specified, the term "whole Board" as used in these By-Laws shall mean the number
of directors elected and holding office at any time. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this Article, and each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, and the directors
so chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced.
Section 3. The business of the corporation shall be managed by its
Board of Directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the certificate of
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<PAGE> 8
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the state of incorporation.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly
elected Board of Directors, or in the event such meeting is not held at the
time and place so fixed by the stockholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the Directors.
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<PAGE> 9
Section 6. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
Section 7. The Secretary shall give notice of any special meeting by
mailing the same at least three days, or by telegraphing, telexing,
telecopying, telephoning or personally delivering the same at least one day,
before the meeting to each director; but such notice may be waived by any
director. When notice is given to a director by telephone, it shall be
effective in accordance with Article IV, Section 1 of these By-Laws.
Section 8. The number of Directors that shall constitute a quorum shall
be not less than one-third of the whole Board of Directors nor less than two
Directors and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation; provided, however, that when the whole Board is comprised of
only one director, then one director shall constitute a quorum and the vote of
such director shall constitute the act of the Board of Directors. If a quorum
shall not be present at any meeting of the Board of Directors, the Directors
present thereat may
8
<PAGE> 10
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation
or these by-laws, any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting, if a written consent thereto is signed by all members of the Board or
of such committee as the case may be, and such written consent is filed with
the Minutes of proceeding of the Board or Committee.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of two or more of the directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board of
Directors.
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<PAGE> 11
Section 11. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 12. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing and
delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram, telex, telecopy or telephone;
provided, that when telephone notice is given,
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<PAGE> 12
such notice shall be effective substantially concurrently with one other method
of giving notice.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The corporate officers of the Company may consist of a Chairman
of the Board, and may include a Vice Chairman of the Board (both the Chairman
and the Vice Chairman shall be chosen from the Board of Directors), a
President, one or more Vice Presidents, a Secretary, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers, a Controller, and
such other officers as the Board of Directors may from time to time appoint
(none of whom need be a member of the Board). In so far as permitted by law,
any two offices may be held by the same person. The foregoing officers shall be
elected by the Board of Directors at the first meeting after the stockholders'
Annual Meeting in each year.
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<PAGE> 13
Notwithstanding any of the provisions of this Article V, the holders of a
majority of the outstanding shares of capital stock of the corporation entitled
to vote for the election of Directors, may (i) by written consent at any time,
or (ii) by vote at any special or annual meeting of stockholders, elect,
replace, remove (or consent to such election, replacement or removal) of any
one or more officers of the corporation.
Any officer elected or appointed by the Board of Directors may be removed
at any time by the affirmative vote of a majority of the whole Board of
Directors.
Section 2. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 3. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of
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<PAGE> 14
the Board of Directors. Any vacancy occurring in any office of the corporation
shall be filled by the Board of Directors.
CHAIRMAN OF THE BOARD
Section 5. The Chairman of the Board may be elected by the Board of
Directors at the first meeting after the Annual Meeting of Stockholders in each
year. The Chairman of the Board shall preside at all meetings of stockholders
and of the Board of Directors, shall be ex-officio a member of all standing
committees, and shall perform such other duties as may from time to time be
requested of him by the Board of Directors.
VICE CHAIRMAN OF THE BOARD
Section 5a. The Vice Chairman of the Board shall preside at meetings of
the Board of Directors in the absence of the Chairman of the Board, and shall
perform such other duties as may from time to time be requested of him by the
Board of Directors.
THE PRESIDENT
Section 6. The president shall have the powers and perform the duties
usually incidental to the office of the president. He shall have the general
and actual management of the business of the corporation under the Chairman of
the
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Board, and shall see that all orders and resolutions of the Board of Directors
are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 8. The vice president, or if there shall be more than one, the
vice presidents in the order determined by the Board of Directors, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the Board of
Directors and all meetings the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
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<PAGE> 16
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall keep in safe custody
the seal of the corporation and, when authorized by the Board of Directors,
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of an assistant secretary.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors, shall
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books
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belonging to the corporation in such depositories as may be designated by the
Board of Directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the Board of Directors,
shall, in the absence
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or disability of the treasurer, perform the duties and exercise the powers of
the treasurer and shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
THE CONTROLLER
Section 15. The controller, following his appointment shall maintain
adequate records of all assets, liabilities and transactions of the corporation
and see that audits thereof are currently and regularly made; and he shall
perform such other duties as may be required by the Board of Directors, the
President or designated Vice President.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 16. Each person who is or was a director or officer of the
corporation, or who serves or may have served at the request of the corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise (including the heirs, executors, administrators or
estate of such person) and who was or is a party or is threatened to be made a
party to any threatened, pending or completed claim, action, suit or
proceeding, whether criminal, civil, administrative or investigative, including
appeals, shall be indemnified by the corporation as a matter of right to the
full extent permitted or authorized by the
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Corporation Law of the state of incorporation of the corporation, as it may
from time to time be amended, against any expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in his capacity as a director or officer, or arising out of his
status as a director or officer. Each person who is or was an employee or agent
of the corporation, or who serves or may have served at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including the heirs, executors,
administrators or estate of such person) may, at the discretion of the Board,
be indemnified by the corporation to the same extent as provided herein with
respect to directors and officers of the corporation.
The corporation may, but shall not be obligated to, maintain insurance at
its expense, to protect itself and any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such.
The corporation may, but shall not be obligated to, pay expenses incurred in
defending a civil or criminal action, suit or
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proceeding in advance of the final disposition of such action, suit or
proceeding.
The indemnification provided by this Section 16 shall not be exclusive of
any other rights to which those seeking indemnification may be entitled as a
matter of law or under any agreement, vote of stockholders or disinterested
directors or otherwise.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
president or a vice president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation.
Section 2. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent or (2) by a transfer clerk acting on behalf of the
corporation and a registrar, the signature of any such president, vice
president, treasurer, assistant treasurer, secretary or assistant secretary may
be facsimile. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
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certificates shall cease to be such officer or officers of the corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless by adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alledged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity against any claim
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that may be made against the corporation with respect to the certificate
alleged to have been lost or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation to cancel the old certificate and record the
transaction upon its books.
FIXING THE DATE FOR DETERMINATION OF
STOCKHOLDERS OF RECORD
Section 5. The Board of Directors may close the stock transfer books
of the corporation for a period not more than forty nor less than ten days
preceding the date of any meeting of stockholders, nor more than forty days
prior to the date of any other action, such as the date for payment of any
dividend or the date for the allotment of rights or the date when any change or
conversion or exchange of capital stock shall go into effect or for a period of
not exceeding forty days in connection with obtaining the consent of
stockholders for any purpose. In lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not more than
forty nor less than ten days preceding the date of any meeting of stockholders,
nor more
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than forty days prior to the date of any other action, such as the date for the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
or a date in connection with obtaining such consent, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting, and any adjournment thereof, or entitled to receive payment of any
such dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to give
such consent and in such case such stockholders and only such stockholders as
shall be stockholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be
notwithstanding any transfer of any stock on the books of the corporation after
any such record date fixed as aforesaid.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to
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vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the state of
incorporation.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of
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the corporation, or for such other purpose as the directors shall think
conducive to the interest of the corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual meeting,
and at any special meeting of stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal"
and the state of
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incorporation. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered or repealed at any meeting of the
stockholders or of the Board of Directors if notice of such alteration or
repeal be contained in the notice of such meeting. No change of the time or
place of the meeting for the election of directors shall be made within sixty
days next before the day on which such meeting is to be held, and in case of
any change of such time or place, notice thereof shall be given to each
stockholder in person or by letter mailed to his last known post office address
at least twenty days before the meeting is held.
DEL.BL
25
<PAGE> 1
EXHIBIT 3.11
AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF THE PULLMAN COMPANY
Pursuant to Section 245 and Section 303 of the General Corporation Law
of the State of Delaware
The Pullman Company, a corporation organized and existing under and by
virtue of the laws of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify:
1. The name of the Corporation is The Pullman Company. The Corporation
was originally incorporated under the name Pullman Standard Inc., and the
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on March 25, 1981.
2. This Amended and Restated Certificate of Incorporation amends,
restates and integrates the Corporation's Restated Certificate of Incorporation,
as amended to date, in its entirety and is intended to supersede the
Corporation's prior Certificate of Incorporation, as amended and restated, in
all respects.
3. Provision for the making of this Amended and Restated Certificate of
Incorporation is contained in an order dated December 19, 1994 of the United
States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") in
In re The Pullman Company et al., Case Nos. 94-1129-1131 confirming the joint
plan of reorganization (the "Plan") of Pullman Holding Corp., Pullman
Intermediate Corp., and The Pullman Company.
4. This Amended and Restated Certificate of Incorporation has been duly
executed by the officers of the Corporation so designated in the Bankruptcy
Court order in accordance with the applicable provisions of Sections 245 and 303
of the General Corporation Law of the State of Delaware.
5. This Amended and Restated Certificate of Incorporation shall become
effective on December 22,1994.
6. The text of the Corporation's Restated Certificate of Incorporation
is hereby amended and restated to read in its entirety as follows.
<PAGE> 2
FIRST: Corporate Title. The name of the Corporation is
The Pullman Company.
SECOND: Registered Office. The address of the Corporation's
registered office in the State of Delaware is Corporation Trust Center, 1209
Orange Street, in the City of Wilmington, County of New Castle, Delaware 1981.
The name of its registered agent at that address is The Corporation Trust
Company.
THIRD: Purpose. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware (the "Delaware Corporation Law").
FOURTH: A. Authorized Shares. The total number of shares of capital
stock which the Corporation shall have the authority to issue is eleven million
one hundred eleven thousand one hundred and eleven (11,111,111) shares, par
value $.01 per share, which shall be designated Common Stock. The shares of
Common Stock shall be divided into two series of which eight million one hundred
eleven thousand one hundred and eleven (8,111,111) shares shall be designated
Series A Common Stock (the "Series A Stock") and three million (3,000,000)
shares shall be designated Series B Common Stock (the "Series B Stock"). Except
as otherwise set forth in this Amended and Restated Certificate of
Incorporation, all shares of Common Stock shall be identical and shall entitle
the holders thereof to the same rights and privileges. In accordance with
Section 1123(a)(6) of Title 11 of the United States Code, as amended, and as in
effect on the date of this Amended and Restated Certificate of Incorporation,
the Corporation shall not issue any nonvoting equity securities until all
payments and distributions to be made under the Plan shall have been made.
B. Common Stock.
1. Dividends; Repurchase. The holders of the Series A Stock and the
Series B Stock shall have the same rights to, and the respective holders of the
Series A Stock and Series B Stock shall participate ratably in, when and if
declared by the Board of Directors, out of the assets of the Corporation which
are by law available therefor, dividends payable either in cash, in property, or
in shares of Common Stock. Any dividend paid in shares of Common Stock shall
only be paid in shares of Series A Stock. So long as any shares of Series B
Stock are issued and outstanding (i) the Corporation will not offer to redeem
any shares of its Common Stock unless it does so pursuant to an offer made pro
rata to all holders of Common Stock of the Corporation, (ii) if the Corporation
seeks to purchase or otherwise reacquire any shares of its Common Stock, it will
do so pursuant to a tender offer made to all holders of the Common Stock of the
Corporation and (iii) the Corporation will not issue rights to purchase, or
offer to issue or sell, shares of its Common Stock or its subsidiaries' common
stock, to holders of
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its Common Stock unless such rights are issued or such offer is made pro rata to
all holders of the Common Stock of the Corporation.
2. Voting Rights. (a) Except as required by law or as otherwise
provided herein, the respective holders of the Series A Stock and Series B Stock
shall vote on all matters as a single class, together with the holders of any
shares of any other class or series of stock of the Corporation entitled to vote
therewith, and at every annual or special meeting of stockholders of the
Corporation, every holder of Common Stock shall be entitled to one vote, in
person or by proxy for each share of Common Stock standing in his/her name on
the books of the Corporation.
(b) From and after the Conversion Date (as defined in Article
FOURTH hereof), the provisions in this Amended and Restated Certificate of
Incorporation requiring class voting by holders of shares of Common Stock shall
thereupon terminate.
(c) Any action to be taken on any of the matters listed below
must be approved by, and the Corporation agrees that it shall not take any
action with respect to any of the matters listed below without the approval of,
a majority of the Series A Directors then in office (as defined below) and all
of the Series B Directors then in office (as defined below):
(i) any transaction involving a merger, business combination,
consolidation or other reorganization involving the Corporation, to the
extent any such transaction contemplates that the holders of Series A
Stock would receive different amounts or forms of consideration in such
transaction than the holders of Series B Stock would receive; or
(ii) any transaction between (x) the Corporation and/or any of
its subsidiaries and (y) the holders of shares of Series A Stock and/or
any of their Affiliates (as defined below).
3. Liquidation, Dissolution, or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution, or winding up of the affairs
of the Corporation, after payment or provision for payment of the debts and
other liabilities of the Corporation, the holders of all outstanding shares of
Common Stock shall be entitled to share ratably in the remaining net assets of
the Corporation.
4. Conversion of Series B Stock to Series A Stock.
(a) Definitions. For the purposes of this Amended and Restated
Certificate of Incorporation, the following terms shall have the meanings set
forth below:
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"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise.
"Conforma Clad Public Offering" means any offering of the Common
Stock of the Corporation, the proceeds of which are used to finance the
operations of the Corporation's Conforma Clad division.
"Conversion Date" means the first date on which there are no
outstanding shares of Series B Stock. For purposes of determining outstanding
shares of Series B Stock hereunder, shares of Series B Stock held by the Company
or any of its Affiliates shall no longer be deemed to be outstanding.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
(b) Mandatory Conversion of All Shares of Series B Stock. Each
outstanding share of Series B Stock shall automatically, and without any further
action by the Corporation or the holders thereof, convert into a share of Series
A Stock, on a basis of one share of Series A Stock for one share of Series B
Stock, immediately upon the date of, and immediately prior to, the closing of a
primary public offering of any shares of Common Stock other than a Conforma Clad
Public Offering or a secondary public offering of shares of Common Stock in
which holders of Series B Stock have had the opportunity to register their
shares.
(c) Optional Exchange of Series B Stock. The holder of any shares
of Series B Stock shall have the right at such holder's option, at any time or
from time to time, to exchange such shares of Series B Stock for fully paid and
nonassessable shares of Series A Stock. The holder of any shares of Series B
Stock may exercise this exchange right by surrendering to the Corporation the
certificate or certificates for the shares of Series B Stock to be exchanged,
accompanied by a written notice stating that the holder elects to exchange all
or a portion of the shares represented thereby. Each share of Series B Stock so
surrendered for exchange shall be exchanged for one share of Series A Stock. The
exchange shall be deemed to have been effected on the date when delivery of
notice of an election to exchange and certificates for shares of Series B Stock
is made, and the Corporation shall issue and deliver to such holder in
accordance with paragraph (d) below a certificate or certificates representing
shares of Series A Stock and Series B Stock, if any, issuable to such holder in
respect of the shares of Series B Stock represented by the certificates
surrendered for exchange.
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(d) Surrender/Reissuance. Upon surrender to the Corporation of a
certificate formerly representing shares of Series B Stock all or a part of
which have been exchanged for (or are to be exchanged for) Series A Stock, the
Corporation or the transfer agent of the Corporation shall cancel the
surrendered certificate for Series B Stock and issue (i) if all the shares of
Series B Stock represented by such surrendered certificate have been exchanged
for (or are to be exchanged for) shares of Series A Stock, a new certificate of
Series A Stock in the same name and in the same denomination as the surrendered
certificate, and (ii) if a portion of the shares of Series B Stock represented
by such surrendered certificate have been exchanged for (or are to be exchanged
for) shares of Series A Stock, a new certificate of Series A Stock in the same
name for the portion of the shares of Series B Stock represented by such
surrendered certificate which have been exchanged for (or are to be exchanged
for) and (b) a new certificate of Series B in the same name for the portion of
the shares of Series B Stock represented by such surrendered certificate which
have not been exchanged (or are not to be exchanged).
5. No Additional Issuance of Series B Stock. Notwithstanding
anything contained in this Amended and Restated Certificate of Incorporation to
the contrary, the Corporation may not issue any additional shares of Series B
Stock or any options, warrants, calls, subscriptions or other similar rights or
other agreements, commitments or outstanding securities obligating the
Corporation to issue, transfer or sell any shares of Series B Stock.
FIFTH: Elections of directors need not be by written ballot unless the
by-laws of the Corporation shall otherwise provide.
SIXTH: A. Board of Directors.
1. Number of Directors: Election of Board prior to the Conversion
Date. Prior to the Conversion Date, the total number of Directors constituting
the Board of Directors of the Corporation shall be seven (7) Directors, five (5)
of whom shall be Series A Directors who shall be elected by the holders of the
Series A Stock (the "Series A Directors"), and two (2) of whom shall be Series B
Directors who shall be elected by the holders of the Series B Stock (the "Series
B Directors"). The initial Directors shall consist of Raynard D. Benvenuti,
Nicholas C. Forstmann, Theodore J. Forstmann, Steven B. Klinsky and Roger G.
Pollazzi, who shall be the Series A Directors, and Donald P. Hilty and Steven M.
Youts, who shall be the Series B Directors. The successors to the initial Series
A Directors shall be nominated by the Series A Directors and the successors to
the Series B Directors shall be nominated by the Series B Directors.
2. Number; Election of Board following the Conversion Date. From and
after the Conversion Date, the Board of Directors of the Corporation shall
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initially consist of the number of Directors in office immediately prior
thereto, and, thereafter, such number as may be fixed in accordance with the
by-laws of the Corporation as in effect from time to time. From and after the
Conversion Date, the Directors shall be elected by the holders of the Common
Stock.
B. Removal of Directors.
1. Prior to the Conversion Date. Prior to the Conversion Date,
any Director may be removed from office without cause, at any time, by the
affirmative vote of stockholders representing not less than a majority of the
holders of the series of Common Stock which elected such Director. Prior to the
Conversion Date, any vacancy created by the removal of a Director shall be
filled only by the holders of the series of Common Stock that elected the
Director that was removed.
2. Following the Conversion Date. From and after the Conversion
Date, any Director may be removed in accordance with the provisions of Delaware
Corporation Law and the by-laws of the Corporation as in effect from time to
time.
C. Vacancies on Board
1. Prior to the Conversion Date. Except as otherwise set forth in
this Amended and Restated Certificate of Incorporation, prior to the Conversion
Date, any vacancy in the Board of Directors, whether arising from death,
resignation, or any other cause (other than removal of an increase in the number
of Directors), may be filled by a majority of the remaining Directors of the
same series as the Director who left the Board of Directors or if only one
Director of such series remains in office, then by such sole Director, in either
case, though less than a quorum; or by the stockholders of the series that
elected such Director at the next annual meeting thereof or at a special meeting
thereof. If there are no remaining Directors of the same series, a special
meeting of stockholders of that series shall be held as soon as possible to
elect the successor. Each Director so elected shall hold office until his
successor shall have been elected and qualified.
2. Following the Conversion Date. From and after the Conversion
Date, any vacancy in the Board of Directors shall be filled in accordance with
the by-laws of the Corporation.
SEVENTH: A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director; provided, however, that the foregoing shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware
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Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware Corporation Law is hereafter amended
to permit further elimination or limitation of the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware
Corporation Law as so amended. Any repeal or modification of this Article
SEVENTH by the stockholders of the Corporation or to otherwise shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
EIGHTH: Amendment of By-laws. The Board of Directors is expressly
authorized to adopt, amend, or repeal the by-laws of the Corporation.
NINTH: Amendment of Certificate. The Corporation reserves the right to
amend, alter, change or repeal any provision contained in this Amended and
Restated Certificate of Incorporation in the manner now or hereafter prescribed
by statute, and all rights conferred upon stockholders herein are granted
subject to this reservation. Prior to the Conversion Date, in addition to any
other vote required by law, Articles FOURTH, SIXTH and NINTH may be amended
only with the affirmative vote of the holders of a majority of the issued and
outstanding shares of Series A Stock and Series B Stock, in each case, voting
separately as series.
TENTH: Saving Clause. In the event that any provision (or portion
thereof) of this Amended and Restated Certificate of Incorporation shall be
found to be invalid, prohibited or unenforceable for any reason, the remaining
provisions (or portions thereof) of this Amended and Restated Certificate of
Incorporation shall remain in full and effect, and shall be construed as if such
invalid, prohibited or unenforceable provision had been stricken herefrom or
otherwise rendered inapplicable, it being the intent of the Corporation and its
stockholders that each such remaining provisions (or portion thereof) of this
Amended and Restated Certificate of Incorporation remain, to the fullest extent
permitted by law, applicable and enforceable as to all stockholders
notwithstanding any such finding.
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IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed under the seal of the Corporation this 22nd day of
December, 1994.
THE PULLMAN COMPANY
By: /s/ Roger G. Pollazzi
---------------------------
Roger G. Pollazzi
President and
Chief Executive Officer
ATTEST:
By: /s/ Louis D. Mattielli
-------------------------
Louis D. Mattielli
Vice President and
General Counsel
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<PAGE> 9
CERTIFICATE OF MERGER
OF
TENNECO AUTOMOTIVE ACQUISITION INC.
INTO
THE PULLMAN COMPANY
Pursuant to Section 251(c) of the General Corporation Law of the State
of Delaware, The Pullman Company (the "Company"), a Delaware corporation,
hereby certifies as follows:
FIRST: The names and states of incorporation of each of the constituent
corporations are as follows:
Name State of Incorporation
---- ----------------------
The Pullman Company Delaware
Tenneco Automotive Acquisition Inc. Delaware
SECOND: An Agreement and Plan of Merger, entered into as of June 17,
1996, as amended (the "Agreement"), by and among the Company, Monroe Auto
Equipment Company, a Delaware corporation, and Tenneco Automotive Acquisition
Inc. ("Newco") has been approved, adopted, certified, executed and acknowledged
by each of the constituent corporations in accordance with the requirements of
Section 251(c) of the General Corporation Law of the State of Delaware.
THIRD: The name of the surviving corporation is The Pullman Company.
FOURTH: The Amended and Restated Certificate of The Pullman Company
shall be amended in its entirety as set forth in Exhibit A attached hereto.
FIFTH: The executed Agreement is on file at the principal place of
business of the surviving corporation, the address of which is 3 Werner Way,
Suite 200, Lebanon, New Jersey 08833.
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SIXTH: A copy of the Agreement will be furnished by the surviving
corporation, on request and without cost, to any stockholder of any constituent
corporation.
SEVENTH: This Certificate of Merger shall be effective on July 1, 1996.
THE PULLMAN COMPANY
By: /s/ Virginia L. Kearns
------------------------------------
Name: Virginia L. Kearns
Title: Vice President of The Pullman
Company
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EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
THE PULLMAN COMPANY
The Restated Certificate of Incorporation of The Pullman Company is as
follows:
Article 1. The name of the corporation is:
The Pullman Company
Article 2. The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
Article 3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
Article 4. The total number of shares of stock which the corporation
shall have authority to issue is two hundred (200) and the par value of each of
such shares is Five Dollars ($5.00) amounting in the aggregate to One Thousand
Dollars ($1,000).
Article 5. The board of directors is authorized to make, alter or
repeal the by-laws of the corporation. Election of directors need not be
written ballot.
Article 6. The corporation is to have perpetual existence.
Article 7. Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the board of directors or in the by-laws of the corporation.
Article 8. A director of the Corporation shall not be personally
liable to the
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Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under Section 174 of the General Corporation Law of Delaware, or
(iv) for any transaction from which the director derived an improper personal
benefit. If the General Corporation Law is hereafter amended to permit further
elimination or limitation of the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the General Corporation Law as so amended. Any
repeal or modification of this Article 8 by the stockholders of the Corporation
or otherwise shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification.
Article 9. The corporation reserves the right to amend, alter, change
or repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
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pursuant to paragraph C of this Article FOURTH, the assets of the Corporation
available to stockholders shall be distributed equally per share to the holders
of Common Stock.
3. Voting Rights. The holders of shares of Common Stock shall be
entitled to one vote in respect of each share held.
C.
The Board of Directors is expressly vested with authority to issue
Preferred Stock from time to time in one or more series, of such rank and with
such distinctive serial designations as may be restated or expressed in the
resolution or resolutions providing for the issue of such stock, and in such
resolution or resolutions providing for the issue of shares of each particular
series. The Board of Directors is also expressly vested with authority to fix
the number of shares constituting such series and to fix:
(1) the rate and times at which, and the conditions under which,
dividends shall be payable on shares of such series, and the status of such
dividends as cumulative or noncumulative and as participating or
non-participating;
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(2) the price or prices, times and terms and conditions, if any,
upon which or at which shares of such series shall be subject to
redemption;
(3) the rights, if any, of holders of shares of such series to
convert such shares into, or to exchange such shares for, shares of other
classes of stock, or series thereof, of the Corporation and the terms and
conditions of such conversion or exchange;
(4) the terms of the sinking fund or redemption or purchase
account, if any, to be provided for shares of such series;
(5) the rights of the holders of shares of such series upon the
liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation;
(6) the limitations, if any, applicable while such series is
outstanding, or the payment of dividends or making of distributions on, or
the acquisition of, or the use of moneys for the purchase of Common Stock;
(7) the full or limited voting rights, if any, to be provided for
shares of such series; and
(8) any other designations, preferences and relative,
participating, optional or other such
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<PAGE> 15
special rights, and qualifications, limitations or restrictions
thereof, of shares of such series;
in each case, so far as not inconsistent with the provisions of this Certificate
of Incorporation, as amended to the date of such resolution or resolutions, and
to the full extent now or hereafter permitted by the laws of the State of
Delaware. All shares of Preferred Stock shall be identical and of equal rank
except as otherwise provided in this Certificate of Incorporation or as may be
fixed by the Board of Directors as provided above; provided, however, that all
shares of each series shall be identical and of equal rank except as to the
times from which cumulative dividends, if any, thereon shall be cumulative. The
amount of the authorized Preferred Stock may be increased or decreased by the
affirmative vote of the holders of a majority of the shares of stock of the
Corporation entitled to vote, without any requirement that such increase or
decrease be approved by a class vote on the part of the Preferred Stock or any
series thereof, or on the part of any other class of stock of the Corporation,
except as may be otherwise provided in this Certificate of Incorporation or in
the above-mentioned resolution or resolutions fixing the voting rights of any
series of the Preferred Stock.
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<PAGE> 16
The Board of Directors is also expressly vested with authority to amend
any of the provisions of any resolution or resolutions providing for the issue
of any series of Preferred Stock, subject to any class voting rights of the
holders of any series of Preferred Stock contained in this Certificate of
Incorporation or in the resolution or resolutions providing for the issue of
such series and subject to the requirements of the laws of the State of
Delaware.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To make, alter or repeal the by-laws of the Corporation.
SEVENTH: Elections of directors need not be by written ballot unless the
by-laws of the Corporation shall so provide.
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be
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<PAGE> 17
designated from time to time by the Board of Directors or in the by-laws of the
Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
5. The foregoing Restated Certificate of Incorporation of the
Corporation was duly adopted in accordance with the provisions of Section 245
of the General Corporation Law of Delaware.
IN WITNESS WHEREOF, we have signed this Certificate on behalf of the
Corporation this 15th day of April, 1985.
/s/ Vice President
---------------------------
Vice President
Attest:
/s/ J. E. Marshall
- -----------------------------
Assistant Secretary
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<PAGE> 18
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
PULLMAN AEROSPACE, INC.
INTO AND WITH
THE PULLMAN COMPANY
THE PULLMAN COMPANY, a corporation organized and existing under
the laws of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That THE PULLMAN COMPANY was incorporated on the 25th day
of March, 1981, pursuant to the General Corporation Law of the State of
Delaware, the provisions of which permit the merger of a subsidiary corporation
into a parent corporation organized and existing under the laws of said State.
SECOND: That THE PULLMAN COMPANY owns all of the outstanding
shares of the capital stock of PULLMAN AEROSPACE, INC., a corporation
incorporated on the 7th day of November, 1983, pursuant to the General
Corporation Law of the State of Delaware.
THIRD: that, in accordance with the provisions of Section 141(f)
of the General Corporation Law of the State of Delaware, the Board of Directors
of THE PULLMAN COMPANY, duly adopted, by unanimous written consent dated the
31st day of October, 1996, the following resolutions to merge PULLMAN
AEROSPACE, INC. into and with THE PULLMAN COMPANY:
RESOLVED, that THE PULLMAN COMPANY merge, and it hereby
does merge into itself said PULLMAN AEROSPACE, INC. and assumes all of
its obligations; and it is further
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<PAGE> 19
RESOLVED, that the proper officers of the Company be, and they hereby
are, authorized, empowered and directed to execute a Certificate of Ownership
and Merger setting forth a copy of the resolutions to merge said PULLMAN
AEROSPACE, INC. and assume all of the liabilities and obligations for the said
PULLMAN AEROSPACE, INC., and to cause the same to be filed, in the manner
provided by law, and to do all acts and things whatsoever, whether within or
without the State of Delaware, which may be in anywise necessary or proper to
effect said merger.
IN WITNESS WHEREOF, said THE PULLMAN COMPANY has caused this Certificate
to be signed by Robert G. Simpson, its Vice President, this 31st day of October,
1996.
THE PULLMAN COMPANY
/s/ Robert G. Simpson
-------------------------------
Robert G. Simpson
Vice President
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<PAGE> 20
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
PULLMAN RSC COMPANY
INTO AND WITH
THE PULLMAN COMPANY
THE PULLMAN COMPANY, a corporation organized and existing under
the laws of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That THE PULLMAN COMPANY was incorporated on the 25th day
of March, 1981, pursuant to the General Corporation Law of the State of
Delaware, the provisions of which permit the merger of a subsidiary corporation
into a parent corporation organized and existing under the laws of said State.
SECOND: That THE PULLMAN COMPANY owns all of the outstanding
shares of the capital stock of PULLMAN RSC COMPANY, a corporation incorporated
on the 12th day of April, 1988, pursuant to the General Corporation Law of the
State of Delaware.
THIRD: That, in accordance with the provisions of Section 141(f)
of the General Corporation Law of the State of Delaware, the Board of Directors
of THE PULLMAN COMPANY, duly adopted, by unanimous written consent dated the
31st day of October, 1996, the following resolutions to merge PULLMAN RSC
COMPANY into and with THE PULLMAN COMPANY:
RESOLVED, that THE PULLMAN COMPANY merge, and it hereby
does merge into itself said PULLMAN RSC COMPANY and assumes all of its
obligations; and it is further
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<PAGE> 21
RESOLVED, that the proper officers of the Company be, and they hereby
are, authorized, empowered and directed to execute a Certificate of Ownership
and Merger setting forth a copy of the resolutions to merge said PULLMAN RSC
COMPANY and assume all of the liabilities and obligations of the said PULLMAN
RSC COMPANY, INC., and to cause the same to be filed, in the manner provided by
law, and to do all acts and things whatsoever, whether within or without the
State of Delaware, which may be in anywise necessary or proper to effect said
merger.
IN WITNESS WHEREOF, said PULLMAN COMPANY has caused this Certificate to
be signed by Robert G. Simpson, its Vice President, this 31st day of October,
1996.
THE PULLMAN COMPANY
/s/ Robert G. Simpson
-------------------------------
Robert G. Simpson
Vice President
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<PAGE> 22
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
HOLMES MACHINERY COMPANY
INTO AND WITH
THE PULLMAN COMPANY
THE PULLMAN COMPANY, a corporation organized and existing under
the laws of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That THE PULLMAN COMPANY was incorporated on the 25th day
of March, 1981, pursuant to the General Corporation Law of the State of
Delaware, the provisions of which permit the merger of a subsidiary corporation
into a parent corporation organized and existing under the laws of said State.
SECOND: That THE PULLMAN COMPANY owns all of the outstanding
shares of the capital stock of HOLMES MACHINERY COMPANY, a corporation
incorporated on the 6th day of September, 1988, pursuant to the General
Corporation Law of the State of Delaware.
THIRD: that, in accordance with the provisions of Section 141(f)
of the General Corporation Law of the State of Delaware, the Board of Directors
of THE PULLMAN COMPANY, duly adopted, by unanimous written consent dated the
31st day of October, 1996, the following resolutions to merge HOLMES MACHINERY
COMPANY into and with THE PULLMAN COMPANY:
RESOLVED, that THE PULLMAN COMPANY merge, and it hereby
does merge into itself said HOLMES MACHINERY COMPANY and assumes all of
its obligations; and it is further
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<PAGE> 23
RESOLVED, that the proper officers of the Company be, and they hereby
are, authorized, empowered and directed to execute a Certificate of Ownership
and Merger setting forth a copy of the resolutions to merge said HOLMES
MACHINERY COMPANY and assume all of the liabilities and obligations of the said
HOLMES MACHINERY COMPANY and to cause the same to be filed, in the manner
provided by law, and to do all acts and things whatsoever, whether within or
without the State of Delaware, which may be in anywise necessary or proper to
effect said merger.
IN WITNESS WHEREOF, said THE PULLMAN COMPANY has caused this Certificate
to be signed by Robert G. Simpson, its Vice President, this 31st day of October,
1996.
THE PULLMAN COMPANY
/s/ Robert G. Simpson
-------------------------------
Robert G. Simpson
Vice President
-23-
<PAGE> 24
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE PULLMAN COMPANY
THE PULLMAN COMPANY, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
DOES HEREBY CERTIFY:
FIRST: That pursuant to a written consent of the Board of Directors of
the Company resolutions were adopted setting forth a proposed amendment to the
Certificate of Incorporation of said Company, as amended as of such date (the
"Certificate of Incorporation"), declaring said amendment to be advisable and
directing that the amendment be considered by the sole stockholder of the
Company. The resolution setting forth the proposed amendment is as follows:
"RESOLVED, that the Board of Directors of the Company hereby
approves and declares it advisable that the Certificate of Incorporation
of the Company be amended (the "Amendment") by deleting Article FOURTH
thereof in its entirety and inserting the paragraph set forth below in
lieu thereof:
"Fourth: The total number of shares of stock which the
corporation shall have authority to issue is two hundred fifth
(250) and the par value of each of such shares is Five Dollars
($5.00) amounting in the aggregate to One Thousand Two Hundred
Fifth Dollars ($1,250).
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<PAGE> 25
SECOND: That thereafter, pursuant to the resolution of its Board of
Directors, a written consent of the sole stockholder of the Company was duly
signed, in accordance with Section 228 of the General Corporation Law of the
State of Delaware (the "DGCL"), as required by the DGCL and the Certificate of
Incorporation, adopting the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the DGCL.
IN WITNESS WHEREOF, said The Pullman Company has caused this
Certificate to be signed as of the 26th day of January, 1998.
THE PULLMAN COMPANY
By: /s/ Karl A. Stewart
-------------------------------
Karl A. Stewart
Vice President and Secretary
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<PAGE> 1
EXHIBIT 3.12
THE PULLMAN COMPANY
BY-LAWS
Adopted: JULY 1, 1996
<PAGE> 2
--ooOoo--
B Y - L A W S
--ooOoo--
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the state of incorporation as the Board of Directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Houston, State of Texas, at such place as
may be fixed from time to time by the Board of Directors. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the state of incorporation, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
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<PAGE> 3
Section 2. Annual meetings of stockholders, shall be held on such date
and at such times as may be fixed by the Board for the purpose of electing a
Board of Directors and for the transaction of other business as may properly be
brought before the meeting.
Section 3. Written notice of the Annual Meeting shall be given to each
stockholder entitled to vote thereat not less than ten nor more than fifty days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, during ordinary business hours, for a period
of at least ten days prior to the election, either at a place within the city,
town or village where the election is to be held and which place shall be
specified in the notice of the meeting, or, if not specified, at the place
where said meeting is to be held, and the list shall be produced and kept at the
time and place of election during the whole time thereof,
2
<PAGE> 4
and subject to the inspection of any stockholder who may be present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting of stockholders, stating
the time, place and object thereof, shall be given to each stockholder entitled
to vote thereat, not less than ten nor more than fifty days before the date
fixed for the meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
3
<PAGE> 5
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
4
<PAGE> 6
Section 10. Each stockholder shall at every meeting of the stockholders
be entitled to one vote in person or by proxy for each share of the capital
stock having voting power held by such stockholder, but no proxy shall be voted
on after eleven months from its date, unless the proxy provides for a longer
period, and, except where the transfer books of the corporation have been closed
or a date has been fixed as a record date for the determination of its
stockholders entitled to vote.
Section 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by any
provisions of the statutes or of the certificate of incorporation, the notice of
meeting, the meeting and vote of stockholders may be dispensed with, if the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted shall sign a consent
in writing, setting forth the action so taken. Prompt notice of such action by
written consent shall be given to those stockholders who have not consented in
writing to such corporate action.
5
<PAGE> 7
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be not less than one nor more than nine. Within the limits above
specified, the term "whole Board" as used in these By-Laws shall mean the number
of directors elected and holding office at any time. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this Article, and each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced.
Section 3. The business of the corporation shall be managed by its Board
of Directors which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the certificate of
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<PAGE> 8
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the state of incorporation.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In this event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the Directors.
7
<PAGE> 9
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 7. The Secretary shall give notice of any special meeting by
mailing the same at least three days, or by telegraphing, telexing, telecopying,
telephoning or personally delivering the same at least one day, before the
meeting to each director; but such notice may be waived by any director. When
notice is given to a director by telephone, it shall be effective in accordance
with Article IV, Section I of these By-Laws.
Section 8. The number of Directors that shall constitute a quorum shall
be not less than one-third of the whole Board of Directors nor less than two
Directors and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation; provided, however, that when the whole Board is comprised of only
one director, then one director shall constitute a quorum and the vote of such
director shall constitute the act of the Board of Directors. If a quorum shall
not be present at any meeting of the Board of Directors, the Directors present
thereat may
8
<PAGE> 10
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if a written consent thereto is signed by all members of the
Board or of such committee as the case may be, and such written consent is
filed with the Minutes of proceeding of the Board or Committee.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of two or more of the directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board of
Directors.
9
<PAGE> 11
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 12. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the,
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing and
delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram, telex, telecopy or telephone; provided,
that when telephone notice is given,
10
<PAGE> 12
such notice shall be effective substantially concurrently with one other method
of giving notice.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The corporate officers of the Company may consist of a
Chairman of the Board, and may include a Vice Chairman of the Board (both the
Chairman and the Vice Chairman shall be chosen from the Board of Directors), a
President, one or more Vice Presidents, a Secretary, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers, a Controller, and
such other officers as the Board of Directors may from time to time appoint
(none of whom need be a member of the Board). In so far as permitted by law,
any two offices may be held by the same person. The foregoing officers shall be
elected by the Board of Directors at the first meeting after the stockholders'
Annual Meeting in each year.
11
<PAGE> 13
Notwithstanding any of the provisions of this Article V, the holders of
a majority of the outstanding shares of capital stock of the corporation
entitled to vote for the election of Directors, may (i) by written consent at
any time, or (ii) by vote at any special or annual meeting of stockholders,
elect, replace, remove (or consent to such election, replacement or removal) of
any one or more officers of the corporation.
Any officer elected or appointed by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the whole Board of
Directors.
Section 2. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
Section 3. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the Board
of Directors may be removed at any time by the affirmative vote of a majority of
12
<PAGE> 14
the Board of Directors. Any vacancy occurring in any office of the corporation
shall be filled by the Board of Directors.
CHAIRMAN OF THE BOARD
Section 5. The Chairman of the Board may be elected by the Board of
Directors at the first meeting after the Annual Meeting of Stockholders in each
year. The Chairman of the Board shall preside at all meetings of stockholders
and of the Board of Directors, shall be ex-officio a member of all standing
committees, and shall perform such other duties as may from time to time be
requested of him by the Board of Directors.
VICE CHAIRMAN OF THE BOARD
Section 5a. The Vice Chairman of the Board shall preside at meetings of
the Board of Directors in the absence of the Chairman of the Board, and shall
perform such other duties as may from time to time be requested of him by the
Board of Directors.
THE PRESIDENT
Section 6. The president shall have the powers and perform the duties
usually incidental to the office of the president. He shall have the general and
actual management of the business of the corporation under the Chairman of the
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<PAGE> 15
Board, and shall see that all orders and resolutions of the Board of Directors
are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 8. The vice president, or if there shall be more than one, the
vice presidents in the order determined by the Board of Directors, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
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<PAGE> 16
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall keep in safe custody
the seal of the corporation and, when authorized by the Board of Directors,
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of an assistant secretary.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors, shall
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books
15
<PAGE> 17
belonging to the corporation in such depositories as may be designated by the
Board of Directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such, sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the restoration
to the corporation, in case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Section 14. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the Board of Directors,
shall, in the absence
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<PAGE> 18
or disability of the treasurer, perform the duties and exercise the powers of
the treasurer and shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
THE CONTROLLER
Section 15. The controller, following his appointment shall maintain
adequate records of all assets, liabilities and transactions of the corporation
and see that audits thereof are currently and regularly made; and he shall
perform such other duties as may be required by the Board of Directors, the
President or designated Vice President.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 16. Each person who is or was a director or officer of the
corporation, or who serves or may have served at the request of the corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise (including the heirs, executors, administrators or
estate of such person) and who was or is a party or is threatened to be made a
party to any threatened, pending or completed claim, action, suit or proceeding,
whether criminal, civil, administrative or investigative, including appeals,
shall be indemnified by the corporation as a matter of right to the full extent
permitted or authorized by the
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Corporation Law of the state of incorporation of the corporation, as it may from
time to time be amended, against any expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in his capacity as a director or officer, or arising out of his
status as a director or officer. Each person who is or was an employee or agent
of the corporation, or who serves or may have served at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including the heirs, executors,
administrators or estate of such person) may, at the discretion of the Board, be
indemnified by the corporation to the same extent as provided herein with
respect to directors and officers of the corporation.
The corporation may, but shall not be obligated to, maintain insurance
at its expense, to protect itself and any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such.
The corporation may, but shall not be obligated to, pay expenses incurred in
defending a civil or criminal action, suit or
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proceeding in advance of the final disposition of such action, suit or
proceeding.
The indemnification provided by this Section 16 shall not be exclusive
of any other rights to which those seeking indemnification may be entitled as a
matter of law or under any agreement, vote of stockholders or disinterested
directors or otherwise.
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ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. General. The corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was on or after December 22, 1994 (as defined
in the Certificate of incorporation) a director or officer of the corporation,
or, with respect to clauses (i) and (ii) of this Section 1, an agent of the
Corporation, or is or was on or after December 22, 1994 serving at the request
of the corporation as a director or officer, or, with respect to clauses (i) and
(ii) of this Section 1, an agent, of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred ("Losses") by him in connection with such action, suit or proceeding,
including, without limitation, Losses incurred arising out of or relating to (i)
the merger of Tenneco Automotive Acquisition Inc. into the corporation, the
Agreement and Plan of Merger, dated June 17, 1996, by and among the
corporation, Monroe Auto Equipment Company and Tenneco Automotive Acquisition
Inc., or any of the
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transactions contemplated thereby or (ii) the Agreement and Plan of Merger,
dated June 6, 1996, by and among the corporation, The Mayflower Corporation plc,
Mayflower Management Corporation and Mayflower Acquisition Corporation, or any
of the transactions contemplated thereby, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Actions By or In Right of the Corporation. The corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he is or was on or after December 22, 1994 a director or officer, or, with
respect to clauses (i) and (ii) of Section 1 above, an agent, of the
corporation, or is or
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was on or after December 22, 1994 serving at the request of the corporation as a
director or officer, or, with respect to clauses (i) and (ii) of Section 1
above, an agent, of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, provided that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Indemnification in Certain Cases. To the extent that a
director or officer, or, with respect to clauses (i) and (ii) of Section 1
above, an agent, of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections 1
and 2 of this Article VI, or in defense of any
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claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Procedure. Any indemnification under Sections 1 and 2 of this
Article VI (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director or officer, or with respect to clauses (i) and (ii) of Section 1 above,
an agent, is proper in the circumstances because he has met the applicable
standard of conduct set forth in such Sections 1 and 2. Such determination shall
be made (a) by a majority vote of the directors who were not parties to such
action, suit or proceeding, even though less than a quorum, or (b) if there are
no such directors, or if such directors so direct, by independent legal counsel
in a written opinion, or (c) by the stockholders.
Section 5. Advances for Expenses. Expenses (including attorneys' fees)
incurred by an officer or director in defending a civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be
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indemnified by the corporation as authorized in this Article VI. Such expenses
(including attorneys' fees) incurred by agents shall be so paid upon terms and
conditions, if any, as the Board of Directors deems appropriate.
Section 6. Rights Not-Exclusive. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other subsections of this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office.
Section 7. Insurance. The corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was on or after December
22, 1994 a director, officer or agent of the corporation, or is or was on or
after December 22, 1994 serving at the request of the corporation as a director,
officer or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify his against such liability under
the provisions of this Article VI.
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Section 8. Definition of Corporation. For purposes of this Article VI,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and agents, so that any person who is or was on or after
December 22, 1994 a director, officer or agent of such constituent corporation,
or is or was on or after December 22, 1994 serving at the request of such
constituent corporation as a director, officer or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this Article VI with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its separate existence had continued.
Section 9. Other Definitions. For purposes of this Article VI,
references to "other enterprises" shall include employee benefit plans;
reference to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the corporation" shall include any service as a director, officer or agent of
the corporation which imposes duties on, or involves services by, such director,
officer or
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agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith or in a manner he reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the corporation" as referred to in this Article VI.
Section 10. Survival of Rights. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article VI shall continue as
to a person who on or after December 22, 1994 has ceased to be a director,
officer or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 11. Jurisdiction. The Court of Chancery shall be vested with
exclusive jurisdiction to hear and determine all actions for the advancement of
expenses or indemnification brought under this Article VI or under any by-law,
agreement, vote of stockholders or disinterested directors, or otherwise. The
Court of Chancery may summarily determine the corporation's obligation to
advance expenses (including attorneys' fees).
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ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
president or a vice president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation.
Section 2. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent or (2) by a transfer clerk acting on behalf of the
corporation and a registrar, the signature of any such president, vice
president, treasurer, assistant treasurer, secretary or assistant secretary may
be facsimile. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose
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facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the corporation.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate
alleged to have been lost or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the
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duty of the corporation to cancel the old certificate and record the transaction
upon its books.
FIXING THE DATE FOR DETERMINATION OF
STOCKHOLDERS OF RECORD
Section 5. The Board of Directors may close the stock transfer books of
the corporation for a period not more than forty nor less than ten days
preceding the date of any meeting of stockholders, nor more than forty days
prior to the date of any other action, such as the date for payment of any
dividend or the date for the allotment of rights or the date when any change or
conversion or exchange of capital stock shall go into effect or for a period of
not exceeding forty days in connection with obtaining the consent of
stockholders for any purpose. In lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not more than forty
nor less than ten days preceding the date of any meeting of stockholders, nor
more than forty days prior to the date of any other action, such as the date for
the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent, as a record date
for the determination of the stockholders entitled to notice of, and to vote at,
any such meeting, and
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any adjournment thereof, or entitled to receive payment of any such dividend, or
to any such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, or to give such consent
and in such case such stockholders and only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting and any adjournment thereof, or to receive payment
of such dividend, or to receive such allotment of rights, or to exercise such
rights, or to give such consent, as the. case may be notwithstanding any
transfer of any stock on the books of the corporation after any such record date
fixed as aforesaid.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
the, state of incorporation.
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ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual meeting,
and at any special meeting of stockholders
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when called for by vote of the stockholders, a full and clear statement of the
business and condition of the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal" and
the state of incorporation. The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE IX
AMENDMENTS
Section 1. These by-laws may be altered or repealed at any meeting of
the stockholders or of the Board of Directors
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<PAGE> 34
if notice of such alteration or repeal be contained in the notice of such
meeting. No change of the time or place of the meeting for the election of
directors shall be made within sixty days next before the day on which such
meeting is to be held, and in case of any change of such time or place, notice
thereof shall be given to each stockholder in person or by letter mailed to his
last known post office address at least twenty days before the meeting is held.
DEL. BL
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EXHIBIT 3.13
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TENNECO AUTOMOTIVE INC.
Tenneco Automotive Inc., a corporation duly organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that:
1. The Certificate of Incorporation of the Corporation is hereby amended
by deleting Paragraph 1 thereof and inserting the following in lieu thereof:
"1. The name of the corporation is Tenneco Automotive Operating
Company Inc."
2. The foregoing amendment was duly adopted in accordance with the
provisions of Sections 242 and 228 (by the written consent of the sole
stockholder of the Corporation) of the General Corporation Law of the State of
Delaware.
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<PAGE> 2
IN WITNESS WHEREOF, Tenneco Automotive Inc. has caused this Certificate to
be executed by its duly authorized officer, on this 5th day of November, 1999.
TENNECO AUTOMOTIVE INC.
By: /s/ MARK P. FRISSORA
-----------------------------
Mark P. Frissora, President
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<PAGE> 3
CERTIFICATE OF DESIGNATION
PREFERENCES AND RIGHTS OF
7% PREFERRED STOCK
TENNECO AUTOMOTIVE INC.
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware
The undersigned, Vice President and Secretary of Tenneco Automotive Inc.,
a corporation organized and existing under the General Corporation Law of the
State of Delaware (the "Corporation"), in accordance with the provisions of
Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the said Corporation, the said Board of
Directors on October 31, 1997, adopted the following resolution creating a
series of 500,000 shares of Preferred Stock designated as 7% Preferred Stock;
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Certificate of Incorporation, a series of Preferred Stock of the
Corporation be and it hereby is created, and that the designation and
amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof are as
follows:
Section 1. Designation and Amount. The shares of such series shall
be designated as "7% Preferred Stock" and the number of shares
constituting such series shall be 500,000.
Section 2. Dividends and Distributions.
(A) The dividend rate on the shares of Preferred Stock shall be
$7.00, per annum, payable by the Corporation on the 31" day of January
commencing
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in the year 1998 (each annual dividend payment is hereinafter referred to
as an "Annual Payment Date") so long as any shares of the 7% Preferred
Stock are outstanding, in cash in United States dollars to each holder of
record of such shares.
(B) The holder of record of any share of 7% Preferred stock entitled
to receive a dividend payment pursuant to Section 2(a) above shall be the
holder of record of such shares as of the close of business on the first
day of January in the year such dividend payment is to be made, as shown
on the stockholder records of the Corporation.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of 7% Preferred Stock from the date of issue of such shares and the
first annual dividend shall be adjusted pro rata from the date of issuance
to the first annual payment date on the basis of a 360-day year. Accrued
but unpaid dividends shall not bear interest. Dividends paid on the shares
of 7% Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the
time outstanding. Accrued and unpaid dividends shall be prorated to the
date of redemption on the basis of a 360-day year.
Section 3. Voting Rights. The holders of the shares of 7% Preferred
Stock shall not be entitled or permitted to vote on any matter required or
permitted to be voted upon by the stockholders of the Corporation, except
as may be otherwise required by Delaware law.
Section 4. Reacquired Shares. Any shares of 7% Preferred Stock
purchased or otherwise acquired by the corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized
but unissued shares of Preferred Stock and may be reissued as part of a
new series of Preferred Stock to be created by resolution or resolutions
of the Board of Directors, subject to the conditions and restrictions on
issuance set forth herein.
Section 5. Liquidation, Dissolution or Winding Up. In the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of the 7% Preferred Stock shall be entitled to
receive the $100.00 per share,
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plus accrued dividends to the date of distribution, whether or not earned
or declared.
Section 6. Optional Redemption. (a) The 7% Preferred Stock shall be
redeemable, the whole or any part, at any time at the option of the
Corporation at a redemption price equal to $100 per share, plus, in each
case, an amount equal to accrued and unpaid accumulated dividends to the
date of such redemption; provided, however, that the redemption price
payable upon any redemption occurring prior to November 1, 2017 shall be
$105 per share, plus, in each case, an amount equal to accrued and unpaid
accumulated dividends to the date of such redemption. Accrued and unpaid
dividends shall be prorated to the date of redemption on the basis of a
360-day year.
(b) Notice of any such redemption shall be given by mailing to the
holders of the 7% Preferred Stock a notice of such redemption, first class
postage prepaid, not later than the thirtieth day and not earlier than the
sixtieth day before the date fixed for redemption, at their last address
as the same shall appear upon the books of the Corporation. Any notice
which is mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the shareholder received
such notice, and failure duly to give such notice by mail, or any defect
in such notice, to any holder of 7% Preferred Stock shall not affect the
validity of the proceedings for the redemption of such 7% Preferred Stock.
If less than all the outstanding shares of 7% Preferred Stock are to be
redeemed, the redemption shall be made by lot as determined by the Board
of Directors.
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<PAGE> 6
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and
do affirm the foregoing as true under the penalties of perjury as of the 31st
day of October, 1997.
TENNECO AUTOMOTIVE INC.
/s/ Karl A. Stewart
-----------------------------------------
Karl A. Stewart
Vice President and Secretary
Attest
/s/ James D. Gaughan
- ---------------------------------
James D. Gaughan
Assistant Secretary
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<PAGE> 7
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TENNECO AUTOMOTIVE INC.
TENNECO AUTOMOTIVE INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
DOES HEREBY CERTIFY:
FIRST: That pursuant to a written consent of the Board of Directors of the
Company resolutions were adopted setting forth a proposed amendment to the
Certificate of Incorporation of said Company, as amended as of such date (the
"Certificate of Incorporation"), declaring said amendment to be advisable and
directing that the amendment be considered by the sole stockholder of the
Company. The resolution setting forth the proposed amendment is as follows:
"RESOLVED, that the Board of Directors of the Company hereby approves and
declares it advisable that the Certificate of Incorporation of the Company be
amended (the "Amendment") by deleting Article FOURTH thereof in its entirety and
inserting the paragraph set forth below in lieu thereof:
"FOURTH: A. The total number of shares of all classes of stock which
the corporation shall be authorized to issue is 500,200 shares, divided
into 200 shares of Common Stock, par value $5.00 per share (herein called
"Common Stock"), and 500,000 shares of Preferred Stock, par value $.01 per
share (herein called "Preferred Stock").
"B. The Board of Directors of the corporation (the "Board of
Directors") is hereby expressly authorized, by resolution or
resolutions thereof, to provide, out of the unissued shares of
Preferred Stock, for
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<PAGE> 8
series of Preferred Stock and, with respect to each such series, to
fix the number of shares constituting such series and the
designation of such series, the voting powers (if any) of the shares
of such series, and the preferences and relative, participating,
optional or other special rights, if any, and any qualifications,
limitations or restrictions thereof, of the shares of such series.
The powers, preferences and relative, participating, optional and
other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding.
"C. Except as may otherwise be provided in this Certificate
of Incorporation (including any certificate filed with the Secretary
of State of the State of Delaware establishing the terms of a series
of Preferred Stock in accordance with Section B of this Article
FOURTH) or by applicable law, each holder of Common Stock, as such,
shall be entitled to one vote for each share of Common Stock held of
record by such holder on all matters on which stockholders generally
are entitled to vote, and no holder of any series of Preferred
Stock, as such, shall be entitled to any voting powers in respect
thereof.
"D. Subject to applicable law and the rights, if any, of the
holders of any outstanding series of Preferred Stock, dividends may
be declared and paid on the Common Stock at such times and in such
amounts as the Board of Directors in its discretion shall determine.
"E. Upon the dissolution, liquidation or winding up of the
corporation, subject to the rights, if any, of the holders of any
outstanding series of Preferred Stock, the holders of the Common
Stock shall be entitled to receive the assets of the corporation
available for distribution to its stockholders ratably in proportion
to the number of shares held by them.
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<PAGE> 9
"F. The corporation shall be entitled to treat the person in
whose name any share of its stock is registered as the owner thereof
for all purposes and shall not be bound to recognize any equitable
or other claim to, or interest in, such share on the part of any
other person, whether or not the corporation shall have notice
thereof, except as expressly provided by applicable law."
SECOND: That thereafter, pursuant to the resolution of its Board of
Directors, a unanimous consent of the stockholders of the Company was duly
signed, in accordance with Section 228 of the General Corporation Law of the
State of Delaware (the "DGCL") , as required by the DGCL and the Certificate of
incorporation, adopting the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the DGCL.
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<PAGE> 10
IN WITNESS WHEREOF, said Tenneco Automotive Inc. has caused this
Certificate to be signed as of the 31st day of October, 1997.
TENNECO AUTOMOTIVE INC.
By: /s/ Karl A. Stewart
---------------------------------
Karl A. Stewart
Vice President and Secretary
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<PAGE> 11
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TENNECO AUTOMOTIVE INC.
TENNECO AUTOMOTIVE INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Company"), DOES HEREBY CERTIFY:
FIRST: That pursuant to a written consent of the Board of Directors of the
Company resolutions were adopted setting forth a proposed amendment to the
Certificate of incorporation of said Company, as amended as of such date (the
"Certificate of Incorporation"), declaring said amendment to be advisable and
directing that the amendment be considered by the sole stockholder of the
Company. The resolution setting forth the proposed amendment is as follows:
"RESOLVED, that the Board of Directors of the company hereby
approves and declares it advisable that the Certificate of Incorporation
of the Company be amended (the "Amendment") by deleting Paragraph A of
Article FOURTH thereof in its entirety and inserting the paragraph set
forth below in lieu thereof:
"FOURTH: A. The total number of shares of all classes of
Stock which the corporation shall be authorized to issue is 500,250
shares, divided into 250 shares of Common Stock, par value $5.00 per
share (herein called "Common Stock") and 500,000 shares of
Preferred Stock, par value $.01 per share (herein called "Preferred
Stock").
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<PAGE> 12
SECOND: That thereafter, pursuant to the resolution of its Board of
Directors, a written consent of the sole stockholder of the Company was duly
signed, in accordance with Section 228 of the General Corporation Law of the
State of Delaware (the "DGCL"), as required by the DGCL and the Certificate of
Incorporation, adopting the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the DGCL.
IN WITNESS WHEREOF, said Tenneco Automotive Inc. has caused this
Certificate to be signed as of the 26th day of January,
TENNECO AUTOMOTIVE INC.
By: /s/ Karl A. Stewart
--------------------------------
Karl A. Stewart
Vice President and secretary
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<PAGE> 13
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MONROE AUTO EQUIPMENT COMPANY
Monroe Auto Equipment Company, a corporation duly organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that:
1. The Certificate of Incorporation of the Corporation is hereby
amended by deleting Paragraph 1 thereof and inserting the following in lieu
thereof:
"1. The name of the corporation is Tenneco Automotive Inc."
2. That the foregoing amendment was duly adopted in accordance
with the provisions of Sections 242 and 228 (by the written consent of the sole
stockholder of the Corporation) of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Monroe Auto Equipment Company has caused this
Certificate to be executed by its duly authorized officer, on this 22nd day of
October, 1996.
MONROE AUTO EQUIPMENT COMPANY
By: /s/ Robert G. Simpson
----------------------------------------
Robert G. Simpson
Vice President and Assistant
Secretary
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<PAGE> 14
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
MONROE AUTO EQUIPMENT COMPANY
INTO
MAEC CORPORATION
* * * * * * * * * *
MAEC CORPORATION (the "Company"), a corporation organized and existing
under the laws of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Company was incorporated on the 13th day of July, 1977,
pursuant to the General Corporation Law of the State of Delaware.
SECOND: That the Company owns at least ninety percent of the outstanding
shares of the stock of Monroe Auto Equipment Company, a corporation incorporated
on the 30th day of March, 1917, pursuant to the provisions of the laws of the
State of Michigan.
THIRD: That the Company, by the following resolutions duly adopted by its
Board of Directors by the unanimous written consent of its members on the 22nd
day of July, 1977, determined to and did merge into itself said Monroe Auto
Equipment Company:
RESOLVED, that the Company merge, and it hereby does merge into
itself, said Monroe Auto Equipment Company, a Michigan corporation
("Monroe") and assumes all of its liabilities and obligations (the
"Merger"); and it is further
RESOLVED, that the Merger shall become effective upon the filing of
an appropriate Certificate of Ownership and Merger with the Secretary of
State of Delaware; and it is further
RESOLVED, that the Company change its corporate name by changing
Paragraph 1 of the Certificate of Incorporation of the Company to read as
follows: "1. The name of the corporation is Monroe Auto Equipment
Company."; and it is further
RESOLVED, that the terms and conditions of the Merger are as
follows:
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<PAGE> 15
Tenneco Inc., a Delaware corporation, ("Tenneco") is the owner of
all of the issued and outstanding shares of capital stock of the
Company and the Company is the owner of 12,585,029 shares, or
approximately 97%, of the 12,953,836 issued and outstanding shares
of Common Stock, par value $1 per share, of Monroe.
On the effective date of the Merger ("Effective Date") the capital
stock of each of the Company and Monroe shall be treated as follows:
(a) Each share of the then issued and outstanding shares of
Common Stock, par value $1 per share, of Monroe ("Monroe
Common Stock"), except shares of Monroe Common Stock owned by
the Company, shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into
.3846 of a share of Common Stock, par value $5 per share, of
Tenneco ("Tenneco Common Stock"), (such shares of Monroe
Common Stock to be converted into shares of Tenneco Common
Stock are sometimes referred to herein as "Eligible Shares").
(b) Each share of Monroe Common Stock then issued and outstanding
which is owned by the Company and each of the 76,800 shares
of Monroe Common Stock held in the treasury of Monroe shall
be cancelled.
(c) Each share of capital stock of the Company then issued and
outstanding shall be unaffected by the Merger and the
certificate(s) representing such shares shall continue to
represent the issued and outstanding shares of capital stock
of the Company as the Surviving Corporation in the Merger.
(d) No scrip or fractional share certificates for Tenneco Common
Stock shall be issued, and an outstanding fractional share
interest of Tenneco Common Stock shall not entitle the owner
thereof to vote, to receive dividends, or to any rights of a
stockholder with respect to such fractional interest.
Instead, the Exchange Agent (to be appointed by Tenneco and
the Company) will act as agent for the holders of Eligible
Shares of Monroe Common Stock and shall sell on the New York
Stock Exchange, as promptly as possible, but in any event no
later than 30 days after the Effective Date, for the accounts
of the owners of the fractional share interests, a number of
shares of Tenneco Common Stock equal to 141,842
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<PAGE> 16
shares, less the number of full shares of Tenneco Common
Stock to which the holders of Eligible Shares are entitled.
The Exchange Agent will, until July 31, 1980, pay to such
owners upon surrender of their Monroe stock certificate(s)
the value of such fractional interest (as determined by such
sale, net of expenses), without interest. On July 31, 1980,
any remaining proceeds of the sale shall be paid over to
Tenneco, after which the holders of such certificates
remaining outstanding shall look only to Tenneco for payment,
subject to the requirements of escheat laws of the various
states which may be applicable.
(e) All shares of Tenneco Common Stock into which shares of
Monroe Common Stock shall have been converted upon the Merger
shall be fully paid and nonassessable.
(f) No transfer of Eligible Shares of Monroe Common Stock shall
be made or consummated after the Effective Date.
; and it is further
RESOLVED, that the form, terms and provisions of the Plan of Merger
merging Monroe into the Company (proof of July 22, 1977), a copy of which
is before this Board, be, and the same hereby is, approved, and the
President or any Vice President, and the Secretary or any Assistant
Secretary, be, and they hereby are, authorized to execute and deliver said
Plan of Merger (the "Plan of Merger") substantially in the form approved
hereby, with such changes therein as the President or Vice President
executing the same shall approve, his approval to be evidenced
conclusively by his execution and delivery thereof; and it is further
RESOLVED, that the Plan of Merger be submitted for adoption by
Tenneco Inc., the holder of all of the issued and outstanding capital
stock of the Company; and it is further
RESOLVED, that, upon adoption of the Plan of Merger by Tenneco Inc.,
the sole stockholder of the Company, the Secretary or any Assistant
Secretary of the Company is authorized and directed to certify such fact
on the Plan of Merger, and the proper officers of the Company are
authorized and directed to complete the execution, acknowledgement, filing
and recording of the Plan of Merger in accordance with the requirements of
the General
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<PAGE> 17
Corporation Law of the State of Delaware and the Business Corporation Act
of the State of Michigan (except that the officers of the Company may, at
their election, file and record in the State of Delaware a Certificate of
Ownership and Merger in accordance with the General Corporation Law of the
State of Delaware and in the State of Michigan a Certificate of Merger in
accordance with the Business Corporation Act of the State of Michigan in
lieu of filing and recording the Plan of Merger); and it is further
RESOLVED, that Houston National Bank be, and it hereby is, appointed
to act as Exchange Agent in connection with the Merger to perform such
duties as may be requested by the appropriate officers of the Company of
Tenneco; and it is further
RESOLVED, that the Memorandum of Instructions for the Exchange Agent
in connection with the Merger (proof of July 22, 1977), a copy of which is
before this Board, be, and the same hereby is, approved, and the President
or any Vice President, and the Secretary or any Assistant Secretary, be,
and they hereby are, authorized to execute and deliver such Memorandum of
Instructions substantially in the form approved hereby, with such changes
therein as the President or Vice President executing the same shall
approve, his approval to be evidenced conclusively by his execution and
delivery thereof; and it is further
RESOLVED, that the officers of the Company be, and they hereby are,
authorized and directed to execute and deliver such documents and
certificates and take such action as they deem necessary or appropriate to
perform the obligations of the Company under the Plan of Merger and to
effect the merger contemplated thereby.
FOURTH: Anything herein or elsewhere to the contrary notwithstanding this
merger may be terminated and abandoned by the Board of Directors of MAEC
CORPORATION at any time prior to the date of filing the merger with the
Secretary of State.
IN WITNESS WHEREOF, said MAEC CORPORATION has caused this certificate to
be signed by E. L. Capps, its Vice President and attested by Gavin H. Smith, its
Assistant Secretary, this 25th day of July, 1977.
ATTEST: MAEC CORPORATION
By /s/ Gavin H. Smith By /s/ E. L. Capps
----------------------------- -------------------------------
Assistant Secretary Vice President
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<PAGE> 18
CERTIFICATE OF INCORPORATION
OF
MAEC CORPORATION
* * * * * *
1. The name of the corporation is
MAEC CORPORATION
2. The address of its registered office in the State of Delaware is
No. 100 West Tenth Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall
have authority to issue is two hundred (200) and the par value of each of such
shares is Five Dollars ($5.00) amounting in the aggregate to One Thousand
Dollars ($1,000).
5A. The name and mailing address of each incorporator is as follows:
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NAME MAILING ADDRESS
---- ---------------
S. S. Simpson 100 West Tenth Street
Wilmington, Delaware 19801
W. J. Reif 100 West Tenth Street
Wilmington, Delaware 19801
R. F. Andrews 100 West Tenth Street
Wilmington, Delaware 19801
5B. The name and mailing address of each person, who is to serve as
a director until the first annual meeting of the stockholders or until a
successor is elected and qualified, is as follows:
NAME MAILING ADDRESS
---- ---------------
K. W. Reese P. O. Box 2511
Houston, Texas 77001
M. W. Meyer P. O. Box 2511
Houston, Texas 77001
E. L. Capps P. O. Box 2511
Houston, Texas 77001
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, alter or
repeal the by-laws of the corporation.
8. Elections of directors need not be by written ballot unless the
by-laws of the corporation shall so provide.
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the
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<PAGE> 20
State of Delaware at such place or places as may be designated from time to
time by the board of directors or in the by-laws of the corporation.
9. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this certificate, hereby
declaring and certifying that this is our act and deed and the facts herein
stated are true, and accordingly have hereunto set our hands this 13th day of
July, 1977.
S. S. Simpson
---------------------------------
S. S. Simpson
W. J. Reif
---------------------------------
W. J. Reif
R. F. Andrews
---------------------------------
R. F. Andrews
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<PAGE> 1
Exhibit 3.14
TENNECO AUTOMOTIVE INC.
BY-LAWS
Adopted: January 21, 1997
<PAGE> 2
TENNECO AUTOMOTIVE INC.
BY-LAWS
Adopted: January 21, 1997
<PAGE> 3
--OO0OO--
B Y - L A W S
--OO0OO--
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of Wilmington, County
of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the state of incorporation as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held in the City of Houston, State of Texas, at such place as may be
fixed from time to time by the Board of Directors. Meetings of stockholders for
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<PAGE> 4
any other purpose may be held at such time and place, within or without the
state of incorporation, as shall be stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, shall be held on such date
and at such times as may be fixed by the Board for the purpose of electing a
Board of Directors and for the transaction of other business as may properly be
brought before the meeting.
Section 3. Written notice of the Annual Meeting shall be given to each
stockholder entitled to vote thereat not less than ten nor more than fifty days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order, showing the address of and
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<PAGE> 5
the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, during ordinary business
hours, for a period of at least ten days prior to the election, either at a
place within the city, town or village where the election is to be held and
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where said meeting is to be held, and the list shall be
produced and kept at the time and place of election during the whole time
thereof, and subject to the inspection of any stockholder who may be present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding
and entitled to vote.
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<PAGE> 6
Such request shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting of stockholders, stating the
time, place and subject thereof, shall be given to each stockholder entitled to
vote thereat, not less than ten nor more than fifty days before the date fixed
for the meeting.
Section 7. Business transacted at any special meeting stockholders shall be
limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issue and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present
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<PAGE> 7
in person or represented by proxy, shall have power to adjourn the meeting
form time to time, without notice other than announcement at the meeting, until
a quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented any business may be transacted which
might have been transacted at the meeting as originally notified.
Section 9. When a quorum is present at any meeting, the vote of the holders of
a majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the
question is one upon which by express provision of the statutes or of the
certificate of incorporation, a different vote is required in which case such
express provision shall govern and control the decision of such question.
Section 10. Each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
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<PAGE> 8
after eleven months from its date, unless the proxy provides for a longer
period, and, except where the transfer books of the corporation have been
closed or a date has been fixed as a record date for the determination of its
stockholders entitled to vote.
Section 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by
any provisions of the statutes or of the certificate of incorporation, the
notice of meeting, the meeting and vote of stockholders may be dispensed with,
if the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted shall sign a
consent in writing, setting forth the action so taken. Prompt notice of such
action by written consent shall be given to those stockholders who have not
consented in writing to such corporate action.
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<PAGE> 9
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be not less than one nor more than nine. Within the limits above
specified, the term "whole Board" as used in these By-Laws shall mean the
number of directors elected and holding office at any time. The directors shall
be elected at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until
his successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced.
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<PAGE> 10
Section 3. The business of the corporation shall be managed by its Board
of Directors which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the state of incorporation.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly
elected Board of Directors, or in the event such meeting is not held at the
time and place so
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fixed by the stockholders, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written
waiver signed by all of the Directors.
Section 6. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
Section 7. The Secretary shall give notice of any special meeting by
mailing the same at least three days, or by telegraphing, telexing,
telecopying, telephoning or personally delivering the same at least one day,
before the meeting to each director; but such notice may be waived by any
director. When notice is given to a director by telephone, it shall be
effective in accordance with Article IV, Section 1 of these By-Laws.
Section 8. The number of Directors that shall constitute a quorum shall be
not less than one-third of the whole Board
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<PAGE> 12
of Directors nor less than two Directors and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation; provided, however, that when
the whole Board is comprised of only one director, then one director shall
constitute a quorum and the vote of such director shall constitute the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the Directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if a written consent thereto is signed by all members of the
Board or of such committee as the case may be,
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<PAGE> 13
and such written consent is filed with the Minutes of proceeding of the Board or
Committee.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of two or more of the directors of the corporation, which, to the
extent provided in the resolution, shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of the
corporation and may authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
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<PAGE> 14
COMPENSATION OF DIRECTORS
Section 12. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing
and delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram, telex, telecopy or telephone;
provided, that when telephone notice is given,
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<PAGE> 15
such notice shall be effective substantially concurrently with one other method
of giving notice.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The corporate officers of the Company may consist of a
Chairman of the Board, and may include a Vice Chairman of the Board (both the
Chairman and the Vice Chairman shall be chosen from the Board of Directors), a
President, one or more Vice Presidents, a Secretary, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers, a Controller, and
such other officers as the Board of Directors may from time to time appoint
(none of whom need be a member of the Board). In so far as
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<PAGE> 16
permitted by law, any two offices may be held by the same person. The foregoing
officers shall be elected by the Board of Directors at the first meeting after
the stockholders' Annual Meeting in each year.
Notwithstanding any of the provisions of this Article V, the holders of a
majority of the outstanding shares of capital stock of the corporation entitled
to vote for the election of Directors, may (i) by written consent at any time,
or (ii) by vote at any special or annual meeting of stockholders, elect,
replace, remove (or consent to such election, replacement or removal) of any
one or more officers of the corporation.
Any officer elected or appointed by the Board of Directors may be removed
at any time by the affirmative vote of a majority of the whole Board of
Directors.
Section 2. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
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Section 3. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
CHAIRMAN OF THE BOARD
Section 5. The Chairman of the Board may be elected by the Board of
Directors at the first meeting after the Annual Meeting of Stockholders in each
year. The Chairman of the Board shall preside at all meetings of stockholders
and of the Board of Directors, shall be ex-officio a member of all standing
committees, and shall perform such other duties as may from time to time be
requested of him by the Board of Directors.
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<PAGE> 18
VICE CHAIRMAN OF THE BOARD
Section 5a. The Vice Chairman of the Board shall preside at meetings of
the Board of Directors in the absence of the Chairman of the Board, and shall
perform such other duties as may from time to time be requested of him by the
Board of Directors.
THE PRESIDENT
Section 6. The President shall have the powers and perform the duties
usually incidental to the office of the president. He shall have the general
and actual management of the business of the corporation under the Chairman of
the Board, and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the
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Board of Directors to some other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 8. The vice president, or if there shall be more than one, the
vice presidents in the order determined by the Board of Directors, shall, in
the absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the Board of Directors in a book to
be kept for that purpose and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform
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<PAGE> 20
such other duties as may be prescribed by the Board of Directors or President,
under whose supervision he shall be. He shall keep in safe custody the seal of
the corporation and, when authorized by the Board of Directors, affix the same
to any instrument requiring it and, when so affixed, it shall be attested by his
signature or by the signature of an assistant secretary.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors, shall
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books
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belonging to the corporation in such depositories as may be designated by the
Board of Directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
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Section 14. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the Board of Directors,
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
THE CONTROLLER
Section 15. The controller, following his appointment shall maintain
adequate records of all assets, liabilities and transactions of the corporation
and see that audits thereof are currently and regularly made; and he shall
perform such other duties as may be required by the Board of Directors, the
President or designated Vice President.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 16. Each person who is or was a director or officer of the
corporation, or who serves or may have served at the request of the corporation
as a director or officer of another corporation, partnership, joint venture,
trust or
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other enterprise (including the heirs, executors, administrators or estate of
such person) and who was or is a party or is threatened to be made a party to
any threatened, pending or completed claim, action, suit or proceeding, whether
criminal, civil, administrative or investigative, including appeals, shall be
indemnified by the corporation as a matter of right to the full extent permitted
or authorized by the Corporation Law of the state of incorporation of the
corporation, as it may from time to time be amended, against any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him in his capacity as a director or
officer, or arising out of his status as a director or officer. Each person who
is or was an employee or agent of the corporation, or who serves or may have
served at the request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (including
the heirs, executors, administrators or estate of such person) may, at the
discretion of the Board, be indemnified by the corporation to the same extent as
provided herein with respect to directors and officers of the corporation.
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<PAGE> 24
The corporation may, but shall not be obligated to, maintain insurance at
its expense, to protect itself and any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such.
The corporation may, but shall not be obligated to, pay expenses incurred in
defending a civil or criminal action, suit or proceeding in advance of the
final disposition of such action, suit or proceeding.
The indemnification provided by this Section 16 shall not be exclusive of
any other rights to which those seeking indemnification may be entitled as a
matter of law or under any agreement, vote of stockholders or disinterested
directors or otherwise.
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<PAGE> 25
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
president or a vice president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation.
Section 2. Where a certificate is signed (1) by a transfer agent or an
assistant transfer agent or (2) by a transfer clerk acting on behalf of the
corporation and a registrar, the signature of any such president, vice
president, treasurer, assistant treasurer, secretary or assistant secretary may
be facsimile. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates have been delivered by the corporation, such certificate or
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<PAGE> 26
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorized such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity against any claim
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<PAGE> 27
that may be made against the corporation with respect to the certificate
alleged to have been lost or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to cancel the old certificate and record the
transaction upon its books.
FIXING THE DATE FOR DETERMINATION OF
STOCKHOLDERS OF RECORD
Section 5. The Board of Directors may close the stock transfer books of
the corporation for a period not more than forty nor less than ten days
preceding the date of any meeting of stockholders, nor more than forty days
prior to the date of any other action, such as the date for payment of any
dividend or the date for the allotment of rights or the date when any change or
conversion or exchange of capital stock shall go into effect or for a period of
not exceeding
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<PAGE> 28
forty days in connection with obtaining the consent of stockholders for any
purpose. In lieu of closing the stock transfer books as aforesaid, the Board of
Directors may fix in advance a date, not more than forty nor less than ten days
preceding the date of any meeting of stockholders, nor more than forty days
prior to the date of any other action, such as the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent, as a record date for the determination
of the stockholders entitled to notice of, and to vote at, any such meeting, and
any adjournment thereof, or entitled to receive payment of any such dividend, or
to any such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, or to give such consent
and in such case such stockholders and only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting and any adjournment thereof, or to receive payment
of such dividend, or to receive such allotment of rights, or to
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<PAGE> 29
exercise such rights, or to give such consent, as the cas may be
notwithstanding any transfer of any stock on the books of the corporation after
any such record date fixed as aforesaid.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of the
state of incorporation.
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<PAGE> 30
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conductive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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<PAGE> 31
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual meeting,
and at any special meeting of stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by resolution
of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal" and
the state of incorporation. The seal may be used by causing it or a
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<PAGE> 32
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered or repealed at any meeting of the
stockholders or of the Board of Directors if notice of such alteration or
repeal be contained in the notice of such meeting. No change of the time or
place of the meeting for the election of directors shall be made within sixty
days next before the day on which such meeting is to be held, and in case of
any change of such time or place, notice thereof shall be given to each
stockholder in person or by letter mailed to his last known post office address
at least twenty days before the meeting is held.
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<PAGE> 1
EXHIBIT 10.22
$500,000,000
TENNECO INC.
11 5/8% SENIOR SUBORDINATED NOTES DUE 2009
PURCHASE AGREEMENT
October 8 1999
SALOMON SMITH BARNEY INC.,
and the Initial
Purchasers listed on
Schedule I hereto
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Tenneco Inc., a Delaware corporation (the "Company"),
proposes, upon the terms and conditions set forth herein, to issue and sell to
Salomon Smith Barney Inc. and Banc of America Securities LLC, Bear, Stearns &
Co. Inc., Chase Securities Inc., Credit Suisse First Boston Corporation, Morgan
Stanley & Co. Incorporated, Banc One Capital Markets, Inc., BNY Capital Markets,
Inc., Commerzbank Capital Markets Corporation, First Union Securities, Inc., ING
Barings LLC, Nesbitt Burns Securities Inc., Scotia Capital Markets (USA) Inc.,
SG Cowen Securities Corporation and TD Securities (USA) Inc. (collectively, the
"Initial Purchasers") $500,000,000 aggregate principal amount of its 11 5/8%
Senior Subordinated Notes due 2009 (the "Notes"). Immediately, upon consummation
of the Spin-Off Transactions (as defined in the Offering Memorandum under the
caption "Description of the Notes"), the Company will cause the Notes to be
guaranteed (each, a "Guarantee") on a senior subordinated basis by each of its
material domestic wholly-owned subsidiaries (except as otherwise provided in the
Indenture (as defined below)), as Guarantors (each, a "Guarantor"). The Notes
and the Guarantees are referred to herein as the "Securities." The Securities
will be issued pursuant to an indenture,
<PAGE> 2
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to be dated as of October 14, 1999 (the "Indenture"), by and among the Company,
the Guarantors and The Bank of New York, as trustee (the "Trustee"). Not less
than $486,875,000 (the "Escrow Account") of the net proceeds from the sale of
the Securities will be deposited with the Trustee, as escrow agent under the
Indenture. Immediately upon consummation of the Spin-Off Transactions, the
Company will cause each of the Guarantors to execute an assumption agreement
(the "Assumption Agreement") substantially in the form of Exhibit C hereto
pursuant to which each of the Guarantors shall agree to assume the rights,
duties and obligations of an "Issuer" hereunder and under the Registration
Rights Agreement (as defined herein), as if such Guarantor were a party hereto
and thereto as of the date hereof and at the Closing Date (as defined herein).
The Company and the Guarantors (collectively, the "Issuers")
wish to confirm as follows their agreement with the Initial Purchasers in
connection with the purchase and resale of the Securities. Notwithstanding
anything to the contrary contained herein, with respect to the Guarantors, such
confirmation and agreement shall be confirmed only from and after execution of
the applicable Assumption Agreement.
1. Preliminary Offering Memorandum and Offering Memorandum.
The Securities will be offered and sold to the Initial Purchasers without
registration under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance on an exemption pursuant to Section 4(2) under the Securities
Act and the rules and regulations promulgated thereunder. The Issuers have
prepared a preliminary offering memorandum, dated September 22, 1999 (the
"Preliminary Offering Memorandum"), and an offering memorandum, dated October 8,
1999 (as amended or supplemented from time to time, the "Offering Memorandum"),
setting forth information regarding the Issuers and the Securities. All
references herein to the Offering Memorandum shall include any supplement or
amendment subsequent thereto. The Issuers hereby confirm that they have
authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the Securities by the
Initial Purchasers on the terms and subject to the conditions set forth herein.
The Issuers understand that the Initial Purchasers propose to
make offers and sales ("Exempt Resales") of the Securities purchased by the
Initial Purchasers hereunder only on the terms and in the manner set forth in
the Offering Memorandum and Section 2 hereof, as soon as the Initial Purchasers
deem advisable after this Agreement has been executed and
<PAGE> 3
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delivered, (i) to persons in the United States whom the Initial Purchasers
reasonably believe to be qualified institutional buyers ("Qualified
Institutional Buyers") as defined in Rule 144A under the Securities Act, as such
rule may be amended from time to time ("Rule 144A"), in transactions under Rule
144A and (ii) outside the United States to persons other than U.S. persons in
reliance upon and in compliance with Regulation S under the Securities Act, as
such regulation may be amended from time to time ("Regulation S"). The persons
specified in clauses (i) and (ii) are referred to herein as the "Eligible
Purchasers." As used herein, the terms "United States" and "U.S. persons" have
the respective meanings given them in Regulation S.
It is understood and acknowledged that upon original issuance
thereof, and until such time as the same is no longer required under the
applicable requirements of the Securities Act, each of the Notes (and each note
issued in exchange therefor or in substitution thereof) shall bear the following
legend:
THIS NOTE (AND ANY GUARANTEE THEREOF) HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND NEITHER
THIS SECURITY (NOR ANY GUARANTEE THEREOF) NOR ANY INTEREST OR
PARTICIPATION HEREIN (OR THEREIN) MAY BE OFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM,
OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OR ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER HEREOF, BY ITS
ACCEPTANCE OF THIS SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT
THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE
THERETO UNDER RULE 144(k) UNDER THE SECURITIES ACT WHICH IS APPLICABLE
TO THIS SECURITY (THE "RESALE RESTRICTION TERMINATION DATE") OTHER THAN
(1) TO THE ISSUER OR ITS SUBSIDIARIES, (2) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING OF RULE 144A
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER, IN EACH CASE TO WHOM NOTICE IS GIVEN THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A
(AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE
OF TRANSFER ON
<PAGE> 4
-4-
THE REVERSE OF THIS SECURITY IF THIS SECURITY IS NOT IN BOOK-ENTRY FORM),
(3) TO A NON-"U.S. PERSON" IN AN "OFFSHORE TRANSACTION" (AS SUCH TERMS ARE
DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY
THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY IF THIS SECURITY IS NOT IN BOOK-ENTRY FORM), (4) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, INCLUDING THE EXEMPTION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT, IF AVAILABLE, OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES
TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE
PROPERTY OF SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR
THEIR CONTROL, AND SUBJECT TO THE RIGHT OF THE ISSUER OR THE TRUSTEE FOR
THE SECURITIES PRIOR TO ANY SUCH SALE, PLEDGE OR OTHER TRANSFER PURSUANT TO
CLAUSE (4) ABOVE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS
LEGEND WILL BE REMOVED UPON REQUEST OF THE HOLDER ON OR AFTER THE RESALE
RESTRICTION TERMINATION DATE.
It is also understood and acknowledged that holders (including
subsequent transferees) of the Securities will have the registration rights set
forth in the registration rights agreement (the "Registration Rights Agreement")
substantially in the form attached hereto as Exhibit A to be dated as of the
Closing Date (as defined herein) by and among the Company and the Initial
Purchasers.
2. Agreements to Sell, Purchase and Resell.
(a) Upon the basis of the representations, warranties and
agreements of the Initial Purchasers herein contained and subject to all the
terms and conditions set forth herein, each of the Issuers hereby agrees to
issue and sell its Securities to the Initial Purchasers and, upon the basis of
the representations, warranties and agreements of the Issuers herein contained
and subject to all the terms and conditions set forth herein, each Initial
Purchaser, severally and not jointly, agrees to purchase from the Issuers that
principal amount of Securities set forth opposite the name of such Initial
Purchaser on Schedule I attached hereto at a purchase price of 97.375% of the
principal amount thereof.
<PAGE> 5
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(b) Each Initial Purchaser represents and warrants to the Issuers that
it is a Qualified Institutional Buyer with such knowledge and experience in
financial and business matters as are necessary to evaluate the merits and risks
of an investment in the Securities, it believes it has received all of the
information it considers necessary or appropriate for deciding whether to make
an investment in the Securities, and it has advised the Issuers that it proposes
to offer the Securities for resale upon the terms and conditions set forth in
this Agreement and in the Offering Memorandum in Exempt Resales. Each Initial
Purchaser hereby represents and warrants to, and agrees with, the Issuers that
it (i) will not solicit offers for, or offer to sell, the Securities by means of
any form of general solicitation or general advertising or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act (including, but not limited to, (A) any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or (B) any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising;
provided, however, that such limitation shall not preclude the Initial
Purchasers from placing any "tombstone" announcement with respect to the resale
by the Initial Purchasers of the Securities, provided that such announcement is
not prohibited by (and is in compliance with) Regulation S), and (ii) will
solicit offers for the Securities only from, and will offer, sell or deliver the
Securities as part of its initial resales only to, (A) persons in the United
States whom such Initial Purchaser reasonably believes to be Qualified
Institutional Buyers, or if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to such Initial Purchaser that each such
account is a Qualified Institutional Buyer to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A, in each case, in
transactions under Rule 144A and (B) outside the United States to persons other
than U.S. persons in reliance on Regulation S. Each Initial Purchaser has
advised the Company that it will offer the Securities to Eligible Purchasers at
a price initially equal to 97.375% of the principal amount thereof, plus accrued
interest, if any, from October 14, 1999.
(c) Each Initial Purchaser represents and warrants that (i) it has not
offered or sold, and will not offer or sell, directly or indirectly, any of the
Securities in the United Kingdom by means of any document, other than to persons
whose ordinary business it is to buy or sell shares or debentures whether as
principal or agent (except in circumstances
<PAGE> 6
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that do not constitute an offer to the public within the meaning of the
Companies Act 1985), (ii) it has complied with and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by such Initial Purchaser in relation to the Securities in, from
or otherwise involving the United Kingdom and (iii) it has only issued or passed
on and will only issue or pass on in or from the United Kingdom to any persons
any document received by such Initial Purchaser in connection with the issue of
the Securities if the recipient is of a kind described in Article 9(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988,
as amended.
(d) Each Initial Purchaser represents and warrants that with respect to
Securities offered and sold or to be offered and sold pursuant to Regulation S
it has offered and sold the Securities and agrees that it will offer and sell
the Securities (i) as part of its initial distribution at any time and (ii)
otherwise until 40 days after the later of the commencement of the offering of
the Securities and the Closing Date, only in accordance with Rule 903 of
Regulation S. Accordingly, each Initial Purchaser represents, warrants and
agrees that with respect to Securities offered and sold or to be offered and
sold pursuant to Regulation S none of it, its affiliates or any person acting on
its behalf or on behalf of its affiliates has engaged or will engage in any
directed selling efforts in the United States with respect to the Securities,
and it and its affiliates have complied and will comply with the offering
restrictions requirements of Regulation S. Each Initial Purchaser agrees that,
at or prior to confirmation of any sale of Securities pursuant to Regulation S,
it will have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases such Securities from it
during the restricted period a confirmation or notice to substantially the
following effect:
The Securities covered hereby have not been registered under the
Securities Act, and may not be offered and sold within the United
States or to, or for the account or benefit of, U.S. persons (i) as
part of their initial distribution at any time or (ii) otherwise until
40 days after the later of the commencement of the offering and the
Closing Date, except in either case in accordance with Regulation S or
Rule 144A under the Securities Act. Terms used above have the
respective meanings given to them in Regulation S under the Securities
Act.
<PAGE> 7
-7-
Each Initial Purchaser understands that the Issuers and, for
the purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Section 7(e) and Section 7(f) hereof, counsel to the Company and counsel to
the Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and agreements and each Initial Purchaser hereby consents to
such reliance.
3. Delivery of the Securities and Payment Therefor. Delivery
to the Initial Purchasers of and payment for the Securities shall be made at the
office of Cahill Gordon & Reindel, 80 Pine Street, New York, New York at 9:00
A.M., New York City time, on October 14, 1999 (the "Closing Date"). The place of
closing for the Securities and the Closing Date may be varied by agreement
between the Initial Purchasers and the Company.
The Securities will be delivered to the Initial Purchasers
against payment of the purchase price therefor by federal funds, certified check
or wire transfer, in each case, of immediately available funds payable in
accordance with written instructions from the Company; provided, that not less
than $486,875,000 such funds shall be deposited in the Escrow Account with the
Trustee pursuant to the terms of the Indenture. The Securities will be evidenced
by one or more global securities (each, a "Global Security"), and will be
registered, in the name of Cede & Co. as nominee of The Depository Trust Company
("DTC") or in such names and in such denominations as the Initial Purchasers
shall request prior to 1:00 p.m., New York City time, on the business day
preceding the Closing Date. The Securities to be delivered to the Initial
Purchasers shall be made available to the Initial Purchasers in New York City
for inspection and packaging not later than 9:30 a.m., New York City time, on
the business day next preceding the Closing Date.
4. Agreements of the Issuers. Each of the Issuers agrees with
the Initial Purchasers as follows:
(a) Until the completion of the distribution of the Securities
by the Initial Purchasers to Eligible Purchasers, the Company will
advise the Initial Purchasers promptly and, if requested, will confirm
such advice in writing, of any material adverse change in the condition
(financial or other), business, properties or results of operations of
Automotive (as defined in the Offering Memorandum), or of the happening
of any event or the existence of any condition that requires any
amendment or supplement to the Offering Memorandum (as then amended or
supplemented) so that the Offering Memorandum (x) will not contain
<PAGE> 8
-8-
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or (y) will comply with applicable law.
(b) The Company will furnish to the Initial Purchasers,
without charge, such number of copies of the Offering Memorandum, as it
may then be amended or supplemented, as the Initial Purchasers may
reasonably request.
(c) The Issuers will not make any amendment or supplement to
the Preliminary Offering Memorandum or to the Offering Memorandum of
which the Initial Purchasers shall not previously have been advised or
to which they shall object in writing after being so advised unless, in
the reasonable opinion of counsel to the Company, such amendment or
supplement is necessary to comply with applicable law.
(d) Prior to the execution and delivery of this Agreement, the
Issuers have delivered or will deliver to the Initial Purchasers,
without charge, in such reasonable quantities as the Initial Purchasers
shall have requested or may hereafter request, copies of the
Preliminary Offering Memorandum. The Issuers consent to the use, in
accordance with the securities or Blue Sky laws of the jurisdictions in
which the Securities are offered by the Initial Purchasers and by
dealers, prior to the date of the Offering Memorandum, of each
Preliminary Offering Memorandum so furnished by the Issuers. The
Issuers consent to the use of the Offering Memorandum (and of any
amendment or supplement thereto prepared in accordance with Section
4(c)) in accordance with the securities or Blue Sky laws of the
jurisdictions in which the Securities are offered by the Initial
Purchasers and by all dealers to whom Securities may be sold, in
connection with the offering and sale of the Securities.
(e) If, at any time prior to completion of the distribution of
the Securities by the Initial Purchasers to Eligible Purchasers, any
event shall occur or condition shall exist that in the judgment of the
Company or in the opinion of the Initial Purchasers based on advice of
counsel requires any amendment or supplement to the Offering Memorandum
(as then amended or supplemented) so that the Offering Memorandum (x)
will not contain any untrue statement of a material fact or omit to
state a material fact
<PAGE> 9
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required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or (y) will comply with applicable law, the Issuers
will, in each such case subject to Section 4(c), promptly prepare an
appropriate supplement or amendment thereto, and will expeditiously
furnish to the Initial Purchasers that number of copies thereof as they
shall reasonably request.
(f) The Issuers will cooperate with the Initial Purchasers and
with their counsel in connection with the qualification of the
Securities for offering and sale by the Initial Purchasers and by
dealers under the securities or Blue Sky laws of such jurisdictions as
the Initial Purchasers may designate and will file such consents to
service of process or other documents necessary or appropriate in order
to effect such qualification; provided that in no event shall an Issuer
be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action that would subject it to
general service of process in any jurisdiction where it is not now so
subject.
(g) So long as any of the Securities are outstanding, the
Company will furnish to the Initial Purchasers (i) as soon as
reasonably practicable, a copy of each report of the Company filed with
the Securities and Exchange Commission (the "Commission") and (ii) from
time to time such other information concerning the Issuers as the
Initial Purchasers may reasonably request.
(h) The Issuers will initially deposit the net proceeds from
the sale of the Securities in the Escrow Account and thereafter will
apply the proceeds from the sale of the Securities in accordance with
the description set forth under "Use of Proceeds" in the Offering
Memorandum.
(i) The Issuers have not taken, nor will they take, directly
or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the
price of the Securities to facilitate the sale or resale of the
Securities. Except as permitted by the Securities Act, the Issuers will
not distribute any offering material in connection with the Exempt
Resales. Except following the effectiveness of the Exchange
Registration Statement or the Shelf Registration (each as defined in
the Registration Rights Agreement), the Issuers will not solicit any
offers to buy and will
<PAGE> 10
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not offer to sell the Securities by means of any form of general
solicitation or general advertising (within the meaning of Regulation D
under the Securities Act) or by means of any directed selling efforts
(as defined under Regulation S and the Commission's releases related
thereto).
(j) The Issuers will assist the Initial Purchasers in causing
the Securities to be eligible for trading on the PORTAL market.
(k) From and after the Closing Date, so long as any of the
Securities are outstanding and are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act or, if earlier,
until two years after the Closing Date, and during any period in which
the Company is not subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Company will
furnish to holders of the Securities and prospective purchasers of
Securities designated by such holders, upon request of such holders or
such prospective purchasers, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act to permit
compliance with Rule 144A in connection with resales of the Securities.
(l) The Issuers agree not to sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as
defined in the Securities Act) that would be integrated with the sale
of the Securities in a manner that would require the registration under
the Securities Act of the sale by the Issuers to the Initial Purchasers
or by the Initial Purchasers to the Eligible Purchasers of the
Securities.
(m) The Issuers agree to comply with all of the terms and
conditions of the Registration Rights Agreement, and the Company agrees
to comply with all agreements set forth in the representation letter of
the Company to DTC relating to the approval of the Notes by DTC for
"book entry" transfer.
(n) The Issuers agree that not later than any registration of
the Securities pursuant to the Registration Rights Agreement, or at
such earlier time as may be so required, the Issuers shall use their
best efforts to cause the Indenture to be qualified under the Trust
Indenture Act of 1939 (the "1939 Act") and will cause to be entered
<PAGE> 11
-11-
into any necessary supplemental indentures in connection therewith.
(o) The Issuers shall not resell any Securities that have been
acquired by them.
(p) Prior to the Closing Date, the Company will furnish to the
Initial Purchasers, as soon as reasonably practicable after they have
been prepared, a copy of any unaudited interim consolidated financial
statements of the Company for any accounting period of the Company
subsequent to the period covered by the most recent consolidated
financial statements of the Company appearing in the Offering
Memorandum.
5. Representations and Warranties of Issuers. The Issuers, jointly and
severally, represent and warrant to the Initial Purchasers that:
(a) No order or decree preventing the use of the Preliminary
Offering Memorandum or the Offering Memorandum or any amendment or
supplement thereto, or any order asserting that the transactions
contemplated by this Agreement are subject to the registration
requirements of the Securities Act, has been issued and no proceeding,
litigation or investigation for any such purpose has been commenced or
is pending or, to the knowledge of any of the Issuers, is threatened.
(b) The Preliminary Offering Memorandum, the Offering
Memorandum and each of the Exchange Act Reports (as defined herein), as
of their respective dates, and the Offering Memorandum, as of the
Closing Date, did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except
that this representation and warranty does not apply to statements or
omissions in the Preliminary Offering Memorandum and Offering
Memorandum made in reliance upon and in conformity with information
relating to any Initial Purchaser furnished to the Company in writing
by such Initial Purchaser through or on behalf of Salomon Smith Barney
Inc. expressly for use therein.
(c) As of the Closing Date and as of the date funds are
released from the Escrow Account to the Company (the "Escrow Closing
Date"), the Indenture will have been duly
<PAGE> 12
-12-
and validly authorized by the Company and as of the Escrow Closing
Date, by the Guarantors, upon its execution and delivery by the
Issuers, and assuming due authorization, execution and delivery by the
Trustee, will be a valid and binding agreement of the Issuers,
enforceable in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and subject to
the applicability of general principles of equity; the Indenture
conforms in all material respects to the description thereof in the
Offering Memorandum; and, assuming the accuracy of the representations
of the Initial Purchasers contained herein, and compliance by the
Initial Purchasers with the Agreements contained herein no
qualification of the Indenture under the 1939 Act is required in
connection with the offer and sale of the Securities contemplated
hereby or in connection with the Exempt Resales.
(d) As of the Closing Date the Notes, and as of the Escrow
Closing Date the Guarantees, will have been duly authorized by the
Company and the Guarantors, respectively, and, when executed by the
Company and the Guarantors, respectively, and (in the case of the
Notes) authenticated by the Trustee in accordance with the Indenture
and delivered to the Initial Purchasers against payment therefor in
accordance with the terms hereof, will have been validly issued and
delivered, and will constitute valid and binding obligations of the
Company and the Guarantors, respectively, entitled to the benefits of
the Indenture and enforceable in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally
and subject to the applicability of general principles of equity; and
the Notes and the Guarantees conform in all material respects to the
descriptions thereof in the Offering Memorandum.
(e) Schedule II sets forth each of the subsidiaries that are
currently Significant Subsidiaries of the Company which hold assets or
operations related to the conduct of the business of Automotive (each,
a "Subsidiary").
(f) Each of the Issuers is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation (except where the failure to be in good
standing, either singly or in the aggregate, would not have a material
adverse effect on
<PAGE> 13
-13-
the Issuers) with full power and authority (corporate and other) to
own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum, and is duly registered and
qualified to conduct its business as presently conducted as described
in the Offering Memorandum and is in good standing in each jurisdiction
where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure
to register or qualify would not have a material adverse effect on the
condition (financial or other), business, properties or results of
operations of Automotive (a "Material Adverse Effect").
(g) There are no legal or governmental proceedings pending
against any of the Issuers or, to the knowledge of any of the Issuers,
threatened against any of them or to which the Issuers or to which any
of the respective properties of the Issuers are subject that are not
disclosed in the Offering Memorandum and that, if adversely decided,
would cause a Material Adverse Effect or materially adversely affect
the issuance of the Securities, the Spin-Off Transactions or the
consummation of any of the transactions contemplated by this Agreement,
the Indenture, the Securities, the Registration Rights Agreement or the
Assumption Agreement (collectively, the "Transaction Documents"). There
are no individual agreements, contracts, indentures, leases or other
instruments of the Issuers that are material to Automotive, taken as a
whole, that are not described in the Offering Memorandum. Except as
disclosed in the Offering Memorandum, none of the Issuers is involved
in any strike, job action or labor dispute with any group of its
employees that would have a Material Adverse Effect, and, to the
knowledge of the Issuers, no such action or dispute is threatened.
(h) None of the Issuers is (x) in violation of its certificate
or articles of incorporation or bylaws or other organizational
documents, or of any law, ordinance, administrative or governmental
rule or regulation applicable to it or of any decree of any court or
governmental agency or body having jurisdiction over it, except where
any such violation or violations in the aggregate would not have a
Material Adverse Effect, or (y) in default in the performance of any
obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or in any agreement,
indenture, lease or other instrument to which any of the Issuers is a
party or by which any of them or any of their respective
<PAGE> 14
-14-
properties may be bound, except as disclosed in the Offering Memorandum
or where any such default or defaults in the aggregate would not have a
Material Adverse Effect.
(i) None of (w) the issuance, offer, sale or delivery of the
Securities, (x) the execution, delivery or performance of the
Transaction Documents by any of the Issuers to the extent a party
thereto, (y) the consummation by the Issuers of the transactions
contemplated hereby or under any of the other Transaction Documents, or
(z) the Spin-Off Transactions (i) requires any consent, approval,
authorization or other order of, or registration or filing with (each,
a "Consent"), any court, regulatory body, administrative agency or
other governmental body, agency or official (except such Consents as
may have been obtained or may be required in connection with the
registration under the Securities Act of the Securities in accordance
with the Registration Rights Agreement, the filing of the Form S-4
Registration Statement of Packaging (as defined in the Offering
Memorandum) in connection with the Spin-Off Transactions (the "Form
S-4") with the Commission, the filing of the Form 10 Registration
Statement of Packaging in connection with the Spin-off Transactions
(the "Form 10"), the qualification of the Packaging common stock for
listing on the New York Stock Exchange, the qualification of the
Indenture under the 1939 Act and except for compliance with the
securities or Blue Sky laws of various jurisdictions or the failure to
obtain which would not have a Material Adverse Effect or materially
adversely affect the consummation of the transactions contemplated by
the Transaction Documents) or conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the
certificate or articles of incorporation or bylaws or other
organizational documents of any of the Issuers, or (ii) conflicts or
will conflict with or constitutes or will constitute a breach of, or a
default under, any agreement, indenture, lease or other instrument to
which any of the Issuers is a party or by which any of them or any of
their respective properties may be bound, except as disclosed in the
Offering Memorandum including, without limitation, any Consent required
in connection with the debt realignment described therein, or any such
conflicts, breaches or defaults that in the aggregate would not have a
Material Adverse Effect, or (iii) violates or will violate any statute,
law, regulation or judgment, injunction, order or decree applicable to
any of the Issuers or any of their respective properties, except any
such violations that in the aggregate
<PAGE> 15
-15-
would not have a Material Adverse Effect, or (iv) will result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of any of the Issuers pursuant to the terms of any
agreement or instrument to which any of them is a party or by which any
of them may be bound or to which any of their property or assets is
subject, other than liens, charges and encumbrances disclosed in the
Offering Memorandum or that would not in the aggregate have a Material
Adverse Effect.
(j) To the Company's knowledge, Arthur Andersen LLP, who have
certified the financial statements included as part of the Offering
Memorandum, are independent public accountants under Rule 101 of the
AICPA's Code of Professional Conduct and its interpretations and
rulings.
(k) The financial statements of the Company included in the
Offering Memorandum, together with the related notes thereto, comply in
all material respects with the requirements of the Securities Act, and
present fairly the financial position, results of operations and cash
flows of the Issuers at the dates and for the periods to which they
relate, and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis ("GAAP"). The pro
forma financial statements and other pro forma financial information
(including the notes thereto) included in the Offering Memorandum (A)
present fairly on the basis stated the information shown therein, (B)
comply in all material respects with the requirements of the Securities
Act and the Exchange Act, (C) have been prepared in accordance with
applicable requirements of Rule 11-02 of Regulation S-X promulgated
under the Securities Act and (D) have been properly computed on the
basis described therein. The Company believes that the assumptions used
in the preparation of the pro forma financial statements and other pro
forma financial information included in the Offering Memorandum are
reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein.
(l) Each of the Issuers has all the requisite corporate power
and authority to execute, deliver and perform its obligations under
each of the Transaction Documents, to the extent a party thereto; the
execution and delivery of, and the performance by each of the Issuers
(to the extent a party thereto) of its obligations under, each of the
Transaction Documents has been duly and validly
<PAGE> 16
-16-
authorized by each of the Issuers and this Agreement and each of the
other Transaction Documents will have been duly executed and delivered
by the Company as of the Closing Date and each of the Guarantors as of
the Escrow Closing Date and, assuming the due authorization, execution
and delivery of each such Transaction Document by the other parties
thereto, will constitute at such time the valid and legally binding
agreement of each of the Issuers, enforceable against each Issuer in
accordance with its terms, except as the enforcement hereof and thereof
may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and subject to
the applicability of general principles of equity, and except as rights
to indemnity and contribution hereunder and thereunder may be limited
by Federal or state securities laws or principles of public policy.
(m) Except as disclosed in the Offering Memorandum, subsequent
to the date as of which such information is given in the Offering
Memorandum, none of the Issuers has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not
in the ordinary course of business, that is material or will be
material to Automotive, and there has not been any material change in
the capital stock, or material increase in the short-term or long-term
debt of the Company or any Subsidiary.
(n) Each of the Issuers has good and marketable title to all
property (real and personal) described in the Offering Memorandum as
being owned by it, free and clear of all liens, claims, security
interests or other encumbrances, except such as are described in the
Offering Memorandum or would not, in the aggregate, have a Material
Adverse Effect, and all the property described in the Offering
Memorandum as being held under lease by each of the Issuers is held by
it under, to each Issuer's knowledge, valid and enforceable leases,
except as the enforcement thereof may be limited by bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors'
rights generally and subject to the applicability of general principles
of equity.
(o) Upon consummation of the Spin-Off Transactions, the
Issuers will have good and marketable title to all property (real and
personal) necessary for the conduct of the business of Automotive as
described in the Offering Memorandum as being owned by it, free and
clear of all
<PAGE> 17
-17-
liens, claims, security interests or other encumbrances, except such as
are described in the Offering Memorandum or would not, in the
aggregate, have a Material Adverse Effect, and upon consummation of the
Spin-Off Transactions all property described in the Offering Memorandum
as being held under lease and used in the conduct of the business of
Automotive as described in the Offering Memorandum will be held by the
Issuers under to each Issuer's knowledge valid and enforceable leases,
except as the enforcement thereof may be limited by bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors'
rights generally and subject to the applicability of general principles
of equity.
(p) Except as permitted by the Securities Act, the Issuers
have not distributed and, prior to the later to occur of the Closing
Date and completion of the distribution of the Securities, will not
distribute any offering material in connection with the offering and
sale of the Securities other than the Preliminary Offering Memorandum
and Offering Memorandum (and any amendment or supplement thereto in
accordance with Section 4(c) hereof).
(q) Each of the Issuers (i) has such permits, licenses,
franchises, certificates of need and other approvals or authorizations
of governmental or regulatory authorities ("Permits") as are necessary
under applicable law to own their respective properties and to conduct
their respective businesses in the manner described in the Offering
Memorandum and (ii) upon consummation of the Spin-Off Transactions,
will have such Permits as are necessary under applicable law to own
properties and conduct the business of Automotive, in each case except
to the extent that the failure to have such Permits would not have a
Material Adverse Effect; each of the Issuers has fulfilled and
performed in all material respects all its obligations with respect to
the Permits, and, to the knowledge of the Issuers, no event has
occurred that allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit, subject in
each case to such qualification as may be set forth in the Offering
Memorandum and except to the extent that any such revocation or
termination, individually or in the aggregate, would not have a
Material Adverse Effect.
<PAGE> 18
-18-
(r) The Company maintains a system of internal accounting
controls and after consummation of the Spin-Off Transactions, the
Company will maintain a system of internal accounting controls
sufficient to provide reasonable assurances that: (i) transactions of
the Issuers are executed in accordance with management's general or
specific authorization; and (ii) transactions of the Issuers are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets.
(s) None of the Issuers nor, to the knowledge of any of the
Issuers, any employee or agent of the Issuers has made any payment of
funds or received or retained any funds in violation of any law, rule
or regulation, which violation would have a Material Adverse Effect.
(t) Except as disclosed in the Offering Memorandum, the
Issuers have filed all tax returns required to be filed (other than
filings being contested in good faith), which returns are true and
correct in all material respects as of their respective filing dates,
and none of the Issuers is in default in the payment of any taxes that
were payable pursuant to said returns or any assessments with respect
thereto (other than taxes being contested in good faith), except where
the failure to file such returns and make such payments (whether or not
being contested in good faith) would not, individually or in the
aggregate, have a Material Adverse Effect.
(u) Upon redemption of the preferred stock of Tenneco
International Holding Corp., no holder of any security of an Issuer
(other than holders of the Securities) will have any right to request
or demand registration of any security of an Issuer because of the
consummation of the Spin-Off Transactions or the transactions
contemplated by the Transaction Documents.
(v) Each of the Issuers owns or possess adequate rights to
use, and after giving effect to the Spin-Off Transactions will own or
possess adequate rights to use all patents, trademarks, trademark
registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in
the Offering Memorandum as being owned by it or necessary for the
conduct of the business of Automotive, and no Issuer has received
notice of any claim to the contrary (a "Claim") or any challenge (a
"Challenge") by any
<PAGE> 19
-19-
other person to the rights of each of the Issuers with respect to the
foregoing, except for such Claims and Challenges that would not have a
Material Adverse Effect.
(w) None of the Issuers is and, upon sale of the Securities to
be issued and sold hereby in accordance herewith and the application of
the net proceeds of such sale as described in the Offering Memorandum
under the caption "Use of Proceeds," will be an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(x) When the Securities are issued and delivered pursuant to
this Agreement, such Securities will not be of the same class (within
the meaning of Rule 144A(d)(3) under the Securities Act) as any
security of an Issuer that is listed on a national securities exchange
registered under Section 6 of the Exchange Act or that is quoted in a
United States automated interdealer quotation system.
(y) None of the Issuers nor any of its affiliates (as defined
in Rule 501(b) of Regulation D under the Securities Act) has directly,
or through any agent (provided that no representation is made as to the
Initial Purchasers or any person acting on their behalf), (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Securities Act) that is or
will be integrated with the offering and sale of the Securities in a
manner that would require the registration of the Securities under the
Securities Act or (ii) engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the
Securities Act) in connection with the offering of the Securities.
(z) Assuming (i) the representations and warranties of the
Initial Purchasers in Section 2 hereof are true and correct in all
material respects, (ii) each Initial Purchaser complies with the
covenants set forth in Section 2 hereof, (iii) compliance by each
Initial Purchaser with the offering and transfer procedures and
restrictions described in the Offering Memorandum, (iv) the accuracy of
the representations and warranties deemed to be made in the Offering
Memorandum by purchasers to whom the Initial Purchasers initially
resell Securities and (v) purchasers to whom the Initial Purchasers
initially resell Securities receive a copy of the Offering Memorandum
prior to such sale, the purchase and sale of the Securities pursuant
<PAGE> 20
-20-
hereto (including the Initial Purchasers' proposed offering of the
Securities on the terms and in the manner set forth in the Offering
Memorandum and Section 2 hereof) do not require registration under the
Securities Act.
(aa) The execution and delivery of this Agreement and the
other Transaction Documents and the sale of the Securities to the
Initial Purchasers by the Issuers and by the Initial Purchasers to
Eligible Purchasers in accordance with the terms hereof and the
consummation of the Spin-Off Transactions will not result in any
prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code. The representations made by
the Issuers in the preceding sentence are made in reliance upon and
subject to the accuracy of, and compliance with, the representations
and covenants made or deemed made by the Eligible Purchasers as set
forth in the Offering Memorandum under the section entitled "Notice to
Investors."
(bb) Except as disclosed or contemplated by the Offering
Memorandum, each of the Issuers is in compliance with, and not subject
to any liability under, any applicable federal, state, local and
foreign statute, regulation, rule, codes, ordinances, directives and
orders relating to pollution or to protection of public or employee
health or safety or to the environment, including, without limitation,
those that relate to any Hazardous Material (as defined herein
("Environmental Laws")), except, in each case, where noncompliance or
liability, individually or in the aggregate, would not have a Material
Adverse Effect. The term "Hazardous Material" means any pollutant,
contaminant or waste, or any hazardous, dangerous, or toxic chemical,
material, waste, substance or constituent subject to regulation under
any Environmental Law.
(cc) Immediately after the consummation of each of the
purchase and sale of the Securities and the Spin-Off Transactions, the
fair value and present fair saleable value of the assets of the Company
will exceed the sum of its stated liabilities and identified contingent
liabilities; the Company is not, nor will it be, after giving effect to
the consummation of such transactions, (i) left with unreasonably small
capital with which to carry on its business as it is proposed to be
conducted, (ii) unable to pay its debts (contingent or otherwise) as
they mature or (iii) otherwise insolvent.
<PAGE> 21
-21-
(dd) The statistical and market-related data included in the
Offering Memorandum are based on or derived from sources that the
Company believes to be reliable and accurate in all material respects.
(ee) In connection with the tender offers and exchange offers
to be consummated in connection with the Spin-Off Transactions, the
Company has complied, and will continue to comply at all times prior to
the expiration of the tender offers and exchange offers, in all
material respects with the applicable requirements of the Exchange Act.
(ff) The historical financial information and statistical data
set forth in the Offering Memorandum under the captions "-- Summary --
Summary Historical and Pro Forma Combined Financial Data",
"Capitalization", "Unaudited Pro Forma Consolidated Financial
Statements", "Supplemental Consolidated Financial Data" and "Selected
Financial Data" in each case including the accompanying notes, are
prepared on a basis consistent with the relevant historical
consolidated financial statements or combined financial statements, as
the case may be, of the Company.
6. Indemnification and Contribution.
(a) The Issuers agree to jointly and severally indemnify and
hold harmless each Initial Purchaser and each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, and each of their respective employees, from and
against any and all losses, claims, damages, liabilities and out-of-pocket
expenses (including reasonable costs of investigation) incurred by any such
persons arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering Memorandum or
Offering Memorandum or in any amendment or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to an Initial
Purchaser through Salomon Smith Barney Inc., furnished in writing to the Company
by an Initial Purchaser, expressly for
<PAGE> 22
-22-
use in connection therewith; provided, however, that the indemnification
contained in this paragraph (a), with respect to the Preliminary Offering
Memorandum shall not inure to the benefit of an Initial Purchaser on account of
any such loss, claim, damage, liability or expense arising from the sale of the
Securities by such Initial Purchaser to any person if the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in the Preliminary Offering Memorandum was corrected in the Offering
Memorandum and such Initial Purchaser sold Securities to that person without
sending or giving, at or prior to the written confirmation of such sale, a copy
of the Offering Memorandum (as then amended or supplemented). The foregoing
indemnity agreement shall be in addition to any liability that an Issuer may
otherwise have.
(b) If any action, suit or proceeding shall be brought against an
Initial Purchaser or any person who controls an Initial Purchaser in respect of
which indemnity may be sought against the Issuers in accordance with this
Section 6, such Initial Purchaser or any such person who controls such Initial
Purchaser or is an employee of such Initial Purchaser shall promptly notify in
writing any Issuer, and the Issuers shall assume the defense thereof, including
the employment of counsel reasonably acceptable to such Initial Purchaser or
such person who controls an Initial Purchaser or such employee of such Initial
Purchaser and payment of all fees and expenses relating to the assumption of the
defense by the Issuers. An Initial Purchaser or any person who controls an
Initial Purchaser or an employee of such Initial Purchaser shall have the right
to employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Initial Purchaser or any such person who
controls an Initial Purchaser or such employee of such Initial Purchaser unless
(i) any Issuer has agreed in writing to pay such fees and expenses, (ii) the
Issuers have failed to assume the defense and employ counsel on a timely basis
or (iii) the named parties to any such action, suit or proceeding (including any
impleaded parties) include both such Initial Purchaser or any such person who
controls an Initial Purchaser or such employee of such Initial Purchaser and an
Issuer and such Initial Purchaser or any such person who controls an Initial
Purchaser or such employee of such Initial Purchaser shall have been advised by
its counsel that representation of such indemnified party and such Issuer by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
<PAGE> 23
-23-
case the Issuers shall not have the right to assume the defense of such action,
suit or proceeding (a "Conflicted Action") on behalf of such Initial Purchaser
or any such person who controls an Initial Purchaser). It is understood,
however, that the Issuers shall, in connection with any such Conflicted Action,
be liable for the reasonable fees and expenses of a single counsel (in addition
to any local counsel) for the Initial Purchasers and each person who controls an
Initial Purchaser and their respective employees, which firm shall be designated
in writing by Salomon Smith Barney Inc., and that all such reasonable fees and
expenses shall be reimbursed as incurred as provided in paragraph (a) hereof.
The Issuers shall not be liable for any settlement of any such action, suit or
proceeding effected without the written consent of the Issuers, but if settled
with such written consent, or if there be a final judgment for the plaintiff in
any such action, suit or proceeding, the Issuers agree to jointly and severally
indemnify and hold harmless the Initial Purchasers, to the extent provided in
paragraph (a), and any person who controls an Initial Purchaser from and against
any loss, claim, damage, liability or expense by reason of such settlement or
judgment.
(c) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless each Issuer, their respective directors, employees
and officers and any person who controls an Issuer within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent as
the indemnity from the Issuers to the Initial Purchasers set forth in paragraph
(a) hereof, but only with respect to information relating to such Initial
Purchaser furnished in writing by such Initial Purchaser through Salomon Smith
Barney Inc. expressly for use in the Preliminary Offering Memorandum or Offering
Memorandum or any amendment or supplement thereto. If any action, suit or
proceeding shall be brought against an Issuer, any of their respective
directors, employees or officers or any such controlling person based on the
Preliminary Offering Memorandum or Offering Memorandum, or any amendment or
supplement thereto, and in respect of which indemnity may be sought against an
Initial Purchaser pursuant to this paragraph (c), such Initial Purchaser shall
have the rights and duties given to the Issuers by paragraph (b) above (except
that if the Issuers shall have assumed the defense thereof, such Initial
Purchaser shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the reasonable fees and
expenses of such counsel shall be at such Initial Purchaser's expense), and each
Issuer, their respective directors and officers and any such controlling person
shall have the rights and duties given to
<PAGE> 24
-24-
the Initial Purchasers by paragraph (b) above. The foregoing indemnity agreement
shall be in addition to any liability that an Initial Purchaser may otherwise
have.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by an
Issuer on the one hand and an Initial Purchaser on the other hand from the
offering of the Securities 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 an Issuer on the one hand and an Initial Purchaser on
the other in connection with the statements or such omissions that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by an Issuer
on the one hand and an Initial Purchaser on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by an Issuer bear to the total discounts and
commissions received by such Initial Purchaser, in each case as set forth in the
table on the cover page of the Offering Memorandum. The relative fault of an
Issuer on the one hand and an Initial Purchaser on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such Issuer on the one hand
or by such Initial Purchaser on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Issuers and the Initial Purchasers agree that it would not be
just and equitable if contribution pursuant to this Section 6 were determined by
a pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other
<PAGE> 25
-25-
out-of-pocket expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending or appearing as a third
party witness in any such action, suit or proceeding. Notwithstanding the
provisions of this Section 6, no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total price of the
Securities purchased by it and distributed to the public exceeds the amount of
any damages that such Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 6 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred, provided
that court judgments shall be payable only when final and non-appealable. The
indemnity and contribution agreements contained in this Section 6 and the
representations and warranties of the Issuers set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of an Initial Purchaser or any person who
controls an Initial Purchaser, an Issuer, their respective directors, employees
or officers or any person controlling an Issuer, (ii) acceptance of any
Securities and payment therefor hereunder and (iii) any termination of this
Agreement. A successor to an Initial Purchaser or any person who controls an
Initial Purchaser, an Issuer, their respective directors or officers or any
person controlling an Issuer, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
6.
(g) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
7. Conditions of the Initial Purchasers' Obligations. The obligations
of each Initial Purchaser to purchase
<PAGE> 26
-26-
and pay for the Securities to be purchased by it on the Closing Date hereunder
are subject to the fulfillment, in such Initial Purchaser's sole discretion, of
the following conditions:
(a) At the time of execution of this Agreement and on the
Closing Date, no order or decree preventing the use of the Offering
Memorandum or any amendment or supplement thereto, or any order
asserting that the transactions contemplated by this Agreement are
subject to the registration requirements of the Securities Act shall
have been issued and no proceedings for those purposes shall have been
commenced or shall be pending or, to the knowledge of the Issuers,
threatened. No order suspending the sale of the Securities in any
jurisdiction shall have been issued and no proceedings for that purpose
shall have been commenced or shall be pending or, to the knowledge of
the Issuers, threatened.
(b) At the time of the execution of this Agreement and on the
Closing Date, the Company shall have entered into a new credit facility
providing for borrowings on the date the Spin-Off Transactions are
consummated of at least $1,550,000,000 and having terms substantially
identical to those set forth in the Offering Memorandum under the
caption "Description of Senior Credit Facility" (the "New Credit
Facility"), and the Company shall have delivered to the Initial
Purchasers a true, correct and complete executed copy of the New Credit
Facility. The Company shall have received the necessary consents under
its Credit Facility by and among the Company, the banks party thereto,
Morgan Guaranty Trust Company, as Administrative Agent, Bank of America
Illinois, as Documentation Agent and J.P. Morgan Securities Inc. as
Arranger, dated November 4, 1996, permitting the Offering of the Notes
and the Spin-Off Transactions and such consents shall be in form and
substance reasonably satisfactory to the Initial Purchasers.
(c) On the Closing Date, Tenneco's board of directors shall
have duly authorized the consummation of the Spin-Off Transactions in
substantially the form set forth in the Offering Memorandum and such
authorization shall not have been rescinded, and the consummation of
the Spin-Off Transactions shall not be subject to any order, decree or
injunction of any court or governmental authority or agency the effect
of which would be to prevent the consummation of such Spin-Off
Transactions.
<PAGE> 27
-27-
(d) Subsequent to the date hereof, (i) except as disclosed or
contemplated in the Offering Memorandum, there shall not have occurred
any material adverse change in the condition (financial or other),
business, prospects, properties, assets, net worth, or results of
operations of (x) the Issuers, taken as a whole or (y) Automotive,
which, in the opinion of the Initial Purchasers, would materially
adversely affect the market for the Securities, or (ii) the Offering
Memorandum shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, if amending
or supplementing the Offering Memorandum to correct any such
misstatement or omission could, in the sole judgment of the Initial
Purchasers, materially adversely affect the marketability of the
Securities.
(e) The Initial Purchasers shall have received on the Closing
Date an opinion of Jenner & Block, counsel for the Issuers, dated the
Closing Date and addressed to the Initial Purchasers, substantially in
the form of Exhibit B hereto.
(f) The Initial Purchasers shall have received on the Closing
Date an opinion of Cahill Gordon & Reindel, counsel for the Initial
Purchasers, dated the Closing Date and addressed to the Initial
Purchasers, with respect to such matters as the Initial Purchasers may
request.
(g) The Initial Purchasers shall have received "cold comfort"
letters addressed to the Initial Purchasers, and dated the date hereof
and the Closing Date, from Arthur Andersen LLP, substantially in the
forms heretofore approved by the Initial Purchasers.
(h) (i) There shall not have been any change in the capital
stock of the Company or any Subsidiary nor any material increase in the
short-term or long-term debt of the Company or any Subsidiary from that
set forth or contemplated in the Offering Memorandum; there has not
occurred and does not exist, since the respective dates as of which
information is given in the Offering Memorandum, any event or condition
which has had or could reasonably be expected to have a Material
Adverse Effect; (ii) except as disclosed or contemplated by the
Offering Memorandum, the Company and the Subsidiaries shall not have
any liabilities
<PAGE> 28
-28-
or obligations, direct or contingent, except for liabilities incurred
in the ordinary course of business, that are material to Automotive;
(iii) all the representations and warranties of the Company contained
in this Agreement shall be true and correct in all material respects on
and as of the date hereof and on and as of the Closing Date as if made
on and as of the Closing Date; and (iv) the Initial Purchasers shall
have received a certificate, dated the Closing Date and signed by the
chief executive officer and the chief accounting officer of each of the
Company (or such other officers as are acceptable to the Initial
Purchasers), to the effect set forth in this Section 7(h) and in
Section 7(j) hereof.
(i) The Issuers shall not have failed at or prior to the
Closing Date to have performed or complied with any of their respective
agreements herein contained and satisfied all the conditions required
to be performed or complied with by them hereunder at or prior to the
Closing Date.
(j) Subsequent to the date hereof, there shall not have been
any announcement by any "nationally recognized statistical rating
organization," as defined for purposes of Rule 436(g) under the
Securities Act, that (i) it is downgrading its rating assigned to any
class of securities of Automotive (including the Securities and such
other securities as the Offering Memorandum contemplates will be issued
in connection with the transactions contemplated herein and the
Spin-Off Transactions), or (ii) it is reviewing its ratings assigned to
any class of securities of Automotive (including the Securities and
such other securities as the Offering Memorandum contemplates will be
issued in connection with the transactions contemplated herein and in
the Spin-Off Transactions) with a view to possible downgrading, with
negative implications or direction not determined.
(k) The Securities shall have been approved for trading on the
PORTAL market.
(l) The Issuers shall have furnished or caused to be furnished
to the Initial Purchasers such further certificates and customary
closing documents as the Initial Purchasers shall have reasonably
requested.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only
<PAGE> 29
-29-
if they are reasonably satisfactory in form and substance to the Initial
Purchasers.
Any certificate or document signed by any officer of an Issuer and
delivered to the Initial Purchasers, or to counsel for the Initial Purchasers,
shall be deemed a representation and warranty by the Issuers to the Initial
Purchasers as to the statements made therein.
8. Expenses.
(a) Whether or not the purchase and sale of the Securities hereunder is
consummated or this Agreement is terminated pursuant to Section 9 hereof, the
Issuers agree to pay the following costs and expenses and all other costs and
expenses incident to the performance by them of their obligations hereunder: (i)
the printing or reproduction of the Preliminary Offering Memorandum and the
Offering Memorandum (including financial statements thereto), and each amendment
or supplement to any of them, the Agreement, Registration Rights Agreement and
the Indenture; (ii) the delivery (including postage, air freight charges and
charges for counting and packaging) of such copies of the Offering Memorandum,
the Preliminary Offering Memorandum and all amendments or supplements thereto as
may be reasonably requested for use in connection with the offering and sale of
the Securities; (iii) the printing, authentication, issuance and delivery of
certificates for the Securities, including any stamp taxes in connection with
the original issuance and sale of the Securities; (iv) the printing (or
reproduction) and delivery of the preliminary and supplemental Blue Sky
Memoranda and all other agreements and documents printed (or reproduced) and
delivered in connection with the offering of the Securities; (v) the application
for quotation of the Securities on PORTAL; (vi) the qualification of the
Securities for offer and sale under the securities or Blue Sky laws of the
several states as provided in Section 4(f) hereof (including the reasonable
fees, expenses and disbursements of counsel for the Initial Purchasers relating
to the preparation, printing or reproduction, and delivery of the preliminary
and supplemental Blue Sky Memoranda and such qualification); and (vii) the
reasonable fees and expenses of the Issuers' accountants and the reasonable fees
and expenses of counsel (including local and special counsel) for the Company.
(b) If the purchase and sale of the Securities hereunder is not
consummated because any condition to the obligations of the Initial Purchasers
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated because
<PAGE> 30
-30-
of any failure, refusal or inability on the part of the Issuers to perform all
obligations and satisfy all conditions on their part to be performed or
satisfied hereunder other than by reason of a default by an Initial Purchaser in
payment for the Securities on the Closing Date, the Issuers shall reimburse the
Initial Purchasers promptly upon demand for all reasonable out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and sale of
the Securities and the other transactions contemplated hereby; provided that the
defaulting Initial Purchaser shall reimburse the Issuers upon demand for all
reasonable out-of-pocket expenses (including reasonable fees and expenses for
law and accounting services and printing costs) that shall have been incurred by
them in connection with the proposed purchase and sale of the Securities and the
transactions contemplated hereby.
9. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchasers, without
liability on the part of the Initial Purchasers to the Issuers, by notice to any
Issuer, if prior to the Closing Date, (i) trading in securities generally on the
New York Stock Exchange, American Stock Exchange or the Nasdaq National Market
shall have been suspended or materially limited, (ii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York state authorities or (iii) there shall have occurred any
outbreak or escalation of hostilities or other international or domestic
calamity, crisis or change in political, financial or economic conditions, the
effect of which on the financial markets of the United States or the market for
the Securities is such as to make it, in the sole judgment of the Initial
Purchasers, impracticable or inadvisable to commence or continue the offering of
the Securities on the terms set forth on the cover page of the Offering
Memorandum (or if not yet in existence then the Preliminary Offering Memorandum)
or to enforce contracts for the resale of the Securities by the Initial
Purchasers. Notice of such termination may be given to the Issuers by telegram,
telecopy or telephone and shall be subsequently confirmed by letter.
10. Default by an Initial Purchaser. If any Initial Purchaser shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Initial Purchaser hereunder and such failure to purchase shall constitute a
default in the performance of its obligations under this Agreement, the
remaining Initial Purchaser shall be obligated to take up and pay for the
Securities which the defaulting Initial Purchasers
<PAGE> 31
-31-
agreed but failed to purchase; provided, however, that in the event that the
aggregate principal amount of Securities which the defaulting Initial Purchaser
agreed but failed to purchase shall exceed 10% of the aggregate principal amount
of Securities set forth in Schedule I hereto, the remaining Initial Purchasers
shall have the right to purchase all, but shall not be under any obligation to
purchase any, of the Securities, and if such non-defaulting Initial Purchasers
do not purchase all the Securities, this Agreement will terminate without
liability to the non-defaulting Initial Purchasers or the Issuers. In the event
of a default by any Initial Purchaser as set forth in this Section 10, the
Closing Date shall be postponed for such period, not exceeding seven days, as
the non-defaulting Initial Purchasers shall determine in order that the required
changes in the Offering Memorandum or in any other documents or arrangements may
be effected. Nothing contained in this Agreement shall relieve any defaulting
Initial Purchaser of its liability, if any, to the Issuers or the non-defaulting
Initial Purchasers for damages occasioned by its default hereunder.
11. Information Furnished by the Initial Purchasers. The statements set
forth in the stabilization legend on page ii and in the ninth paragraph under
the caption "Plan of Distribution" in the Preliminary Offering Memorandum and
the Offering Memorandum, constitute the only information furnished by the
Initial Purchasers as such information is referred to in Sections 5(b) and 6
hereof.
12. Miscellaneous. Except as otherwise provided herein, notice given
pursuant to any provision of this Agreement shall be in writing and shall be
delivered (i) if to the Issuers, at Tenneco, 500 North Field Drive, Lake Forest,
IL 60045, Attention: Karl A. Stewart, or (ii) if to the Initial Purchasers, to
Salomon Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, Attention:
Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
Initial Purchasers, Issuers, and their respective directors, officers and the
controlling persons referred to in Section 6 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the term
"successor" nor the terms "successors and assigns" as used in this Agreement
shall include a purchaser from an Initial Purchaser of any of the Securities in
its status as such purchaser.
<PAGE> 32
-32-
13. Applicable Law; Counterparts. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York without regard
to principles of conflicts of law.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument.
<PAGE> 33
S-1
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Guarantors and the Initial Purchasers.
Very truly yours,
TENNECO INC.
By: /s/ Karen R. Osar
Name: Karen R. Osar
Title: Vice President & Treasurer
Confirmed as of the date first above mentioned.
SALOMON SMITH BARNEY INC.,
and the Initial
Purchasers listed on
Schedule I hereto
By: Salomon Smith Barney Inc.
By: /s/ Stephen Cunningham
Name: Stephen Cunningham
Title: Vice President
<PAGE> 34
SCHEDULE I
INITIAL PURCHASERS' PRINCIPAL AMOUNT
OF SECURITIES TO BE PURCHASED
<TABLE>
<CAPTION>
NAME AMOUNT
- ---- ------
<S> <C>
Salomon Smith Barney Inc. $ 225,000,000
Credit Suisse First Boston Corporation 62,500,000
Morgan Stanley & Co. Incorporated 37,500,000
Banc of America Securities LLC 37,500,000
Chase Securities Inc. 37,500,000
Bear, Stearns & Co. Inc. 17,500,000
BNY Capital Markets 10,000,000
Banc One Capital Markets 10,000,000
Commerzbank Capital Markets Corporation 10,000,000
Nesbitt Burns Securities Inc. 8,750,000
First Union Securities, Inc. 8,750,000
ING Barings 8,750,000
Scotia Capital Markets (USA) Inc. 8,750,000
Societe Generale 8,750,000
TD Securities 8,750,000
---------
TOTAL: $ 500,000,000
===========
</TABLE>
<PAGE> 35
SCHEDULE II
AUTOMOTIVE SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF
OWNED BY AND INCORPORATION/
NAME PERCENTAGE OWNED ORGANIZATION
- ---- ---------------- ------------
<S> <C> <C>
Tenneco Automotive Inc. Tenneco Inc./100% Delaware
Tenneco International Holding Corp. Tenneco Inc./100%(a) Delaware
</TABLE>
- ----------
(a) As of consummation of the Spin-Off Transactions.
<PAGE> 36
EXHIBIT A
[Form of Registration Rights Agreement]
(executed and filed as Exhibit
10.23 to the Registration
Statement with which this is filed)
<PAGE> 37
EXHIBIT B
[Form of Opinion of Jenner & Block]
October __, 1999
SALOMON SMITH BARNEY INC.,
and the other Initial Purchasers listed
on Schedule I hereto
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, NY 10013
Ladies and Gentlemen:
We have acted as special counsel to Tenneco Inc., a Delaware
corporation (the "Company"), in connection with the execution, delivery and
performance by the Company of the Purchase Agreement among Salomon Smith Barney
Inc., the other Initial Purchasers and the Company dated October 8, 1999 (the
"Purchase Agreement"), pursuant to which the Initial Purchasers are purchasing
an aggregate principal amount of $500 million 115/8% Senior Subordinated Notes
due 2009 (the "Notes"), to be issued pursuant to an indenture dated as of
October __, 1999 (the "Indenture") between the Company and The Bank of New York,
as Trustee. This opinion is being delivered pursuant to Section 7(e) of the
Purchase Agreement. Initially capitalized terms not defined herein have the
definitions set forth in the Purchase Agreement.
For purposes of our opinion, we have examined the following
documents (the "Documents"):
(a) The Preliminary Offering Memorandum dated September
22, 1999 (the "Preliminary Offering Memorandum")
relating to the Notes;
(b) The final Offering Memorandum dated October 8, 1999
(the "Offering Memorandum") relating to the Notes;
<PAGE> 38
October __, 1999
Page 2
(c) The Purchase Agreement;
(d) The Indenture;
(e) The form of the Notes; and
(f) The Registration Rights Agreement dated October __,
1999 (the "Registration Rights Agreement").
In addition, we have examined originals or copies of certificates and the
documents delivered in connection with the sale of the Notes on the date hereof.
We have also examined certified copies of resolutions of the Board of Directors
and/or committees of the Board of Directors of the Company authorizing the
Documents and other matters. In addition, we have made inquiries of officers and
employees of the Company and we have examined originals (or copies certified or
otherwise identified to our satisfaction) of such instruments, certificates and
documents and we have reviewed such questions of law, as we have deemed
necessary or appropriate for the purpose of the opinion rendered below. As to
any fact material to our opinion, we have (with your permission and without any
investigation or independent confirmation) assumed the accuracy of such
instruments, certificates and documents with respect to the facts stated
therein. In rendering the opinion that follows, we have assumed (i) the
genuineness of all signatures, (ii) the authenticity of all documents submitted
to us as originals, (iii) the conformity to the original documents of all
documents submitted to us as copies, (iv) that all documents which must be
executed and delivered by parties other than the Company to be effective have
been duly authorized, executed and delivered by such other parties and (v) that
the Notes have been fully paid for.
Whenever our opinion with respect to the existence or absence
of facts is indicated to be based on our knowledge, we are referring to the
actual knowledge of Jenner & Block attorneys who have given substantive
attention to matters concerning the Company during the course of our
representation of the Company, which knowledge has been obtained by such
attorneys in their capacity as such. Notwithstanding the foregoing, for purposes
of our opinion in subparagraph 9(ii), knowledge shall mean the actual knowledge
of Jenner & Block attorneys who have devoted a significant amount of time to the
Spin-Off Transactions, which knowledge has been obtained by such attorneys in
their capacity as such. Except as expressly set forth herein, we have not
undertaken any independent investigation to determine the existence or absence
of such facts and no inference as to our knowledge concerning such facts should
be drawn from the fact that such representation has been undertaken by us.
<PAGE> 39
October __, 1999
Page 3
Based on the foregoing and subject to such other or further
exceptions and limitations as may be set forth below, it is our opinion that:
1. Each of the Company, Tenneco Automotive Inc., a
Delaware corporation ("TA"), andTenneco International
Holding Corp., a Delaware corporation ("TIHC"), is
validly existing and in good standing under the laws
of its jurisdiction of incorporation with requisite
corporate power and authority to own, lease and
operate its properties and to conduct its business as
described in the Offering Memorandum, and is duly
registered and qualified to conduct its business and
is in good standing in each jurisdiction where the
nature of its properties or the conduct of its
business requires such registration or qualification,
except where the failure to register or qualify would
not reasonably be expected to have a Material Adverse
Effect.
2. The Company has the requisite corporate power and
authority to execute, deliver and perform its
obligations under the Purchase Agreement, the
Indenture and the Registration Rights Agreement; the
execution and delivery of, and the performance by the
Company of its obligations under, each of the
Purchase Agreement, the Indenture and the
Registration Rights Agreement has been duly and
validly authorized by the Company, and each of the
Purchase Agreement, the Indenture and the
Registration Rights Agreement has been duly executed
and delivered by the Company. The Purchase Agreement,
the Indenture and Registration Rights Agreement
(assuming due authorization and execution by each
party thereto other than the Company, to the extent a
party thereto) each constitute a valid and legally
binding agreement of the Company, enforceable against
the Company in accordance with its terms.
3. The Notes have been duly authorized by the Company
and, when authenticated by the Trustee in accordance
with the Indenture and delivered to the Initial
Purchasers against payment therefor in accordance
with the terms of the Purchase Agreement, will have
been validly issued and delivered, and will
constitute valid and binding obligations of the
Company entitled to the benefits of the Indenture and
enforceable in accordance with their terms.
4. None of (a) the issuance, offer, sale or delivery of
the Securities, (b) the execution, delivery or
performance of the Documents by the Company, TA, or
TIHC, to the extent a party thereto, or (c) the
consummation by the Company, TA or TIHC of any of the
transactions contemplated by the
<PAGE> 40
October __, 1999
Page 4
Documents, (i) to our knowledge, requires any
consent, approval, authorization or other order of,
or registration or filing with (each, a "Consent"),
any court, regulatory body, administrative agency or
other governmental body, agency or official (except
such as may have been obtained or may be required in
connection with the registration under the Securities
Act of the Securities in accordance with the
Registration Rights Agreement, the qualification of
the Indenture under the 1939 Act and except for
compliance with the securities or Blue Sky laws of
various jurisdictions), (ii) conflicts or will
conflict with or constitutes or will constitute a
breach of, or a default under, the certificate of
incorporation or by-laws of the Company, TA or TIHC,
except any such conflicts, breaches and defaults that
in the aggregate would not reasonably be expected to
have a Material Adverse Effect, (iii) to our
knowledge, conflicts or will conflict with or
constitutes or will constitute a breach of, or a
default under, any agreement, indenture, lease or
other instrument known to us to which the Company, TA
or TIHC is a party or by which any of them or any of
their respective properties may be bound, except as
disclosed in the Offering Memorandum including,
without limitation, any Consent required in
connection with the debt realignment described
therein, or any such conflicts, breaches and defaults
that in the aggregate would not reasonably be
expected to have a Material Adverse Effect, (iv)
violates or will violate any statute, law, regulation
or filing or judgment, injunction, order or decree
known to us to be applicable to the Company, TA or
TIHC, or any of their respective properties, except
any such violations that in the aggregate could not
have a Material Adverse Effect (it being understood
that we express no opinion in this paragraph 4
regarding compliance with disclosure requirements or
prohibitions against fraud or misrepresentation), or
(v) will result in the creation or imposition of any
lien, charge or encumbrance upon any property or
assets of the Company, TA or TIHC pursuant to the
terms of any agreement or instrument known to us to
which any of them is a party or by which any of them
may be bound or to which any of their properties or
assets is subject, other than as disclosed in the
Offering Memorandum.
5. The Initial Purchasers will acquire title to the
Notes, free and clear of all security interests,
mortgages, pledges, liens, encumbrances, claims and
equities if the Initial Purchasers acquire such Notes
in good faith and without notice of any such security
interests, mortgages, pledges, liens, encumbrances,
claims or equities.
<PAGE> 41
October __, 1999
Page 5
6. The Indenture creates a valid security interest in
favor of the Trustee in all right, title and interest
of the Company in and to the Collateral (as defined
in the Indenture).
7. Assuming (i) the representations and warranties of
the Company in Section 5 of the Purchase Agreement
are true and correct, (ii) the representations and
warranties of the Initial Purchasers in Section 2 of
the Purchase Agreement are true and correct, (iii)
the Company complies with the covenants set forth in
Section 4 of the Purchase Agreement, (iv) the Initial
Purchasers comply with the covenants set forth in
Section 2 of the Purchase Agreement, (v) the Initial
Purchasers comply with the offering and transfer
procedures and restrictions described in the Offering
Memorandum, (vi) the representations and warranties
deemed to be made in the Offering Memorandum by
purchasers to whom the Initial Purchasers initially
resell Securities are true and correct and (vii)
purchasers to whom the Initial Purchasers initially
resell Securities receive a copy of the Offering
Memorandum prior to such sale, the purchase and sale
of the Securities pursuant to the Purchase Agreement
(including the Initial Purchasers' offering and sale
of the Securities on the terms and in the manner set
forth in the Offering Memorandum and Section 2 of the
Purchase Agreement) do not require registration under
the Securities Act.
8. Assuming the accuracy of the Initial Purchasers'
representations and warranties contained in the
Purchase Agreement and the compliance by the Initial
Purchasers with the agreements contained in the
Purchase Agreement, no qualification of the Indenture
under the 1939 Act, as now in effect, is required in
connection with the offer and sale of the Securities
to the Initial Purchasers or the initial resale of
the Securities by the Initial Purchasers to Eligible
Purchasers solely in the manner contemplated by the
Purchase Agreement.
9. To our knowledge, (i) none of the Company, TA or TIHC
is in violation of its certificate of incorporation
or by-laws, (ii) none of the Company, TA or TIHC is
in violation of any law, ordinance, administrative or
governmental rule or regulation known to us to be
applicable to it, decree of any court or governmental
agency or body known to us as having jurisdiction
over the Company and (iii) none of the Company, TA or
TIHC is in default in the performance of any
obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of
indebtedness known to us to which any of the Company,
TA or TIHC is a party or by which any of their
<PAGE> 42
October __, 1999
Page 6
respective properties may be bound, except as
disclosed in the Offering Memorandum or where any
such default or defaults in the aggregate would not
reasonably be expected to have a Material Adverse
Effect.
10. To our knowledge, (i) there are no legal governmental
proceedings involving or affecting any of the
Company, TA or TIHC, or any of their respective
properties or assets, which would be required to be
described in a prospectus pursuant to the Securities
Act that are not described in the Offering
Memorandum, and (ii) there are no material contracts
or other documents which would be required to be
described in a prospectus pursuant to the Securities
Act that are not described in the Offering
Memorandum.
11. The statements in the Offering Memorandum under the
heading "Description of the Notes," insofar as such
statements purport to summarize certain provisions of
the Notes, the Guarantees, the Registration Rights
Agreement and the Indenture, are correct in all
material respects and provide a fair summary of the
provisions of such agreements and instruments.
12. The statements in the Offering Memorandum under the
heading "Risk Factors -- Risks Relating to the
Spin-Off," "Business -- Legal and Environmental
Proceedings", and "United States Federal Tax
Consequences" are correct in all material respects
and fairly summarize the legal matters and material
tax consequences, as the case may be, described
therein.
13. The Company is not, nor immediately after the sale of
the Securities to be sold under the Purchase
Agreement and the application of the proceeds from
such sale (as described in the Offering Memorandum
under the caption "Use of Proceeds") will it be an
"investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
14. Neither the consummation of the transactions
contemplated by the Purchase Agreement nor the sale,
issuance, execution or delivery of the Securities
will violate Regulation T, U or X of the Board of
Governors of the Federal Reserve system.
* * * * *
We have participated in conferences with officers and other
representatives of the Issuers, representatives of the independent public
accountants for the Issuers, representatives of the Initial Purchasers and
counsel for the Initial Purchasers at which the contents of the Offering
<PAGE> 43
October __, 1999
Page 7
Memorandum and related matters were discussed, and, although we have not
independently verified and are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum, no information has come to our attention
that leads us to believe that the Offering Memorandum, as of its date or as of
the date hereof, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary to make the statements contained therein, in the light of the
circumstances under which they were made, not materially misleading (it being
understood that we are not commenting as to the financial statements and related
notes thereto and the other financial, statistical and accounting data or
information, on the basis of and subject to the foregoing, included in the
Offering Memorandum or omitted therefrom).
We have assumed that New York law is identical to Illinois law
for purposes of rendering the opinions contained in paragraphs 2 and 3. We have
no knowledge that any provisions of New York law would render any of the
documents referred to in such paragraphs unenforceable in any material respect
(subject to each of the other assumptions and qualifications contained in this
letter).
As to the foregoing matters with respect to which we express
our opinion, we advise that: (i) we are not admitted to practice in any state
other than Illinois, and do not render any opinion as to legal matters subject
to or governed by laws other than those of the State of Illinois, United States
federal jurisprudence or the Delaware General Corporation Law and (ii) any
opinion to the effect that an instrument constitutes a binding obligation of any
person, or that it is enforceable in accordance with its terms, does not include
any opinion that specific performance or other equitable relief or remedies
would be available in the event of a breach of any particular provision thereof
and is qualified by the effect of applicable bankruptcy, moratorium, insolvency,
reorganization, fraudulent conveyance, and other laws and legal principles
affecting or limiting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law) and, in
certain circumstances, considerations of public policy, and (iii) the
enforceability of any indemnification or contribution provision of any contract
may be prohibited or limited under applicable securities laws or public policy
underlying such laws.
Our opinions are limited to the specific issues addressed and
are limited in all respects to laws and facts existing on the date hereof. By
rendering our opinions, we do not undertake to advise you of any changes in such
laws, or facts which may occur after the date hereof.
<PAGE> 44
October __, 1999
Page 8
This opinion is furnished only for your benefit and may not be
relied upon by any other person or entity, nor may copies be delivered or
disclosed to any other person or entity, without the prior written consent of
this firm, except to the extent and in the manner contemplated by the Purchase
Agreement.
Very truly yours,
JENNER & BLOCK
<PAGE> 45
EXHIBIT C
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT (this "Agreement"), dated as of [ ], 1999, is
by and among [ ], a Salomon Smith Barney Inc. and each of the other
Initial Purchasers listed on Schedule I to the Purchaser Agreement
(collectively, the "Initial Purchasers").
WITNESSETH
WHEREAS, Tenneco Inc. (the "Company") has heretofore executed and delivered
to the Initial Purchasers a purchase agreement (the "Purchase Agreement"), dated
as of October 8, 1999, providing for the terms pursuant to which the Initial
Purchasers will purchase $500,000,000 aggregate principal amount of 11 5/8%
Senior Subordinated Notes due 2009 (the "Notes") of the Company;
WHEREAS, the Company has heretofore executed and delivered to the Initial
Purchasers a registration rights agreement (the "Registration Rights
Agreement"), dated as of October 14, 1999, providing for the registration of the
Notes under the Securities Act of 1933, as amended;
WHEREAS, the Company has consummated the Spin-Off Transactions (as defined
in the Purchase Agreement);
WHEREAS, pursuant to the Purchase Agreement and the Registration Rights
Agreement, the Company has agreed to cause each of the Guarantors to,
concurrently with the consummation of the Spin-Off Transactions, execute this
Agreement pursuant to which such Guarantors shall agree to be bound by, and have
the rights and obligations set forth in each of the Purchase Agreement and the
Registration Rights Agreement; and
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the Company
and the Guarantors mutually covenant and agree for the benefit of the Initial
Purchasers as follows:
1. ASSUMPTION. The Guarantors hereby agree to be deemed the "Guarantors"
and an "Issuer" for all purposes under
<PAGE> 46
2
the Purchase Agreement and the Registration Rights Agreement and to perform all
obligations and duties of the Guarantors or an Issuer, as the case may be,
thereunder.
2. REPRESENTATIONS AND WARRANTIES. By execution of this Agreement, the
Guarantors hereby acknowledge and agree that they are making all of the
representations and warranties to the Initial Purchasers that the Issuers have
provided in the Purchase Agreement.
3. NEW YORK LAW TO GOVERN. The internal law of the State of New York,
without regard to the choice of law rules thereof, shall govern and be used to
construe this Agreement.
4. COUNTERPARTS. The parties may sign any number of copies of this
Agreement. Each signed copy shall be an original, but all of them together
represent the same agreement.
5. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered, all as of the date first above written, which is
the date of the Spin-Off Transactions.
TENNECO AUTOMOTIVE INC.
[ ]
By:
--------------------------------------------
Name:
Title:
[ ]
By:
--------------------------------------------
Name:
Title:
SALOMON SMITH BARNEY INC.,
and the Initial
Purchasers listed
on Schedule I to
the Purchase Agreement
By: SALOMON SMITH BARNEY INC.
By:
--------------------------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.23
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of October 14, 1999
Among
TENNECO INC.
and
THE GUARANTORS NAMED HEREIN
as Issuers
and
SALOMON SMITH BARNEY INC.
and
each of the other Initial Purchasers
named herein
11 5/8% Senior Subordinated Notes due 2009
- --------------------------------------------------------------------------------
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated as of
October 14, 1999, by and among Tenneco Inc., a Delaware corporation (the
"Company"), and each of the Company's subsidiaries who from time to time execute
an Assumption Agreement (as defined), as guarantors (the "Guarantors" and,
together with the Company, the "Issuers"), as issuers, and Salomon Smith Barney
Inc., Banc Of America Securities LLC, Bear, Stearns & Co. Inc., Chase Securities
Inc., Credit Suisse First Boston Corporation, Morgan Stanley & Co. Incorporated,
Banc One Capital Markets, Inc., BNY Capital Markets, Inc., Commerzbank Capital
Markets Corporation, First Union Securities, Inc., ING Barings LLC, Nesbitt
Burns Securities Inc., Scotia Capital Markets (USA) Inc., SG Cowen Securities
Corporation and TD Securities (USA) Inc. as initial purchasers (collectively,
the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated October 8, 1999, by and among the Company, the Guarantors and
the Initial Purchasers (the "Purchase Agreement"), which provides for, among
other things, the sale by the Company to the Initial Purchasers of $500,000,000
aggregate principal amount of the Company's 11 5/8% Senior Subordinated Notes
due 2009 (the "Notes") guaranteed by the Guarantors (the "Guarantees"). The
Notes and the Guarantees are referred to herein as the "Securities." In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers
have agreed to provide the registration rights set forth in this Agreement for
the benefit of the Initial Purchasers and any subsequent holder or holders of
each of the Notes. The execution and delivery of this Agreement is a condition
to the Initial Purchasers' obligation to purchase the Notes under the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a) hereof.
Advice: See Section 5 hereof.
<PAGE> 3
-2-
Affiliate: With respect to any specified person, "Affiliate" shall mean any
other Person which, directly or indirectly, controls or is controlled by or
under direct or indirect common control with such specified person. For the
purposes of this definition, "control," when used with respect to any person,
means the power to direct the management and policies of such person, directly
or indirectly whether through the ownership of voting securities, by contract or
otherwise and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2(b) hereof.
Closing: See Purchase Agreement.
Company: See the introductory paragraphs hereto.
Effectiveness Date: The 150th day after the Issue Date; provided, however,
that with respect to any Shelf Registration other than the Shelf Registration
that is required if no Exchange Registration Statement has been filed, the
Effectiveness Date shall be the 90th day after the obligation to file the
applicable Registration Statement.
Effectiveness Period: See Section 3(a) hereof.
Event Date: See Section 4(b) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Notes: The 11 5/8% Senior Subordinated Notes due 2009, Series B,
of the Company, guaranteed on a senior subordinated basis by each of the
Guarantors, that are identical to the Notes in all material respects, except
that the provisions regarding restrictions on transfer shall be modified, as
appropriate, and the issuance thereof pursuant to the Exchange Offer shall have
been registered pursuant to an effective Registration Statement in compliance
with the Securities Act.
Exchange Offer: See Section 2(a) hereof.
Exchange Registration Statement: See Section 2(a) hereof.
<PAGE> 4
-3-
Filing Date: (i) with respect to the Exchange Registration Statement, the
120th day after the Issue Date and (ii) with respect to any Shelf Registration,
(A) if no Exchange Registration Statement has been filed by the Issuers
pursuant to this Agreement, the 120th day after the Issue Date and (B) in each
other case (which may be applicable notwithstanding the consummation of the
Exchange Offer), the 60th day after the delivery of the applicable Shelf Notice.
Guarantors: See the introductory paragraphs hereto.
Holder: Any holder of a Registrable Note.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of October 14, 1999, by and among the
Issuers and The Bank of New York, as Trustee, pursuant to which the Notes and
the Guarantees are being issued, as the same may be amended or supplemented
from time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraphs hereto.
Initial Shelf Registration: See Section 3(a) hereof.
Inspectors: See Section 5(r) hereof.
Issue Date: October 14, 1999, the date of original issuance of the
Securities.
Issuers: See the introductory paragraphs hereto.
NASD: See Section 5(r) hereof.
Notes: See the introductory paragraphs hereto.
Offering Memorandum: The final offering memorandum of the Issuers dated
October 8, 1999, in respect of the offering of the Securities.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2(b) hereof.
<PAGE> 5
-4-
Person: An individual, trustee, corporation, partnership, joint stock
company, trust, unincorporated association, union, business association, firm
or other legal entity.
Private Exchange: See Section 2(b) hereof.
Private Exchange Notes: See Section 2(b) hereof.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act and any term sheet filed pursuant to Rule
434 under the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereto.
Records: See Section 5(m) hereof.
Registrable Notes: Each Note upon its original issuance and at all times
subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof is
applicable upon original issuance and at all times subsequent thereto and each
Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with
respect to any Exchange Note as to which Section 2(c)(iv) hereof is applicable,
the Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii) such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes that may be resold without complying with the prospectus
delivery requirements under the Securities Act, (iii) such Note, Exchange Note
or Private Exchange Note, as the case may be, ceases to be outstanding for
purposes of the Indenture or (iv) such Note, Exchange Note or Private Exchange
Note, as the case may be, may be resold without restriction pursuant to Rule
144 under the Securities Act.
<PAGE> 6
-5-
Registration Default: See Section 4(a) hereof.
Registration Statement: Any registration statement of the Issuers that
covers any of the Notes, the Exchange Notes or the Private Exchange Notes (and
the related Guarantees), filed with the SEC under the Securities Act, including
the Prospectus, amendments and supplements to such registration statement,
including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities: See the introductory paragraphs hereto.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration: See Section 3(b) hereof.
Subsequent Shelf Registration: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
<PAGE> 7
-6-
Trustee: The trustee under the Indenture and the trustee under any
indenture governing the Exchange Notes and Private Exchange Notes.
Underwritten registration or underwritten offering: A registration in
which securities of the Issuers are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
(a) The Issuers shall (A) prepare and file with the SEC on or prior
to the Filing Date with respect to the Exchange Registration Statement (as
defined below) a Registration Statement under the Securities Act with respect
to an offer by the Company to the holders of the Notes to issue and deliver to
such holders, in exchange for Notes, a like principal amount of Exchange Notes
(the "Exchange Offer"), (B) use their best efforts to cause the Registration
Statement relating to the Exchange Offer to be declared effective by the SEC
under the Securities Act on or prior to the Effectiveness Date and (C) commence
the Exchange Offer and use their best efforts to issue, on or prior to 180
days after the Issue Date, the Exchange Notes. The offer and sale of the
Exchange Notes pursuant to the Exchange Offer shall be registered pursuant to
the Securities Act on the appropriate form (the "Exchange Registration
Statement") and duly registered or qualified under all applicable state
securities or Blue Sky laws and will comply with all applicable tender offer
rules and regulations under the Exchange Act and state securities or Blue Sky
laws. The Exchange Offer shall not be subject to any condition, other than that
the Exchange Offer does not violate any applicable law or interpretation of the
staff of the SEC. Upon consummation of the Exchange Offer in accordance with
this Section 2, the Issuers shall have no further registration obligations
other than with respect to (i) Private Exchange Notes, (ii) Exchange Notes held
by Participating Broker-Dealers and (iii) Notes or Exchange Notes as to which
Section 3(a)(iii) hereof applies. No securities shall be included in the
Exchange Registration Statement other than the Exchange Notes.
(b) The Issuers may require each holder of Notes as a condition to
its participation in the Exchange Offer to represent to the Issuers and their
counsel in writing (which may be contained in the applicable letter of
transmittal) that at the time of the consummation of the Exchange Offer (i) any
Exchange Notes received by such holder will be acquired in the ordinary course
of its business, (ii) such holder will have no arrangement or understanding
with any Person to participate in
<PAGE> 8
-7-
the distribution (within the meaning of the Securities Act) of the Exchange
Notes, (iii) such holder is not an Affiliate of an Issuer, or if it is an
Affiliate of an Issuer, it will comply with the registration and prospectus
delivery requirements of the Securities Act, to the extent applicable and (iv)
if such holder is a broker-dealer that will receive Exchange Notes for its own
account in exchange for the Notes that were acquired as a result of
market-making or other trading activities, that it will deliver a Prospectus in
connection with any resale of such Exchange Notes.
If, prior to consummation of the Exchange Offer, the Initial Purchasers
hold any Notes acquired by it and having, or that are reasonably likely to be
determined to have, the status of an unsold allotment in the initial
distribution, or any other holder of Notes is not entitled to participate in
the Exchange Offer, the Company upon the request of such Initial Purchaser or
any such holder shall, simultaneously with the delivery of the Exchange Notes
in the Exchange Offer, issue and deliver to such Initial Purchaser and any such
holder, in exchange (the "Private Exchange") for such Notes held by such
Initial Purchaser and any such holder, a like principal amount of debt
securities of the Company, guaranteed by each of the Guarantors on a senior
subordinated basis, that are identical in all material respects to the Exchange
Notes (the "Private Exchange Notes") (and that are issued pursuant to the same
indenture as the Exchange Notes). The Private Exchange Notes shall bear the
same CUSIP number as the Exchange Notes.
The Issuers and the Initial Purchasers acknowledge that the staff of the
SEC has taken the position that any broker-dealer that owns Exchange Notes that
were received by such broker-dealer for its own account in the Exchange Offer
(a "Participating Broker-Dealer") may be deemed to be an "underwriter" within
the meaning of the Securities Act and must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes (other than a resale of an unsold allotment resulting from the
original offering of the Notes).
The Issuers and the Initial Purchasers also acknowledge that it is the SEC
staff's position that if the Prospectus contained in the Exchange Registration
Statement includes a plan of distribution containing a statement to the above
effect and the means by which Participating Broker-Dealers may resell the
Exchange Notes, without naming the Participating Broker-Dealers or specifying
the amount of Exchange Notes owned by them, such Prospectus may be delivered by
Participating Broker-Dealers
<PAGE> 9
-8-
to satisfy their prospectus delivery obligations under the Securities Act in
connection with resales of Exchange Notes for their own accounts, so long as the
Prospectus otherwise meets the requirements of the Securities Act.
In light of the foregoing, if requested by a Participating Broker-Dealer,
the Issuers agree (x) to use their best efforts to keep the Exchange
Registration Statement continuously effective for a period of up to 180 days or
such earlier date as each Participating Broker-Dealer shall have notified the
Company in writing that such Participating Broker-Dealer has resold all
Exchange Notes acquired in the Exchange Offer (the "Applicable Period"), (y) to
comply with the provisions of Section 5 of this Agreement, as they relate to
the Exchange Offer and the Exchange Registration Statement, and (z) to deliver
to such Participating Broker-Dealer a "cold comfort" letter of the independent
public accountants of the Issuers and a legal opinion as to matters reasonably
requested by such Participating Broker-Dealer relating to the Exchange
Registration Statement and the related Prospectus and any amendments or
supplements thereto.
Interest on the Exchange Notes and the Private Exchange Notes will accrue
from (A) the later of (i) the last interest payment date on which interest was
paid on the Notes surrendered in exchange therefor and (ii) if the Notes are
surrendered for exchange on a date in a period which includes the record date
for an interest payment date to occur on or after the date of such exchange and
as to which interest will be paid, the date on such interest payment date or
(B), if no interest has been paid on the Notes, from the Issue Date.
In connection with each Exchange Offer, the Issuers shall:
(1) mail, or cause to be mailed, to each Holder of record entitled to
participate in the Exchange a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(2) use their best efforts to keep the Exchange Offer open for not less
than 20 business days after the date that notice of the Exchange offer is
mailed to Holders (or longer if required by applicable law);
<PAGE> 10
-9-
(3) utilize the services of a depositary for the Exchange Offer with an
address in the Borough of Manhattan, The City of New York;
(4) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all applicable laws,
rules and regulations.
As soon as practicable after the close of the applicable Exchange Offer
and the applicable Private Exchange, if any, the Issuers shall:
(1) accept for exchange all Registrable Notes validly tendered and not
validly withdrawn pursuant to the applicable Exchange Offer and the applicable
Private Exchange, if any;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange and cause the Trustee to authenticate and deliver
promptly to each Holder Registrable Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to the securities of such
Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes shall be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to
the Indenture and that, in either case, has been qualified under the TIA or is
exempt from such qualification and shall provide that (a) the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture
and (b) the Private Exchange Notes shall be subject to the transfer
restrictions set forth in such indenture. The Indenture or such indenture shall
provide that the Exchange Notes, the Private Exchange Notes and the Notes shall
vote and consent together on all matters as one class and that none of the
Exchange Notes, the Private Exchange Notes or the Notes will have the right to
vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Issuers are not permitted to
effect the Exchange Offer, (ii) the Exchange Offer is not consummated within
180 days of
<PAGE> 11
-10-
the Issue Date, (iii) any holder of any Private Exchange Notes so requests in
writing to the Issuers within 30 days after the consummation of the Exchange
Offer, or (iv) in the case of any Holder that participates in the Exchange
Offer, such Holder does not receive Exchange Notes on the date of the exchange
that may be sold without restriction under state and federal securities laws
(other than due solely to the status of such Holder as an affiliate of the
Issuers within the meaning of the Securities Act), then in the case of each of
clauses (i) to and including (iv) of this sentence, the Issuers shall promptly
deliver to the Holders and the Trustee written notice thereof (the "Shelf
Notice") and shall file a Shelf Registration pursuant to Section 3 hereof.
3. Shelf Registration
If at any time a Shelf Notice is delivered as contemplated by Section
2(c) hereof, then:
(a) Shelf Registration. The Issuers shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange
Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is
applicable (the "Initial Shelf Registration"). The Issuers shall use their best
efforts to file with the SEC the Initial Shelf Registration on or before the
applicable Filing Date. The Initial Shelf Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Notes for
resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Issuers shall not
permit any securities other than the Registrable Notes to be included in the
Initial Shelf Registration or any Subsequent Shelf Registration (as defined
below).
The Issuers shall use their best efforts to cause the Initial Shelf
Registration to be declared effective under the Securities Act on or prior to
the Effectiveness Date and to keep the Initial Shelf Registration continuously
effective under the Securities Act until the date which is two years from the
Issue Date (the "Effectiveness Period"), or such shorter period ending when (i)
all Registrable Notes covered by the Initial Shelf Registration have been sold
in the manner set forth and as contemplated in the Initial Shelf Registration or
(ii) a Subsequent Shelf Registration covering all of the Registrable Notes
covered by and not sold under the Initial Shelf Registration or an earlier
Subsequent Shelf Registration has
<PAGE> 12
-11-
been declared effective under the Securities Act; provided, however, that the
Effectiveness Period in respect of the Initial Shelf Registration shall be
extended to the extent required to permit dealers to comply with the applicable
prospectus delivery requirements of Rule 174 under the Securities Act and as
otherwise provided herein.
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration
or any Subsequent Shelf Registration ceases to be effective for any reason at
any time during the Effectiveness Period (other than because of the sale of all
of the securities registered thereunder), the Issuers shall use their best
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 60 days of such cessation
of effectiveness amend the Initial Shelf Registration in a manner to obtain the
withdrawal of the order suspending the effectiveness thereof, or file an
additional "shelf" Registration Statement pursuant to Rule 415 covering all of
the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Issuers
shall use their best efforts to cause the Subsequent Shelf Registration to be
declared effective under the Securities Act as soon as practicable after such
filing and to keep such subsequent Shelf Registration continuously effective for
the remainder of the Effectiveness Period. As used herein the term "Shelf
Registration" means the Initial Shelf Registration and any Subsequent Shelf
Registration.
(c) Supplements and Amendments. The Issuers shall promptly supplement
and amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter of such Registrable
Notes.
4. Additional Interest
(a) The Issuers and the Initial Purchasers agree that the Holders will
suffer damages if the Issuers fail to fulfill their obligations under Section 2
or Section 3 hereof and that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, the Issuers agree to pay, as
liquidated damages, additional interest on the Notes ("Additional Interest")
under the circumstances and to the ex-
<PAGE> 13
-12-
tent set forth below (each of which shall be given independent effect):
(i) if (A) neither the Exchange Registration Statement nor the
Initial Shelf Registration has been filed on or prior to the applicable
Filing Date or (B) notwithstanding that the Issuers have consummated or
will consummate the Exchange Offer, the Issuers are required to file a
Shelf Registration and such Shelf Registration is not filed on or prior to
the Filing Date applicable thereto; or
(ii) if (A) neither the Exchange Registration Statement nor the
Initial Shelf Registration is declared effective by the SEC on or prior to
the relevant Effectiveness Date or (B) notwithstanding that the Issuers
have consummated or will consummate the Exchange Offer, the Issuers are
required to file a Shelf Registration and such Shelf Registration is not
declared effective by the SEC on or prior to the Effectiveness Date in
respect of such Shelf Registration; or
(iii) if (A) the Issuers have not exchanged Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the 180th day after the Issue Date or (B) if applicable, a
Shelf Registration has been declared effective and such Shelf Registration
ceases to be effective at any time during the Effectiveness Period (other
than such time as all Notes have been disposed of thereunder);
(each such event referred to in clauses (i) through (iii) above being a
"Registration Default") then, commencing on the date of such Registration
Default, Additional Interest shall accrue on the principal amount of the Notes
at a rate of 0.25% per annum for the first 90 days immediately following the
date of such Registration Default and the rate of such Additional Interest
shall increase by an additional 0.25% per annum at the beginning of each
subsequent 90-day period; provided, however, that the rate of Additional
Interest that shall accrue on the Notes may not exceed in the aggregate 1.00%
per annum; provided, further, however, that (1) upon the filing of the
applicable Exchange Registration Statement or the applicable Shelf Registration
as required hereunder (in the case of clause (i) above of this Section 4(a)),
(2) upon the effectiveness of the applicable Exchange Registration Statement or
the applicable Shelf Registration Statement as required hereunder (in the case
of clause (ii) of this Section 4(a)), or (3) upon the exchange of
<PAGE> 14
-13-
the applicable Exchange Notes for all Notes tendered (in the case of clause
(iii)(A) of this Section 4(a), or upon the effectiveness of the applicable Shelf
Registration Statement which had ceased to remain effective (in the case of
(iii)(B) of this Section 4(a)), Additional Interest on the Notes in respect of
which such events relate as a result of such clause (or the relevant subclause
thereof), as the case may be, shall cease to accrue or accumulate, as the case
may be. If, after the cure of all Registration Defaults then in effect, there is
a subsequent Registration Default, the rate of Additional Interest for such
subsequent Registration Default shall initially be 0.25%, regardless of the rate
of Additional Interest in effect with respect to any prior Registration Default
at the time of the cure of such Registration Default.
(b) The Issuers shall notify the Trustee (who shall be acting under
and protected by the terms of the Indenture) within three business days after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Any amounts of Additional
Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 shall be
payable in cash semiannually on each April 15 and October 15 (to the holders of
record on the April 1 and October 1 immediately preceding such dates),
commencing with the first such date occurring after any such Additional Interest
commences to accrue. The amount of Additional Interest will be determined by
multiplying the applicable rate of Additional Interest by the principal amount
of the Registrable Notes, multiplied by a fraction, the numerator of which is
the number of days such rate of Additional Interest was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months and, in the case of a partial month, the actual number of days elapsed),
and the denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement pursuant to
Sections 2 or 3 hereof, the Issuers shall effect such registrations to permit
the sale of the securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Issuers hereunder, the
Issuers shall:
(a) Prepare and file with the SEC prior to the applicable Filing
Date, a Registration Statement or Registration Statements as prescribed by
Sections 2 or 3 hereof, and use
<PAGE> 15
14
their best efforts to cause each such Registration Statement to become effective
and remain effective as provided herein; provided, however, that, if (1) such
filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in the
Exchange Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period relating thereto,
before filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Issuers shall furnish to and afford the Holders of the
Registrable Notes included in such Registration Statement or each such
Participating Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if any, a reasonable opportunity to review copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed (in each case at least
five days prior to such filing, or such later date as is reasonable under the
circumstances). The Issuers shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto if the Holders of a
majority in aggregate principal amount of the Registrable Notes included in
such Registration Statement, or any such Participating Broker-Dealer, as the
case may be, their counsel, or the managing underwriters, if any, shall
reasonably object on a timely basis.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented by
any prospectus supplement required by applicable law, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act applicable to it with respect to the
disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus. The Issuers shall be deemed not to have used
their best efforts to keep a Registration Statement effective during the
Effectiveness Period or the Applicable Period, as the case may be, relating
thereto if the Issuers voluntarily take any action that would result in selling
Holders of the Registrable Notes covered thereby or Participating Broker-Dealer
seeking to sell Exchange Notes not being able to sell
<PAGE> 16
15
such Registrable Notes or such Exchange Notes during that period unless such
action is required by applicable law or permitted by this Agreement.
(c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period relating thereto from whom the Company has received
written notice that it will be a Participating Broker-Dealer in the applicable
Exchange Offer, notify the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if any, promptly (but in any event within 2 business days), and
confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective under the Securities Act (including in such notice a written statement
that any Holder may, upon request, obtain, at the sole expense of the Issuers,
one conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or deemed
to be incorporated by reference and exhibits), (ii) of the issuance by the SEC
of any stop order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of any preliminary prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time when a
prospectus is required by the Securities Act to be delivered in connection with
sales of the Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of the Issuers contained in
any agreement (including any underwriting agreement) contemplated by Section
5(1) hereof cease to be true and correct in all material respects, (iv) of the
receipt by the Issuers of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or any
of the Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
written threat of any proceeding for such purpose, (v) of the happening of any
event, the existence of any condition or any information becoming known that
makes any statement made in such Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes in or
amendments or supplements to such Registration Statement,
<PAGE> 17
-16-
Prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(vi) of the Issuers' determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Notes or the
Exchange Notes to be sold by any Participating Broker-Dealer, for sale in any
jurisdiction, and, if any such order is issued, to use its best efforts to
obtain the withdrawal of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
reasonably requested by the managing underwriter or underwriters (if any), the
Holders of a majority in aggregate principal amount of the Registrable Notes
being sold in connection with an underwritten offering (i) as promptly as
practicable incorporation in a prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters (if
any), such Holders, or counsel for any of them determine is reasonably
necessary to be included therein, (ii) make all required filings of such
prospectus supplement or such post-effective amendment as soon as practicable
after the Issuers have received notification of the matters to be incorporated
in such prospectus supplement or post-effective amendment, and (iii) supplement
or make amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during
<PAGE> 18
-17-
the Applicable Period, furnish to each selling Holder of Registrable Notes and
to each such Participating Broker-Dealer who so requests and to their respective
counsel and each managing underwriter, if any, at the sole expense of the
Issuers, one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including financial
statements and schedules, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, deliver to each selling Holder of Registrable Notes or each
such Participating Broker-Dealer, as the case may be, their respective counsel,
and the underwriters, if any, at the sole expense of the Issuers, as many
copies of the Prospectus or Prospectuses (including each form of preliminary
prospectus) and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably request; and,
subject to the last paragraph of this Section 5, the Issuers hereby consent to
the use of such Prospectus and each amendment or supplement thereto by each of
the selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, and the underwriters or agents, if any, and
dealers (if any), in connection with the offering and sale of the Registrable
Notes covered by, or the sale by Participating Broker-Dealers of the Exchange
Notes pursuant to, such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery of
a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any selling Holder, Participating Broker-Dealer, or the managing underwriter,
or underwriters reasonably request in writing; provided, however, that where
Exchange Notes held by Participating Broker-Dealers
<PAGE> 19
-18-
or Registrable Notes are offered other than through an underwritten offering,
the Issuers agree to cause their counsel to perform Blue Sky investigations and
file registrations and qualifications required to be filed pursuant to this
Section 5(h), keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of the
Exchange held by Participating Broker-Dealers or the Registrable Notes covered
by the Registration Statement; provided, however, that the Issuers shall not be
required to (A) qualify generally to do business in any jurisdiction where it is
not then so qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
(C) subject itself to taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may reasonably
request.
(j) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in the Exchange Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and
(subject to Section 5(a) hereof) file with the SEC, at the sole expense of the
Issuers, a supplement or post-effective amendment to the applicable Registration
Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Notes being sold thereunder or to the purchasers of the Exchange Notes to whom
such Prospectus will be delivered by a participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit to
state a
<PAGE> 20
-19-
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, the Issuers shall not be required to
amend or supplement a Registration Statement, any related Prospectus or any
document incorporated therein by reference, in the event that, and for a period
not to exceed an aggregate of 60 days in any calendar year if, (i) an event
occurs and is continuing as a result of which a Shelf Registration would, in the
Issuers' good faith judgment, contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
and (ii)(a) the Issuers determine in their good faith judgment that the
disclosure of such event at such time would have a material adverse effect on
the business, operations or prospects of the Issuers or (b) the disclosure
otherwise relates to a pending material business transaction that has not yet
been publicly disclosed.
(k) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates for
the Registrable Notes in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes.
(l) In the case of a Shelf Registration, enter into such agreements
(including underwriting agreements) and take all such other appropriate actions
as are reasonably requested in order to expedite or facilitate the registration
or the disposition of such Registrable Notes, and in such connection, (i) make
such representations and warranties to Holders of such Registrable Notes with
respect to the business of the Issuers and their subsidiaries as then conducted
and the Registration Statement, Prospectus and documents, if any, incorporated
or deemed to be incorporated by reference therein, in each case, as are
customarily made by issuers to underwriters in underwritten offerings, and
confirm the same if and when requested; (ii) obtain opinions of counsel to the
Issuers and updates thereof in form and substance reasonably satisfactory to the
Holders of a majority in principal amount of the Registrable Notes being sold,
addressed to each selling Holder covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may be
reasonably requested by such Holders; (iii) obtain "cold comfort" letters and
updates thereof from the independent certified public accountants of the Issuers
(and, if necessary, any other independent certified public accountants of any
subsidiary of the
<PAGE> 21
-20-
Issuers or of any business acquired by any of the Issuers for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to the selling Holders of Registrable Notes
that satisfy the applicable requirements of Statement of Accounting Standards
No. 72, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
offerings and such other matters as reasonably requested by such selling
Holders; and (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable than those
set forth in Section 7 hereof (or such other provisions and procedures
acceptable to the Issuers and the Holders of a majority in aggregate principal
amount of Registrable Notes covered by such Registration with respect to all
parties to be indemnified pursuant to said Section including, without
limitation, such selling Holders). The above shall be done at each closing in
respect of the sale of Registrable Notes, or as and to the extent required
thereunder.
(m) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or
(2) a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, make available for inspection by any selling Holder of such
Registrable Notes being sold, or each such Participating Broker-Dealer, as the
case may be, any underwriter participating in any such disposition of
Registrable Notes, if any, and any attorney, accountant or other agent retained
by any such selling Holder or each such Participating Broker-Dealer, as the
case may be, or underwriter (collectively, the "Inspectors"), at the offices
where normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and instruments of the Issuers and
subsidiaries of the Issuers (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of the
Issuers and any of their subsidiaries to supply all information reasonably
requested by any such Inspector in connection with such Registration Statement
and Prospectus. Each Inspector shall agree in writing that it will keep the
Records confidential and that it will not disclose any of the Records that the
Issuers determine, in good faith, to be confidential and notify the Inspectors
in writing are confidential unless (i) the disclosure of such Records is
necessary to avoid or correct a material misstatement or material omission in
such Registration Statement
<PAGE> 22
-21-
or Prospectus, (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction, or (iii) the
information in such Records has been made generally available to the public;
provided, however, that prior notice shall be provided as soon as practicable
to the Issuers of the potential disclosure of any information by such Inspector
pursuant to clauses (i) or (ii) of this sentence to permit the Issuers to
obtain a protective order (or waive the provisions of this paragraph (m)) and
that such Inspector shall take such actions as are reasonably necessary to
protect the confidentiality of such information (if practicable) to the extent
such action is otherwise not inconsistent with, an impairment of or in
derogation of the rights and interests of the Holder or any Inspector.
(n) Provide an indenture trustee for the Registrable Notes or the Exchange
Notes, as the case may be, and cause the Indenture or the trust indenture
provided for in Section 2(a) hereof, as the case may be, to be qualified under
the TIA not later than the effective date of the first Registration Statement
relating to the Registrable Notes; and in connection therewith, cooperate with
the trustee under any such indenture and the Holders of the Registrable Notes,
to effect such changes to such indenture as may be required for such indenture
to be so qualified in accordance with the terms of the TIA; and execute, and
use their best efforts to cause such trustee to changes, and all other forms
and documents required to be filed with the SEC to enable such indenture to be
so qualified in a timely manner.
(o) Comply with all applicable rules and regulations of the SEC and make
generally available to their securityholders with regard to any applicable
Registration Statement, a consolidated earning statement satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any twelve-month period (or 90 days after the end of any
12-month period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which any Registrable Notes are sold to underwriters in a
firm commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Issuers after the effective date of a Registration
Statement, which statements shall cover said 12-month periods.
<PAGE> 23
-22-
(p) Upon consummation of an Exchange Offer or a Private Exchange, obtain
an opinion of counsel to the Issuers addressed to the Trustee for the benefit of
all Holders of Registrable Notes participating in the Exchange Offer or Private
Exchange, as the case may be, that the Exchange Notes or Private Exchange Notes
as the case may be, and the related indenture constitute legal, valid and
binding obligations of the Issuers and the related Guarantees, the legal, valid
and binding obligations of each Guarantor, enforceable against them in
accordance with their respective terms subject to customary exceptions and
qualifications.
(q) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Issuers (or to such
other Person as directed by the Issuers) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Issuers shall mark, or
cause to be marked, on such Registrable Notes that such Registrable Notes are
being canceled in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be; provided that in no event shall such Registrable
Notes be marked as paid or otherwise satisfied.
(r) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the National Association
of Securities Dealers, Inc. (the "NASD").
(s) Use their best efforts to take all other steps reasonably necessary
to effect the registration of the applicable Registrable Notes covered by a
Registration Statement contemplated hereby.
The Issuers may require each seller of any Registrable Notes as to which
any registration is being effected to furnish to the Issuers such information
regarding such seller and the distribution of such Registrable Notes as the
Issuers may, from time to time, reasonably request. The Issuers may exclude from
such registration the Registrable Notes of any seller for so long as such seller
fails to furnish such information within a reasonable time after receiving such
request and in such event shall have no further obligation under this Agreement
(including without limitation the obligation under Section 4) with respect to
such seller or any subsequent holder of such Registrable Notes. Each seller as
to which any Shelf Registration is being effected agrees to furnish promptly to
<PAGE> 24
-23-
the Issuers all information required to be disclosed in order to make the
information previously furnished to the Issuers by such seller not materially
misleading.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Issuers, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the securities covered thereby and that
such holding does not imply that such Holder will assist in meeting any future
financial requirements of the Issuers, or (ii) in the event that such reference
to such Holder by name or otherwise is not required by the Securities Act or any
similar federal statute then in force, the deletion of the reference to such
Holder in any amendment or supplement to the applicable Registration Statement
filed or prepared subsequent to the time that such reference ceases to be
required.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by its acquisition of such Registrable Notes or Exchange Notes, as the
case may be, to be sold by such Participating Broker-Dealer, as the case may
be, that, upon actual receipt of any notice from the Issuers of the happening
of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or
5(c)(vi) hereof, such Holder or Participating Broker-Dealer, as the case may
be, will forthwith discontinue disposition of such Registrable Notes or
Exchange Notes, as the case may be, covered by such Registration Statement or
Prospectus until such Holder's or Participating Broker-Dealer's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section 5(j)
hereof, or until it is advised in writing (the "Advice") by the Issuers that
the use of the applicable Prospectus may be resumed, and has received copies of
any amendments or supplements thereto. In the event that the Issuers shall give
any such notice, the Applicable Period shall be extended by the number of days
during such periods from and including the date of the giving of such notice to
and including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof or (y)
the Advice.
<PAGE> 25
-24-
6. Registration Expenses
All fees and expenses incident to the performance of or compliance with
this Agreement by the Issuers (other than any underwriting discounts or
commissions) shall be borne by the Issuers whether or not the Exchange
Registration Statement or any Shelf Registration is filed or becomes effective
or the Exchange Offer is consummated, including, without limitation, (i) all
registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, fees
and disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the holders of Registrable Notes or Exchange Notes, as
the case may be, are located, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes, as the case may be, to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses, including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
by the Holders of a majority in aggregate principal amount of the Registrable
Notes included in any Registration Statement or to be sold by any Participating
Broker-Dealer, as the case may be, (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Issuers and fees and
disbursements of one special counsel for all of the sellers of each of the
Registrable Notes (exclusive of any counsel retained pursuant to Section 7
hereof), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(l)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) Securities Act liability
insurance, if the Issuers desire such insurance, (vii) fees and expenses of all
other Persons retained by the Issuers, (viii) internal expenses of the Issuers
(including, without limitation, all salaries and expenses of officers and
employees of the Issuers performing legal or accounting duties), (ix) the
expense of any annual audit, (x) any fees and expenses incurred in connection
with the listing of the securities to be registered on any securities exchange,
and the obtaining of a rating of the securities, in each case, if applicable,
and (xi) the
<PAGE> 26
-25-
expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, indentures and any other
documents necessary in order to comply with this Agreement.
7. Indemnification and Contribution
(a) The Issuers agree to indemnify and hold harmless each Holder of
the Registrable Notes and each Participating Broker-Dealer selling the Exchange
Notes during the Applicable Period, the Affiliates, officers, directors and
employees of each such Person, and each Person, if any, who controls any such
Person within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act (each, a "Participant"), from and against any and all
losses, claims, damages, judgments, liabilities and expenses (including, without
limitation, the legal fees and other expenses actually incurred in connection
with any suit, action or proceeding or any claim asserted) caused by, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment thereto)
or Prospectus (as amended or supplemented if the Issuers shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or caused
by, arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the case of the Prospectus in the light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to the Issuers
in writing by such Participant expressly for use therein and with respect to any
preliminary Prospectus, to the extent that any such loss, claim, damage or
liability arises solely from the fact that any Participant sold Registrable
Notes or Exchange Notes to a person to whom there was not sent or given a copy
of the Prospectus (as amended or supplemented) at or prior to the written
confirmation of such sale if the Issuers shall have previously furnished copies
thereof to the Participant in accordance herewith and the Prospectus (as amended
or supplemented) would have corrected any such untrue statement or omission.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Issuers, the Affiliates, officers, directors and employees
of the Issuers and each Person who controls the Issuers within the meaning of
Sec-
<PAGE> 27
-26-
tion 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent (but on a several, and not joint, basis) as the foregoing indemnity from
the Issuers to each Participant, but only with reference to information
relating to such Participant furnished to the Issuers in writing by or on
behalf of such Participant expressly for use in any Registration Statement or
Prospectus, any amendment or supplement thereto, or any preliminary prospectus.
The liability of any Participant under this paragraph shall in no event exceed
the proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Persons against whom such indemnity may be sought (the "Indemnifying
Persons") in writing, and the Indemnifying Persons, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Persons may reasonably designate in such proceeding and shall pay
the fees and expenses actually incurred by such counsel related to such
proceeding; provided, however, that the failure to so notify the Indemnifying
Persons will not relieve it from any liability under paragraph (a) or (b) above
unless and to the extent such failure results in the forfeiture by the
Indemnifying Person of substantial rights and defenses and the Indemnifying
Person was not otherwise aware of such action or claim. In any such proceeding,
any Indemnified Person shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Person unless (i) the Indemnifying Persons and the Indemnified Person shall
have mutually agreed to the contrary, (ii) the Indemnifying Persons shall have
failed within a reasonable period of time to retain counsel reasonably
satisfactory to the Indemnified Person or (iii) the named parties in any such
proceeding (including any impleaded parties) include both any Indemnifying
Person and the Indemnified Person or any affiliate thereof and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
Indemnifying Persons shall not, in connection with such proceeding or separate
but substantially similar related proceedings in the same jurisdiction arising
out of the same general allegations, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all
<PAGE> 28
-27-
Indemnified Persons, and that all such fees and expenses shall be reimbursed
promptly as they are incurred. Any such separate firm for the Participants and
such control Persons of Participants shall be designated in writing by
Participants who sold a majority in interest of Registrable Notes and Exchange
Notes sold by all such Participants and shall be reasonably acceptable to the
Issuers, and any such separate firm for the Issuers, their affiliates,
officers, directors, representatives, employees and agents and such control
Persons of such Issuers shall be designated in writing by such Issuers and
shall be reasonably acceptable to the Holders.
The Indemnifying Persons shall not be liable for any settlement of any
proceeding effected without its prior written consent (which consent shall not
be unreasonably withheld or delayed), but if settled with such consent or if
there be a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
each of the Indemnifying Persons agrees to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. No Indemnifying Person shall, without the prior written
consent of the Indemnified Persons (which consent shall not be unreasonably
withheld or delayed), effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, or indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional
written release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of such
Indemnified Person.
(d) If the indemnification provided for in paragraphs (a) and (b) of this
Section 7 is for any reason unavailable to, or insufficient to hold harmless,
an Indemnified Person in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Person or Persons on the one hand and the Indemnified
Person or Persons on the other in connection with the statements or omissions
or alleged
<PAGE> 29
-28-
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuers on the one hand or
such Participant or such other Indemnified Person, as the case may be, on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages, judgments, liabilities and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability that the Indemnifying Persons may otherwise
have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
The Issuers covenant and agree that they will file the reports required to
be filed by it under the Securities Act
<PAGE> 30
-29-
and the Exchange Act and the rules and regulations adopted by the SEC thereunder
in a timely manner in accordance with the requirements of the Securities Act and
the Exchange Act and, if at any time such Issuers are not required to file such
reports, such Issuers will, upon the request of any Holder or beneficial owner
of Registrable Notes, make available such information necessary to permit sales
pursuant to Rule 144A under the Securities Act. The Issuers further covenant and
agree, for so long as any Registrable Notes remain outstanding, that they will
take such further action as any Holder of Registrable Notes may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Notes without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under the
Securities Act, as such Rules may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Issuers have not, as of the date
hereof, and the Issuers shall not, after the date of this Agreement, enter into
any agreement with respect to any of their securities that is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Issuers' other issued and outstanding
securities under any such agreements. The Issuers will not enter into any
agreement with respect to any of their securities which will grant to any Person
piggy-back registration rights with respect to any Registration Statement.
(b) Adjustments Affecting Registrable Securities. The Issuers shall
not, directly or indirectly, take any action with respect to the Registrable
Notes that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (I) the Issuers and (II)(A) the Holders of not less than a majority
in aggregate principal amount of the then outstanding Registrable Notes and (B)
in circumstances that would adversely
<PAGE> 31
-30-
affect the Participating Broker-Dealers, the Participating Broker-Dealers
holding not less than a majority in aggregate principal amount or liquidation
preference, as the case may be, of the Exchange Notes held by all Participating
Broker-Dealers; provided, however, that Section 7 and this Section 10(c) may
not be amended, modified or supplemented without the prior written consent of
each Holder and each Participating Broker-Dealer (including any person who was
a Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes,
as the case may be, disposed of pursuant to any Registration Statement)
affected by any such amendment, modification or supplement. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders of
Registrable Notes whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Registrable Notes may be given by
Holders of at least a majority in aggregate principal of the Registrable Notes
being sold pursuant to such Registration Statement.
(d) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, the Exchange Indenture or of the Issuers, as
appropriate; and
(ii) if to the Issuers, at the address as follows:
Tenneco Inc.
500 North Field Drive
Lake Forest, Illinois 60045
Fax: (847) 482-5940
Attention: Karl A. Stewart
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
<PAGE> 32
-31-
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in the Indenture if such communication
relates to the Notes, Exchange Notes or Private Exchange Notes.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties hereto, the Holders and the Participating Broker-Dealers; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor of assign of a Holder or a Participating Broker-Dealer unless
and to the extent such successor or assign holds Registrable Notes.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
<PAGE> 33
-32-
(j) Securities Held by the Issuers or Their Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes
is required hereunder, Registrable Notes held by the Issuers or their
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(k) Third-Party Beneficiaries. Holders of Registrable Notes, and
Participating Broker-Dealers are intended third-party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
(l) Guarantors. Immediately upon consummation of the Spin-Off
Transactions (as defined in the Purchase Agreement), the Company will cause each
of subsidiaries that is required by the Indenture to execute a Guarantee (as
defined in the Indenture) as of that time to execute an assumption agreement
(the "Assumption Agreement") substantially in the form of Exhibit C to the
Purchase Agreement, pursuant to which each such subsidiary shall agree to
assume the rights, duties and obligations of an "Issuer" hereunder.
Notwithstanding anything to the contrary contained herein, with respect to the
Guarantors, the covenants and agreements contained herein shall be made only
from and after execution of the applicable Assumption Agreement.
(m) Entire Agreement. This Agreement and together with the Purchase
Agreement and the Indenture are intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all
prior oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda between the Holders
on the one hand and the Issuers on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof
are merged herein and replaced hereby.
<PAGE> 34
S-1
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TENNECO INC.
By: /s/ Karl A. Stewart
------------------------------
Name: Karl A. Stewart
Title: Vice President
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
SALOMON SMITH BARNEY INC.,
and the Initial Purchasers
named herein
By: Salomon Smith Barney Inc.
By: /s/ Steven Cunningham
--------------------------------
Name: Steven Cunningham
Title: Vice President
<PAGE> 1
Exhibit 10.24
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT (this "Agreement"), dated as of November 4, 1999, is
by and among Tenneco Automotive Inc., Tenneco International Holding Corp.,
Tenneco Global Holdings Inc., The Pullman Company, Clevite Industries Inc. and
TMC Texas Inc. (collectively, the "Guarantors"), Salomon Smith Barney Inc. and
each of the other Initial Purchasers listed on Schedule I to the Purchaser
Agreement (collectively, the "Initial Purchasers").
W I T N E S S E T H
WHEREAS, Tenneco Inc. (the "Company") has heretofore executed and
delivered to the Initial Purchasers a purchase agreement (the "Purchase
Agreement"), dated as of October 8, 1999, providing for the terms pursuant to
which the Initial Purchasers purchased $500,000,000 aggregate principal amount
of 11 5/8% Senior Subordinated Notes due 2009 (the "Notes") of the Company;
WHEREAS, the Company has heretofore executed and delivered to the Initial
Purchasers a registration rights agreement (the "Registration Rights
Agreement"), dated as of October 14, 1999, providing for the registration of
the Notes under the Securities Act of 1933, as amended;
WHEREAS, the Company will consummate on the date hereof the Spin-Off
Transactions (as defined in the Purchase Agreement);
WHEREAS, pursuant to the Purchase Agreement and the Registration Rights
Agreement, the Company has agreed to cause each of the Guarantors to,
concurrently with the consummation of the Spin-Off Transactions, execute this
Agreement pursuant to which such Guarantors shall agree to be bound by, and
have the rights and obligations set forth in each of the Purchase Agreement and
the Registration Rights Agreement; and
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guarantors mutually covenant and agree for the benefit of the Initial
Purchasers as follows:
1. ASSUMPTION. The Guarantors hereby agree to be deemed the "Guarantors"
and an "Issuer" for all purposes under the Purchase Agreement and the
Registration Rights Agreement and to perform all obligations and duties of the
Guarantors or an Issuer, as the case may be, thereunder.
2. REPRESENTATIONS AND WARRANTIES. By execution of this Agreement, the
Guarantors hereby acknowledge and agree that they are making all of the
representations and warranties to the Initial Purchasers that the Issuers have
provided in the Purchase Agreement.
3. NEW YORK LAW TO GOVERN. The internal law of the State of New York,
without regard to the choice of law rules thereof, shall govern and be used to
construe this Agreement.
4. COUNTERPARTS. The parties may sign any number of copies of this
Agreement. Each signed copy shall be an original, but all of them together
represent the same agreement.
5. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered, all as of the date first above written, which is
the date of the Spin-Off Transactions.
TENNECO AUTOMOTIVE INC.
By: /s/ Timothy R. Donovan
---------------------------------
Timothy R. Donovan
Senior Vice President
And General Counsel
By:
---------------------------------
Don P. Carpenter
Vice President and
Assistant Secretary
TENNECO INTERNATIONAL
HOLDING CORP.
By: /s/ Timothy R. Donovan
---------------------------------
Timothy R. Donovan
Vice President and
Assistant Secretary
By:
---------------------------------
Don P. Carpenter
Vice President and
Assistant Secretary
S-1
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered, all as of the date first above written, which is
the date of the Spin-Off Transactions.
TENNECO AUTOMOTIVE INC.
By:
---------------------------------
Timothy R. Donovan
Senior Vice President
And General Counsel
By: /s/ Don P. Carpenter
---------------------------------
Don P. Carpenter
Vice President and
Assistant Secretary
TENNECO INTERNATIONAL
HOLDING CORP.
By:
---------------------------------
Timothy R. Donovan
Vice President and
Assistant Secretary
By: /s/ Don P. Carpenter
---------------------------------
Don P. Carpenter
Vice President and
Assistant Secretary
S-1
<PAGE> 5
TENNECO GLOBAL HOLDINGS INC.
By: /s/ Timothy R. Donovan
---------------------------------
Timothy R. Donovan
Vice President and
Assistant Secretary
By:
---------------------------------
Don P. Carpenter
Vice President and
Assistant Secretary
THE PULLMAN COMPANY
By: /s/ Timothy R. Donovan
---------------------------------
Timothy R. Donovan
Vice President and
Assistant Secretary
By:
---------------------------------
Don P. Carpenter
Vice President and
Assistant Secretary
TMC TEXAS INC.
By:
---------------------------------
Bert F. Neece
Vice President and
Assistant Treasurer
By:
---------------------------------
Don P. Carpenter
Vice President
and Secretary
S-2
<PAGE> 6
TENNECO GLOBAL HOLDINGS INC.
By:
------------------------
Timothy R. Donovan
Vice President and
Assistant Secretary
By:/s/ Don P. Carpenter
------------------------
Don P. Carpenter
Vice President and
Assistant Secretary
THE PULLMAN COMPANY
By:
------------------------
Timothy R. Donovan
Vice President and
Assistant Secretary
By:/s/ Don P. Carpenter
------------------------
Don P. Carpenter
Vice President and
Assistant Secretary
TMC TEXAS INC.
By:/s/ Bert F. Neece
------------------------
Bert F. Neece
Vice President and
Assistant Secretary
By:/s/ D. Carpenter
------------------------
Don P. Carpenter
Vice President
and Secretary
S-2
<PAGE> 7
SALOMON SMITH BARNEY INC.,
and the Initial
Purchasers listed
on Schedule I to
the Purchase Agreement
By: SALOMON SMITH BARNEY INC.
By: /s/ Steven Cunningham
-----------------------
Name: Steven Cunningham
Title: Vice President
S-3
<PAGE> 8
CLEVITE INDUSTRIES INC.
By: /s/ Timothy R. Donovan
-----------------------
Vice President and
Assistant Secretary
By: /s/ Don P. Carpenter
-----------------------
Don P. Carpenter
Vice President and
Assistant Secretary
S-4
<PAGE> 1
EXHIBIT 12.1
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
COMBINED WITH 50% OWNED UNCONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
---------------
1999 1998
----- -----
<S> <C> <C>
Income from continuing operations........................... $ 80 $ 169
Add:
Interest.................................................. 58 49
Portion of rentals representative of interest factor...... 8 7
Preferred stock dividend requirements of majority-owned
subsidiaries........................................... 20 22
Income tax expense (benefit) and other taxes on income.... 60 48
Amortization of interest capitalized...................... -- --
Undistributed (earnings) losses of affiliated companies in
which less than a 50% voting interest is owned......... -- --
----- -----
Earnings as defined............................... $ 226 $ 295
===== =====
Interest.................................................... $ 58 $ 49
Interest capitalized........................................ -- --
Portion of rentals representative of interest factor........ 8 7
Preferred stock dividend requirements of majority-owned
subsidiaries on a pre-tax basis........................... 32 36
----- -----
Fixed charges as defined.......................... $ 98 $ 92
===== =====
Ratio of earnings to fixed charges.......................... 2.31 3.21
===== =====
</TABLE>
<PAGE> 1
EXHIBIT 12.2
TENNECO AUTOMOTIVE INC. AND CONSOLIDATED SUBSIDIARIES
COMBINED WITH 50% OWNED UNCONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Income from continuing operations...................... $ 116 $ 234 $ 82 $ 90 $ 145
Add:
Interest............................................. 69 58 60 44 33
Portion of rentals representative of interest
factor............................................ 10 10 12 11 11
Preferred stock dividend requirements of
majority-owned subsidiaries....................... 27 21 21 23 --
Income tax expense and other taxes on income......... 13 80 79 91 52
Amortization of interest capitalized................. -- -- -- -- --
Undistributed (earnings) losses of affiliated
companies in which less than a 50% voting interest
is owned.......................................... -- -- -- -- --
----- ----- ----- ----- -----
Earnings as defined.......................... $ 235 $ 403 $ 254 $ 259 $ 241
===== ===== ===== ===== =====
Interest............................................... $ 69 $ 58 $ 60 $ 44 $ 33
Interest capitalized................................... -- -- -- -- 1
Portion of rentals representative of interest factor... 10 10 12 11 11
Preferred stock dividend requirements of majority-owned
subsidiaries on a pre-tax basis...................... 30 16 37 44 --
----- ----- ----- ----- -----
Fixed charges as defined..................... $ 109 $ 84 $ 109 $ 99 $ 45
===== ===== ===== ===== =====
Ratio of earnings to fixed charges..................... 2.16 4.80 2.33 2.62 5.36
===== ===== ===== ===== =====
</TABLE>
<PAGE> 1
Exhibit 21
TENNECO AUTOMOTIVE INC. SUBSIDIARIES AND AFFILIATES
<TABLE>
<S> <C>
TENNECO AUTOMOTIVE INC. (DELAWARE)
Tenneco Automotive Operating Company Inc. ......................................... 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 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%)
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%)
</TABLE>
1
<PAGE> 2
TENNECO AUTOMOTIVE INC. SUBSIDIARIES AND AFFILIATES
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO AUTOMOTIVE INC. (DELAWARE)
SUBSIDIARIES OF TENNECO AUTOMOTIVE OPERATING COMPANY INC. (DELAWARE)
SUBSIDIARIES OF TENNECO INTERNATIONAL HOLDING CORP. (DELAWARE)
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. (Poland) ............................... 1
(Tenneco International Holding Corp. owns 1%; and Tenneco Global Holdings
Inc. owns 99%)
Tenneco Romania Srl (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
</TABLE>
(1) In dissolution.
2
<PAGE> 3
TENNECO AUTOMOTIVE INC. SUBSIDIARIES AND AFFILIATES
<TABLE>
<S> <C>
SUBSIDIARIES OF TENNECO AUTOMOTIVE INC. (DELAWARE)
SUBSIDIARIES OF TENNECO AUTOMOTIVE OPERATING COMPANY INC. (DELAWARE)
SUBSIDIARIES OF TENNECO INTERNATIONAL HOLDING CORP. (DELAWARE)
SUBSIDIARIES OF TENNECO HOLDINGS DANMARK A/S (DENMARK)
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
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) .......................................... 0.1
(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) ............. 0.1
(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%)
</TABLE>
3
<PAGE> 4
TENNECO AUTOMOTIVE INC. SUBSIDIARIES AND AFFILIATES
<TABLE>
<CAPTION>
SUBSIDIARIES OF TENNECO AUTOMOTIVE INC. (DELAWARE)
SUBSIDIARIES OF TENNECO AUTOMOTIVE OPERATING COMPANY INC. (DELAWARE)
SUBSIDIARIES OF THE PULLMAN COMPANY (DELAWARE)
SUBSIDIARIES OF AUTOPARTES WALKER S.A. DE C.V. (MEXICO)
<S> <C>
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%)
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. (Mexico) ...................................... 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
</TABLE>
4
<PAGE> 5
TENNECO AUTOMOTIVE INC. SUBSIDIARIES AND AFFILIATES
<TABLE>
<CAPTION>
SUBSIDIARIES OF TENNECO AUTOMOTIVE INC. (DELAWARE)
SUBSIDIARIES OF TENNECO AUTOMOTIVE OPERATING COMPANY INC. (DELAWARE)
SUBSIDIARIES OF WALKER EUROPE, INC. (DELAWARE)
<S> <C>
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
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%)
</TABLE>
5
<PAGE> 6
TENNECO AUTOMOTIVE INC. SUBSIDIARIES AND AFFILIATES
<TABLE>
<CAPTION>
SUBSIDIARIES OF TENNECO AUTOMOTIVE INC. (DELAWARE)
SUBSIDIARIES OF TENNECO DEUTSCHLAND HOLDINGGESELLSCHAFT MBH (GERMANY)
SUBSIDIARIES OF HEINRICH GILLET GMBH & CO. KG (GERMANY)
<S> <C>
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%)
Mastra-Gillet Industria e Comercio Ltda. (Brazil) ........................... 50
(Heinrich Gillet GmbH & Co. KG owns 50%; and Mastra Industria e
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>
6
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in this registration
statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
December 29, 1999
<PAGE> 1
EXHIBIT 24
TENNECO AUTOMOTIVE INC. AND SUBSIDIARIES
POWER OF ATTORNEY
The undersigned does hereby appoint Timothy R. Donovan, Mark
A. McCollum and Kenneth R. Trammell, and each of them, with full power to act
alone, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute a Registration Statement on Form S-4 of
Tenneco Automotive Inc., Tenneco Automotive Operating Company Inc., Clevite
Industries Inc., The Pullman Company, Tenneco Global Holdings Inc., Tenneco
International Holding Corp. and TMC Texas Inc. (collectively, "Automotive")
relating to the offer to exchange new notes and subsidiary guarantees of
Automotive which have been registered under the Securities Act for certain
outstanding notes and subsidiary guarantees of Automotive, and any and all
amendments (including post-effective amendments) to said Registration Statement
on Form S-4 and any subsequent registration statement filed by Automotive
pursuant to Rule 462(b) of the Securities Act, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purchases as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any one
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN TESTIMONY WHEREOF, the undersigned has executed this
instrument this 23rd day of December, 1999.
/s/ Mark P. Frissora
------------------------------------
Name: Mark P. Frissora
<PAGE> 2
TENNECO AUTOMOTIVE INC. AND SUBSIDIARIES
POWER OF ATTORNEY
The undersigned does hereby appoint Timothy R. Donovan and
Kenneth R. Trammell, and each of them, with full power to act alone, as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to execute a Registration Statement on Form S-4 of Tenneco
Automotive Inc., Tenneco Automotive Operating Company Inc., Clevite Industries
Inc., The Pullman Company, Tenneco Global Holdings Inc., Tenneco International
Holding Corp. and TMC Texas Inc. (collectively, "Automotive") relating to the
offer to exchange new notes and subsidiary guarantees of Automotive which have
been registered under the Securities Act for certain outstanding notes and
subsidiary guarantees of Automotive, and any and all amendments (including
post-effective amendments) to said Registration Statement on Form S-4 and any
subsequent registration statement filed by Automotive pursuant to Rule 462(b) of
the Securities Act, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purchases as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any one of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN TESTIMONY WHEREOF, the undersigned has executed this
instrument this 23rd day of December, 1999.
/s/ Mark A. McCollum
------------------------------------------
Name: Mark A. McCollum
<PAGE> 3
TENNECO AUTOMOTIVE INC. AND SUBSIDIARIES
POWER OF ATTORNEY
The undersigned does hereby appoint Timothy R. Donovan, Mark
A. McCollum and Kenneth R. Trammell, and each of them, with full power to act
alone, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute a Registration Statement on Form S-4 of
Tenneco Automotive Inc., Tenneco Automotive Operating Company Inc., Clevite
Industries Inc., The Pullman Company, Tenneco Global Holdings Inc., Tenneco
International Holding Corp. and TMC Texas Inc. (collectively, "Automotive")
relating to the offer to exchange new notes and subsidiary guarantees of
Automotive which have been registered under the Securities Act for certain
outstanding notes and subsidiary guarantees of Automotive, and any and all
amendments (including post-effective amendments) to said Registration Statement
on Form S-4 and any subsequent registration statement filed by Automotive
pursuant to Rule 462(b) of the Securities Act, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purchases as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any one
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN TESTIMONY WHEREOF, the undersigned has executed this
instrument this 23rd day of December, 1999.
/s/ Kenneth R. Trammell
--------------------------
Name: Kenneth R. Trammell
<PAGE> 4
TENNECO AUTOMOTIVE INC. AND SUBSIDIARIES
POWER OF ATTORNEY
The undersigned does hereby appoint Timothy R. Donovan, Mark
A. McCollum and Kenneth R. Trammell, and each of them, with full power to act
alone, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute a Registration Statement on Form S-4 of
Tenneco Automotive Inc., Tenneco Automotive Operating Company Inc., Clevite
Industries Inc., The Pullman Company, Tenneco Global Holdings Inc., Tenneco
International Holding Corp. and TMC Texas Inc. (collectively, "Automotive")
relating to the offer to exchange new notes and subsidiary guarantees of
Automotive which have been registered under the Securities Act for certain
outstanding notes and subsidiary guarantees of Automotive, and any and all
amendments (including post-effective amendments) to said Registration Statement
on Form S-4 and any subsequent registration statement filed by Automotive
pursuant to Rule 462(b) of the Securities Act, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purchases as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any one
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN TESTIMONY WHEREOF, the undersigned has executed this
instrument this 23rd day of December, 1999.
/s/ Dana G. Mead
--------------------------
Name: Dana G. Mead
<PAGE> 5
TENNECO AUTOMOTIVE INC. AND SUBSIDIARIES
POWER OF ATTORNEY
The undersigned does hereby appoint Timothy R. Donovan, Mark A.
McCollum and Kenneth R. Trammell, and each of them, with full power to act
alone, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute a Registration Statement on Form S-4 of
Tenneco Automotive Inc., Tenneco Automotive Operating Company Inc., Clevite
Industries Inc., The Pullman Company, Tenneco Global Holdings Inc., Tenneco
International Holding Corp. and TMC Texas Inc. (collectively, "Automotive")
relating to the offer to exchange new notes and subsidiary guarantees of
Automotive which have been registered under the Securities Act for certain
outstanding notes and subsidiary guarantees of Automotive, and any and all
amendments (including post-effective amendments) to said Registration Statement
on Form S-4 and any subsequent registration statement filed by Automotive
pursuant to Rule 462(b) of the Securities Act, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purchases as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any one
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
23rd day of December, 1999.
/s/ Sir David Plastow
-----------------------------------
Name: Sir David Plastow
<PAGE> 6
TENNECO AUTOMOTIVE INC. AND SUBSIDIARIES
POWER OF ATTORNEY
The undersigned does hereby appoint Timothy R. Donovan, Mark A.
McCollum and Kenneth R. Trammell, and each of them, with full power to act
alone, as her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for her and in her name, place and stead, in
any and all capacities, to execute a Registration Statement on Form S-4 of
Tenneco Automotive Inc., Tenneco Automotive Operating Company Inc., Clevite
Industries Inc., The Pullman Company, Tenneco Global Holdings Inc., Tenneco
International Holding Corp. and TMC Texas Inc. (collectively, "Automotive")
relating to the offer to exchange new notes and subsidiary guarantees of
Automotive which have been registered under the Securities Act for certain
outstanding notes and subsidiary guarantees of Automotive, and any and all
amendments (including post-effective amendments) to said Registration Statement
on Form S-4 and any subsequent registration statement filed by Automotive
pursuant to Rule 462(b) of the Securities Act, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purchases as she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any one
of them, or their or her substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
23rd day of December, 1999.
/s/ M. Kathryn Eickhoff
-------------------------
Name: M. Kathryn Eickhoff
<PAGE> 7
TENNECO AUTOMOTIVE INC. AND SUBSIDIARIES
POWER OF ATTORNEY
The undersigned does hereby appoint Timothy R. Donovan, Mark
A. McCollum and Kenneth R. Trammell, and each of them, with full power to act
alone, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute a Registration Statement on Form S-4 of
Tenneco Automotive Inc., Tenneco Automotive Operating Company Inc., Clevite
Industries Inc., The Pullman Company, Tenneco Global Holdings Inc., Tenneco
International Holding Corp. and TMC Texas Inc. (collectively, "Automotive")
relating to the offer to exchange new notes and subsidiary guarantees of
Automotive which have been registered under the Securities Act for certain
outstanding notes and subsidiary guarantees of Automotive, and any and all
amendments (including post-effective amendments) to said Registration Statement
on Form S-4 and any subsequent registration statement filed by Automotive
pursuant to Rule 462(b) of the Securities Act, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purchases as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any one
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN TESTIMONY WHEREOF, the undersigned has executed this
instrument this 23rd day of December, 1999.
/s/ Mark Andrews
--------------------------
Name: Mark Andrews
<PAGE> 8
TENNECO AUTOMOTIVE INC. AND SUBSIDIARIES
POWER OF ATTORNEY
The undersigned does hereby appoint Timothy R. Donovan, Mark
A. McCollum and Kenneth R. Trammell, and each of them, with full power to act
alone, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute a Registration Statement on Form S-4 of
Tenneco Automotive Inc., Tenneco Automotive Operating Company Inc., Clevite
Industries Inc., The Pullman Company, Tenneco Global Holdings Inc., Tenneco
International Holding Corp. and TMC Texas Inc. (collectively, "Automotive")
relating to the offer to exchange new notes and subsidiary guarantees of
Automotive which have been registered under the Securities Act for certain
outstanding notes and subsidiary guarantees of Automotive, and any and all
amendments (including post-effective amendments) to said Registration Statement
on Form S-4 and any subsequent registration statement filed by Automotive
pursuant to Rule 462(b) of the Securities Act, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purchases as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any one
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN TESTIMONY WHEREOF, the undersigned has executed this
instrument this 23rd day of December, 1999.
/s/ Roger B. Porter
--------------------------
Name: Roger B. Porter
<PAGE> 9
TENNECO AUTOMOTIVE INC. AND SUBSIDIARIES
POWER OF ATTORNEY
The undersigned does hereby appoint Timothy R. Donovan, Mark
A. McCollum and Kenneth R. Trammell, and each of them, with full power to act
alone, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute a Registration Statement on Form S-4 of
Tenneco Automotive Inc., Tenneco Automotive Operating Company Inc., Clevite
Industries Inc., The Pullman Company, Tenneco Global Holdings Inc., Tenneco
International Holding Corp. and TMC Texas Inc. (collectively, "Automotive")
relating to the offer to exchange new notes and subsidiary guarantees of
Automotive which have been registered under the Securities Act for certain
outstanding notes and subsidiary guarantees of Automotive, and any and all
amendments (including post-effective amendments) to said Registration Statement
on Form S-4 and any subsequent registration statement filed by Automotive
pursuant to Rule 462(b) of the Securities Act, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purchases as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any one
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN TESTIMONY WHEREOF, the undersigned has executed this
instrument this 23rd day of December, 1999.
/s/ Paul T. Stecko
--------------------------
Name: Paul T. Stecko
<PAGE> 10
TENNECO AUTOMOTIVE INC. AND SUBSIDIARIES
POWER OF ATTORNEY
The undersigned does hereby appoint Timothy R. Donovan, Mark A.
McCollum and Kenneth R. Trammell, and each of them, with full power to act
alone, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute a Registration Statement on Form S-4 of
Tenneco Automotive Inc., Tenneco Automotive Operating Company Inc., Clevite
Industries Inc., The Pullman Company, Tenneco Global Holdings Inc., Tenneco
International Holding Corp. and TMC Texas Inc. (collectively, "Automotive")
relating to the offer to exchange new notes and subsidiary guarantees of
Automotive which have been registered under the Securities Act for certain
outstanding notes and subsidiary guarantees of Automotive, and any and all
amendments (including post-effective amendments) to said Registration Statement
on Form S-4 and any subsequent registration statement filed by Automotive
pursuant to Rule 462(b) of the Securities Act, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purchases as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any one
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN TESTIMONY WHEREOF, the undersigned has executed this instrument this
23rd day of December, 1999.
/s/ David B. Price, Jr.
---------------------------
Name: David B. Price, Jr.
<PAGE> 11
TENNECO AUTOMOTIVE INC. AND SUBSIDIARIES
POWER OF ATTORNEY
The undersigned does hereby appoint Mark A. McCollum and
Kenneth R. Trammell, and each of them, with full power to act alone, as his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to execute a Registration Statement on Form S-4 of Tenneco
Automotive Inc., Tenneco Automotive Operating Company Inc., Clevite Industries
Inc., The Pullman Company, Tenneco Global Holdings Inc., Tenneco International
Holding Corp. and TMC Texas Inc. (collectively, "Automotive") relating to the
offer to exchange new notes and subsidiary guarantees of Automotive which have
been registered under the Securities Act for certain outstanding notes and
subsidiary guarantees of Automotive, and any and all amendments (including
post-effective amendments) to said Registration Statement on Form S-4 and any
subsequent registration statement filed by Automotive pursuant to Rule 462(b)
of the Securities Act, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purchases as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any one of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN TESTIMONY WHEREOF, the undersigned has executed this
instrument this 23rd day of December, 1999.
/s/ Timothy R. Donovan
---------------------------------------
Name: Timothy R. Donovan
<PAGE> 1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
-------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip Code)
-------------
TENNECO AUTOMOTIVE INC.
(Exact name of obligor as specified in its charter)
Delaware 76-0515284
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
TENNECO AUTOMOTIVE OPERATING COMPANY INC.
(Exact name of obligor as specified in its charter)
Delaware 74-1933558
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
CLEVITE INDUSTRIES INC.
(Exact name of obligor as specified in its charter)
Delaware 22-2940561
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
THE PULLMAN COMPANY
(Exact name of obligor as specified in its charter)
<PAGE> 2
Delaware 02-0359911
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
TENNECO GLOBAL HOLDINGS INC.
(Exact name of obligor as specified in its charter)
Delaware 76-0450674
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
TENNECO INTERNATIONAL HOLDING CORP.
(Exact name of obligor as specified in its charter)
Delaware 74-2067082
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
TMC TEXAS INC.
(Exact name of obligor as specified in its charter)
Delaware 76-0523820
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
500 North Field Drive
Lake Forest, Illinois 60045
(Address of principal executive offices) (Zip code)
-------------------
11-5/8% Senior Subordinated Notes due 2009
(Title of the indenture securities)
================================================================================
<PAGE> 3
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
<TABLE>
<CAPTION>
---- -------
Name Address
---- -------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 27th day of December, 1999.
THE BANK OF NEW YORK
By: /s/ MICHAEL CULHANE
------------------------------
Name: MICHAEL CULHANE
Title: VICE PRESIDENT
<PAGE> 5
EXHIBIT 7 TO FORM T-1
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1999, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
In Thousands
<S> <C>
ASSETS
Cash and balances due from depository
institutions:
Noninterest-bearing balances and currency
and coin...................................... $ 6,394,412
Interest-bearing balances....................... 3,966,749
Securities:
Held-to-maturity securities..................... 805,227
Available-for-sale securities................... 4,152,260
Federal funds sold and Securities purchased
under agreements to resell...................... 1,449,439
Loans and lease financing receivables:
Loans and leases, net of unearned
income........................................ 37,900,739
LESS: Allowance for loan and lease losses....... 572,761
LESS: Allocated transfer risk reserve........... 11,754
Loans and leases, net of unearned income,
allowance, and reserve........................ 37,316,224
Trading Assets.................................... 1,646,634
Premises and fixed assets (including
capitalized leases)............................. 678,439
Other real estate owned........................... 11,571
Investments in unconsolidated subsidiaries
and associated companies........................ 183,038
Customers' liability to this bank on
acceptances outstanding......................... 349,282
Intangible assets................................. 790,558
Other assets...................................... 2,498,658
-----------
Total assets...................................... $60,242,491
===========
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices........................ $ 26,030,231
Noninterest-bearing........................ 11,348,986
Interest-bearing........................... 14,681,245
In foreign offices, Edge and Agreement
subsidiaries, and IBFs................... 18,530,950
Noninterest-bearing........................ 156,624
Interest-bearing........................... 18,374,326
Federal funds purchased and Securities sold
under agreements to repurchase............. 2,094,678
Demand notes issued to the U.S. Treasury..... 232,459
Trading liabilities.......................... 2,081,462
Other borrowed money:
With remaining maturity of one year or
less...................................... 863,201
With remaining maturity of more than one
year through three years.................. 449
With remaining maturity of more than
three years............................... 31,080
Bank's liability on acceptances executed and
outstanding................................ 351,286
Subordinated notes and debentures............ 1,308,000
Other liabilities............................ 3,055,031
------------
Total liabilities............................ 54,578,827
============
EQUITY CAPITAL
Common stock................................. 1,135,284
Surplus...................................... 815,314
Undivided profits and capital reserves....... 3,759,164
Net unrealized holding gains (losses) on
available-for-sale securities.............. (15,440)
Cumulative foreign currency translation
adjustments................................ (30,658)
------------
Total equity capital......................... 5,663,664
------------
Total liabilities and equity capital......... $ 60,242,491
============
</TABLE>
<PAGE> 7
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni
Alan R. Griffith Directors
Gerald L. Hassell
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TENNECO AUTOMOTIVE INC.
(FORMERLY KNOWN AS TENNECO INC.)
OFFER TO EXCHANGE
11 5/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES B,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
PURSUANT TO THE PROSPECTUS, DATED ,
FOR ALL ISSUED AND OUTSTANDING
11 5/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, , UNLESS THE EXCHANGE OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK (THE "EXCHANGE AGENT")
<TABLE>
<S> <C> <C>
By Regular or Certified Mail: By Facsimile: By Overnight Courier or Hand:
(Eligible Guarantor
Institutions Only)
</TABLE>
To Confirm by Telephone
or for Information Call:
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN THOSE
LISTED ABOVE, OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY OF YOUR OUTSTANDING NOTES.
By signing this Letter of Transmittal (the "Letter of Transmittal"), you
hereby acknowledge that you have received and reviewed the Prospectus, dated
, (the "Prospectus"), of Tenneco Automotive Inc.,
formerly known as Tenneco Inc. (the "Company"), and this Letter of Transmittal.
The Prospectus, together with this Letter of Transmittal, constitutes the
Company's offer to exchange (the "Exchange Offer") an aggregate principal amount
of up to $500,000,000 of the Company's 11 5/8% Senior Subordinated Notes due
2009, Series B (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for a like principal
amount of the Company's issued and outstanding 11 5/8% Senior Subordinated Notes
due 2009, Series A (the "Outstanding Notes"). The Outstanding Notes were issued
in offerings under Rule 144A and Regulation S of the Securities Act that were
not registered under the Securities Act. This Exchange Offer is being extended
to all holders of the Outstanding Notes.
If you decide to tender your Outstanding Notes, and the Company accepts the
Outstanding Notes, this will constitute a binding agreement between you and the
Company, subject to the terms and conditions set forth in the Prospectus and
this Letter of Transmittal. Unless you comply with the procedures described in
the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures," you must do one of the following prior to the expiration of the
Exchange Offer to participate in the Exchange Offer:
- tender your Outstanding Notes by sending the certificates for your
Outstanding Notes, in proper form for transfer, a properly completed and
duly executed Letter of Transmittal, with any required
<PAGE> 2
signature guarantees, and all other documents required by this Letter of
Transmittal to the Exchange Agent at one of the addresses listed above;
or
- tender your Outstanding Notes by using the book-entry transfer procedures
described in the Prospectus under the caption "The Exchange
Offer -- Procedures for Tendering," and transmitting this Letter of
Transmittal, with any required signature guarantees, or an Agent's
Message (as defined below) instead of this Letter of Transmittal to the
Exchange Agent.
In order for a book-entry transfer to constitute a valid tender of your
Outstanding Notes in the Exchange Offer, the Exchange Agent must receive a
confirmation of book-entry transfer ( a "Book-Entry Confirmation") of your
Outstanding Notes into the Exchange Agent's account at The Depository Trust
Company prior to the expiration of the Exchange Offer. The term "Agent's
Message" means a message, transmitted by the Depository Trust Company and
received by the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that The Depository Trust Company has received an
express acknowledgment from you that you have received and have agreed to be
bound by the terms of this Letter of Transmittal. If you use this procedure, the
Company may enforce the Letter of Transmittal against you.
DELIVERY OF DOCUMENTS TO THE DEPOSITORY TRUST COMPANY'S BOOK-ENTRY TRANSFER
FACILITY WILL NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
If you are a holder of Outstanding Notes and wish to tender your
Outstanding Notes in the Exchange Offer, but (1) the Outstanding Notes are not
immediately available, (2) time will not permit your Outstanding Notes or other
required documents to reach the Exchange Agent before the expiration of the
Exchange Offer, or (3) the procedure for book-entry transfer cannot be completed
prior to the expiration of the Exchange Offer, you may tender Outstanding Notes
by following the procedures described in the Prospectus under the caption "The
Exchange Offer -- Guaranteed Delivery Procedures."
Only registered holders of Outstanding Notes -- which term, for purposes of
this Letter of Transmittal, includes any participant in The Depository Trust
Company's system whose name appears on a security position listing as the owner
of the Outstanding Notes -- are entitled to tender their Outstanding Notes for
exchange in the Exchange Offer. If you are a beneficial owner whose Outstanding
Notes are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and you wish to tender your Outstanding Notes in the
Exchange Offer, you should promptly contact the person in whose name the
Outstanding Notes are registered and instruct that person to tender on your
behalf. If you wish to tender in the Exchange Offer on your own behalf, prior to
completing and executing this Letter of Transmittal and delivering the
certificates for your Outstanding Notes, you must either make appropriate
arrangements to register ownership of the Outstanding Notes in your name or
obtain a properly completed bond power from the person in whose name the
Outstanding Notes are registered.
YOU MUST COMPLETE THIS LETTER OF TRANSMITTAL IF YOUR ARE A REGISTERED
HOLDER OF OUTSTANDING NOTES -- WHICH TERM, FOR PURPOSES OF THIS LETTER OF
TRANSMITTAL, INCLUDES ANY PARTICIPANT IN THE DEPOSITORY TRUST COMPANY'S SYSTEM
WHOSE NAME APPEARS ON A SECURITY POSITION LISTING AS THE OWNER OF THE
OUTSTANDING NOTES -- AND EITHER (1) YOU WISH TO TENDER THE CERTIFICATES
REPRESENTING YOUR OUTSTANDING NOTES TO THE EXCHANGE AGENT TOGETHER WITH THIS
LETTER OF TRANSMITTAL OR (2) YOU WISH TO TENDER YOUR OUTSTANDING NOTES BY
BOOK-ENTRY TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT THE DEPOSITORY TRUST
COMPANY AND YOU ELECT TO SUBMIT THIS LETTER OF TRANSMITTAL TO THE EXCHANGE AGENT
INSTEAD OF AN AGENT'S MESSAGE.
In order to properly complete this Letter of Transmittal, you must: (1)
complete the box entitled "Description of Outstanding Notes Tendered," (2) if
appropriate, check and complete the boxes relating to book-entry transfer and
guaranteed delivery and the boxes entitled "Special Issuance Instructions" and
"Special Delivery Instructions," (3) sign this Letter of Transmittal by
completing the box entitled "Sign Here" and (4) complete the box entitled
"Substitute Form W-9." By completing the box entitled "Description of
Outstanding Notes Tendered" and signing below, you will have tendered your
Outstanding Notes for exchange on the terms and conditions described in the
Prospectus and this Letter of Transmittal. You should read the detailed
instructions below before completing this Letter of Transmittal.
2
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX BELOW TO BE COMPLETED BY ALL TENDERING HOLDERS OF
OUTSTANDING NOTES
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------
1 2 3
------------------------------------------------------
AGGREGATE
PRINCIPAL PRINCIPAL
CERTIFICATE AMOUNT OF AMOUNT
NAME AND ADDRESS OF REGISTERED HOLDER NUMBER(S)* OUTSTANDING NOTE(S) TENDERED**
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
TOTAL:
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
* Need not be completed by holders who tender by book-entry
transfer.
- ---------------------------------------------------------------------------
** Outstanding Notes tendered by this Letter of Transmittal
must be in denominations of $1,000 principal amount and any
integral multiple thereof. Unless otherwise indicated in
column 3, a holder will be deemed to have tendered ALL of
the Outstanding Notes represented by the certificate(s)
listed in column 1. See Instruction 4.
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 4
BOXES BELOW TO BE CHECKED AS APPLICABLE
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF THE CERTIFICATE(S) REPRESENTING YOUR OUTSTANDING NOTES
IS BEING TENDERED WITH THIS LETTER OF TRANSMITTAL.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF THE CERTIFICATE(S) REPRESENTING YOUR OUTSTANDING NOTES
HAS BEEN LOST, DESTROYED OR STOLEN AND YOU REQUIRE ASSISTANCE IN
OBTAINING A NEW CERTIFICATE(S).
Certificate Number(s)
---------------------------------------------------
Principal Amount(s) Represented
-----------------------------------------
You must contact the Exchange Agent to obtain instructions for
replacing lost, destroyed or stolen certificate(s) representing
Outstanding Notes. (See Instruction 12)
- --------------------------------------------------------------------------------
------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes or Outstanding Notes not tendered
or exchanged are to be issued in the name of someone other than the
registered holder of the Outstanding Notes whose name(s) appear below in
the box entitled "Sign Here".
[ ] Outstanding Note(s) to:
[ ] New Note(s) to:
Name:
------------------------------------------------------------------------
(PLEASE PRINT)
Address:
---------------------------------------------------------------------
-----------------------------------------------------------------------------
(ZIP CODE)
Telephone Number ( ) -
----- --------------
-----------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE INSTRUCTION 9)
------------------------------------------------------
------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes or Outstanding Notes not tendered
or exchanged are to be delivered to someone other than the registered
holder of the Outstanding Notes whose name(s) appear(s) below in the box
entitled "Sign Here" or to the registered holder at an address other than
that shown below in the box entitled "Sign Here".
[ ] Outstanding Note(s) to:
[ ] New Note(s) to:
Name:
------------------------------------------------------------------------
(PLEASE PRINT)
Address:
---------------------------------------------------------------------
-----------------------------------------------------------------------------
(ZIP CODE)
Telephone Number ( ) -
----- ----------------
-----------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE INSTRUCTION 9)
------------------------------------------------------
<PAGE> 5
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OUTSTANDING NOTES ARE BEING DELIVERED UNDER A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
--------------------------------------------
Window Ticket Number (if any)
----------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-------------------------
Name of Institution Which Guaranteed Delivery
------------------------------
If delivered by Book-Entry Transfer, complete the following:
Name of Tendering Institution
----------------------------------------------
Account Number
-------------------------------------------------------------
Transaction Code Number
----------------------------------------------------
BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
----------------------------------------------
Account Number
-------------------------------------------------------------
Transaction Code Number
----------------------------------------------------
[ ] CHECK HERE IF OUTSTANDING NOTES THAT ARE NOT TENDERED OR NOT EXCHANGED ARE
TO BE RETURNED BY CREDITING THE DEPOSITORY TRUST COMPANY ACCOUNT NUMBER
INDICATED ABOVE.
<PAGE> 6
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, as
described in the Prospectus and this Letter of Transmittal, I hereby tender to
Tenneco Automotive Inc. the aggregate principal amount of Outstanding Notes
described above in the box entitled "Description of Outstanding Notes Tendered"
in exchange for a like principal amount of New Notes which have been registered
under the Securities Act.
Subject to and effective upon the acceptance for exchange of all or any
portion of the Outstanding Notes tendered by this Letter of Transmittal in
accordance with the terms and conditions of the Exchange Offer -- including, if
the Exchange Offer is extended or amended, the terms and conditions of any
extension or amendment -- I hereby sell, assign and transfer to, or upon the
order of, the Company all right, title and interest in and to the Outstanding
Notes tendered by this Letter of Transmittal. I hereby irrevocably constitute
and appoint the Exchange Agent as my agent and attorney-in-fact -- with full
knowledge that the Exchange Agent is also acting as the agent of the Company in
connection with the Exchange Offer -- with respect to the tendered Outstanding
Notes, with full power of substitution, such power of attorney being deemed to
be an irrevocable power coupled with an interest, subject only to the right of
withdrawal described in the Prospectus, to (1) deliver certificates for the
tendered Outstanding Notes to the Company together with all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company,
upon receipt by the Exchange Agent, as my agent, of the New Notes to be issued
in exchange for the tendered Outstanding Notes, (2) present certificates for the
tendered Outstanding Notes for transfer, and to transfer the tendered
Outstanding Notes on the books of the Company , and (3) receive for the account
of the Company all benefits and otherwise exercise all rights of ownership of
the tendered Outstanding Notes, all in accordance with the terms and conditions
of the Exchange Offer.
I hereby represent and warrant that I have full power and authority to
tender, sell, assign and transfer the Outstanding Notes tendered by this Letter
of Transmittal and that, when the tendered Outstanding Notes are accepted for
exchange, the Company will acquire good, marketable and unencumbered title to
the tendered Outstanding Notes, free and clear of all liens, restrictions,
charges and encumbrances, and that the tendered Outstanding Notes are not
subject to any adverse claims or proxies. I will, upon request, execute and
deliver any additional documents deemed by the Company or the Exchange Agent to
be necessary or desirable to complete the exchange, sale, assignment and
transfer of the Outstanding Notes tendered by this Letter of Transmittal, and I
will comply with my obligations under the Registration Rights Agreement, dated
as of October 14, 1999 (the "Registration Rights Agreement"), by and among the
Company, the guarantors named therein, Salomon Smith Barney Inc., and the other
initial purchasers named therein. I have read and I agree to all of the terms of
the Exchange Offer.
The name(s) and address(es) of the registered holder(s) -- which term, for
purposes of this Letter of Transmittal, includes any participant in The
Depository Trust Company's system whose name appears on a security position
listing as the holder of the Outstanding Notes -- of the Outstanding Notes
tendered by this Letter of Transmittal are printed above as they appear on the
certificate(s) representing the Outstanding Notes. The certificate number(s) and
the Outstanding Notes that I wish to tender are indicated in the appropriate
boxes above.
Unless I have otherwise indicated by completing the box entitled "Special
Issuance Instructions" above, I hereby direct that the New Notes be issued in
the name(s) of the undersigned or, in the case of a book-entry transfer of
Outstanding Notes, that the New Notes be credited to the account indicated above
maintained with The Depository Trust Company. Similarly, unless I have otherwise
indicated by completing the box entitled "Special Delivery Instructions," I
hereby direct that the New Notes be delivered to the address shown below my
signature.
If I have (1) tendered any Outstanding Notes that are not exchanged in the
Exchange Offer for any reason or (2) submitted certificates for more Outstanding
Notes than I wish to tender, unless I have otherwise indicated by completing the
boxes entitled "Special Issuance Instructions" or "Special Delivery
Instructions," I hereby direct that certificates for any Outstanding Notes that
are not tendered or not exchanged should be issued in the name of the
undersigned, if applicable, and delivered to the address
<PAGE> 7
shown below my signature or, in the case of a book-entry transfer of Outstanding
Notes, that Outstanding Notes that are not tendered or not exchanged be credited
to the account indicated above maintained with The Depository Trust Company, in
each case, at the Company's expense, promptly following the expiration or
termination of the Exchange Offer.
I understand that if I decide to tender Outstanding Notes, and the Company
accepts the Outstanding Notes for exchange, this will constitute a binding
agreement between me and the Company, subject to the terms and conditions set
forth in the Prospectus and this Letter of Transmittal.
I also recognize that, under certain circumstances described in the
Prospectus under the caption "The Exchange Offer -- Conditions to the Exchange
Offer," the Company may not be required to accept for exchange any of the
Outstanding Notes tendered by this Letter of Transmittal.
By tendering Outstanding Notes and executing this Letter of Transmittal, or
delivering an Agent's Message instead of this Letter of Transmittal, I hereby
represent and agree that: (1) I am not, nor is the person receiving my New Notes
pursuant the Exchange Offer, an "affiliate" (as defined in Rule 405 under the
Securities Act) of the Company or, if I am an "affiliate," that I will comply
with the registration and prospectus delivery requirements of the Securities
Act, to the extent applicable; (2) any New Notes I or any such other person
receive in the Exchange Offer are being acquired in the ordinary course of
business; (3) neither I nor any such other person has any arrangement or
understanding with any person to participate in a distribution of the New Notes
to be issued in the Exchange Offer; (4) if I am not a Participating Broker
Dealer (as defined below), I am not engaged in, and do not intend to engage in,
a distribution of the New Notes; and (5) if I am a Participating Broker-Dealer,
I will receive the New Notes for my own account in exchange for Outstanding
Notes that I acquired as a result of my market-making or other trading
activities and I will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of the New Notes I receive in the
Exchange Offer. As used in this Letter of Transmittal, a "Participating
Broker-Dealer" is a broker-dealer that receives New Notes for its own account in
exchange for Outstanding Notes that it acquired as a result of market-making or
other trading activities (other than Outstanding Notes acquired directly from
the Company or any affiliate of the Company). If I am a Participating
Broker-Dealer, by making the representation set forth above and delivering a
prospectus in connection with any resale transaction involving the New Notes, I
understand that I will not be deemed to have admitted that I am an "underwriter"
within the meaning of the Securities Act. If I am using the Exchange Offer to
participate in a distribution of the New Notes, I acknowledge and agree that, if
the resales are of New Notes obtained by me in exchange for Outstanding Notes
acquired by me in the Exchange Offer directly from the Company or an affiliate
thereof, I (1) could not, under Securities and Exchange Commission policy, rely
on the position of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation (available May
13, 1988), as interpreted in the Commission's letter to Shearman & Sterling
dated July 2, 1993, and similar no-action letters, and (2) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement containing
the selling security holder information required by Item 507 or 508, as
applicable, of Regulation S-K under the Securities Act.
To the extent necessary to ensure that the Prospectus is available for
sales of New Notes acquired by Participating Broker-Dealers, the Company and the
guarantors agree to use their respective reasonable best efforts to keep the
Registration Statement of which the Prospectus forms a part continuously
effective, supplemented, amended and current as required by and subject to the
Registration Rights Agreement and in conformity with the requirements of the
Registration Rights Agreement, the Securities Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
180 days from the date the Exchange Offer is consummated or such shorter period
as provided in the Registration Rights Agreement. Each Participating
Broker-Dealer, by tendering Outstanding Notes and executing this Letter of
Transmittal, or delivering an Agent's Message instead of this Letter of
Transmittal, agrees that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in the Prospectus untrue in any
<PAGE> 8
material respect or which causes the Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
in the Prospectus, in light of the circumstances under which they were made, not
misleading, the Participating Broker-Dealer will suspend the sale of New Notes
under the Prospectus. Each Participating Broker-Dealer further agrees that, upon
receipt of a notice from the Company to suspend the sale of New-Notes as
provided above, the Participating Broker-Dealer will suspend resales of the New
Notes until (1) the Company has amended or supplemented the Prospectus to
correct the misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to the Participating Broker-Dealer or (2) the Company
has given notice that the sale of the New Notes may be resumed, as the case may
be. If the Company gives notice to suspend the sale of the New Notes as provided
above, it will extend the period referred to above during which Participating
Broker-Dealers are entitled to use the Prospectus in connection with the resale
of New Notes by the number of days during the period from and including the date
of the giving of such notice to and including the date when Participating
Broker-Dealers receive copies of the supplemented or amended Prospectus
necessary to permit resales of the New Notes or to and including the date on
which the Company has given notice that the sale of New Notes may be resumed, as
the case may be.
As a result, a Participating Broker-Dealer who intends to use the
Prospectus in connection with resales of New Notes received in exchange for
Outstanding Notes in the Exchange Offer must notify the Company, on or prior to
the expiration of the Exchange Offer, that it is a Participating Broker-Dealer.
Participating Broker-Dealers must send the required written notice to the
Company's executive offices located at 500 North Field Drive, Lake Forest,
Illinois 60045, Attn: Timothy R. Donovan, Senior Vice President and General
Counsel, and this notice must be received by the Company prior to the expiration
of the Exchange Offer.
Interest on the New Notes will accrue as described in the Prospectus under
the caption "The Exchange Offer -- Interest on the New Notes."
All authority conferred in or agreed to be conferred in this Letter of
Transmittal will survive my death or incapacity, and any obligation of mine
under this Letter of Transmittal will be binding upon my heirs, executors,
administrators, personal representatives, trustees in bankruptcy, legal
representatives, successors and assigns. Except as stated in the Prospectus,
this tender is irrevocable.
<PAGE> 9
SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2) This Letter
of Transmittal must be signed by (1) the registered holder(s) -- which term, for
purposes of this Letter of Transmittal, includes any participant in The
Depository Trust Company's system whose name appears on a security position
listing as the holder of the Outstanding Notes -- exactly as the name(s) of the
registered holder(s) appear(s) on the certificate(s) for the Outstanding Notes
tendered or on the register of holders maintained by the Company, or (2) by any
person(s) authorized to become the registered holder(s) by endorsements and
documents transmitted with this Letter of Transmittal -- including any opinions
of counsel, certifications and other information as may be required by the
Company for the Outstanding Notes to comply with the restrictions on transfer
applicable to the Outstanding Notes. If the signature below is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
another acting in a similar fiduciary or representative capacity, please set
forth the signer's full title. See Instruction 5.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Noteholder(s)
Dated:
-------------------------------------------------------------------------,
Name(s)
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity
------------------------------------------------------------------------
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Zip Code)
Tax Identification or
Social Security No.
-------------------------------------------------------------
(See Instruction 9)
Area Code and Telephone No.
-----------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) Guaranteed
(See Instruction 2, if required)
Eligible Guarantor Institution
--------------------------------------------------
Official Signature
--------------------------------------------------------------
Dated:
-------------------------------------------------------------------------,
<PAGE> 10
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: THE BANK OF NEW YORK
- ----------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT -------------------------------
FORM W-9 AND CERTIFY BY SIGNING AND DATING BELOW. Social Security Number
DEPARTMENT OF THE TREASURY (If awaiting TIN write
INTERNAL REVENUE SERVICE "Applied For")
PAYER'S REQUEST FOR OR
TAXPAYER IDENTIFICATION
NUMBER ("TIN") -------------------------------
Employer Identification
Number
(If awaiting TIN write
"Applied For")
-----------------------------------------------------------------------------------------
PART 2 -- Certificate -- Under penalties of perjury, I certify that:
(1) the number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me), and
(2) I am not subject to backup withholding because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS")
that I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding.
-----------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item: (2) above if you have been
notified by the IRS that you are currently subject backup withholding because of
underreporting interest or dividends on your tax returns. However, if after being
notified by the IRS that you are subject to backup withholding, you receive another
notification from the IRS that you are no longer subject to backup withholding, do not
cross out such item (2). (Also see instructions in the enclosed Guidelines.)
- ----------------------------------------------------------------------------------------------------------------------------
Signature Date
------------------------------------------------------------------------------ ------------------, ------
- ----------------------------------------------------------------------------------------------------------------------------
PART 3 -- Awaiting TIN [ ]
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY CASH PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. 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 (1) 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 (2)
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 by
the time of payment, 31% of all reportable payments made to me thereafter will
be withheld, but that such amounts will be refunded to me if I provide a
certified Taxpayer Identification Number to the Exchange Agent within sixty (60)
days.
<TABLE>
<S> <C>
- ----------------------------------------------- ----------------------------------------, -----
Signature Date
</TABLE>
<PAGE> 11
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. You must complete this Letter of Transmittal if you are a holder of
Outstanding Notes -- which term, for purposes of this Letter of Transmittal,
includes any participant in The Depository Trust Company's system whose name
appears on a security position listing as the holder of the Outstanding
Notes -- and either (1) you wish to tender the certificates representing your
Outstanding Notes to the Exchange Agent together with this Letter of Transmittal
or (2) you wish to tender you Outstanding Notes by book-entry transfer to the
Exchange Agent's account at The Depository Trust Company and you elect to submit
this Letter of Transmittal to the Exchange Agent instead of an Agent's Message.
In order to constitute a valid tender of your Outstanding Notes, unless you
comply with the procedures for Guaranteed Delivery described below, the Exchange
Agent must receive the following documents at one of the addresses listed above
prior to the expiration of the Exchange Offer: (1) certificates for the
Outstanding Notes, in proper form for transfer, or Book-Entry Confirmation of
transfer of the Outstanding Notes into the Exchange Agent's account at The
Depository Trust Company, (2) a properly completed and duly executed Letter of
Transmittal, with any required signature guarantees, or, in the case of a
Book-Entry Confirmation, an Agent's Message instead of this Letter of
Transmittal, and (3) all other documents required by this Letter of Transmittal.
Outstanding Notes tendered in the Exchange Offer must be in denominations of
$1,000 principal amount and any integral multiple thereof.
If you are a holder of the Outstanding Notes and wish to tender your
Outstanding Notes, but (1) the certificates for Outstanding Notes are not
immediately available, (2) time will not permit your certificates for
Outstanding Notes or other required documents to reach the Exchange Agent before
the expiration of the Exchange Offer, or (3) the procedure for book-entry
transfer cannot be completed prior to the expiration of the Exchange Offer, you
may effect a tender if: (1) the tender is made through an Eligible Institution
(as defined below); (2) prior to the expiration of the Exchange Offer, the
Exchange Agent receives from an Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form we have
provided, setting forth your name and address and the amount of Outstanding
Notes you are tendering and stating that the tender is being made by Notice of
Guaranteed Delivery; and (3) the Exchange Agent receives within five New York
Stock Exchange, Inc. ("NYSE") trading days after the date on which the Exchange
Offer expires: (a) the certificates for all physically tendered Outstanding
Notes, in proper form for transfer, or a Book-Entry Confirmation of transfer of
the Outstanding Notes into the Exchange Agent's account at The Depository Trust
Company, as the case may be, (b) a properly completed and duly executed Letter
of Transmittal, with any required signature guarantees, or, in the case of a
Book-Entry Confirmation, an Agent's Message instead of the Letter of
Transmittal, and (c) all other documents required by the Letter of Transmittal.
The Notice of Guaranteed Delivery may be sent by overnight courier, hand
delivery, registered or certified mail or facsimile transmission and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice.
THE METHOD OF DELIVERY OF CERTIFICATES FOR OUTSTANDING NOTES, LETTERS OF
TRANSMITTAL, AGENT'S MESSAGES AND ALL OTHER REQUIRED DOCUMENTS IS AT YOUR
ELECTION. IF YOU DELIVER YOUR OUTSTANDING NOTES BY MAIL, WE RECOMMEND REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, YOU SHOULD
ALLOW SUFFICIENT TIME TO ASSURE TIMELY DELIVERY. DO NOT SEND CERTIFICATES FOR
OUTSTANDING NOTES, LETTERS OF TRANSMITTAL, AGENT'S MESSAGES OR OTHER REQUIRED
DOCUMENTS TO THE COMPANY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of this Letter of Transmittal or
delivery of an Agent's Message instead of the Letter of Transmittal, waives any
right to receive any notice of the acceptance of such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(a) this Letter of Transmittal is signed by the registered
holder -- which term, for purposes of this Letter of Transmittal, includes
any participant in The Depository Trust Company's system whose name appears
on a security position listing as the owner of the Outstanding Notes -- of
Outstanding
<PAGE> 12
Notes tendered with this Letter of Transmittal, unless such holder(s) has
completed either the box entitled "Special Issuance Instructions" or the
box entitled "Special Delivery Instructions" above, or
(b) the Outstanding Notes are tendered for the account of a firm that
is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
An "Eligible Institution" (as defined in Rule 17Ad-15 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) means:
- Banks (as defined in Section 3(a) of the Federal Deposit Insurance Act);
- Brokers, dealers, municipal securities dealers, municipal securities
brokers, government securities dealers and government securities brokers
(as defined in the Exchange Act);
- Credit unions (as defined in Section 19B(1)(A) of the Federal Reserve
Act);
- National securities exchanges, registered securities associations and
clearing agencies (as these terms are defined in the Exchange Act); and
- Savings associations (as defined in Section 3(b) of the Federal Deposit
Insurance Act).
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Outstanding Notes Tendered" is inadequate, the certificate
number(s) and/or the principal amount of Outstanding Notes and any other
required information should be listed on a separate signed schedule which is
attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Outstanding Notes will
be accepted only in denominations of $1,000 principal amount and integral
multiples thereof. If you are tendering less than all of the Outstanding Notes
evidenced by any certificate you are submitting, please fill in the principal
amount of Outstanding Notes which are to be tendered in column 3 ("Principal
Amount of Outstanding Notes Tendered") of the box entitled "Description of
Outstanding Notes Tendered." In that case, unless you have otherwise indicated
by completing the boxes entitled "Special Issuance Instructions" or "Special
Delivery Instructions", new certificate(s) for the remainder of the Outstanding
Notes that were evidenced by your old certificate(s) will be sent to the
registered holder of the Outstanding Notes, promptly after the expiration of the
Exchange Offer. All Outstanding Notes represented by certificates delivered to
the Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
Except as otherwise provided in this Letter of Transmittal, tenders of
Outstanding Notes may be withdrawn at any time prior to the expiration of the
Exchange Offer. For a withdrawal to be effective, a written notice of withdrawal
must be received by the Exchange Agent prior to the expiration of the Exchange
Offer at one of the addresses listed above. Any notice of withdrawal must
specify the name of the person who tendered the Outstanding Notes to be
withdrawn, identify the Outstanding Notes to be withdrawn, including the
principal amount of the Outstanding Notes, and, where certificates for
Outstanding Notes have been transmitted, specify the name in which the
Outstanding Notes are registered, if different from that of the withdrawing
holder. If certificates for Outstanding Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of the
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Guarantor Institution unless the holder is
an Eligible Guarantor Institution. If Outstanding Notes have been tendered using
the procedure for book-entry transfer described in the Prospectus under the
caption "The Exchange Offer -- Book-Entry Transfer," any notice of withdrawal
must specify the name and number of the account at The Depository Trust Company
to be credited with the withdrawn Outstanding Notes and otherwise comply with
the procedures of the book-entry transfer facility. All questions as to the
validity, form and eligibility -- including time of receipt -- of these notices
will be determined by the Company. Any such determination
<PAGE> 13
will be final and binding. Any Outstanding Notes so withdrawn will be deemed not
to have been validly tendered for exchange for purposes of the Exchange Offer.
Any Outstanding Notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the registered holder without cost
to that holder as soon as practicable after withdrawal, non-acceptance of tender
or termination of the Exchange Offer. In the case of Outstanding Notes tendered
using the procedure for book-entry transfer described in the Prospectus under
the caption "The Exchange Offer -- Procedures for Tendering," the Outstanding
Notes will be credited to the tendering holder's account with The Depository
Trust Company. Properly withdrawn Outstanding Notes may be retendered at any
time prior to the expiration of the Exchange Offer by following one of the
procedures described in the Prospectus under the caption "The Exchange
Offer -- Procedures for Tendering."
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the
Outstanding Notes tendered hereby, the signature(s) must correspond exactly with
the name(s) as written on the face of the certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Outstanding Notes tendered hereby are registered in the name
of two or more joint owners, all such owners must sign this Letter of
Transmittal.
If any tendered Outstanding Notes are registered in different name(s) on
several certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registered holders.
When this Letter of Transmittal is signed by the registered holder(s) of
the Outstanding Notes listed and transmitted by this Letter of Transmittal, no
endorsement(s) of certificate(s) or separate bond power(s) are required unless
New Notes are to be issued in the name of a person other than the registered
holder(s). Signature(s) on the certificate(s) or bond power(s) must be
guaranteed by an Eligible Guarantor Institution.
If a person or persons other than the registered holder(s) of Outstanding
Notes signs the Letter of Transmittal, certificates for the Outstanding Notes
must be endorsed or accompanied by appropriate bond powers, signed exactly as
the name or names of the registered holder(s) that appears on the certificates
for the Outstanding Notes and also must be accompanied by any opinions of
counsel, certifications and other information as the Company may require in
accordance with the restrictions on transfer applicable to the Outstanding
Notes. Signatures on certificates or bond powers must be guaranteed by an
Eligible Guarantor Institution.
If you are a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation, or act in a similar fiduciary or representative
capacity, and wish to sign this Letter of Transmittal or any certificates for
Outstanding Notes or bond powers, you must indicate your status when signing. If
you are acting in any of these capacities, you must submit proper evidence
satisfactory to us of your authority to so act unless we waive this requirement.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be delivered to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Outstanding Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained with The Depository Trust Company. See Instruction 4.
7. IRREGULARITIES. All questions as to the validity, form,
eligibility -- including time of receipt -- and acceptance of Outstanding Notes
tendered for exchange will be determined by the Company in its sole discretion.
The Company's determination will be final and binding. The Company reserves the
absolute right to reject any and all tenders of Outstanding Notes improperly
tendered or to not accept any Outstanding Notes, the acceptance of which might
be unlawful as determined by the Company or its counsel. The Company also
reserves the absolute right to waive any defects or irregularities or conditions
of the Exchange Offer as to any Outstanding Notes either before or after the
expiration of the Exchange
<PAGE> 14
Offer -- including the right to waive the ineligibility of any holder who seeks
to tender Outstanding Notes in the Exchange Offer. The Company's interpretation
of the terms and conditions of the Exchange Offer as to any particular
Outstanding Notes either before or after the expiration of the Exchange Offer --
including the terms and conditions of the Letter of Transmittal and the
accompanying instructions -- will be final and binding. Unless waived, any
defects or irregularities in connection with tenders of Outstanding Notes for
exchange must be cured within a reasonable period of time, as determined by the
Company. Neither the Company, the Exchange Agent nor any other person has any
duty to give notification of any defect or irregularity with respect to any
tender of Outstanding Notes for exchange, nor will the Company have any
liability for failure to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at the addresses
and telephone number listed on the front of this Letter of Transmittal.
Additional copies of the Prospectus, this Letter of Transmittal or the Notice of
Guaranteed Delivery may be obtained from the Exchange Agent or from your broker,
dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Outstanding Notes are accepted for exchange is
required to provide the Exchange Agent with the holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 above. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service may
subject the holder or other payee to a $50 penalty. In addition, cash payments
to such holders or other payees with respect to Outstanding Notes exchanged in
the Exchange Offer may be subject to 31% backup withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering 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 above 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 prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain all amounts
withheld during the 60-day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60-day period
will be remitted to the holder and no further amounts will be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within the 60-day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered holder of
the Outstanding Notes or of the last transferee appearing on the transfers
attached to, or endorsed on, the Outstanding Notes. If the Outstanding Notes are
registered in more than one name or are not in the name of the actual holder,
consult the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional guidance on which number to
report.
Certain holders -- including, among others, corporations, financial
institutions and certain foreign persons -- may not be subject to these backup
withholding and reporting requirements. These holders should nevertheless
complete the Substitute Form W-9 above, and check the box in Part 2 of the
Substitute Form W-9, to avoid possible erroneous backup withholding. A foreign
person may qualify as an exempt recipient by submitting a properly completed IRS
Form W-8, signed under penalties of perjury, attesting to that holder's exempt
status. Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
<PAGE> 15
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If backup withholding results in
an overpayment of taxes, a refund may be obtained.
10. WAIVER OF CONDITIONS. The Company's obligation to complete the Exchange
Offer is subject to the conditions described in the Prospectus under the caption
"The Exchange Offer -- Conditions to the Exchange Offer." These conditions are
for the Company's benefit only and the Company may assert them regardless of the
circumstances giving rise to any condition. The Company may also waive any
condition in whole or in part at any time in its sole discretion. The Company's
failure at any time to exercise any of the foregoing rights will not constitute
a waiver of that right and each right is an ongoing right that the Company may
assert at any time.
11. NO CONDITIONAL TENDERS. No alternative, conditional or contingent
tenders will be accepted. All tendering holders of Outstanding Notes, by
execution of this Letter of Transmittal, waive any right to receive notice of
the acceptance of Outstanding Notes for exchange.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Outstanding Notes have been lost, destroyed or stolen, the holder
should check the box above regarding lost, destroyed or stolen certificates and
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen certificate(s) have been followed.
13. TRANSFER TAXES. You will not be obligated to pay any transfer taxes in
connection with the tender of Outstanding Notes in the Exchange Offer unless you
instruct the Company to register New Notes in the name of, or request that
Outstanding Notes not tendered or not accepted in the Exchange Offer be returned
to, a person other than the registered tendering holder. In those cases, you
will be responsible for the payment of any applicable transfer tax. If
satisfactory evidence of payment of these taxes or an exemption from payment is
not submitted with this Letter of Transmittal, no certificates for New Notes
will be issued until such evidence is received by the Exchange Agent.
IMPORTANT: UNLESS YOU COMPLY WITH THE GUARANTEED DELIVERY PROCEDURES
DESCRIBED ABOVE, THIS LETTER OF TRANSMITTAL (OR A FACSIMILE OF THIS LETTER OF
TRANSMITTAL), OR, IN THE CASE OF OUTSTANDING NOTES TENDERED BY BOOK-ENTRY
TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY, AN
AGENT'S MESSAGE INSTEAD OF THIS LETTER OF TRANSMITTAL, AND ALL OTHER REQUIRED
DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION OF THE
EXCHANGE OFFER.
<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>
- ------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, the
first individual on
the account(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, the
first individual on
the account(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if
the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent
minor, or incompetent person person(3)
7. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under State law
8. Sole proprietorship account The owner(4)
- ------------------------------------------------------------
- ------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------------
9. A valid trust, estate, or pension The legal entity
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.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
Agriculture in 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 a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the individual name, business name, or "doing business as" name of the
owner. Use either individual's social security number or business's employer
identification number (if it has one).
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 17
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(A), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A dealer required to register in securities or commodities registered in the
U.S. or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to 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 where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to 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 made to a nominee.
Exempt payees described above should file 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 RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
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 IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, 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 taxpayer identification number to a payer, 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) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) 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.
(4) 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> 1
EXHIBIT 99.2
TENNECO AUTOMOTIVE INC.
(FORMERLY KNOWN AS TENNECO INC.)
OFFER TO EXCHANGE
11 5/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES B,
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ALL ISSUED AND OUTSTANDING
11 5/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES A
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Tenneco Automotive Inc., formerly known as Tenneco Inc. (the "Company"), is
offering, subject to the terms and conditions set forth in the Prospectus, dated
, (the "Prospectus"), to exchange (the "Exchange Offer") an
aggregate principal amount of up to $500,000,000 of the Company's 11 5/8% Senior
Subordinated Notes due 2009, Series B (the "New Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of the Company's issued and outstanding 11 5/8%
Senior Subordinated Notes due 2009, Series A (the "Outstanding Notes"). The
Outstanding Notes were issued on October 14, 1999 in offerings under Rule 144A
and Regulation S of the Securities Act that were not registered under the
Securities Act. The Exchange Offer is being extended to all holders of the
Outstanding Notes in order to satisfy certain obligations of the Company
contained in the Registration Rights Agreement, dated as of October 14, 1999,
among the Company, the guarantors named therein, Salomon Smith Barney Inc. and
the other initial purchasers named therein. The New Notes are substantially
identical to the Outstanding Notes, except that the transfer restrictions and
registration rights applicable to the Outstanding Notes generally do not apply
to the New Notes. See "The Exchange Offer" in the Prospectus.
We are requesting that you contact your clients for whom you hold
Outstanding Notes regarding the Exchange Offer. For your information and for
forwarding to your clients for whom you hold Outstanding Notes registered in
your name or in the name of your nominee, or who hold Outstanding Notes
registered in their own names, we are enclosing the following documents:
1. Prospectus dated , ;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if (a) certificates for the Outstanding Notes are not immediately
available, (b) time will not permit the certificates for the Outstanding
Notes or other required documents to reach the Exchange Agent before the
expiration of the Exchange Offer or (c) the procedure for book-entry
transfer cannot be completed prior to the expiration of the Exchange Offer;
4. A form of letter which may be sent to your clients for whose
account you hold Outstanding Notes registered in your name or the name of
your nominee, with space provided for obtaining the clients' instructions
with respect to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to The Bank of New York, the Exchange
Agent for the Exchange Offer.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON , , UNLESS THE EXCHANGE OFFER IS
EXTENDED (AS IT MAY BE EXTENDED, THE "EXPIRATION TIME"). OUTSTANDING NOTES
TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE
EXPIRATION TIME.
<PAGE> 2
Unless a holder of Outstanding Notes complies with the procedures described
in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures," the holder must do one of the following prior to the Expiration
Time to participate in the Exchange Offer:
- tender the Outstanding Notes by sending the certificates for the
Outstanding Notes, in proper form for transfer, a properly completed and
duly executed Letter of Transmittal, with any required signature
guarantees, and all other documents required by the Letter of
Transmittal, to The Bank of New York, as Exchange Agent, at one of the
addresses listed in the Prospectus under the caption "The Exchange
Offer -- Exchange Agent"; or
- tender the Outstanding Notes by using the book-entry procedures described
in the Prospectus under the caption "The Exchange Offer -- Procedures for
Tendering" and transmitting a properly completed and duly executed Letter
of Transmittal, with any required signature guarantees, or an Agent's
Message (as defined below) instead of the Letter of Transmittal, to the
Exchange Agent.
In order for a book-entry transfer to constitute a valid tender of Outstanding
Notes in the Exchange Offer, the Exchange Agent must receive a confirmation of
book-entry transfer (a "Book-Entry Confirmation") of the Outstanding Notes into
the Exchange Agent's account at The Depository Trust Company prior to the
Expiration Time. The term "Agent's Message" means a message, transmitted by The
Depository Trust Company and received by the Exchange Agent and forming a part
of the Book-Entry Confirmation, which states that The Depository Trust Company
has received an express acknowledgment from the tendering holder of Outstanding
Notes that the holder has received and has agreed to be bound by the Letter of
Transmittal.
If a registered holder of Outstanding Notes wishes to tender the
Outstanding Notes in the Exchange Offer, but (a) the certificates for the
Outstanding Notes are not immediately available, (b) time will not permit the
certificates for the Outstanding Notes or other required documents to reach the
Exchange Agent before the Expiration Time, or (c) the procedure for book-entry
transfer cannot be completed before the Expiration Time, a tender of Outstanding
Notes may be effected by following the Guaranteed Delivery Procedures described
in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks, trust companies and other nominees for reasonable and necessary costs and
expenses incurred by them in forwarding the Prospectus and the related documents
to the beneficial owners of Outstanding Notes held by them as nominee or in a
fiduciary capacity. The Company will pay or cause to be paid all stock transfer
taxes applicable to the exchange of Outstanding Notes in the Exchange Offer,
except as set forth in Instruction 13 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to The Bank
of New York, the Exchange Agent for the Exchange Offer, at its address and
telephone number set forth on the front of the Letter of Transmittal.
Very truly yours,
TENNECO AUTOMOTIVE INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
<PAGE> 1
EXHIBIT 99.3
TENNECO AUTOMOTIVE INC.
(FORMERLY KNOWN AS TENNECO INC.)
OFFER TO EXCHANGE
11 5/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES B,
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ALL ISSUED AND OUTSTANDING
11 5/8% SENIOR SUBORDINATED NOTES DUE 2009, SERIES A
To Our Clients:
Enclosed for your consideration is a Prospectus dated ,
(the "Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of Tenneco
Automotive Inc., formerly known as Tenneco Inc. (the "Company"), to exchange an
aggregate principal amount of up to $500,000,000 of its 11 5/8% Senior
Subordinated Notes due 2009, Series B (the "New Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of its issued and outstanding 11 5/8% Senior
Subordinated Notes due 2009, Series A (the "Outstanding Notes"), which were
issued in offerings under Rule 144A and Regulation S of the Securities Act that
were not registered under the Securities Act. The Exchange Offer is being
extended to all holders of the Outstanding Notes in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement, dated
as of October 14, 1999, among the Company, the guarantors named therein, Salomon
Smith Barney Inc. and the other initial purchasers named therein. The New Notes
are substantially identical to the Outstanding Notes, except that the transfer
restrictions and registration rights relating to the Outstanding Notes generally
do not apply to the New Notes. See "The Exchange Offer" in the Prospectus.
These materials are being forwarded to you as the beneficial owner of the
Outstanding Notes held by us for your account but not registered in your name. A
TENDER OF SUCH OUTSTANDING NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD
AND PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Outstanding Notes held by us for your account, pursuant to the
terms and conditions set forth in the enclosed Prospectus and Letter of
Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Outstanding Notes on your behalf in accordance
with the provisions of the Exchange Offer. The Exchange Offer will expire at
5:00 p.m., New York City time, on , , unless the Exchange Offer
is extended. Any Outstanding Notes tendered pursuant to the Exchange Offer may
be withdrawn at any time before the expiration of the Exchange Offer.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Outstanding Notes.
2. The Exchange Offer is subject to certain conditions set forth in
the Prospectus under the caption "The Exchange Offer -- Conditions to the
Exchange Offer."
3. Any transfer taxes incident to the transfer of Outstanding Notes
from the holder to the Company will be paid by the Company, except as
otherwise provided in Instruction 13 of the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on
, , unless the Exchange Offer is extended.
If you wish to have us tender your Outstanding Notes, please so instruct us
by completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY
AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OUTSTANDING NOTES.
<PAGE> 2
INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
materials referred to therein relating to the Exchange Offer made by Tenneco
Automotive Inc. (formerly Tenneco Inc.) with respect to its Outstanding Notes.
This will instruct you to tender the Outstanding Notes held by you for the
account of the undersigned, subject to the terms and conditions set forth in the
Prospectus and the related Letter of Transmittal.
Please tender the Outstanding Notes held by you for my account as indicated
below:
11 5/8% Senior Subordinated Notes due 2009, Series A $
- --------------------------------------------
Aggregate
Principal Amount
of Outstanding
Notes
[ ] Please do not tender any Outstanding Notes held by you for my account.
Dated: ______, ____
Signature(s):
- --------------------------------------------------------------------------------
Print Name(s) here:
- --------------------------------------------------------------------------------
Print Address(es):
- --------------------------------------------------------------------------------
Area Code and Telephone Number(s):
- -----------------------------------------------------------------
Tax Identification or Social Security Number(s):
- ------------------------------------------------------
NONE OF THE OUTSTANDING NOTES HELD BY US FOR YOUR ACCOUNT WILL BE TENDERED
UNLESS WE RECEIVE WRITTEN INSTRUCTIONS FROM YOU TO DO SO. UNLESS A SPECIFIC
CONTRARY INSTRUCTION IS GIVEN IN THE SPACE PROVIDED, YOUR SIGNATURE(S) HEREON
SHALL CONSTITUTE AN INSTRUCTION TO US TO TENDER ALL THE OUTSTANDING NOTES HELD
BY US FOR YOUR ACCOUNT.
<PAGE> 1
EXHIBIT 99.4
TENNECO AUTOMOTIVE INC.
(FORMERLY KNOWN AS TENNECO INC.)
NOTICE OF GUARANTEED DELIVERY
This form or one substantially equivalent to this form must be used to
accept the offer (the "Exchange Offer") of Tenneco Automotive Inc., formerly
known as Tenneco Inc. (the "Company"), to exchange an aggregate principal amount
of up to $500,000,000 of its 11 5/8% Senior Subordinated Notes due 2009, Series
B (the "New Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), for a like principal amount of the
Company's issued and outstanding 11 5/8% Senior Subordinated Notes due 2009,
Series A (the "Outstanding Notes"), which were issued in offerings under Rule
144A and Regulation S of the Securities Act that were not registered under the
Securities Act. The Exchange Offer will expire at 5:00 p.m., New York City time,
on , , unless extended (as it may be extended, the
"Expiration Time"). As described in the enclosed Prospectus, dated
, (the "Prospectus"), if you are a registered
holder of Outstanding Notes and wish to tender your Outstanding Notes, but (1)
the certificates for Outstanding Notes are not immediately available, (2) time
will not permit your certificates for Outstanding Notes or other required
documents to reach The Bank of New York, as exchange agent (the "Exchange
Agent"), before the Expiration Time or (3) the procedure for book-entry transfer
cannot be completed before the Expiration Time, you may effect a tender of your
Outstanding Notes if:
- the tender is made through an "Eligible Institution" (as defined in the
Prospectus under the caption "The Exchange Offer -- Procedures for
Tendering"),
- prior to the Expiration Time, the Exchange Agent receives from an
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in this form, setting forth your name
and address, and the amount of Outstanding Notes you are tendering and
stating that the tender is being made by Notice of Guaranteed Delivery.
These documents may be sent by overnight courier, registered or certified
mail or facsimile transmission.
If you elect to use this procedure, you must also guarantee that within
five New York Stock Exchange, Inc. ("NYSE") trading days after the date on which
the Expiration Time occurs, either (a) the Letter of Transmittal, or facsimile
thereof, together with the certificate(s) representing the Outstanding Notes and
any other documents required by the Letter of Transmittal, will be deposited by
the Eligible Institution with the Exchange Agent or (b) that a confirmation of
book-entry transfer (as described in the Prospectus under the caption "The
Exchange Offer -- Procedures for Tendering") of such Outstanding Notes into the
Exchange Agent's account at DTC, along with a properly completed and duly
executed Letter of Transmittal or Agent's Message (as defined in the Prospectus
under the caption "The Exchange Offer -- Procedures for Tendering"), will be
delivered to the Exchange Agent.
For your tender to be effective, the Exchange Agent must actually receive
either (a) the properly completed and duly executed Letter of Transmittal, or
facsimile thereof, together with the certificate(s) representing all tendered
Outstanding Notes in proper form for transfer and all other documents required
by the Letter of Transmittal or (b) if applicable, confirmation of a book-entry
transfer into the Exchange Agent's account at DTC, along with a properly
completed and duly executed Letter of Transmittal or Agent's Message, in each
case within five NYSE trading days after the date on which the Expiration Time
occurs.
Delivery to: THE BANK OF NEW YORK, Exchange Agent
<TABLE>
<S> <C> <C>
By Regular or Certified Mail: By Facsimile: By Overnight Courier or Hand:
(Eligible Guarantor Institutions Only)
</TABLE>
To Confirm by Telephone
or for Information Call:
DELIVERY OF A LETTER OF TRANSMITTAL OR AGENT'S MESSAGE TO AN ADDRESS OTHER
THAN THE ADDRESS LISTED ABOVE OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER
THAN AS SET FORTH ABOVE IS NOT VALID DELIVERY OF THE LETTER OF TRANSMITTAL OR
AGENT'S MESSAGE.
<PAGE> 2
Ladies and Gentlemen:
Subject to the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to Tenneco
Automotive Inc. the principal amount of Outstanding Notes set forth below
pursuant to the guaranteed delivery procedure described in the Prospectus under
the caption "The Exchange Offer -- Guaranteed Delivery Procedures."
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
Principal Amount of Outstanding Notes Tendered:* If Outstanding Notes will be delivered by book- entry
transfer to The Depository Trust Company, provide
account number.
$
---------------------------------------------------
Certificate Nos. (if available):
Account Number
--------------------------------------------------- -------------------------------
Total Principal Amount Represented by
Outstanding Notes Certificate(s):
$
---------------------------------------------------
* Must be in denominations of principal amount of
$1,000 and any integral multiple thereof.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
<PAGE> 3
PLEASE SIGN HERE
X
- --------------------------------------------------- -------------------------
X
- --------------------------------------------------- -------------------------
Signature(s) of Owner(s) or Authorized Signatory Date
Area Code and Telephone Number: ( )
------- --------------------------
Must be signed by the holder(s) of Outstanding Notes as their name(s)
appear(s) on certificates for Outstanding Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
<TABLE>
<S> <C>
Name(s):
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
Capacity:
------------------------------------------------------------
Address(es):
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution, hereby guarantees that either (a) a properly completed and duly
executed Letter of Transmittal, or facsimile thereof, together with the certificates representing the principal
amount of Outstanding Notes tendered hereby in proper form for transfer, and all other documents required by
the Letter of Transmittal, or (b) confirmation of the book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at The Depository Trust Company pursuant to the procedures set forth in the Prospectus
under the caption "The Exchange Offer -- Procedures for Tendering," together with a properly completed and duly
executed Letter of Transmittal or properly completed Agent's Message, will be received by the Exchange Agent at
the address set forth above, no later than five NYSE trading days after the date on which the Expiration Time
occurs.
- -----------------------------------------------------------------------------------------------------------------
Name of Firm: ---------------------------------------------------
------------------------------------- (AUTHORIZED SIGNATURE)
Address: Name:
------------------------------------------- ----------------------------------------------
(PLEASE TYPE OR PRINT)
- -----------------------------------------------------
(ZIP CODE) Title:
---------------------------------------------
Area Code and Tel. No.: Date:
--------------------------- ----------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OUTSTANDING NOTES WITH THIS FORM.
CERTIFICATES FOR OUTSTANDING NOTES SHOULD BE SENT ONLY WITH A COPY OF
YOUR PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.
