<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [X]
Filed by Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
----------------------------------------------------------------
TENNECO INC.
(Name of Registrant as Specified In Its Charter)
----------------------------------------------------------------
TENNECO INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate Box):
[X] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(3).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11:1/
----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------
- ---------
1/Set forth the amount on which the filing fee is calculated and state how it
was determined.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing:
1) Amount Previously Paid: _____________________________________
2) Form, Schedule or Registration No.: _________________________
3) Filing Party: _______________________________________________
4) Date Filed: _________________________________________________
<PAGE>
TENNECO INC
Tenneco Building
P.O. Box 2511
Houston, Texas 77252-2511
(713) 757-2131
[LOGO OF TENNECO APPEARS HERE]
April 1, 1994
To the Stockholders of Tenneco Inc.:
The Annual Meeting of Stockholders of the Company will be held Tuesday,
May 10, 1994, at 10:30 a.m. in the LaSalle Ballroom of the Doubletree Hotel,
Allen Center, 400 Dallas Street, Houston, Texas. A Notice of the meeting, a
Proxy and a Proxy Statement containing information about the matters to be
acted upon are enclosed.
Holders of $7.40 Cumulative Preferred Stock and Common Stock are entitled to
vote at the Annual Meeting on the basis of one vote for each share held.
A record of the Company's activities for the year 1993 is contained in the
Annual Report to Stockholders. We urge each stockholder who cannot attend the
Annual Meeting to please assist us in preparing for the meeting by completing,
executing and returning your Proxy promptly.
Very truly yours,
[SIGNATURE OF DANA G. MEAD
APPEARS HERE]
DANA G. MEAD
President and Chief Executive Officer
<PAGE>
TENNECO INC Tenneco Building
P.O. Box 2511
Houston, Texas 77252-2511
(713) 757-2131
[LOGO OF TENNECO APPEARS HERE]
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
MAY 10, 1994
The Annual Meeting of Stockholders of Tenneco Inc. will be held in the
LaSalle Ballroom of the Doubletree Hotel, Allen Center, 400 Dallas Street,
Houston, Texas, on Tuesday, May 10, 1994, at 10:30 a.m., Houston time.
The purposes of the meeting are:
1. To elect four Directors for a term to expire at the 1997 Annual Meeting
of Stockholders;
2. To approve the adoption of the 1994 Tenneco Inc. Stock Ownership Plan;
3. To approve the appointment of Arthur Andersen & Co. as independent
public accountants for the year 1994;
4. To act upon any of the proposals of the stockholders that may be
introduced at the meeting as set forth in the accompanying Proxy
Statement; and
5. To act upon such other matters as may be brought before the meeting
affecting the business and affairs of the Company.
The Board of Directors knows of no other matters at this time that may be
brought before the meeting. Holders of $7.40 Cumulative Preferred Stock and
Common Stock of record at the close of business on March 18, 1994, are entitled
to vote at the meeting.
Each stockholder who does not expect to attend the meeting is urged to
complete, date and sign the enclosed Proxy and return it to the Company in the
enclosed envelope, which requires no postage if mailed in the United States.
By Order of the Board of Directors
KARL A. STEWART
Secretary
Houston, Texas
April 1, 1994
<PAGE>
TENNECO INC Tenneco Building
P.O. Box 2511
Houston, Texas 77252-2511
(713) 757-2131
[LOGO OF TENNECO APPEARS HERE]
April 1, 1994
PROXY STATEMENT
This statement is furnished in connection with the solicitation on behalf of
the Board of Directors of the Company of proxies to be voted at the Annual
Meeting of Stockholders on May 10, 1994, for the purposes set forth in the
accompanying Notice of the meeting. Holders of $7.40 Cumulative Preferred Stock
and Common Stock of record at the close of business on March 18, 1994, will be
entitled to vote at the Annual Meeting. Each share is entitled to one vote.
Shares represented by proxies will be voted at the Annual Meeting. At March 18,
1994, there were 783,041 shares of $7.40 Cumulative Preferred Stock and
170,141,308 shares of Common Stock outstanding and entitled to vote. Except as
set forth on page 7 under the caption "Other Stock Ownership," to the knowledge
of the Board of Directors, no person owns beneficially more than five percent
of the outstanding shares of any class of voting securities of the Company.
ELECTION OF DIRECTORS
(ITEM 1)
The Board of Directors presently consists of 11 members, divided into three
classes. The following four nominees (Class I) are proposed to be elected at
this Annual Meeting to serve for a term to expire at the 1997 Annual Meeting of
Stockholders and until their successors are chosen and have qualified. The
remaining seven directors will continue to serve as set forth below. The
persons named as proxy voters in the accompanying proxy, or their substitutes,
will vote for the nominees for directors, each of whom has been designated as
such by the Board of Directors. If, for any reason not presently known, any of
the nominees is not available for election, another person or other persons who
may be nominated will be voted for in the discretion of the proxy voters.
Directors are elected by the affirmative vote of the holders of a majority of
the shares present, in person or by Proxy, and authorized to vote on the
matter.
Brief statements setting forth the age (at April 1, 1994), the principal
occupation and employment during the past five years, the year in which first
elected a director and other information concerning each nominee and the
remaining directors appears below.
1
<PAGE>
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR THREE YEAR TERM EXPIRING AT THE 1997 ANNUAL MEETING OF STOCKHOLDERS (CLASS
I)
Mark 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 67 and has been a Director of the Company
since 1987. He is a member of the Compensation and
Benefits Committee and the Nominating and Management
Development Committee.
---------------------------
W. Michael Blumenthal has been a limited partner in
Lazard Freres & Co., an investment banking firm, since
April 1990, prior to which he was Chairman of Unisys
Corporation and had been an executive officer of that
company for more than five years. He is also a director
of Daimler-Benz InterServices.
Mr. Blumenthal is 68 and has been a Director of the
Company since 1985. He is a member and the Chairman of
the Nomination and Management Development Committee.
---------------------------
Belton K. Johnson is engaged in farming, ranching and
investments and has pursued such interests for more than
five years. He is also a director of American Telephone
and Telegraph Company.
Mr. Johnson is 64 and has been a Director of the Company
since 1979. He is a member of the Executive Committee
and the Compensation and Benefits Committee.
---------------------------
William L. Weiss has been Chairman and Chief Executive
Officer of Ameritech Corporation, a telecommunications
and information services company, for more than five
years. Mr. Weiss is a director of Ameritech Corporation,
Abbott Laboratories, Inc., Merrill Lynch & Co., Inc. and
the Quaker Oats Company.
Mr. Weiss is 64 and has been a Director of the Company
since January 1994.
2
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT THE 1995 ANNUAL MEETING OF STOCKHOLDERS (CLASS II)
M. Kathryn 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 American
Telephone and Telegraph Company, The Upjohn Company and
National Westminster Bancorp.
Ms. Eickhoff is 54 and has been a Director of the
Company since 1987 and is a member of the Executive
Committee and Audit Committee. She previously served as
a member of the Board of Directors from 1982 until her
resignation to join the Office of Management and Budget
in 1985.
---------------------------
Peter T. Flawn is a former President of The University
of Texas at Austin having served in such capacity for
more than five years preceding his retirement in 1985.
He is also a director of Harte-Hanks Communications,
Inc., Global Marine Inc., Input/Output, Inc. and Radian
Corporation.
Dr. Flawn is 68 and has been a Director of the Company
since 1980. He is a member of the Executive Committee
and is a member and the Chairman of the Audit Committee.
---------------------------
Michael H. Walsh is Chairman of the Board of Directors
of the Company and served as an executive officer of the
Company from 1991, when he joined the Company as
President. He was elected Chief Executive Officer in
January 1992 and Chairman of the Board in May 1992, and
served in such capacity until February 24, 1994, when he
took a medical leave of absence from the Company and
resigned as Chief Executive Officer. Mr. Walsh continues
to serve as Chairman of the Board on medical leave.
Prior to joining the Company, Mr. Walsh served as
Chairman and Chief Executive Officer of Union Pacific
Railroad Company from October 1986. He is also a
director of Value Health, Inc.
Mr. Walsh is 51 and has been a Director of the Company
since 1991 and is a member of the Executive Committee.
3
<PAGE>
John B. McCoy is Chairman and Chief Executive Officer of
BANC ONE Corporation, a bank holding company, and has
served in that position since 1987, prior to which he
was President of that company from 1983. He is a
director of Cardinal Distribution, Inc., the Federal
Home Loan Mortgage Corporation, and Ameritech Corp. He
also serves on the advisory council of the American
Bankers Association.
Mr. McCoy is 50 and has been a director of the Company
since March 1992. He is a member of the Compensation and
Benefits Committee.
---------------------------
Dana G. Mead is President and Chief Executive Officer of
the Company and has served as an executive officer of
the Company since April 1992, when he joined the Company
as Chief Operating Officer. He became President on May
12, 1992 and was elected to the additional position of
Chief Executive Officer of the Company on February 24,
1994. Prior to joining the Company, Mr. Mead served as
an Executive Vice President of International Paper
Company since 1988, and served as Senior Vice President
of that company from 1981. He is also a director of Alco
Standard Corporation, Baker Hughes Incorporated, Cummins
Engine Company, Inc. and National Westminster Bancorp.
Mr. Mead is 58 and has been a Director of the Company
since April 1992. He is a member and Chairman of the
Executive Committee and an ex officio member of the
Audit, Compensation and Benefits, and Nominating and
Management Development Committees.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT THE 1996 ANNUAL MEETING OF STOCKHOLDERS (CLASS III)
Henry U. Harris, Jr., is Vice Chairman Emeritus of Smith
Barney Shearson Inc., an investment banking firm, and
has been an executive officer of that firm for more than
five years.
Mr. Harris is 67 and has been a Director of the Company
since 1968. He is a member of the Audit Committee and
the Nominating and Management Development Committee.
4
<PAGE>
Joseph J. Sisco has been a partner of Sisco Associates,
a management consulting firm, since January 1980. From
1976 until January 1980 he served as President of The
American University, and, until February 1981, he was
Chancellor of that University. Prior to 1976, Dr. Sisco
was employed by the United States Department of State
for 25 years, last serving as Under Secretary of State
for Political Affairs. He is also a director of The
Interpublic Group of Companies, Inc., Raytheon Company,
and Braun AG.
Dr. Sisco is 74 and has been a Director of the Company
since 1977. He is a member of the Executive Committee,
the Nominating and Management Development Committee and
is a member and the Chairman of the Compensation and
Benefits Committee.
STOCK OWNERSHIP
MANAGEMENT
At January 31, 1994, the number of shares of Common Stock of the Company
beneficially owned by (i) each present director or nominee for director (ii)
each of the executive officers whose names are set forth on the Summary
Compensation Table at page 9, and (iii) all executive officers, directors and
nominees for director as a group, were as follows:
<TABLE>
<CAPTION>
SHARES OF COMMON
DIRECTORS STOCK OWNED(1)(2)
- --------- -----------------
<S> <C>
Mark Andrews.................................................. 2,774(3)
W. Michael Blumenthal......................................... 2,801
M. Kathryn Eickhoff........................................... 2,650
Peter T. Flawn................................................ 3,250
Henry U. Harris, Jr........................................... 10,927
Belton K. Johnson............................................. 5,511
John B. McCoy................................................. 2,250
Dana G. Mead.................................................. 64,139
Joseph J. Sisco............................................... 2,629
Michael H. Walsh.............................................. 307,024(4)
William L. Weiss.............................................. 250
<CAPTION>
EXECUTIVE OFFICERS
- ------------------
<S> <C>
Theodore R. Tetzlaff(5)....................................... 16,000(3)
Edward J. Campbell(6)......................................... 68,068(7)
Stephen D. Chesebro'(8)....................................... 53,197
All executive officers and directors or nominees as a group... 900,170(9)
</TABLE>
(See notes on following page)
5
<PAGE>
- ---------
(1) Each director or nominee and executive officer has sole voting and
investment power over the shares beneficially owned (or has the right to
acquire shares as set forth in note (2) below) set forth in this column,
except for (i) shares which are held in trust for each director and
executive officer under the Company's restricted stock plans, (ii) shares
which Mr. Walsh has the right to acquire pursuant to options granted in
connection with his employment agreement, and (iii) shares to which Mr.
Campbell and other executive officers of the Company have the right to
acquire pursuant to the Company's 1981 Tenneco Inc. Key Employee Stock
Option Plan.
The percent of the class of Common Stock owned by each director or nominee
and by all executive officers and directors as a group was less than one
percent. Also, at January 31, 1994, executive officers and directors of the
Company as a group owned 3,400 shares, (less than one percent) of the
outstanding shares of $2.80 Depositary Shares (each representing one-half of
a share of Series A Cumulative Preferred Stock) of the Company.
(2) Includes shares which are held in trust under the Company's restricted
stock plans; at January 31, 1994, Messrs. Walsh, Mead, Tetzlaff, Campbell
and Chesebro' held 34,000; 24,500; 15,000; 19,240; and 33,825 restricted
shares, respectively, under the Tenneco Inc. Key Employee Restricted Stock
and Restricted Unit Plan or under the 1994 Tenneco Inc. Stock Ownership
Plan, and Ms. Eickhoff and Messrs. Andrews, Blumenthal, Flawn, Harris,
Johnson and Sisco each held 1,250 restricted shares, Mr. McCoy held 750
restricted shares and Mr. Weiss held 250 restricted shares under the
Tenneco Inc. Directors Restricted Stock and Restricted Unit Program.
(3) At January 31, 1994, Messrs. Andrews and Tetzlaff were also the beneficial
owner of 2,000 shares and 1,000 shares, respectively, of $2.80 Depositary
Shares (each representing one-half of a share of Series A Cumulative
Preferred Stock) of the Company.
(4) Includes 166,667 shares that are subject to exercisable options granted
pursuant to the employment agreement with Mr. Walsh described under the
heading "Employment Contracts and Termination of Employment and Change-in-
Control Arrangements".
(5) Mr. Tetzlaff is General Counsel of the Company.
(6) Mr. Campbell was President of Case Corporation, a wholly-owned indirect
subsidiary of the Company, until his retirement on March 31, 1994.
(7) Includes shares that are subject to exercisable options granted pursuant to
the 1981 Tenneco Inc. Key Employee Stock Option Plan; at January 31, 1994,
Mr. Campbell held such options to purchase 1,951 shares.
(8) Mr. Chesebro' is President and Chief Executive Officer of Tenneco Gas,
Inc., a wholly-owned indirect subsidiary of the Company.
(9) Includes 173,997 shares that are subject to options that are exercisable by
all executive officers and directors of the Company as a group, and
includes 358,370 shares that are held in trust under the Tenneco Inc. Key
Employee Restricted Stock and Restricted Unit Plan, the 1994 Tenneco Inc.
Stock Ownership Plan, and the Tenneco Inc. Directors Restricted Stock and
Restricted Unit Program, for all executive officers and directors of the
Company as a group.
6
<PAGE>
OTHER STOCK OWNERSHIP
At January 31, 1994, the trust named below was the owner of more than five
percent of the Company's Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------------------------ -------------------- --------
<S> <C> <C>
LaSalle National Trust, N.A...................... 9,006,603 shares* 5.3%
Trustee for the Tenneco Inc. Stock Employee
Compensation Trust (the "Trust")
135 South LaSalle Street
Chicago, IL 60603
</TABLE>
- ---------
* The Trust holds the Company's Common Stock pursuant to a trust agreement
creating the Trust in connection with the prefunding of certain obligations
of the Company and its affiliates under various employee benefit plans. Both
the Trust and the Trustee have disclaimed beneficial ownership of the shares
of Common Stock. The Trustee has no discretion in the manner in which the
Company's Common Stock held by the Trust will be voted. The trust agreement
provides that participants in the Tenneco Inc. Thrift Plan (the "Thrift
Plan") will, in effect, determine the manner in which shares of the Company's
Common Stock held in the Trust are voted. Participants in the Thrift Plan
will direct the voting of shares of Common Stock held in their accounts under
that plan. The Trustee, upon certification from the trustee of the Thrift
Plan, will vote the Common Stock held in the Trust in the same manner as
participants directed the voting of the shares of Common Stock in the Thrift
Plan. The trust agreement further provides that all voting instructions
received by the Trustee will be held in confidence and not disclosed to any
person, including the Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1993, the Board of Directors held nine meetings, and each director
attended more than 75% of the aggregate of all meetings of the Board of
Directors and all meetings of the committees of the Board on which the director
served.
There are four standing committees of the Board of Directors, which have the
following described responsibilities and authority.
The Audit Committee has the responsibility, among other things, to (i)
recommend the selection of the Company's independent public accountants, (ii)
review and approve the scope of the independent public accountants' audit
activity and extent of non-audit services, (iii) review with management and
such independent public accountants the adequacy of the Company's basic
accounting system and the effectiveness of the Company's internal audit plan
and
7
<PAGE>
activities, (iv) review with management and the independent public accountants
the Company's certified financial statements and exercise general oversight of
the Company's financial reporting process and (v) review with the Company
litigation and other legal matters that may affect the Company's financial
condition and monitor compliance with the Company's business ethics and other
policies. Six meetings of the Audit Committee were held in 1993.
The Compensation and Benefits Committee has the responsibility, among other
things, to (i) establish the salary rate of officers and employees of the
Company and its subsidiaries, (ii) examine periodically the compensation
structure of the Company and (iii) supervise the welfare and pension plans and
compensation plans of the Company. Five meetings of the Compensation and
Benefits Committee were held in 1993.
The Executive Committee has, during the interval between the meetings of the
Board of Directors, the authority to exercise all the powers of the Board that
may be delegated legally to it by the Board in the management and direction of
the business and affairs of the Company. No meetings of the Executive Committee
were held in 1993.
The Nominating and Management Development Committee has the responsibility,
among other things, to (i) review possible candidates for members of the Board
of Directors and recommend a slate of nominees for election as directors at the
Company's annual stockholders' meeting, (ii) review the function and
composition of the other committees of the Board of Directors and recommend
membership on such committees and (iii) review the qualifications and recommend
candidates for election as officers of the Company. Three meetings of the
Nominating and Management Development Committee were held in 1993.
A stockholder of the Company may nominate persons for election to the Board
of the Company if the stockholder submits such nomination, together with
certain related information required by the Company's By-Laws, in writing to
the Secretary of the Company not less than fifty days nor more than seventy-
five days prior to the date of any annual meeting of stockholders.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the remuneration paid by the Company (i) to
the Chairman of the Board and Chief Executive Officer and (ii) to each of the
four most highly compensated key executive officers of the Company whose salary
and bonus exceeded $100,000, for the years indicated, was as follows:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ -------------------
OTHER
ANNUAL RESTRICTED ALL OTHER
NAME AND PRINCIPLE COMPEN- STOCK OPTIONS/ COMPEN-
POSITION YEAR SALARY(1) BONUS SATION(2) AWARDS(3) SARS SATION(4)
------------------ ---- ---------- ---------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael H. Walsh(5) 1993 $1,005,006 $1,000,000 $ 10,472 $ 815,938 25,000 $ 122,655
Chairman and Chief 1992 $ 903,272 $1,600,000 $212,910 $1,990,650 -- $ 119,740
Executive Officer 1991 $ 300,000 -- (6) $4,262,500 250,000 (6)
Dana G. Mead(7) 1993 $ 664,839 $ 700,000 $ 60,007 $ 582,813 50,000 $ 93,979
President and Chief 1992 $ 455,208 $ 600,000 $401,783 $2,110,625 -- $1,529,122
Operating Officer
Theodore R. Tetzlaff(8) 1993 $ 350,000 $ 250,000 -- $ 243,440 -- --
General Counsel 1992 $ 250,000 -- -- -- -- --
Edward J. Campbell(9) 1993 $ 461,951 $ 310,000 $ 6,980 -- -- $ 69,620
President of 1992 $ 439,467 $ 310,000 $ 6,426 $ 396,875 -- $ 56,287
Case Corporation 1991 $ 374,925 $ 157,372 (6) $ 221,325 -- (6)
S. D. Chesebro' 1993 $ 423,006 $ 300,000 $ 537 $ 279,750 -- $ 60,945
President and Chief 1992 $ 376,070 $ 415,000 $ 75,095 $ 854,889 -- $ 52,088
Operating Officer of 1991 $ 308,269 $ 100,000 (6) $ 277,875 -- (6)
Tenneco Gas Inc.
</TABLE>
- --------
(1) Includes base salary plus amounts paid in lieu of Company matching
contributions to the Thrift Plan.
(2) Includes amounts attributable to (i) the value of personal benefits
provided by the Company to its executive officers, which have an aggregate
value in excess of $50,000, such as the personal use of Company owned
property, membership dues, assistance provided to such persons with regard
to financial, tax and estate planning, (ii) reimbursement for taxes and
(iii) above-market rate of earnings on deferred income. The amount of each
such personal benefit that exceeds 25% of the estimated value of the total
personal benefits provided by the Company to the individuals named in the
table was as follows: During 1993: $34,832
for use of Company owned property and $19,950 for financial planning
services for Mr. Mead; $6,980 and $537 for reimbursement for taxes for
Messrs. Campbell and Chesebro',
(Notes continued on following page)
9
<PAGE>
respectively; and During 1992: $102,431 and $319,643 in relocation expenses
for Messrs. Walsh and Mead, respectively; and $30,029 for use of Company
owned property and $16,355 for reimbursement for taxes for Mr. Chesebro'.
(3) Includes the dollar value of grants of restricted stock and restricted
units made pursuant to the Company's benefit plans based on the price of
the Company's Common Stock on the date of grant. At December 31, 1993,
Messrs. Walsh, Mead, Tetzlaff, Campbell and Chesebro' held 17,500; 12,500;
5,000; 19,240; and 29,325 shares, respectively, under such plans. The value
at December 31, 1993 (based on a per share price of $52.625 on that date)
of all restricted shares held was $920,938 for Mr. Walsh; $657,813 for Mr.
Mead; $263,125 for Mr. Tetzlaff; $1,012,505 for Mr. Campbell; and
$1,543,228 for Mr. Chesebro'. Dividends will be paid on the restricted
shares held by each individual.
(4) Includes amounts attributable during 1993 to benefit plans of the Company
as follows:
(a) The amounts contributed pursuant to the Thrift Plan for the account of
Messrs. Walsh, Campbell and Chesebro', respectively, was $8,994, and for
Mr. Mead was $4,660.
(b) The amounts accrued under the Deferred Compensation Plan, together with
adjustments based upon changes in the Consumer Price Index for All Urban
Households, as computed by the Bureau of Labor Statistics, for Messrs.
Walsh, Mead, Campbell, and Chesebro' were $105,576; $63,346; $35,456;
and $37,252, respectively.
(c) Amounts imputed as income for federal income tax purposes under the
Company's group life insurance plan for Messrs. Walsh, Mead, Campbell,
and Chesebro' were $8,084; $25,973; $25,170; and $14,699, respectively.
(5) Mr. Walsh served as Chairman and Chief Executive Officer of the Company
during 1993 and resigned as Chief Executive Officer on February 24, 1994.
(6) Under applicable transition rules of the Securities and Exchange
Commission, amounts for 1991 are not included.
(7) Mr. Mead joined the Company in April 1992 and served as President and Chief
Operating Officer during 1993 and on February 24, 1994 he was elected to
the additional position of Chief Executive Officer.
(8) Mr. Tetzlaff has served as General Counsel of the Company since July 1992,
and is a partner in the law firm of Jenner & Block (see additional
information under the heading "Transactions with Management and Others").
(9) Mr. Campbell served as President of Case Corporation, a wholly-owned
indirect subsidiary of the Company, from January 1992, through March 31,
1994, when he retired, prior to which time, Mr. Campbell served as
President and Chief Executive Officer of Newport News Shipbuilding and Dry
Dock Company, also a wholly-owned indirect subsidiary of the Company.
---------------
10
<PAGE>
The following table sets forth the number of stock options that were granted
during 1993 to the persons named in the Summary Compensation Table.
OPTION GRANTS IN 1993
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
% OF
TOTAL
OPTIONS
OPTIONS GRANTED GRANT
GRANTED TO EXERCISE DATE
(NO. OF EMPLOYEES OR BASE PRESENT
SHARES) IN FISCAL PRICE(4) EXPIRATION VALUE
NAME (1)(2) YEAR(3) PER SHARE DATE (5)
---- ------- --------- --------- ---------------- --------
<S> <C> <C> <C> <C> <C>
Michael H. Walsh.......... 25,000 33% $48.688 December 8, 2003 $406,750
Dana G. Mead.............. 50,000 67% $48.688 December 8, 2003 $813,500
</TABLE>
- ---------
(1) The options reported in this column and in the Summary Compensation Table
consist of Non-Qualified Options granted under the 1994 Tenneco Inc. Stock
Ownership Plan, subject to stockholder approval of the plan at this 1994
Annual Meeting. The options will become exercisable at the rate of one-
third per year on December 8 of 1994, 1995, and 1996, respectively.
(2) These options provide that a grantee who delivers shares of Common Stock to
pay the option exercise price will be granted, upon such delivery and
without further action by the Company, an additional option to purchase the
number of shares so delivered. These "reload" options are granted at 100%
of the fair market value (as defined in the plan) on the date they are
granted, they become exercisable six months from that date and expire
coincident with the options they replace. Grantees are limited to 10 reload
options and the automatic grant of such reload options is limited to twice
during any one calendar year.
(3) Based on total 1993 grants of 75,000 options.
(4) All options were granted at 100% of the fair market value on the date of
grant.
(5) In accordance with the rules of the Securities and Exchange Commission,
this column illustrates the gains that may exist for the respective options
over a ten year period using the Black-Scholes option pricing model. This
valuation model is hypothetical; the actual value, if any, depends on the
excess of the market price of the stock over the exercise price on the date
the option is exercised. If the market price does not increase above the
exercise price, compensation to the grantee will be zero. The Black-Scholes
option pricing model is a mathematical formula used for estimating option
values that incorporates various assumptions. The Grant Date Present Value
set out in this column is based on the following assumptions: (a) a ten-
year option term with all options being exercised by the eighth year; (b)
options becoming exercisable at the rate of 33 1/3% per year from the date
of grant; (c) 0.333 expected future annual stock volatility; (d) a 5.6%
expected rate of return during the option term; and (e) a 2.97% expected
dividend yield.
11
<PAGE>
The following table sets forth the number of stock options and related stock
appreciation rights ("SARs") that were exercised during 1993 and the number and
value of unexercised stock options and related SARs held, as of December 31,
1993, by the persons named in the Summary Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN 1993 AND
1993 YEAR-END VALUES
<TABLE>
<CAPTION>
TOTAL NO. OF UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS HELD AT THE-MONEY OPTIONS HELD AT
SHARES DECEMBER 31, 1993 DECEMBER 31, 1993(1)
ACQUIRED ON VALUE -------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael H. Walsh........ -- -- 166,667 108,333(2) $2,697,839 $1,447,336
Dana G. Mead............ -- -- -- 50,000(2) -- $ 196,850
Edward J. Campbell...... -- -- 1,951(3) -- $ 22,599 --
Stephen D. Chesebro'.... 65(4) $6,329(4) -- -- -- --
</TABLE>
- ---------
Notes:
(1) Based on the fair market value of $52.625.
(2) Includes Options granted under the 1994 Tenneco Inc. Stock Ownership Plan,
subject to stockholder approval of the plan at this 1994 Annual Meeting, to
Messrs. Walsh and Mead for 25,000 Options and 50,000 Options, respectively.
(3) Exercisable Options and SARs.
(4) Shares acquired and value realized on the exercise of SARs.
----------------
12
<PAGE>
The following table sets forth the aggregate estimated annual benefits
payable upon normal retirement pursuant to the Company's Retirement Plan,
Benefit Equalization Plan and Supplemental Executive Retirement Plan to
persons in specified remuneration and years of credited participation
classifications.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED PARTICIPATION
--------------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 350,000 $ 82,500 $110,000 $137,500 $165,000 $192,500
400,000 94,300 125,700 157,100 188,600 220,000
450,000 106,100 141,400 176,800 212,100 247,500
500,000 117,900 157,100 196,400 235,700 275,000
550,000 129,600 172,900 216,100 259,300 302,500
600,000 141,400 188,600 235,700 282,900 330,000
650,000 153,200 204,300 255,400 306,400 357,500
700,000 165,000 220,000 275,000 330,000 385,000
750,000 176,800 235,700 294,600 353,600 412,500
800,000 188,600 251,400 314,300 377,100 440,000
850,000 200,400 267,100 333,900 400,700 467,500
900,000 212,100 282,900 353,600 424,300 495,000
950,000 223,900 298,600 373,200 447,900 522,500
1,000,000 235,700 314,300 392,900 471,400 550,000
1,100,000 259,300 345,700 432,100 518,600 605,000
1,200,000 282,900 377,100 471,400 565,700 660,000
1,300,000 306,400 408,600 510,700 612,900 715,000
1,400,000 330,000 440,000 550,000 660,000 770,000
1,500,000 353,600 471,400 589,300 707,100 825,000
</TABLE>
- ---------
Notes:
1. The benefits set forth above are computed as a straight life annuity and
are based on years of credited participation in the Retirement Plan and
the employee's average base salary during the final five years of credited
participation in the Plan; such benefits are not subject to any deduction
for Social Security or other offset amounts. The years of credited
participation under the Retirement Plan for Messrs. Walsh, Mead, Campbell,
and Chesebro', are 2.8, 1, 26, and 28 years, respectively (See: Note 2
below for additional information relating to Messrs. Walsh and Mead; and
the "Summary Compensation Table" on page 9 for salary and bonus
information for Messrs. Walsh, Mead, Campbell, and Chesebro').
2. Pursuant to employment agreements with Messrs. Walsh and Mead described
under the heading "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements", the Company has agreed to pay Messrs.
Walsh and Mead such supplemental payments (in addition to any benefits
payable under the Company's qualified and nonqualified pension plans) as
may be necessary to make each person's total payments equal to the amount
each would have received had he continued to be covered under pension
plans maintained by his former employer (based on his actual service with
the Company plus 13 and 14 years, respectively, of credited service with
each person's former employer, and on the compensation received from the
Company as salary and bonuses).
---------------
13
<PAGE>
COMPENSATION OF DIRECTORS
Directors who are also officers of the Company or its subsidiaries do not
receive additional directors' fees or amounts for committee participation. All
other directors annually are each paid a director's fee of $20,000 per annum
and receive 250 restricted shares of the Company's Common Stock, discussed
below, and are paid an attendance fee of $1,500 plus expenses for each meeting
of the Board of Directors attended (including any executive session of the
Board). Each director who serves as a Chairman of the Audit, Compensation and
Benefits or Nominating and Management Development Committees of the Board of
Directors is paid an additional fee of $5,000 per Chairmanship, and directors
who serve as members of such committees are paid an additional fee of $3,000
per committee membership. Members of the Executive Committee receive an
additional $1,500 attendance fee plus expenses for each meeting of that
committee attended. Payment of all or a portion of such fees, together with
interest and an adjustment based upon changes in the Consumer Price Index For
All Urban Households as computed by the Bureau of Labor Statistics, may be
deferred at the election of the director until the earliest of (i) the year
next following the date upon which he or she ceases to be a director of the
Company, (ii) the year selected by the director for commencement of payment of
the deferred amount, or (iii) the director's attainment of age 74.
Each director who is not also an officer of the Company receives annually 250
restricted shares of the Company's Common Stock. Such restricted shares may not
be sold, transferred, assigned, pledged, or otherwise encumbered and are
subject to forfeiture should the director cease to serve on the Board prior to
the expiration of the restricted period which ends upon such director's normal
retirement from the Board, unless such director is disabled, dies, or the
Compensation and Benefits Committee of the Board, at its discretion, determines
otherwise. During such restricted period, holders of restricted shares are
entitled to vote the shares and receive dividends.
----------------
The report of the Compensation and Benefits Committee and the performance
graphs that appear immediately below are not deemed to be soliciting material
or to be filed with the Securities and Exchange Commission under the Securities
Act of 1933 or the Securities Exchange Act of 1934 or incorporated by reference
in any document so filed.
----------------
TENNECO INC. COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The executive compensation philosophy, policies, plans and programs of the
Company are under the supervision of the Compensation and Benefits Committee
(the "Committee"), which is composed of the directors named below, none of whom
is an officer or employee of the Company. The Committee has furnished the
following report on executive compensation:
Compensation Philosophy
The basic philosophy underlying Tenneco's executive compensation policies,
plans and programs is that executive and stockholder financial interests should
be aligned as closely as
14
<PAGE>
possible, and the compensation package should be based on delivering pay in
line with performance. As much emphasis should be placed on the worth of an
individual's contributions as on his/her position. The cornerstone of Tenneco's
program is to provide common plans for the Company and its operating divisions
in terms of design, but with performance goals that are customized for each
division, thereby effectively permitting each operating unit to control its own
earnings opportunities.
Accordingly, the executive compensation program for the Company's Chief
Executive Officer ("CEO") and the other executives named in this proxy
statement ("Named Executives"), as well as other executives of the Company, has
been structured to:
--Reinforce a results-oriented management culture with executive pay that
varies according to corporate, division, and individual performance
against extraordinarily aggressive goals.
--Provide incentives, in the form of substantial long-term reward
potential, for senior executives to remain employees of the Company.
--Focus on annual and long-term business results that include growth in
earnings per share as well as growth in stockholder value, divisional net
income and cash flow with improvement in cost of quality, safety, risk
management, effective leadership and equal employment opportunities
performance.
--Align the interests of the Company's executives and stockholders by
accelerating the acquisition and encouraging the retention of Tenneco
shares by those executives.
--Extend stock acquisition programs into lower organizational levels
through the use of stock options.
--De-emphasize fixed compensation in the form of base salary and place
greater emphasis on variable performance-based compensation.
--Provide plans that are simple and easy to describe and understand.
Based on these objectives, the executive compensation program has been
designed to generate compensation from several sources--salaries, annual cash
incentive awards, deferred compensation payments, long-term incentive
opportunities, and other benefits typically offered to executives by major
corporations.
The Company's policy is to provide total compensation to its executives based
on performance that is competitive and at market levels when financial and
qualitative targets are met. Tenneco's compensation plans provide that as an
executive's level of responsibility increases, (i) a greater portion of his/her
potential total compensation is based on performance (both individual and
corporate), and a lesser portion is comprised of salary, causing potentially
15
<PAGE>
greater variability in the individual's total compensation from year-to-year,
and (ii) the mix of compensation for that executive shifts to a greater portion
being derived from compensation plans that result in stock ownership.
In designing and administering the components of the executive compensation
program, the Committee strives to balance short and long-term incentive
objectives and to employ prudent judgment when establishing performance
criteria, evaluating performance and determining actual incentive payments.
The following is a description of each of the components of the executive
compensation program along with a discussion of the decisions and actions taken
by the Committee with regard to 1993 compensation; there also follows a
discussion regarding the CEO's compensation.
Annual Cash Compensation Program
An executive's annual cash compensation consists of a base salary plus
amounts paid in lieu of Company matching contributions to the Thrift Plan,
bonuses under the Company's Executive Incentive Compensation plan, and deferred
compensation payments under the Company's deferred compensation plan. Certain
senior executives may receive annual cash compensation under the 1994 Tenneco
Inc. Stock Ownership Plan (the "1994 Stock Ownership Plan") described below.
Each year the Committee reviews with the CEO and the senior human resources
executive of the Company an annual salary plan for the Company's executives and
other key management personnel (excluding the CEO) following which the
Committee approves that plan with changes that the Committee deems appropriate.
The salary plan that is developed is based in part on competitive market data
and on assessments of past and anticipated future performance. The Committee
employs competitive market data for directional and guideline purposes in
combination with corporate, divisional and individual performance results. The
competitive market data used by the Committee includes several of the companies
comprising the Peer Group on the Performance Graph, which follows this report.
However, their inclusion in this data is a function of their participation in
the various nationally recognized compensation surveys in which the Company
participates, rather than an alignment of companies in similar industry groups.
The Committee does not target salary levels to the performance of comparable
companies; however, as a matter of philosophy and policy, salary levels are
structured within a range of reputable survey data for comparable companies.
This range is established to permit judgments to be exercised as to the quality
of earnings as well as aggregated and individual executive performance. The
Committee also reviews, with the assistance of the senior human resources
executive, and (subject to the employment agreement between the Company and the
CEO that was entered into when the CEO joined the Company) sets the salary of
the CEO based on similar information and criteria and the Committee's
assessment of his past performance and its expectations as to his future
contributions in leading the Company.
16
<PAGE>
Annual performance goals (operating income, cash flow, and other qualitative
objectives that have been assigned to division and individual participants) are
established under the Executive Incentive Compensation Plan at the beginning of
each year for purposes of determining incentive awards for that year. At the
conclusion of each year, the Committee approves incentive and deferred award
payments to employees based on the degree of achievement of the goals
established at the beginning of that year and on judgments of individual
performance. Using operating income and cash flow as a starting point, each
organization receives incentive compensation funds based on judgmental
considerations including the degree of difficulty in meeting targets,
contribution to overall corporate performance, capital and asset management,
safety performance, quality and risk management initiatives, equal employment
opportunities performance, and leadership. The Committee does not place a
greater value on any particular one of these considerations; rather, the
performance against such goals is considered as part of the overall information
considered by the Committee. The Committee makes individual awards based upon
its evaluation of the individual's contribution to the overall performance
results of his division. The Committee believes that the Company performed very
well in relation to the goals set for 1993, as set out on pages 18 and 19.
Effective for 1994 and subsequent years, the CEO, the Named Executives and
other senior executives of the Company, its subsidiaries and divisions may
receive performance units under the 1994 Stock Ownership Plan. The performance
units will permit these executives to earn cash bonuses based upon the
attainment of specified goals relating to earnings per share from continuing
operations or shareholder returns. The performance units are discussed further
below under the captions "$1 Million Tax Limitation" and "Approval of the 1994
Tenneco Inc. Stock Ownership Plan".
Long Term Incentives--Restricted Stock Awards
The Company's Restricted Stock plan is designed to align a significant
portion of the executive compensation program with stockholder interests.
Shares of restricted stock are allocated to the divisions based on operating
performance and the Committee's judgment. The Committee bases its determination
of the size of Restricted Stock Awards on performance of each division and the
Company against a longer range set of financial, operating, and other
objectives. Corporate performance defines the overall amount of shares to be
awarded. Each division's performance is reviewed to determine the number of
shares allocated to such division for distribution to award recipients within
that division. These are adjusted on a discretionary basis, based on the
quality of these results and on internal equity. The Committee believes that
the Company performed very well in relation to its goals during 1993, as set
out on pages 18 and 19. This plan, approved by stockholders at the Annual
Stockholders Meeting held in 1988, permits the granting of restricted stock,
which the recipient cannot sell or otherwise dispose of
17
<PAGE>
until the applicable restrictive holding period has been satisfied. For 1994
the Company is proposing the adoption of the 1994 Stock Ownership Plan that
will provide the ability to grant a variety of long term awards. Awards under
this plan in 1994 will include restricted stock. See the separate discussion of
that plan under "Approval of the 1994 Tenneco Inc. Stock Ownership Plan" and
the discussion below under "$1 Million Tax Limitation". In addition, in 1994 a
plan was initiated that sets forth either stock ownership requirements or
guidelines for stock ownership depending on an individual's organization level
for employees of the Company and its subsidiaries.
CEO Compensation
To ensure the CEO's salary continues to be competitive, and to recognize the
leadership he demonstrated, effective January 1, 1994, the base salary of Mr.
Walsh as CEO, was increased to $1,000,000 from $975,000; on February 24, 1994,
Mr. Walsh took a medical leave of absence from the Company and resigned as CEO.
The Committee determined that the level of the Company's performance during
1993 represented a significant achievement considering the difficult economic
environment in 1993. Such performance, which is summarized below, is before the
1992 restructuring charges, but after giving effect to the adoption of
Financial Accounting Standards (FAS) 106 and 109 regarding accounting for post-
retirement benefits other than pensions and accounting for income taxes.
Factors considered by the Committee included the following improvements in
1993 from the results of the prior year:
--An increase of $1.59 or 159 percent, in earnings per share from
continuing operations.
--A $329 million increase in operating income up 39 percent.
--Implementation of the Case Corporation restructuring program in 1993 and
a $342 million increase in operating income at Case to a profit of $82
million.
--A $644 million improvement in operating cash flow from continuing
operations.
--A 30 percent increase in the Company's Common share price--over twice the
increase in the Dow Jones Industrial Average and more than four times
higher than the Standard & Poor's Composite Index of 500 Stocks.
--A $3 billion increase in the market value of the Company.
--A successful public offering of 23.5 million shares of Common Stock.
--A $2 billion decrease in consolidated debt.
18
<PAGE>
--A reduction in the industrial debt-to-capitalization ratio (including
market value of shares held in the SECT, a trust to fund Tenneco benefit
plans) to 49.3 percent--the first time this ratio has been below 50
percent since 1984.
--Company-wide quality improvement program which will enhance operating
income by approximately $680 million by year-end 1994, two years ahead of
our original schedule.
The Committee's assessment is that the Company, under the leadership of its
CEO, and the initiatives and programs he put in place upon commencement of his
employment in September 1991 and during 1992 and 1993, have produced
significant improvements in Tenneco's overall performance including the factors
set forth above which were specifically considered by the Committee in
formulating his compensation.
In 1993, the incentive award to the CEO was $1 million. The CEO also received
for 1993 a $100,000 deferred compensation award under the Company's deferred
compensation plan, which was also in accordance with his employment agreement.
The size of this award is consistent with awards to other senior executives who
are participants in this plan and reflects the Committee's judgment based on
its evaluation of Mr. Walsh's contribution to the Company's 1993 operating
results which are set out above.
In 1993, the CEO received a grant of 17,500 shares of restricted stock and an
option to purchase 25,000 shares of Common Stock. The size of the restricted
stock award is consistent with awards given to other senior executives who are
participants in this plan and reflects the Committee's judgment based on its
evaluation of Mr. Walsh's contribution to the Company's 1993 operating results
which are set out above.
$1 Million Tax Limitation
Effective in 1994, the Internal Revenue Code of 1986, as amended, imposes a
$1 million limit on the amount that a publicly-traded corporation may deduct
for compensation paid to the CEO or a Named Executive who is still employed on
the last day of the year; provided, however, "performance-based compensation"
is excluded from this $1 million limitation.
The Company desires both to compensate its executives adequately and to
safeguard its tax deduction for compensation. Consequently, the 1994 Stock
Ownership Plan, for which shareholder approval is sought at this 1994 Annual
Meeting, subjects stock options, stock appreciation rights ("SARs"), stock
equivalent units and performance unit grants to certain conditions designed to
make the cash or stock that an executive receives under such awards
"performance-based compensation"; however, restricted stock awards under that
Plan will not qualify as "performance-based compensation" and will therefore be
subject to the $1 million limitation.
19
<PAGE>
The 1994 Stock Ownership Plan limits the number of stock options and SARs
that may be granted to any one participant. Also, the plan provides that
covered executives may receive a bonus pursuant to performance unit grants only
upon the attainment of the goals described above. The plan limits the number of
stock equivalent units that may be granted to a participant in any one year,
and it provides that the covered executives as determined by the Committee may
earn the stock equivalent units only upon the attainment of such target levels
of either earnings or shareholder return as may be specified by the Committee.
The Compensation Committee has established the specific targets applicable to
performance unit awards that may be made under the plan for 1994. Assuming that
the 1994 Stock Ownership Plan is approved by the shareholders at this 1994
Annual Meeting, the cash or stock (except restricted stock awards) that the
executives receive under this plan will be fully deductible by the Company for
Federal income tax purposes. See the section of this proxy statement under the
caption "Approval of the 1994 Tenneco Inc. Stock Ownership Plan", which
describes the 1994 Stock Ownership Plan.
Compensation and Benefits Committee
Joseph J. Sisco--Chairman
Mark Andrews
B. K. Johnson
John B. McCoy
20
<PAGE>
PERFORMANCE GRAPHS
The following performance graph compares the yearly percentage change in the
Cumulative Total Return (as defined below for the following graph) on a share
of Common Stock of the Company with (i) the Standard & Poor's 500 Stock Index;
and (ii) an industry peer group index based on a combination of the six
Standard & Poor's sub-indices described below.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
12/1988 12/1989 12/1990 12/1991 12/1992 12/1993
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Tenneco Inc. 100 134.35 108.44 77.01 103.95 140.06
-----------------------------------------------------------------------------------
S&P 500 100 131.69 127.60 166.47 179.15 197.21
-----------------------------------------------------------------------------------
Peer Group 100 124.32 107.31 128.90 136.17 175.92
</TABLE>
-------------------------------------------------------------------------
BASE - DECEMBER 31, 1988 = 100
---------
Notes:
1. "Cumulative Total Return" on a share of Common Stock of the Company is
measured by dividing (a) the sum of (i) the cumulative amount of
dividends for the five years December 31, 1988, through December 31,
1993, (assuming the reinvestment of dividends over such period) and
(ii) the difference between the price of a share of Common Stock of the
Company at December 31, 1988, and December 31, 1993, by (b) the price
of a share of such Common Stock at December 31, 1988.
2. Based on the identifiable assets of each of the Company's six current
business segments, adjusted in each case to exclude discontinued
operations, the six Standard & Poor's sub-indices included in the
combined industry peer group have been weighted as set forth below for
the following years:
(Notes continued on following page)
21
<PAGE>
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Machinery--Diversified......................... 55% 57% 57% 54% 50% 45%
Aerospace/Defense.............................. 10% 10% 9% 9% 9% 9%
Natural Gas.................................... 18% 16% 15% 18% 21% 22%
Auto Parts--Aftermarkets....................... 6% 6% 7% 6% 6% 8%
Containers--Paper.............................. 6% 6% 7% 8% 9% 11%
Chemicals...................................... 5% 5% 5% 5% 5% 5%
</TABLE>
3. The stock price performance shown on this graph is not necessarily
indicative of future price performance of the Company's Common Stock.
As illustrated in the following chart, Tenneco's Cumulative Total Return (as
defined below for the following graph) increased by 81.9% from December 31,
1991, to December 31, 1993, while, during the same period, the S&P 500 and Peer
Group increased by 18.5% and 36.5%, respectively.
<TABLE>
<S> <C> <C> <C>
12/1991 12/1992 12/1993
--------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Tenneco
Inc. 100 134.98 181.87
--------------------------------------
S&P 500 100 107.62 118.46
--------------------------------------
Peer Group 100 105.48 136.53
</TABLE>
------------------------------------------
BASE - DECEMBER 31, 1991 = 100
---------
Notes:
1. "Cumulative Total Return" on a share of Common Stock of the Company is
measured by dividing (a) the sum of (i) the cumulative amount of
dividends for the two years
22
<PAGE>
December 31, 1991 through December 31, 1993 (assuming the reinvestment
of dividends over such period) and (ii) the difference between the price
of a share of Common Stock of the Company at December 31, 1991 and
December 31, 1993 by (b) the price of a share of such Common Stock at
December 31, 1991.
2. Based on the identifiable assets of each of the Company's six current
business segments, adjusted in each case to exclude discontinued
operations, the six Standard & Poor's sub-indices included in the
combined industry peer group have been weighted as set forth below for
the following years:
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
<S> <C> <C> <C>
Machinery--Diversified..................................... 54% 50% 45%
Aerospace/Defense.......................................... 9% 9% 9%
Natural Gas................................................ 18% 21% 22%
Auto Parts--Aftermarkets................................... 6% 6% 8%
Containers--Paper.......................................... 8% 9% 11%
Chemicals.................................................. 5% 5% 5%
</TABLE>
3. The stock price performance shown on this graph is not necessarily
indicative of future price performance of the Company's Common Stock.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has an agreement with Mr. Walsh providing for his employment with
the Company through September 30, 1995. During the term of his employment, the
Company will pay Mr. Walsh a salary of not less than $900,000 per year (with
such increases after January 1, 1993 as determined by the Compensation and
Benefits Committee of the Board), and payments under the Company's Deferred
Compensation Plan of not less than $100,000 during the term of his employment.
Also, under the employment agreement, the Company has agreed that in the event
Mr. Walsh's employment is terminated for any reason other than for cause,
death, or permanent disability the Company will pay to Mr. Walsh an amount
equal to two times his annual salary. Further, if such event occurs, all
restrictions remaining on Restricted Shares or Restricted Units granted to him
will lapse, all stock options will become immediately exercisable, and all
amounts credited to his deferred compensation plan would be due and payable. In
the event of Mr. Walsh's death prior to payment of all amounts due under this
agreement, such amounts are to be paid to his estate or beneficiary, as so
designated.
The Company has an agreement with Mr. Mead for his employment with the
Company providing for the payment to Mr. Mead of a salary of not less than
$575,000 per year (with such increases after January 1, 1993 as determined by
the Compensation and Benefits Committee of the Board). Also the Company has
agreed that in the event Mr. Mead's employment is
23
<PAGE>
terminated for any reason other than for cause, death, or permanent disability
the Company will pay to Mr. Mead an amount equal to three times his annual
salary plus $300,000. In the event the Company terminates Mr. Mead for
nonperformance of his duties prior to age 60, the Company will guarantee a
payment to him of an amount equal to the full retirement benefit he would be
entitled to at age 60 (including services with his prior employer and bonus
included in the calculation of such benefit). In the event of Mr. Mead's death
prior to retirement, all restrictions remaining on any outstanding awards under
the Restricted Stock Plan will lapse and the shares distributed to his estate
or his beneficiary, as so designated.
As an inducement to Mr. Campbell to assume the position of President of Case
Corporation on January 1, 1992, the Company reached an understanding (the
"Prior Agreement") with Mr. Campbell regarding his compensation and related
matters for the period from January 1, 1992, through December 31, 1994. The
compensation received by Mr. Campbell during 1992 and 1993, which is reflected
in this Proxy Statement, was paid in accordance with the Prior Agreement. Mr.
Campbell chose to retire on March 31, 1994, and, in connection with his
retirement, Case Corporation agreed to preserve for Mr. Campbell the economic
benefits of the Prior Agreement as though his employment with Case Corporation
had continued through December 31, 1994, as was contemplated by the Prior
Agreement. Under such Agreement, Case Corporation agreed to make a cash payment
to Mr. Campbell in April 1994 in the amount of $370,983, an amount equal to the
base salary and matching contributions to the Thrift Plan that Mr. Campbell
would have received during the period from April 1, 1994, through December 31,
1994, if he had not retired. Further, as contemplated by the Prior Agreement,
Mr. Campbell received his 1994 award under the Executive Incentive Compensation
Plan in the amount of $168,000; the full amount of his $25,000 1994 Deferred
Compensation Award; and management of the Company recommended and the
Compensation and Benefits Committee of the Board of Directors of the Company
approved, an award to Mr. Campbell of 20,000 restricted shares of the Company's
Common Stock under the Restricted Stock Plan, which vested effective on his
retirement, in accordance with the terms of such plan. Case Corporation also
agreed to pay Mr. Campbell supplemental retirement payments equal to the
difference between the payments he will receive under the Tenneco Inc.
Retirement Plan and the payments that he would have received under such plan if
(i) his employment had continued through December 31, 1994, and (ii) as
contemplated by the Prior Agreement, the awards under the Executive Incentive
Compensation Plan over the final five years of his employment were included in
benefit calculations under such plan. Mr. Campbell will also receive financial
and tax planning assistance through March 31, 1995, up to a maximum of $20,000
in any one calendar year.
The Company has established a Benefits Protection Program (the "Program") to
enable the Company 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
24
<PAGE>
that their job security or benefit entitlements will be jeopardized by a
"Change-in-Control" of the Company (as such term is defined in the Program).
The Program is designed to achieve this purpose through (i) the establishment
of a severance plan for the benefit of certain employees whose employment is
terminated by the Company or an affiliate (or, in the case of certain
employees, is deemed to have been so terminated) without cause within two years
following such Change-in-Control, (ii) the establishment of a trust fund
designed to ensure the payment of benefits accrued under certain employee
benefit plans, (iii) the amendment of certain employee benefit plans to ensure
that, during a minimum specified period following the Change-in-Control, such
plans continue in effect on a basis not less favorable to the employees than
was the case immediately prior to the Change-in-Control, and (iv) the amendment
of the Company's Retirement Plan to ensure that for a five-year period
following the Change-in-Control "surplus assets" in such plan are utilized
exclusively to satisfy benefit obligations to active and retired employees.
Under the Program, Messrs. Walsh, Mead, Campbell and Chesebro would have
become entitled to receive payments from the Company in the amount of
$5,687,500, $3,312,500, $1,737,800, and $1,554,300, respectively, had their
employment been terminated on December 31, 1993, without cause and after a
Change-in-Control, and, in addition, restricted shares held in the name of such
individuals under the Company's Key Employee Restricted Stock and Restricted
Unit Plan would have automatically reverted to the Company and the Company
would have been obliged to pay such individuals the fair market value thereof
all as provided by such plan. Such severance payments are, however, subject to
limitations set forth in the Program designed to ensure that all payments are
fully deductible by the Company for federal corporate income tax purposes.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During 1993, the Company and its subsidiaries (i) paid the law firm of Jenner
& Block, of which Mr. T.R. Tetzlaff, General Counsel of the Company, is a
partner, approximately $7.6 million for legal services (pursuant to an
agreement with the Company, Mr. Tetzlaff has agreed to devote whatever time is
necessary to attend to the responsibilities of General Counsel of the Company,
and will not receive from Jenner & Block any part of the fees paid by the
Company to that firm during such period he serves as General Counsel) (ii) paid
the firm of Eickhoff Economics, Inc., of which Ms. Eickhoff is a partner,
approximately $149,000 for financial consulting services (which amount was
greater than five percent of such firm's gross revenues during that year) and
(iii) paid to a subsidiary of Ameritech Corporation, of which Mr. Weiss is a
director and an executive officer, approximately $122,000 for paging and
computer leasing services. Additionally, during 1993 the Company engaged the
firm of Lazard Freres & Co., of which Mr. Blumenthal is a Limited Partner, to
provide investment banking services, and the Company proposes to engage such
firm for similar services during the current fiscal year (the amount paid for
these services did not exceed five percent of such firm's consolidated gross
revenues for 1993).
25
<PAGE>
All such transactions discussed above were in the ordinary course of
business.
Transactions involving Messrs. McCoy and Andrews are set out below under the
caption "Compensation Committee Interlocks and Insider Participation".
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Andrews, Johnson, McCoy and Sisco are members of the Compensation and
Benefits Committee of the Board of Directors. Mr. Walsh, during 1993 as CEO of
the Company, was designated by the Company's By-Laws as an ex officio member of
the Compensation and Benefits Committee (as well as all of the Board's
Committees, except for the Executive Committee in which he is a member). As an
ex officio member, he may attend meetings of such committee; however, he has no
authority to vote for or against any action taken or contemplated to be taken
by such committee and his attendance is for the sole purpose of providing
information to the committee in order to assist the members in making informed
decisions. Mr. Walsh did not participate in any deliberations of the
Compensation and Benefits Committee relating to his compensation.
During 1993, (i) the Company and its subsidiaries paid to a subsidiary of
BANC ONE Corporation, of which Mr. McCoy is a director and an executive
officer, approximately $276,000 in interest and fees in connection with a
credit facility the Company maintains under an existing credit agreement (which
includes forty-two other lenders) and for other general banking services; and
(ii) Mr. Andrews purchased agricultural machinery from an independent Case
Corporation equipment dealership and financed $100,000 of the purchase price
for such equipment through Case Credit Corporation (Case Corporation's
financing subsidiary for such transactions) at 5.9% interest for a term of 60
months, maturing August 12, 1998.
All such transactions discussed above involving Messrs. McCoy and Andrews
were in the ordinary course of business.
APPROVAL OF 1994 TENNECO INC. STOCK OWNERSHIP PLAN
(ITEM 2)
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THIS PROPOSAL
On December 8, 1993, the Board of Directors of the Company unanimously
adopted the 1994 Tenneco Inc. Stock Ownership Plan (the "1994 Stock Ownership
Plan") subject to approval by the Company's stockholders at this 1994 Annual
Meeting.
A FULL COPY OF THE 1994 STOCK OWNERSHIP PLAN IS ATTACHED AS APPENDIX "A" TO
THIS PROXY STATEMENT. ALTHOUGH THE MAJOR FEATURES OF THE 1994 STOCK OWNERSHIP
PLAN ARE SUMMARIZED BELOW, THIS IS ONLY A SUMMARY AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE COMPLETE TEXT OF THE 1994 STOCK OWNERSHIP PLAN.
CAPITALIZED TERMS NOT OTHERWISE DEFINED HEREIN HAVE THE MEANINGS ASCRIBED TO
THEM IN THE 1994 STOCK OWNERSHIP PLAN.
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<PAGE>
PURPOSE. The purpose of the plan is to promote the long-term success of the
Company and its subsidiaries for the benefit of the Company's stockholders by
encouraging its officers and employees to have meaningful investments in the
Company so that, as stockholders themselves, those individuals will be more
likely to represent the views and interests of other stockholders and by
providing incentives to such officers and key employees for continued services.
The Company believes that the possibility of participation under the 1994 Stock
Ownership Plan will provide this group of officers and employees an incentive
to perform more effectively and will assist the Company and its subsidiaries in
attracting and retaining people of outstanding training, experience and
ability. In this regard, the Company intends to broaden the base of
participants from approximately 650 officers and key employees participating
under the current Restricted Stock Plan to approximately 2,400 under the 1994
Stock Ownership Plan.
TERM. The 1994 Stock Ownership Plan was adopted effective as of December 8,
1993, subject to stockholder approval at this Annual Meeting, for a term to
expire on December 31, 1998.
ADMINISTRATION. The 1994 Stock Ownership Plan is administered by the
Compensation and Benefits Committee of the Board of Directors (the
"Committee"), which has exclusive authority to make awards under the 1994 Stock
Ownership Plan and all interpretations and determinations affecting the 1994
Stock Ownership Plan. No member of the Committee is eligible to participate in
the 1994 Stock Ownership Plan.
PARTICIPATION. Participation in the 1994 Stock Ownership Plan is limited to
officers and key employees of the Company and its subsidiaries who are selected
from time to time by the Committee. Participants in the 1994 Stock Ownership
Plan are also eligible to participate in other incentive plans of the Company.
SHARES AVAILABLE FOR AWARDS. 8,400,000 shares of Common Stock (approximately
4.9% of the issued and outstanding Common Stock) are available for issuance
under the 1994 Stock Ownership Plan, subject to adjustment as described below.
Such shares may consist in whole or in part of authorized and unissued shares
of Common Stock, treasury shares, or shares held by the Tenneco Inc. Stock
Employee Compensation Trust. With respect to the unexercised portion of any
lapsed, forfeited or cancelled Awards, such shares will not again be available
for distribution in connection with future Awards to participants subject to
Section 16 of the Exchange Act.
The 1994 Stock Ownership Plan provides that no more than 3 million shares may
be used for Incentive Stock Options and 2.5 million shares may be used for
Restricted Stock Awards, subject to adjustment as described below.
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<PAGE>
CASH AWARDS. The 1994 Stock Ownership Plan allows the Committee to Award
Stock Equivalent Units, Dividend Equivalent Units, Stock Appreciation Rights
and Performance Units to be exercisable for or settled in cash. Such Awards,
which may be redeemed or exercised only on a fixed date or dates not less than
six months after the date of such Award or incident to retirement, death, or
Total Disability, coincident with termination of employment, are not included
in this limitation.
AWARDS. The 1994 Stock Ownership Plan permits grants of any or all of the
following types of Awards: (i) Options, including Incentive Stock Options
("ISOs"), Non-Qualified Stock Options, Qualified Stock Options, and Reload
Stock Options; (ii) Stock Appreciation Rights ("SARs"); (iii) Restricted Stock;
(iv) Stock Equivalent Units; (v) Dividend Equivalents; and (vi) Performance
Units. All Awards will be evidenced by an Award Agreement, which sets out the
details, terms, conditions and limitations applicable to such Award. Under the
terms of the 1994 Stock Ownership Plan, no Award may vest in less than six
months from the Award Date, except in the event of retirement, death or Total
Disability.
STOCK OPTIONS. The 1994 Stock Ownership Plan provides that the Option Price
pursuant to which Common Stock may be purchased will be not less than 100% of
the fair market value of the Company's Common Stock on the date the Stock
Option is awarded. The term of each Option will be fixed by the Committee and
evidenced in an Award Agreement. Payment of the Option Price may be made in
cash, check, through the delivery of shares of Common Stock ("Owned Shares")
having a fair market value on the exercise date equal to the Option Price or
such other method as may be permitted by the Committee.
The Committee may award Reload Stock Options in conjunction with any stock
option awarded under the 1994 Stock Ownership Plan or otherwise. A Reload Stock
Option is an option to purchase shares equal to the number of shares of Common
Stock delivered in payment of the option price for a stock option and is deemed
to be granted upon such delivery without further action by the Committee.
Reload Stock Options are subject to all of the terms and conditions of Stock
Options generally, except that their term ends upon termination of the Stock
Options with respect to which they are granted.
STOCK APPRECIATION RIGHTS. The Committee may award SARs either free standing
as an additional right (the "Additional Right SAR") or in conjunction with any
other Award as an alternative right (the "Alternative Right SAR"). The exercise
of an Award granted in conjunction with an Alternative Right SAR terminates the
Alternative Right SAR to the extent of the shares or share equivalents acquired
upon exercise of the Award. Conversely, the exercise of an Alternative Right
SAR terminates the associated Award to the extent of the shares or share
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<PAGE>
equivalents with respect to which such right is exercised. The exercise of an
Additional Right SAR has no effect on the exercisability of any other Award and
the exercise of any other Award has no effect on the exercisability of an
Additional Right SAR.
Upon the exercise of an SAR, the participant will receive the excess of the
Fair Market Value of a share of Common Stock on the Settlement Date over the
Award Price. The Award Price for: (i) Additional Right SARs is 100% of the Fair
Market Value of a share of Common Stock on the date the SAR was awarded; and
(ii) Alternative Right SARs is 100% of the Fair Market Value of a share of
Common Stock on the date such other Award was made. For purposes of the
limitation on the aggregate number of shares of Common Stock which may be
issued under the 1994 Stock Ownership Plan, only the number of shares actually
issued in connection with the exercise of an SAR will be considered.
RESTRICTED STOCK. The Committee may make Awards of Restricted Stock on such
terms, conditions and restrictions (which may include, but are not limited to,
continuous service with the Company, achievement of specific business
objectives, and other measurements of individual, business unit, or company
performance) as it determines. Such terms and conditions may include the manner
in which such Restricted Stock is held, the extent to which the holder of such
shares has rights of a stockholder and the circumstances under which such
shares will be forfeited. None of the shares subject to a Restricted Stock
Award may be assigned, transferred, pledged or sold by the Participant until
the termination or earlier lapse of restrictions relating thereto.
The Company's ability to take a Federal income tax deduction with respect to
Restricted Stock Awards made to "Covered Employees" as defined in Section 162
of the Code will be subject to limitation, as discussed below under the caption
"Tax Aspects of the 1994 Stock Ownership Plan".
STOCK EQUIVALENT UNITS. The Committee may make Awards of Stock Equivalent
Units on such terms, conditions and restrictions (which may include, but are
not limited to, continuous service with the Company, achievement of specific
business objectives, and other measurements of individual, business unit, or
Company performance) as it determines. Such terms and conditions may include
the manner in which such Stock Equivalent units are held and the circumstances
under which such units will be forfeited. A Stock Equivalent Unit is an Award
unit having a value equivalent to the Fair Market Value of one share of Common
Stock, the value of which fluctuates with that of the Common Stock from which
such unit derives its value.
The Committee intends, during each year of the plan, to establish performance
criteria associated with grants of Stock Equivalent Units to participants who
may be "covered employees", as such term is defined in Section 162 of the Code,
which are intended to qualify
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<PAGE>
under such section with regard to preserving the Company's tax deduction for
certain compensation paid in excess of $1 million, as discussed below under the
heading "Tax Aspects of the 1994 Stock Ownership Plan".
DIVIDEND EQUIVALENTS. The Committee may provide in the Award Agreement that
Awards accrue Dividend Equivalents that shall accrue and be payable, subject to
any additional conditions or limitations imposed by the Committee, in the
amount of and at such times as dividends are paid by the Company on shares of
Common Stock.
PERFORMANCE UNITS. The Committee may make Awards of Performance Units, which
are based on the attainment over a specified period of individual performance
targets or on parameters, including but not limited to, earnings per share,
total shareholder return, return on stockholders' equity, and cumulative return
on net assets employed.
The Committee intends, during each year of the plan, to establish performance
criteria associated with grants of Performance Units to participants who may be
"covered employees", as such term is defined in Section 162 of the Code, which
are intended to qualify under such section with regard to preserving the
Company's tax deduction for certain compensation paid in excess of $1 million,
as discussed below under the heading "Tax Aspects of the 1994 Stock Ownership
Plan".
SETTLEMENT OF AWARDS. At the Committee's discretion, Awards may be settled in
cash, shares of Common Stock, other awards, or in combinations thereof. The
Committee may also require or permit participants to defer the issuance of
shares or the settlement of awards in cash under such rules and procedures as
it may establish. The Committee may also provide that deferred settlements
include the payment or crediting of interest on the deferral amounts or the
payment or crediting of Dividend Equivalents on deferred settlements
denominated in shares of Common Stock. The Committee may determine the manner
in which federal, state or local tax withholding obligations of the Company
will be satisfied including, but not limited to, the reduction in the amount of
stock or cash to be delivered or paid to the Participant or reimbursement by
the Participant in cash or with shares of Common Stock (rounded up to the next
full share), at the Fair Market Value on the Settlement Date.
TAX ASPECTS OF THE 1994 STOCK OWNERSHIP PLAN.
$1 MILLION LIMITATION ON DEDUCTIBILITY. The performance goals established for
awards of Performance Units and Stock Equivalent Units are intended to qualify
such Awards as "performance-based compensation" as defined in Section 162 of
the Code in order to preserve tax deductions by the Company with respect to any
such compensation in excess of $1 million paid to "Covered Employees", i.e.,
the Company's Chief Executive Officer and the four highest compensated
executive officers of the Company or those individuals deemed to
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<PAGE>
be executive officers of the Company (other than the Chief Executive Officer)
and who are officers on the last day of the year in question.
The material terms of the performance goals applicable to Performance Units
are as follows: (i) the individuals eligible to receive compensation through
Performance Units are senior executives of the Company or a subsidiary or
division thereof, although the specific performance goals described herein are
applicable only to awards made to individuals who the Compensation Committee
has determined are or are likely to become persons whose compensation might be
subject to the rules of Code Section 162(m); (ii) the business criteria on
which performance goals will be based will be the attainment of certain levels
of either earnings per share from continuing operations or shareholder return
(stock price plus dividends), which goals may be set in the alternative; and
(iii) the maximum amount of compensation that may be paid under Performance
Units to any one individual with respect to any one year will be $2,000,000.
The material terms of the performance goals applicable to Stock Equivalent
Units are as follows: (i) the individuals eligible to receive compensation
through Stock Equivalent Units are senior executives of the Company or a
subsidiary or division thereof, although the specific performance goals
described herein are applicable only to awards made to individuals who the
Compensation Committee has determined are or are likely to become persons
whose compensation might be subject to the rules of Code Section 162(m); (ii)
the business criteria on which performance goals will be based will be the
attainment of certain levels of either earnings or shareholder return (stock
price plus dividends), which goals may be set in the alternative; and (iii)
the maximum amount of compensation that may be paid under Stock Equivalent
Units to any one individual with respect to any one year may not exceed
100,000 units.
To qualify stock options and SARs as "performance-based compensation" for
Federal Income Tax purposes, the Plan limits the total number of shares of
Common Stock subject to stock options and underlying SARs awarded to any one
participant during the period from December 8, 1993, through December 31,
1998, to 10% of the number of shares authorized under the Plan.
Awards of Restricted Stock to Covered Employees will not qualify as
"performance-based compensation" and will be subject to the limitation on
deductibility under Section 162 of the Code.
FEDERAL INCOME TAX CONSEQUENCES. The rules governing the tax treatment of
Stock Options, Stock Appreciation Rights, Restricted Stock, Stock Equivalent
Units, Dividend Equivalents and Performance Units are quite technical.
Therefore, the description of the Federal income tax consequences set forth
below is necessarily general in nature and does not purport to be complete.
Moreover, statutory provisions are subject to change, as are their
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interpretations, and their applications may vary in individual circumstances.
Finally, the tax consequences under applicable state and local income tax laws
may not be the same as under the Federal income tax laws.
Incentive Stock Options. With respect to ISOs, generally, the participant
will recognize no taxable gain or loss when the ISO is granted or exercised,
and upon exercise, the spread between the fair market value and the exercise
price will be an item of tax preference for purposes of the participant's
alternative minimum tax.
If the shares acquired upon the exercise of an ISO are held for at least one
year after exercise and two years after grant (the "Holding Periods"), the
participant will recognize any gain or loss realized upon such sale as long-
term capital gain or loss. The Company will not be entitled to a deduction. If
the shares are not held for the Holding Periods, the participant will recognize
ordinary income in an amount equal to the difference between the exercise price
and the fair market value of Common Stock on the date the option is exercised.
The Company will be entitled to a deduction equal to the amount of any ordinary
income so recognized. If the shares are not held for the Holding Period and the
amount realized upon sale is less than the grant price, such difference will be
a capital loss to the participant.
Non-Qualified Stock Options. With respect to Non-Qualified Stock Options,
generally, the participant will recognize no taxable income at the time of
grant. Upon exercise of a Non-Qualified Stock Option, the participant will
recognize ordinary income equal to the difference between the exercise price
and the fair market value of the shares on the date of exercise. The
participant will recognize as a capital gain or loss any profit or loss
realized on the sale or exchange of any shares disposed of or sold. The Company
will be entitled to deduct an amount equal to the difference between the
exercise price and the fair market value of the shares on the date of exercise.
Reload Stock Options. The participant recognizes no income on the grant of a
Reload Stock Option. The tax consequences to the participant and the Company
are the same as that for a Non-Qualified Stock Option.
Stock Appreciation Rights. Upon the grant of an SAR, the participant realizes
no taxable income and the Company receives no deduction. The participant
realizes income at the time of exercise, if the award becomes vested and is no
longer subject to forfeiture and the participant is entitled to receive the
value of the award. The Company receives a deduction of the same amount in the
same year the participant recognizes income.
Restricted Stock. A participant granted shares of Restricted Stock is not
required to include the value of such shares in income until the first time
such participant's rights in the shares are transferable or are not subject to
a substantial risk of forfeiture, whichever occurs earlier, unless such
participant timely files an election under Code (S) 83(b) to be taxed on the
receipt of the shares. In either case, the amount of such income will be equal
to the excess of the fair market
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<PAGE>
value of the stock at the time the income is recognized over the amount (if
any) paid for the stock. The Company will generally be entitled to a deduction,
in the amount of the ordinary income recognized by the participant, for the
Company's taxable year in which the participant recognizes such income.
However, the deduction with respect to Awards of Restricted Stock to Covered
Employees will be subject to the $1 million limitation under Code Section 162.
Stock Equivalent Units. A participant granted Stock Equivalent Units
recognizes income in the amount of the award of those units when they vest and
are no longer subject to forfeiture and he is entitled to receive the value of
the award. The Company receives a deduction for the same amount in the year
that income is recognized by the participant.
Dividend Equivalents. A participant granted Dividend Equivalents recognizes
income in the amount of the award of those units when they vest and are no
longer subject to forfeiture and he is entitled to receive the value of the
award. The Company receives a deduction for the same amount in the year that
income is recognized by the participant.
Performance Units. A participant granted Performance Units recognizes income
in the amount of the award of those units when they vest and are no longer
subject to forfeiture and he is entitled to receive the value of the award. The
Company receives a deduction for the same amount in the year that income is
recognized by the participant.
STOCKHOLDER APPROVAL. The affirmative vote of the holders of a majority of
the shares present, in person or by Proxy, and authorized to vote on this
proposal is required to approve the 1994 Stock Ownership Plan, which includes
performance goals discussed above under the caption "Tax Aspects of the 1994
Stock Ownership Plan".
PLAN AWARDS. In December 1993 and January 1994, the Committee granted
Restricted Stock and Stock Option Awards pursuant to the Plan, subject to
approval of the Plan by the Company's stockholders at this 1994 Annual Meeting.
Awards made to the Company's Chief Executive Officer, the other executive
officers and all other employees of the Company, are reflected in the following
table.
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<PAGE>
1994 TENNECO INC. STOCK OWNERSHIP
<TABLE>
<CAPTION>
RESTRICTED STOCK STOCK
----------------------- OPTIONS
NAME AND POSITION DOLLAR VALUE(1) SHARES SHARES(2)
- ----------------- --------------- ------- ---------
<S> <C> <C> <C>
Michael H. Walsh.......................... $ 944,625 16,500 125,000
Chairman of the
Board and Chief
Executive Officer
Dana G. Mead.............................. $ 687,000 12,000 150,000
President and Chief
Operating Officer
Theodore R. Tetzlaff...................... $ 858,750 15,000 16,000
General Counsel
Stephen D. Chesebro'...................... $ 257,625 4,500 16,000
President and Chief
Operating Officer of
Tenneco Gas, Inc.
All Executive Officers as a Group......... $ 4,532,482 79,170 411,745
All other Employees....................... $14,087,500 246,070 1,352,625
</TABLE>
- ---------
(1) On January 31, 1994, the average of the high and low sale price of the
Company's Common Stock on the New York Stock Exchange Composite Tape was
$57.25 per share.
(2) The options reported in this column consist of Non-Qualified Options (as
defined by the 1994 Stock Ownership Plan) to acquire shares of the
Company's Common Stock. The options will become exercisable at the rate of
one-third per year on January 11 of 1995, 1996, and 1997, respectively,
except for options to acquire 25,000 shares of stock granted to Mr. Walsh
and options to acquire 50,000 shares of stock granted to Mr. Mead during
1993, which will become exercisable at the rate of one-third per year on
December 8 of 1994, 1995, and 1996, respectively. All option grants during
1993 were made at $48.688 per share and 1994 were made at $53.938, which is
equal to 100% of the fair market value (as defined in the plan) on the date
of grant. These options were granted with a reload feature that provides
the grantee who uses previously owned shares of Common Stock to pay the
option exercise price with an automatic reload option equal to the number
of such shares. All reload options are granted at 100% of the fair market
value (as defined in the plan) on the date of the original option exercise;
they become exercisable six months from the date of grant and expire
coincident with the original options. Grantees are limited to 10 reload
options for the options granted in 1993 and 1994, respectively; however,
the automatic grant of such reload options is limited to twice during any
one year period.
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APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 3)
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THIS PROPOSAL
Financial statements of the Company and its consolidated subsidiaries are
included in the Company's Annual Report furnished to all stockholders. Upon
recommendation of the Audit Committee of the Board of Directors, the Board of
Directors has appointed Arthur Andersen & Co. as independent public accountants
for the Company to examine its consolidated financial statements for the year
1994 and has determined that it would be desirable to request that the
stockholders approve such appointment. If the stockholders should not approve
such appointment, the Audit Committee and the Board would reconsider the
appointment. Arthur Andersen & Co. also acted as the Company's principal
accountants for the fiscal year ended December 31, 1993. Representatives of
Arthur Andersen & Co. are expected to be present at the Annual Meeting and will
have the opportunity to make a statement if they desire to do so and are also
expected to be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
(ITEM 4)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST STOCKHOLDER PROPOSALS 1 AND 2
The Company has been informed that the following stockholders intend to
submit proposals for action at the Annual Meeting: Stockholder Proposal 1 was
submitted by the Women's Division of the General Board of Global Ministries of
the United Methodist Church, 475 Riverside Drive, New York, New York 10115; and
The Retirement Plans for Employees of the Sisters of Mercy of the Regional
Community of Detroit, 34605 Twelve Mile Road, Farmington Hills, Michigan 48331-
3221. Stockholder Proposal 2 was submitted by The New York City Teachers'
Retirement System, c/o Comptroller of the City of New York, Trustee, 1 Centre
Street, New York, New York 10007-2341.
The affirmative vote of the holders of a majority of the shares present, in
person or by Proxy, and authorized to vote on such proposal is required to
approve Stockholder Proposal 1 and Stockholder Proposal 2, respectively. The
Board of Directors is opposed to these proposals.
STOCKHOLDER PROPOSAL 1.
"WHEREAS WE BELIEVE:
"The responsible implementation of sound environmental policy increases long-
term shareholder value by increasing efficiency, decreasing clean-up costs,
reducing litigation, and enhancing public image and product attractiveness;
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"Adherence to public standards for environmental performance gives a company
greater public credibility than is achieved by following standards created by
industry alone. In order to maximize public credibility and usefulness, such
standards also need to reflect what investors and other stakeholders want to
know about the environmental records of their companies;
"Standardized environmental reports will provide shareholders with useful
information which allows comparisons of performance against uniform standards
and comparisons of progress over time. Companies can also attract new capital
from investors seeking investments that are environmentally responsible,
responsive, progressive, and which minimize the risk of environmental
liability.
"AND WHEREAS:
"The Coalition for Environmentally Responsible Economies (CERES)--which
comprises large institutional investors with $150 billion in stockholdings
(including shareholders of this Company), public interest representatives, and
environmental experts--consulted with dozens of corporations and produced
comprehensive public standards for both environmental performance and
reporting. Over 50 companies have endorsed the CERES Principles--including the
Sun Company, a Fortune-500 company--to demonstrate their commitment to public
environmental accountability.
"In endorsing the CERES Principles, a company commits to work toward:
1. Protection of the biosphere 6. Safe products and services
2. Sustainable use of natural resources 7. Environmental restoration
3. Waste reduction & disposal 8. Informing the public
4. Energy Conservation 9. Management commitment
5. Risk Reduction 10. Audits and reports
"The full test of the CERES Principles and the accompanying CERES Report Form
are available from CERES, 711 Atlantic Avenue, Boston MA 02110, tel: 617/451-
0927.
"Concerned investors are asking the Company to be publicly accountable for
its environmental impact, including collaboration with this corporate,
environmental, investor, and community coalition to develop (a) standards for
environmental performance and disclosure; (b) appropriate goals relative to
these standards; (c) evaluation methods and tools for measurement of progress
toward these goals; and (d) a format for public reporting of this progress.
"We believe this request is consistent with regulation adopted by the
European Community for companies' voluntary participation in verified and
publicly-reported eco-management and auditing.
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"RESOLVED: Shareholders request the Company to endorse the CERES Principles
as a commitment to be publicly accountable for its
environmental impact.
"SUPPORTING STATEMENT
"We invite the Company to endorse the CERES Principles by (1) stating its
endorsement in a letter signed by a senior officer; (2) committing to implement
the Principles; and (3) annually completing the CERES Report. Endorsing these
Principles complements rather than supplants internal corporate environmental
policies and procedures.
"We believe that without this public scrutiny, corporate environmental
policies and reports lack the critical component of adherence to standards set
not only by management but also by other stakeholders. Shareholders are asked
to support this resolution, to encourage our Company to demonstrate
environmental leadership and accountability for its environmental impact."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST STOCKHOLDER PROPOSAL NUMBER 1
This Proposal is substantially the same as one that was defeated at the 1992
and 1993 Annual Stockholders' Meetings by over 88% and 90%, respectively, and
the Company continues to oppose such Proposal.
The Proposal seeks to have the Company adopt the CERES Principles as its
environmental goals. The Board believes that the Company currently has active
programs that address its environmental responsibilities and therefore the
implementation of the CERES Principles would not provide significantly greater
environmental oversight or protection than now exists, would result in
additional costs and administrative burden, as well as increased exposure of
the Company's assets to claims, litigation and related costs due to the
inherent ambiguity and vagueness of the CERES Principles. The CERES Principles
also provide for reporting policies which the Board believes to be
inappropriate.
In recognition of our stockholders' interest in the Company maintaining
environmental goals and achievement records that may be measured against its
performance objectives and internationally established principles and
performance standards, the Company recently adopted the International Chamber
of Commerce (the "ICC") Business Charter for Substainable Development:
Principles for Environmental Management. The ICC Principles provide recognized
global standards by which the Company can measure and improve its performance
corporate-wide. This is a voluntary business initiative under the sponsorship
of the ICC.
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The first of the 16 ICC Principles for Environmental Management deal with
making environmental management a corporate priority and establishing policies,
programs and practices for conducting operations in an environmentally sound
manner. The second and third principles call for integrating these fully into
the Company's business and continually improving them. The next nine principles
provide broad guidelines for policies, programs and practices. The final four
principles address the broader social responsibility of the corporation to
transfer technology, contribute to initiatives that will enhance environmental
awareness and protection, foster communication with employees and the public,
and provide appropriate information to the stockholders and the public on the
Company's environmental compliance performance.
Through this action, the Company joins more than 1,000 other signatories to
the ICC Principles for Environmental Management, including 36 of the Fortune 50
multinational companies. The adoption of ICC Principles underscores the depth
of the Company's environmental commitment to achieve world class status in this
area of operations. It also adds another step to those already taken to
strengthen the Company's commitment.
Set forth in the Company's 1993 Annual Report to Stockholders (which has been
provided to you) is information concerning environmentally related matters
affecting the Company, including pending litigation. The Company does not
believe that the ultimate resolution of those environmentally related matters
will have a material adverse effect upon its consolidated financial condition
or results of operations.
Accordingly, it is recommended that stockholders vote AGAINST this Proposal.
STOCKHOLDER PROPOSAL 2.
"WHEREAS, the board of directors is meant to be an independent body elected
by shareholders and charged by law and shareholders with the duty, authority
and responsibility to formulate and direct corporate policies, and
"WHEREAS, this company has provided that the board may designate from among
its members one or more committees, each of which to the extent allowed, shall
have certain designated authority, and
"WHEREAS, we believe that there must be a link between corporate performance
and executive compensation, and that it is important that our company's
executive compensation structure become more closely tied to performance, and
"WHEREAS, we believe that directors independent of management are best
qualified to act in the interests of shareholders and can take steps necessary
to evaluate management performance, establish executive compensation and
establish a better relationship between company performance and executive pay,
NOW THEREFORE BE IT
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"RESOLVED, that the shareholders request the company establish a Compensation
Committee to evaluate and establish executive compensation. The Committee shall
be composed solely of independent directors and shall have access to outside
advice, such as, but not restricted to, compensation consultants.
"For these purposes, an independent director is one who: (1) has not been
employed by the Company or an affiliate in an executive capacity within the
last five years; (2) is not a member of a company that is one of this company's
paid advisors or consultants; (3) is not employed by a significant customer or
supplier; (4) does not have a personal services contract with the company; (5)
is not employed by a tax-exempt organization that receives significant
contributions from the company; (6) is not a relative of the management of the
company; (7) has not had any business relationship that would be required to be
disclosed under Regulation S-K. Also, to the extent possible within the
standards stated above, no individual shall serve on the Committee in the year
preceding the expiration of that individual's terms as a director.
"STATEMENT OF SUPPORT
"As long-term shareholders we are concerned about our company's prospects for
profitable growth. This is intended to address the issue of pay vs. performance
and to provide shareholders with an independent committee which will represent
their interests. We urge you to vote FOR this proposal."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST STOCKHOLDER PROPOSAL NUMBER 2
The Board is in agreement that the members of the Company's Compensation
Committee should be independent. However, the Board believes that the
Proposal's definition of "independent director" is far too restrictive and
inappropriate.
The corporate By-Laws require the Company to maintain an independent
compensation committee (the "Compensation Committee") consisting of at least
four members, none of whom may be officers of the Company or any of its
subsidiaries. Further, the Board of Directors has established a Nominating and
Management Development Committee that is charged with the responsibility, among
other things, to ensure the independence of the members of the Compensation
Committee. The Nominating and Management Development Committee reviews the
function and composition of the Compensation Committee and recommends
candidates for appointment by the full Board. In addition, the By-Laws appoint
the Chief Executive Officer (the "CEO") of the Company as an ex officio member
of all of the Board's committees (except for the Executive Committee of which
the CEO is a member). As an ex officio member, the CEO may attend meetings of
these committees; however, the CEO has no authority to vote for or against any
action taken or contemplated to be taken by such committees, and his attendance
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is for the sole purpose of providing information to the committees to assist
the members in making informed decisions. The CEO does not participate in any
deliberations of the Compensation Committee relating to his compensation.
The Company, through its six major operating divisions, does business world-
wide with numerous major corporations and to arbitrarily exclude persons of
integrity and competence who would not be available to serve under the
definition provided in this Proposal would be too restrictive. For example, the
majority of the Company's outside directors are associated with major
corporations with which the Company may have transactions from time to time in
the ordinary course of business (see the discussion above under the caption
"Transactions with Management and Others"). This proposal would arbitrarily
exclude experienced, qualified and independent persons from service on the
Compensation Committee simply because the Company may do business with one of
these companies. Accordingly, the Board believes that the Proposal would
needlessly restrict the Company from including highly qualified individuals
whose advice and counsel would otherwise benefit the Company and its
stockholders.
The Board therefore recommends a vote AGAINST this Proposal.
OTHER MATTERS
The Board of Directors is not aware of any other matters that may properly
come before the Annual Meeting. However, should any such matters come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of proxy to vote all proxies (unless otherwise directed by stockholders)
in accordance with their judgment on such matters.
EFFECT OF ABSTENTIONS AND BROKER NON-VOTE
The Company's By-Laws require a majority of the shares authorized to vote at
the Annual Meeting of Stockholders be present, in person or by Proxy, to
establish a quorum. Shares abstaining with regard to a matter to be presented
to the stockholders constitute part of the quorum present with respect to such
matter; however, shares for which voting power has been withheld, such as
broker non-votes, do not constitute part of the quorum present with respect to
such matter. Consequently, the number of shares representing the quorum present
for the meeting may be greater than the shares present for action on a
particular proposal.
SOLICITATION OF PROXIES AND VOTING
A proxy may be revoked by notice in writing to the Secretary at any time
prior to the exercise thereof.
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The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, and may be made by directors, officers and
employees, personally or by telephone or telegram. Proxy cards and material
also will be distributed to beneficial owners of stock through brokers,
custodians, nominees and other like parties, and the Company expects to
reimburse such parties for their charges and expenses. Georgeson & Co. Inc.,
New York, New York, has been retained to assist the Company in the solicitation
of proxies at a fee estimated not to exceed $25,000.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposal to be presented by a stockholder at the Company's 1995 Annual
Meeting of Stockholders must be received by the Company by December 2, 1994, so
that it may be considered by the Company for inclusion in its proxy statement
and form of proxy relating to that meeting.
KARL A. STEWART
Vice President and Secretary
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THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES THERETO. REQUESTS FOR COPIES OF SUCH REPORT SHOULD BE
DIRECTED TO KARL A. STEWART, VICE PRESIDENT AND SECRETARY, TENNECO INC., P.O.
BOX 2511, HOUSTON, TEXAS 77252-2511.
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APPENDIX "A"
1994 TENNECO INC. STOCK OWNERSHIP PLAN
1. PURPOSE
The purpose of the Plan is to promote the long-term success of the Tenneco
Companies for the benefit of the Company's shareholders by encouraging its
officers and key employees to have meaningful investments in the Company so
that, as stockholders themselves, those individuals will be more likely to
represent the views and interests of other stockholders and by providing
incentives to such officers and key employees for continued service. The
Company believes that the possibility of participation under the Plan will
provide this group of officers and employees an incentive to perform more
effectively and will assist the Company and the Tenneco Companies in attracting
and retaining people of outstanding training, experience and ability.
2. DEFINITIONS
"Authorized Plan Shares" has the meaning set forth in Section 6(a).
"Award" means an award or grant made to a Participant under Section 8.
"Award Agreement" means the agreement provided in connection with an Award
under Section 12.
"Award Date" means the date that an Award is made, as specified in an Award
Agreement.
"Board of Directors" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, or any successor
legislation.
"Company" means Tenneco Inc.
"Committee" means the Compensation and Benefits Committee of the Board of
Directors, or any successor committee thereto.
"Common Stock" means the Company's common stock, $5 par value per share.
"Covered Employees" shall have the meaning specified in Section 162(m)(3) of
the Code.
"Dividend Equivalent" means an amount equal to the amount of the cash
dividends that are declared and become payable after the Award Date for the
Award to which it relates and on or before the Settlement Date for such Award.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" on any date means the average of the highest and the
lowest sales prices of a share of Common Stock on the Composite Tape for such
date, as reported by the National Quotation Bureau Incorporated; provided that
if (i) no sales of Common Stock are included on the Composite Tape for such
date, or (ii) in the opinion of the Committee, the sales of Common Stock on
such date are insufficient to constitute a representative market, then the Fair
Market Value of a share of Common Stock on such date shall be deemed to be the
average of the highest and lowest prices of a share of Common Stock as reported
on said Composite Tape for the next preceding day on which (x) sales of Common
Stock are included and (y) the circumstances described in this clause (ii) do
not exist.
"ISO" means any Stock Option designated in an Award Agreement as an
"Incentive Stock Option" within the meaning of Section 422 of the Code.
"Non-Qualified Stock Option" means any Stock Option that is not an ISO or a
Qualified Stock Option.
"Option Price" means the purchase price of one share of Common Stock under a
Stock Option.
"Participant" means an employee or officer of a Tenneco Company who has been
selected by the Committee to receive an Award under the Plan.
"Performance Unit" means an Award denominated in cash, the amount of which
may be based on performance of the Participant or of Tenneco Inc. or of any
subsidiary or division thereof.
"Plan" means this 1994 Tenneco Inc. Stock Ownership Plan, as amended from
time to time.
"Qualified Stock Option" means any Stock Option, other than an ISO, that
qualifies for favorable tax treatment under any section or sections of the
Code.
"Reload Stock Option" means a Stock Option (i) that is awarded, either
automatically in accordance with the terms of an Award Agreement in which one
or more other Awards are made or by separate Award, upon the exercise of a
stock option granted under this Plan or otherwise where the option price is
paid by the option holder by delivery of shares of Common Stock on the
Settlement Date for such exercise and (ii) that entitles such holder to
purchase the number of shares so delivered for an Option Price equal to the
Fair Market Value of a share of Common Stock on such Settlement Date.
"Restricted Stock" means shares of Common Stock subject to restrictions and
conditions pursuant to Section 8(c).
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"Rule 16b-3" means Regulation (S) 240.16b-3 of the rules and regulations of
the Securities and Exchange Commission promulgated under the Exchange Act, as
such Rule became effective May 1, 1991, as it may be amended after December 8,
1993.
"Settlement Date" means, (i) with respect to any Stock Option that has been
exercised in whole or in part, the date or dates upon which shares of Common
Stock are to be delivered to the Participant and the Option Price therefor
paid, (ii) with respect to any SARs that have been exercised, the date or dates
upon which a cash payment is to be made to the Participant, or in the case of
SARs that are to be settled in shares of Common Stock, the date or dates upon
which such shares are to be delivered to the Participant, (iii) with respect to
Performance Units, the date or dates upon which cash or shares of Common Stock
are to be delivered to the Participant, (iv) with respect to Dividend
Equivalents, the date upon which payment thereof is to be made, and (v) with
respect to Stock Equivalent Units, the date upon which payment thereof is to be
made, in each case, determined in accordance with the terms of the Award
Agreement under which any such Award was made.
"Stock Appreciation Right" or "SAR" means an Award that entitles the
Participant to receive on the Settlement Date an amount equal to the excess of
(i) the Fair Market Value of a share of Common Stock on the date of
exercise of the SAR over
(ii) the Fair Market Value of one share of Common Stock on the Award Date
or any other higher amount specified in the Award Agreement.
"Stock Equivalent Unit" means an Award that entitles the Participant to
receive on the Settlement Date an amount equal to the Fair Market Value of one
share of Common Stock on such date.
"Stock Option" or "Option" means any right to purchase shares of Common Stock
(including a Reload Stock Option) awarded pursuant to Section 8(a).
"Tenneco Company" means the Company, any stock corporation of which a
majority of the capital stock generally entitled to vote for directors is owned
directly or indirectly by the Company, and any other company designated as such
by the Committee, but only during the period of such ownership or designation.
3. TERM
The Plan shall be effective as of December 8, 1993, subject to approval by
the Company's Stockholders, and shall remain in effect through December 31,
1998. After termination of the Plan, no further Awards may be granted other
than Reload Stock Options granted in accordance with Award Agreements existing
as of December 31, 1998, but outstanding Awards shall remain effective in
accordance with their terms and the terms of the Plan.
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4. PLAN ADMINISTRATION
(a) The Committee shall be responsible for administering the Plan.
(i) Composition of the Committee. The Committee shall be comprised of two
or more members of the Board of Directors, all of whom shall be
"disinterested persons" as defined in Rule 16b-3 and "outside directors" as
that term is used in Section 162 of the Code and the regulations
promulgated thereunder.
(ii) Powers. The Committee shall have full and exclusive discretionary
power to interpret the Plan and to determine eligibility for benefits and
to adopt such rules, regulations and guidelines for administering the Plan
as the Committee may deem necessary or proper. Such power shall include,
but not be limited to, selecting Award recipients, establishing all Award
terms and conditions and, subject to Section 13, adopting modifications and
amendments to the Plan or any Award Agreement, including without
limitation, any that are necessary to comply with the laws of the countries
in which the Company or its affiliates operate.
(iii) Delegation. The Committee may delegate to one or more of its
members or to one or more agents or advisors such non-discretionary
administrative duties as it may deem advisable, and the Committee or any
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee
or such person may have under the Plan.
(b) The Committee may employ attorneys, consultants, accountants and other
persons, and the Committee, the Company and its officers and directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon the Participants, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination, or interpretation made in good
faith with respect to the Plan or Awards, and all members of the Committee
shall be fully protected by the Company, to the fullest extent permitted by
applicable law, in respect of any such action, determination or interpretation.
5. ELIGIBILITY
Awards will be limited to persons who are officers or key employees of the
Tenneco Companies. In determining the persons to whom Awards shall be made, the
Committee shall, in its discretion, take into account the nature of the
person's duties, past and potential contributions to the success of the Tenneco
Companies and such other factors as the Committee shall deem relevant in
connection with accomplishing the purposes of the Plan. A
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director of the Company or a Tenneco Company who is not also an officer or
employee shall not be eligible to receive an Award. A person who has received
an Award or Awards may receive an additional Award or Awards. For purposes of
this Section 5, the terms "employee" and "officer" shall also include any
former employee or former officer of a Tenneco Company eligible to receive a
replacement award as contemplated in the third sentence of Section 8.
6. AUTHORIZED AWARDS; LIMITATIONS
(a) Except for adjustments pursuant to Section 7, the maximum number of
shares of Common Stock that shall be available for issuance under the Plan (the
"Authorized Plan Shares") shall be 8,400,000 (approximately 4.9% of the issued
and outstanding shares of Common Stock on the effective date of the Plan).
(b) Except for adjustments pursuant to Section 7, in no event (i) shall more
than 3.0 million of the Authorized Plan Shares be available for issuance
pursuant to the exercise of ISOs awarded under the Plan; and (ii) shall more
than 2.5 million of the Authorized Plan Shares be available for issuance
pursuant to Restricted Stock Awards.
(c) (i) Determinations as to the number of Authorized Plan Shares that remain
available for issuance under the Plan shall be made in accordance with such
rules or procedures as the Committee shall determine from time to time, which
shall be consistent with the requirements of Rule 16b-3 and such
interpretations thereof as have been made, or may be made from time to time, by
courts of competent jurisdiction or the Securities and Exchange Commission or
the staff of such Commission to the end that all persons subject to Section 16
of the Exchange Act shall be entitled to the fullest extent possible to the
exemption provided by Rule 16b-3.
(ii) If an Award expires unexercised or is forfeited, surrendered, cancelled,
terminated or settled in cash in lieu of Common Stock, the shares of Common
Stock that were theretofore subject (or potentially subject) to such Award may
again be made subject to an Award Agreement; provided, however, that any such
shares subject to a forfeited Award shall not again be made subject to an Award
Agreement to Participants who are subject to Section 16 of the Exchange Act if
any Participant received, directly or indirectly, any of the benefits of
ownership of the securities of the Company underlying such Award, including
without limitation, the receipt of dividend payments but excluding (i) the
right to vote such shares and (ii) the accumulation of dividends or Dividend
Equivalents which also are forfeited.
(d) Common Stock that may be issued under the Plan may be either authorized
and unissued shares, or issued shares that have been reacquired by the Company
and that are being held as treasury shares, or shares held by the Tenneco Inc.
Stock Employee Compensation Trust. No fractional shares of Common Stock shall
be issued under the Plan; provided, however, that cash, in an amount equal to
the Fair Market Value of a fractional share
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of Common Stock as of the Settlement Date of the Award, shall be paid in lieu
of any fractional shares in the settlement of Awards payable in shares of
Common Stock.
(e) In no event shall the number of shares of Common Stock subject to Stock
Options plus the number of shares underlying SARs awarded to any one
Participant during the period from December 8, 1993, through December 31, 1998,
exceed 10% of the Authorized Plan Shares. In all events, determinations under
the preceding sentence shall be made in a manner that is consistent with Code
Section 162 and the regulations promulgated thereunder.
7. ADJUSTMENTS AND REORGANIZATIONS
The Committee may make such adjustments to Awards granted under the Plan
(including the terms, exercise price and otherwise) as it deems appropriate in
the event of changes that impact the Company, the Company's share price, or
share status, provided that any such actions are consistently and equitably
applied to all affected Participants; provided, that, notwithstanding any other
provision hereof, insofar as any Award is subject to performance goals
established to qualify payments thereunder as "performance-based compensation"
as described in Section 162(m) of the Code, the Committee shall have no power
to adjust such Awards other than (i) negative discretion and (ii) the power to
adjust Awards for corporate transactions, in either case to the extent
permissible under regulations interpreting Code Section 162(m).
In the event of any merger, reorganization, consolidation, recapitalization,
separation, liquidation, stock dividend, extraordinary dividend, spin-off,
split-up, rights offering, share combination, or other change in the corporate
structure of the Company affecting the Common Stock, the number and kind of
shares that may be delivered under the Plan shall be subject to such equitable
adjustment as the Committee, in its sole discretion, may deem appropriate in
order to preserve the benefits or potential benefits to be made available under
the Plan, and the number and kind and price of shares subject to outstanding
Awards and any other terms of outstanding Awards shall be subject to such
equitable adjustment as the Committee, in its sole discretion, may deem
appropriate in order to prevent dilution or enlargement of outstanding Awards.
8. AWARDS
The Committee shall determine the type and amount of any Award to be made to
any Participant; provided, however, that, except as provided in paragraph (g),
no Award granted pursuant to this Plan shall vest in less than six months after
the date the Award is granted. Awards may be granted singly, in combination, or
in tandem. Awards may also be made in combination or in tandem with, in
replacement of, as alternatives to, or as the payment form
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for, grants or rights under any other employee benefit or compensation plan of
the Tenneco Companies, including any such employee benefit or compensation plan
of any acquired entity.
(a) Stock Options.
(i) Grants. Stock Options (including Reload Stock Options) granted under
this Plan may be any of the following:
(1) an ISO,
(2) a Non-Qualified Stock Option, or
(3) a Qualified Stock Option.
The Committee may grant any Participant one or more ISOs, Non-Qualified
Stock Options, Qualified Stock Options, or all three types of Stock
Options, in each case with or without SARs or Reload Stock Options or any
other form of Award. Stock Options granted pursuant to this Plan shall be
subject to such additional terms, conditions, or restrictions as may be
provided in the Award Agreement relating to such Stock Option.
(ii) Option Price. The Option Price of a Stock Option shall be not less
than 100% of the Fair Market Value of a share of Common Stock on the Award
Date; provided, however, that in the case of a Stock Option granted
retroactively in tandem with or as a substitution for another Award, the
Option Price shall be not less than 100% of the Fair Market Value of a
share of Common Stock on the date of such other Award; and provided further
that in any case ISOs shall have a price equal to 100% of the Fair Market
Value of a share of Common Stock on the Award Date.
(iii) ISOs. Anything in this Plan to the contrary notwithstanding, no
term of this Plan relating to ISOs shall be interpreted, amended or
altered, nor shall any discretion or authority awarded under the Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code, or,
without the consent of the Participants affected, to disqualify any ISO
under Section 422 of the Code.
An ISO shall not be granted to an individual who, on the date of grant,
owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the employing Tenneco Company or of its parent or
any subsidiary corporation.
The aggregate Fair Market Value, determined on the Award Date, of the
shares of Common Stock or other stock with respect to which one or more
ISOs (or other "incentive stock options," within the meaning of Subsection
(b) of Section 422 of the Code, under all other stock option plans of the
Participant's employing Tenneco Company and its parent and subsidiary
corporations) granted on or after January 1, 1987, that are exercisable for
the first time by the Participant during any particular calendar year shall
not exceed the $100,000 limitation imposed by Section 422(d) of the Code.
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(iv) Manner of Payment of Option Price. The Option Price shall be paid in
full at the time of the exercise of the Stock Option and may be paid in any
of the following methods or combinations thereof:
(A) In United States dollars in cash, check, bank draft or money
order payable to the order of the Company;
(B) By the delivery of shares of Common Stock having an aggregate
Fair Market Value on the date of such exercise equal to the Option
Price;
(C) In any other manner that the Committee shall approve, including
without limitation any arrangement that the Committee may establish to
enable Participants to simultaneously exercise Stock Options and sell
the shares of Common Stock acquired thereby and apply the proceeds to
the payment of the Option Price therefor.
(v) Reload Stock Options. The Committee may award Reload Stock Options to
any Participant either in combination with other Awards or in separate
Award Agreements that grant Reload Stock Options upon exercise of
outstanding stock options granted under this Plan or otherwise.
(b) Stock Appreciation Rights.
(i) Grants. The Committee may award any Participant SARs, which shall be
subject to such additional terms, conditions, or restrictions as may be
provided in the Award Agreement relating to such SAR Award, including any
limits on aggregate appreciation. SARs may be settled in Common Stock or
cash or both.
(ii) Award Price. The Award Price per share of Common Stock of a SAR
shall be fixed in the Award Agreement and shall be not less than 100% of
the Fair Market Value of a share of Common Stock on the date of the award;
provided, however, that in the case of a SAR awarded retroactively in
tandem with or as a substitution for another Award, the Award Price per
share of a SAR shall be not less than 100% of the Fair Market Value of a
share of Common Stock on the date of such other Award.
(iii) Distribution of SARs. SARs shall be exercisable in accordance with
the conditions and procedures set out in the Award Agreement relating to
such SAR Award.
(c) Restricted Stock. The Committee may award Restricted Stock to any
Participant. Awards of Restricted Stock shall be subject to such conditions and
restrictions as are established by the Committee and set forth in the Award
Agreement, which may include, but are not limited to, continued service with
the Company, achievement of specific business objectives, and other
measurements of individual or business unit or Company performance.
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(d) Stock Equivalent Units. The Committee may award Stock Equivalent Units to
any Participant. All or part of any Stock Equivalent Units Award may be subject
to conditions and restrictions established by the Committee, and set forth in
the Award Agreement, which may include, but are not limited to, continued
service with the Company, achievement of specific business objectives, and
other measurements of individual or business unit or Company performance that
may include but shall not be limited to, earnings per share, net profits, total
shareholder return, cash flow, return on shareholders' equity, and cumulative
return on net assets employed. Without limiting the generality of the
foregoing, it is intended that the Committee shall establish performance goals
applicable to Stock Equivalent Units granted to Participants who, in the
judgment of the Committee, may be Covered Employees in such manner as shall
permit it to qualify as "performance-based compensation" as described in
Section 162(m)(4)(C) of the Code. It is specifically provided that the material
terms of such performance goals for Participants who, in the judgment of the
Committee, may be Covered Employees, shall, until changed by the Committee with
the approval of the shareholders, be as follows: (i) the business criteria on
which performance goals shall be based shall be the attainment of such target
levels of either earnings or shareholder return as may be specified by the
Committee; and (ii) the maximum number of Stock Equivalent Units that may be
granted to any Participant in any one calendar year shall not exceed 100,000.
(e) Dividend Equivalents. The Committee may provide in any Award Agreement in
which Stock Equivalent Units are awarded that such Stock Equivalent Units may
accrue Dividend Equivalents. In lieu of awarding Dividend Equivalents, the
Committee may provide for automatic awards of additional Stock Equivalent Units
on each date that cash dividends are paid on the Common Stock in an amount
equal to (i) the product of the dividend per share on the Common Stock times
the total number of Stock Equivalent Units then held by the Participant,
divided by (ii) the Fair Market Value of the Common Stock on the dividend
payment date.
(f) Performance Units. Performance Units shall be based on attainment over a
specified period of individual performance targets or on other parameters that
may include but shall not be limited to, earnings per share, total shareholder
return, cash flow, return on shareholders' equity, and cumulative return on net
assets employed. Performance Units may be settled in Common Stock or cash or
both. Without limiting the generality of the foregoing, it is intended that the
Committee shall establish performance goals applicable to Performance Units
granted to Participants who, in the judgment of the Committee, may be Covered
Employees in such a manner as shall permit payments with respect thereto to
qualify as "performance-based compensation" as described in Section
162(m)(4)(C) of the Code. It is specifically provided that the material terms
of such performance goals for Participants who, in the judgment of the
Committee, may be Covered Employees, shall, until changed by the Committee with
the approval of the shareholders, be as follows: (i) the business criteria on
which the performance goals shall be based shall be the attainment of such
target levels of either earnings per share
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from continuing operations or total shareholder return as may be specified by
the Committee; and (ii) the maximum amount of compensation that may be paid to
any one Participant with respect to any one year shall be $2,000,000.
(g) The Committee may also, in its sole discretion, shorten or terminate the
restricted period or waive any other conditions for the lapse of restrictions
with respect to all or any portion of any Award. Notwithstanding the foregoing,
all restricted periods shall terminate and the Awards shall be fully vested
with respect to any Participant upon the Participant's Retirement, death, or
Total Disability, coincident with termination of employment with Tenneco
Companies. For purposes of this Section 8:
"Retirement" means the Participant's termination of employment with the
Tenneco Companies at a time when, under the Tenneco Inc. Retirement Plan or
under any other retirement plan that is maintained by a Tenneco Company and
that is determined by the Committee to be the functional equivalent of the
Tenneco Inc. Retirement Plan, the Participant is eligible to receive an
immediately payable normal retirement benefit, or, if approved by the
Committee, the Participant is eligible to receive an immediately payable early
retirement benefit under such plans; and
"Total Disability" means the permanent inability of the Participant, which is
a result of accident or sickness, to perform such Participant's occupation or
employment for which the Participant is suited by reason of the Participant's
previous training, education and experience and which results in the
termination of the Participant's employment with any Tenneco Company.
9. DIVIDENDS
The Committee may provide in the appropriate Award Agreement that dividends
on Restricted Stock may be paid currently in cash or credited to a
Participant's account for subsequent distribution as determined by the
Committee. The Award Agreement may provide for the reinvestment of dividends
paid on Restricted Stock in shares of Common Stock.
10. DEFERRALS AND SETTLEMENTS
Settlement of Awards may be in the form of cash, Common Stock, other Awards,
or in combinations thereof as the Committee shall determine, and with such
other restrictions as it may impose. The Committee may also require or permit
Participants to defer the issuance or vesting of shares or the settlement of
Awards under such rules and procedures as it may establish under the Plan. The
Committee may also provide that deferred settlements include the payment of, or
crediting of interest on, the deferral amounts or the payment or crediting of
Dividend Equivalents on deferred settlements denominated in shares.
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<PAGE>
11. TRANSFERABILITY AND BENEFICIARIES
No Awards under the Plan shall be assignable, alienable, saleable or
otherwise transferable other than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order (as defined
by the Code) or Title I of the Employee Retirement Income Security Act, or the
rules thereunder unless otherwise determined by the Committee.
12. AWARD AGREEMENTS
Awards under the Plan shall be evidenced by Award Agreements that set forth
the details, conditions and limitations for each Award, which may include the
term of an Award (except that (i) except as provided in Section 8(g), no Award
shall vest in less than six months after the date the Award is granted and (ii)
in no event shall the term of any ISO exceed a period of ten years from the
date of its grant), the provisions applicable in the event the Participant's
employment terminates, and the Company's authority to unilaterally or
bilaterally amend, modify, suspend, cancel or rescind any Award.
13. AMENDMENTS; COMPLIANCE WITH RULE 16B-3
The Committee may suspend, terminate, or amend the Plan as it deems necessary
or appropriate to better achieve the purposes of the Plan, except that, without
the approval of the Company's shareholders, no such amendment shall be made for
which shareholder approval is necessary to comply with any applicable tax or
regulatory requirement, including for these purposes any approval requirement
which is a prerequisite for exemptive relief under Section 16b of the Exchange
Act.
14. TAX WITHHOLDING
The Company shall have the right to (i) make deductions from any settlement
of an Award made under the Plan, including the delivery or vesting of shares,
or require shares or cash or both be withheld from any Award, in each case in
an amount sufficient to satisfy withholding of any federal, state or local
taxes required by law, or (ii) take such other action as may be necessary or
appropriate to satisfy any such withholding obligations. The Committee may
determine the manner in which such tax withholding may be satisfied, and may
permit shares of Common Stock (rounded up to the next whole number) to be used
to satisfy required tax withholding based on the Fair Market Value of any such
shares of Common Stock, as of the Settlement Date of the applicable Award.
15. OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS
Unless otherwise specifically determined by the Committee, settlements of
Awards received by a Participant under the Plan shall not be deemed a part of
the Participant's regular,
A-11
<PAGE>
recurring compensation for purposes of calculating payments or benefits from
any Company benefit plan, severance program or severance pay law of any
country. Further, the Company may adopt other compensation programs, plans or
arrangements as it deems appropriate or necessary.
16. UNFUNDED PLAN
Unless otherwise determined by the Committee, the Plan shall be unfunded and
shall not create (or be construed to create) a trust or a separate fund or
funds. The Plan shall not establish any fiduciary relationship between the
Company and any Participant or other person. To the extent any person holds any
rights by virtue of a grant awarded under the Plan, such right (unless
otherwise determined by the Committee) shall be no greater than the right of an
unsecured general creditor of the Company.
17. FUTURE RIGHTS
No person shall have any claim or right to be granted an award under the
Plan, and no Participant shall have any right under the Plan to be retained in
the employment of the Company or its affiliates.
18. GOVERNING LAW
The validity, construction and effect of the Plan, and any actions taken or
relating to the Plan, shall be determined in accordance with the laws of the
State of Delaware and applicable federal law.
19. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of a Participant,
including, without limitation, the estate of such Participant and the executor,
administrator or trustee of such estate, or any receiver or trustee in
bankruptcy or representative of the Participant's creditors.
20. RIGHTS AS A SHAREHOLDER
Except as otherwise provided in any Award Agreement, a Participant shall have
no rights as a shareholder of the Company until he or she becomes the holder of
record of Common Stock.
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<PAGE>
NOTICE OF ANNUAL
MEETING AND
PROXY STATEMENT
- -------------------------------------------------------------------------------
ANNUAL MEETING
OF STOCKHOLDERS
MAY 10, 1994
TENNECO INC
P.O. Box 2511 HOUSTON, TEXAS 77252-2511
[LOGO OF TENNECO APPEARS HERE]
<PAGE>
P R O X Y
TENNECO INC
[LOGO OF TENNECO APPEARS HERE]
ANNUAL MEETING OF STOCKHOLDERS MAY 10, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby appoint D. G. MEAD, P. T. FLAWN and K. A. STEWART,
and any of them, with full power of substitution, as Proxies to vote, as
directed on the reverse side of this card, or, if not so directed, in
accordance with the Board of Directors' recommendations, all shares of Tenneco
Inc. held of record by the undersigned at the close of business on March 18,
1994 and entitled to vote at the Annual Meeting of Stockholders of Tenneco Inc.
to be held at 10:30 a.m., May 10, 1994, in the La Salle Ballroom of the
Doubletree Hotel, Allen Center, 400 Dallas Street, Houston, Texas, or at any
adjournment thereof, and to vote, in their discretion, upon such other matters
as may properly come before the Annual Meeting.
Election of Directors Nominees:
Mark Andrews
W. Michael Blumenthal
Belton K. Johnson
William L. Weiss
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxies cannot
vote your shares unless you sign and return this card.
Please mark
X your votes 2000
as in
this example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3
AND AGAINST ITEM 4.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A THE BOARD OF DIRECTORS
VOTE FOR ITEMS 1, 2 AND 3. RECOMMENDS A VOTE
AGAINST BOTH STOCKHOLDER
PROPOSALS (ITEM 4).
- --------------------------------------------------------------------------------
1. Election of FOR WITHHELD 4. Stockholder FOR AGAINST ABSTAIN
Directors. / / / / Proposal 1-- / / / / / /
(see reverse) Approval of
For, except vote withheld from Proposal
the following nominee(s): concerning
endorsement
----------------- of the CERES
Principles.
2. Approval of FOR AGAINST ABSTAIN
1994 Tenneco / / / / / / Stockholder FOR AGAINST ABSTAIN
Inc. Stock Proposal 2-- / / / / / /
Ownership Approval of
Plan. Proposal
concerning
3. Approval of FOR AGAINST ABSTAIN modification
Independent / / / / / / of
Accountants. Compensation
Committee.
5. In the discretion of the Proxies
named herein, the Proxies are
authorized to vote upon other
matters as may properly come
before the meeting.
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments thereof.
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE DATE
<PAGE>
TENNECO INC
[Tenneco address appears here] [Tenneco logo appears here]
April 1, 1994
Dear Benefit Plan Participant:
The Annual Meeting of Stockholders of Tenneco Inc. is scheduled to be held in
Houston, Texas, at 10:30 a.m., on Tuesday, May 10, 1994. A copy of the Notice
and Proxy Statement, which is being sent to all registered stockholders in
connection with the Annual Meeting is enclosed for your information.
Also enclosed with this letter is a form of proxy card which designates the
number of shares held in your benefit plan account. By executing this proxy
card you instruct the benefit plan trustee (the "Trustee") how to vote the
shares of Tenneco Inc. Stock in your account which you are entitled to vote.
The Trustee will vote all shares eligible to be voted by benefit plan
participants in accordance with their instructions.
If you return your form of proxy executed but without furnishing voting
instructions, the eligible shares in your account will be voted by the Trustee,
as holder of record of the shares in your account, FOR the election of the
nominees for Directors named in the Proxy Statement, FOR approval of the 1994
Tenneco Inc. Stock Ownership Plan, FOR the approval of the appointment of
Arthur Andersen & Co. as the Company's independent public accountants for the
year 1994, AGAINST the Stockholder Proposals, and as recommended by Management
on all other matters to be considered at the Annual Meeting.
If you do not return your executed form of proxy to the Trustee, then your
shares can be voted by the Trustee only in accordance with the requirements of
your benefit plan, which may or may not reflect your views.
YOUR VOTE IS IMPORTANT. PLEASE SEND YOUR EXECUTED FORM OF PROXY CARD WITH
YOUR VOTING INSTRUCTIONS AT YOUR EARLIEST OPPORTUNITY. For your convenience, a
return envelope is enclosed.
YOUR BENEFITS COMMITTEE
<PAGE>
PHOTOGRAPHS OF DIRECTORS APPEAR ON TX]2, TX]3, TX]4 AND TX]5.
