<PAGE> 1
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: December 26, 1996 (Date of Earliest
Event Reported: December 11, 1996)
EL PASO TENNESSEE PIPELINE CO.
(Formerly Tenneco Inc.)
(Exact Name of Registrant as Specified in the Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-9864 74-0233548
(Commission File Number) (I.R.S. Employer Identification No.)
El Paso Energy Building
1001 Louisiana Street
Houston, Texas 77002
(Address of Principal Executive Offices) (Zip Code)
(713) 757-2131
(Registrant's Telephone Number, Including Area Code)
Tenneco Inc.
1275 King Street
Greenwich, Connecticut 06831
(former name and address if
changed since last report)
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<PAGE> 2
Items 1 and 2. Changes in Control of the Registrant; Acquisition or Disposition
of Assets.
On December 12, 1996, El Paso Natural Gas Company, doing business as El
Paso Energy Corporation ("El Paso"), completed the acquisition of the energy
assets and certain other discontinued business assets and liabilities of the
Registrant. References herein to "Old Tenneco" refer to the Registrant prior to
the Distributions and Merger described below and references to the "Company" or
"El Paso Tennessee" refer to the Registrant following the Distributions and
Merger. In the Merger, Old Tenneco (i.e., Tenneco, Inc.) changed its name to "El
Paso Tennessee Pipeline Co."
On December 12, 1996, El Paso Merger Company, an indirect subsidiary of
El Paso ("El Paso Merger Sub"), merged with and into Old Tenneco (the
"Merger"), which became an indirect subsidiary of El Paso. The Merger was
effected in accordance with the Amended and Restated Agreement and Plan of
Merger dated as of June 19, 1996 (the "Merger Agreement"), among El Paso Merger
Sub, El Paso and Old Tenneco, which Merger Agreement is filed as an exhibit to
this Current Report on Form 8-K and incorporated herein by reference. In
addition, El Paso and New Tenneco Inc. ("New Tenneco") entered into a Letter
Agreement, dated December 11, 1996, relating to the Merger, which Letter
Agreement is filed as an exhibit to this Current Report on Form 8-K and
incorporated herein by reference.
The consideration paid by El Paso in the Merger consisted of:
o the retention after the Merger of approximately $2.6 billion
of debt and preferred stock obligations of Old Tenneco, subject
to certain adjustments (which consisted, in part, of (1)
approximately $.2 billion of public debt of Old Tenneco
outstanding at the effective time of the Merger, (2) $2.1
billion of debt of Old Tenneco outstanding at the effective
time of the Merger under a $3 billion Revolving
<PAGE> 3
Credit and Competitive Advance Facility Agreement, dated as of
November 4, 1996 (the "Credit Agreement"), among Old Tenneco,
the banks and other financial institutions party thereto and
The Chase Manhattan Bank, as agent), and (3) $300 million of
Old Tenneco preferred stock;
o the issuance of 18.8 million shares of common stock of
El Paso valued at approximately $914 million, based on a closing
price per share of common stock on the New York Stock Exchange
of $48.625 on December 9, 1996, to Old Tenneco's then
existing common and preferred stockholders; and;
o the retention of approximately $600 million of estimated
assumed liabilities related to certain discontinued businesses
of Old Tenneco.
The number of shares of El Paso's common stock issued in the merger to
shareholders of Old Tenneco was determined pursuant to formulas set forth in
the Merger Agreement. In the Merger, (i) a holder of Old Tenneco's common stock
received .093 of a share of El Paso's common stock for each share of Old Tenneco
common stock, (ii) a holder of Old Tenneco's $7.40 Cumulative Preferred Stock
received 2.365 shares of El Paso's common stock for each such share of $7.40
Cumulative Preferred Stock, and (iii) a holder of Old Tenneco's $4.50 Cumulative
Preferred Stock received 2.365 shares of El Paso's common stock for each such
share of $4.50 Cumulative Preferred Stock.
As a result of the Merger, El Paso indirectly owns 100% of the common
equity and approximately 75% of the combined equity value of El Paso
Tennessee. Currently, approximately $300 million of preferred stock issued in a
public offering by Old Tenneco on November 18, 1996 remains outstanding. The
holders of such preferred stock have the right to elect one-sixth of the board
of directors of El Paso Tennessee.
El Paso currently is engaged in a comprehensive review of the business
and operations of Tenneco Energy. Following the completion of such review, El
Paso intends to integrate, for the most part, the operations of Tenneco Energy
with those of El Paso to increase operating and administrative efficiency
through consolidation and reengineering of facilities, workforce reductions and
coordination of purchasing, sales and marketing activities. El Paso
anticipates that the complementary interstate and intrastate pipeline
operations and gas marketing activities of El Paso and Tenneco Energy should
provide the combined company with increased operating flexibility and access to
additional customers and markets. As previously disclosed, El Paso is in the
process of monetizing certain assets of Tenneco Energy through asset sales and
non-recourse project financings which currently are expected to provide net
proceeds to El Paso Tennessee of approximately $500 million, which net proceeds
will be used to repay outstanding borrowings under the Credit Agreement.
Prior to the Merger, Old Tenneco and its subsidiaries effected various
intercompany transfers and distributions which restructured, divided and
separated their businesses, assets and liabilities so that all the assets,
liabilities and operations related to their automotive parts, packaging and
administrative services businesses (collectively, the "Industrial Business")
and their shipbuilding business (the "Shipbuilding Business") were spun-off to
Old Tenneco's then existing common stockholders (the "Distributions"). The
Distributions were effected on December 11, 1996 pursuant to the Distribution
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<PAGE> 4
Agreement dated as of November 1, 1996 (as amended, the "Distribution Date"),
among Old Tenneco, New Tenneco and Newport News Shipbuilding Inc. ("Newport
News"), which Distribution Agreement is filed as an exhibit to this Current
Report on Form 8-K and incorporated herein by reference. Following the
Distributions, the remaining operations of Old Tenneco consisted primarily of
those operations related to the transmission and marketing of natural gas.
In connection with the Distributions, Old Tenneco's Board of Directors
declared a special distribution consisting of all of the capital stock of (i)
New Tenneco (now known as Tenneco Inc.), a newly formed, wholly owned
subsidiary of Old Tenneco which held the Industrial Business, and (ii) Newport
News, a newly formed, wholly owned subsidiary of Old Tenneco which held the
Shipbuilding Business.
The shares of common stock of New Tenneco and Newport News were
distributed to holders of record of Old Tenneco's common stock on the
distribution record date, December 11, 1996, without any consideration being
paid by such holders, on the basis of (i) one share of common stock of New
Tenneco for every share of common stock of Old Tenneco and (ii) one share of
common stock of Newport News for every five shares of common stock of Old
Tenneco. No certificates or scrip representing fractional shares of Newport
News common stock were issued in the Distributions. Holders of Old Tenneco
common stock who would be entitled to receive fractional shares of common stock
of Newport News received cash in the Distributions, in lieu of such fractional
shares, derived from the sale of such fractional shares on the open market.
The reorganization of Old Tenneco, including the Merger and the
Distributions, was approved by the shareholders of Old Tenneco at a special
meeting of shareholders on December 10, 1996. The issuance of common stock of
El Paso in the Merger was approved by the shareholders of El Paso at a special
meeting of shareholders on December 9, 1996.
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<PAGE> 5
As a part of the Merger, the directors and executive officers of El Paso
Merger Sub became the directors and executive officers, respectively, of El Paso
Tennessee. The directors of El Paso Tennessee are William A. Wise, H. Brent
Austin, Joel Richards III, Britton White, Jr. and Jeffrey I. Beason.
As described above, Old Tenneco entered into the Credit Agreement under
which a syndicate of banks and other financial institutions (the "Lenders")
committed to provide up to $3 billion of financing to Old Tenneco on an
unsecured basis. Chase Securities Inc. arranged the Credit Agreement and The
Chase Manhattan Bank is acting as agent for the Lenders. A list of the Lenders
is set forth on Exhibit 99.2 which is incorporated herein by reference. The
Credit Agreement consists of a 364-day revolving credit facility, with a
two-year term thereafter, the proceeds of which were used to effect the Debt
Realignment (as defined and as described in the Merger Agreement) and for other
general corporate purposes, and is guaranteed by El Paso. The borrowings under
the Credit Agreement will mature in November 1999. Borrowings under the Credit
Agreement bear interest at a rate per annum equal to, at the borrowers' option,
either
(a) the highest of (i) the rate from time to time publicly
announced by The Chase Manhattan Bank in New York City as its prime
rate, and (ii) the federal funds effective rate from time to time plus
1/2 of 1%, plus in each case, the Applicable Margin (as defined), or
(b) the average of the rates at which eurodollar deposits
for one, two, three or six months or, subject to availability to each
lender, nine or 12 months (as selected by the borrowers) are offered in
the interbank eurodollar market in the approximate amount of the
relevant loan, plus the Applicable Margin.
The "Applicable Margin" will be based on El Paso's senior long-term debt
rating, as determined from time to time, or if El Paso's debt is not rated,
each rating agency will be
Although the separation of the Industrial Business from the remainder of
the businesses, operations and companies constituting the Tenneco Group prior to
the Merger has been structured as a "spin-off" of New Tenneco and Newport News
for legal, tax and other reasons, New Tenneco will succeed to certain important
aspects of the former Tenneco business, organization and affairs, namely: (i)
New Tenneco has been renamed "Tenneco Inc." subsequent to the consummation of
the Merger; (ii) New Tenneco is headquartered at Tenneco's current headquarters
in Greenwich, Connecticut; (iii) New Tenneco's Board of Directors consist of
those persons previously constituting the former Tenneco Board of Directors
prior to the Merger; (iv) New Tenneco's executive management consist
substantially of the Tenneco executive management; and (v) the Industrial
Business to be conducted by New Tenneco will consist largely of Tenneco
Automotive and Tenneco Packaging, which combined represent over half of the
assets, revenues and operating income of the businesses, operations and
companies constituting the Tenneco Group. Consequently, New Tenneco will
reflect the Newport News business and the energy businesses which were merged
with El Paso as discontinued operations in its financial statements.
Additionally, the Company will reflect the financial position and results of
operations of the acquired energy businesses on a separate and stand alone basis
in its historical financial statements.
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<PAGE> 6
assumed to have assigned its lowest rating. At December 26, 1996, the
outstanding loans under the Credit Agreement bore a weighted average interest
rate of 5.94% per annum.
The Credit Agreement requires that El Paso's ratio of total
indebtedness to total indebtedness plus net worth not exceed 70%. Failure to
satisfy the foregoing minimum requirement will be a default under the Credit
Agreement that will enable the Lenders to refuse to loan funds to El Paso
Tennessee and to accelerate the indebtedness thereunder. The Credit Agreement
also imposes prohibitions or limitations on liens (other than agreed permitted
liens), subsidiary indebtedness and guarantee obligations, and asset
dispositions (with certain permitted exceptions), among others. The Credit
Agreement contains certain default provisions, including, among other things,
(i) nonpayment of any amount due to the lenders under the Credit Agreement,
(ii) material breach of representations and warranties, (iii) default in the
performance of covenants, (iv) bankruptcy or insolvency, (v) cross-default with
respect to indebtedness for borrowed money and related guaranty obligations in
excess of $100 million, and (vi) a judgment suffered by El Paso in excess of
$50 million not covered by insurance and which judgment shall not have been
vacated, discharged, stayed or bonded pending appeal within 60 days.
The directors of El Paso Tennessee are William A. Wise, H. Brent
Austin, Joel Richards III, Britton White, Jr. and Jeffrey I. Beason.
Item 5. Other Events.
El Paso announced on December 23, 1996 that it reached a settlement
that resolves its gas purchase contract disputes with KCS Energy, Inc. Attached
as an exhibit to this Current Report on Form 8-K and incorporated by reference
herein is a press release related to such settlement.
Item 7. Financial Statements and Exhibits.
(b) Pro forma financial information:
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<PAGE> 7
EL PASO TENNESSEE PIPELINE CO.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Financial Statements of
the Company (the "Pro Forma Financial Statements") illustrate the effect of: the
Corporate Restructuring Transactions, the Cash Realignment and Debt Realignment,
the public offering of New Preferred Stock, and the Distributions. The Unaudited
Pro Forma Consolidated Balance Sheet has been prepared as if such transactions
occurred on September 30, 1996; the Unaudited Pro Forma Consolidated Statements
of Income have been prepared as if such transactions occurred as of January 1,
1995. Capitalized terms used herein shall have the respective meanings set forth
in the Merger Agreement or the Distribution Agreement unless otherwise defined
herein.
The Corporate Restructuring Transactions represent a reorganization of
companies, assets and liabilities under common control and, accordingly, the
transfers of assets and liabilities pursuant to the Corporate Restructuring
Transactions will be accounted for at historical cost. In addition, the
Distributions represent the pro rata distribution of the common stock of New
Tenneco and Newport News to the holders of Tenneco Common Stock in a spin off
transaction. Consequently, the Distributions will be recorded based on
historical cost.
As part of the Merger, El Paso issued approximately $750 million
(subject to the effects of a collar on the average El Paso common stock market
price) of El Paso equity consideration to holders of Tenneco stock. A special
meeting of El Paso's stockholders was held on Monday, December 9, 1996 at which
the Stock Issuance was approved. The value of the El Paso Common Stock issued
was calculated based on a closing price per share of common stock on the NYSE of
$48.625 on December 9, 1996. El Paso's acquisition of the Company will be
accounted for under the purchase method and the purchase price adjustments will
be reflected in the separate consolidated financial statements of the Company. A
final determination of required purchase accounting adjustments, including the
allocation of the purchase price to the assets acquired and liabilities assumed
based on their respective fair values, has not yet been made. Accordingly, the
purchase accounting adjustments made in connection with the development of the
Pro Forma Financial Statements are preliminary and have been made solely for
purposes of developing the pro forma consolidated financial information.
However, El Paso's management believes that the pro forma adjustments and the
underlying assumptions reasonably present the significant effects of the Merger
and the Refinancing Transactions (as defined).
As used herein, "Refinancing Transactions" means certain transactions
with respect to Tenneco Energy in order to reduce the amount of El Paso
Tennessee debt including (i) the monetization of certain assets of Tenneco
Energy for anticipated net proceeds of approximately $500 million, and (ii) a
public equity offering by El Paso of approximately $200 million and the use of
the net proceeds thereof to purchase a subordinated series of preferred stock
from El Paso Tennessee. In addition, El Paso will undertake a study to determine
the fair value of the Company's assets and liabilities and will revise purchase
accounting adjustments upon completion of that study. The actual financial
position and results of operations of the Company will differ, perhaps
significantly, from the pro forma amounts reflected herein because of a variety
of factors, including access to additional information, changes in value and
changes in operating results between the dates of the pro forma financial
information and the date on which the purchase accounting adjustments are
finalized.
The Pro Forma Financial Statements are not necessarily indicative of
actual operating results or financial position had the transactions reflected
therein occurred as of the dates indicated above, nor do they purport to
indicate operating results or financial position which may be attained in the
future.
<PAGE> 8
EL PASO TENNESSEE PIPELINE CO.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(MILLIONS)
<TABLE>
<CAPTION>
PRE-MERGER PRO FORMA PRO FORMA MERGER
------------------------------------------------- ------------------------------
RESTRUCTURING,
CONSOLIDATED REALIGNMENT, COMPANY MERGER AND CONSOLIDATED
COMPANY OFFERING AND AS REFINANCING COMPANY
HISTORICAL DISTRIBUTIONS ADJUSTED TRANSACTIONS PRO FORMA
------------ ------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary investments..... $ 165 $ (78)(c) $ 87 $ $ 87
Receivables........................ 1,797 (958)(c) 839 839
Inventories........................ 1,254 (1,229)(c) 25 25
Other current assets................ 369 (251)(c) 118 118
------- ------- ------- ------- ------
Total current assets............ 3,585 (2,516) 1,069 1,069
------- ------- ------- ------- ------
Net property, plant and equipment..... 6,904 (3,971)(c) 2,933 1,720 (f) 4,073
(580)(h)(i)
Goodwill and intangibles.............. 1,381 (1,333)(c) 48 48
Other assets and deferred charges..... 2,107 (1,195)(c) 912 (590)(e) 402
80 (i)
------- ------- ------- ------- ------
Total assets................... $13,977 $(9,015) $ 4,962 $ 630 $5,592
======= ======= ======= ======= ======
LIABILITIES AND SHAREOWNER'S EQUITY
Current Liabilities:
Short-term debt.................. $ 1,913 $(1,861)(b) $ 52 $ 330 (j) $ 382
Payables......................... 1,113 (760)(c) 353 20 (d) 373
Other current liabilities........ 1,219 (670)(c) 433 120 (e) 553
(116)(b)
------- ------- ------- ------- ------
Total current liabilities..... 4,245 (3,407) 838 470 1,308
------- ------- ------- ------- ------
Long-term debt...................... 3,399 (295)(a) 2,428 (500)(i) 1,398
(676)(b) (200)(h)
(330)(j)
Other liabilities and deferred
credits.......................... 1,233 (665)(c) 568 151 (e) 719
Deferred income taxes............... 1,024 (601)(c) 423 335 (g) 758
------- ------- ------- ------- ------
,901 (5,644) 4,257 (74) 4,183
------- ------- ------- ------- ------
Minority interest................... 301 (301)(c) -- --
------- ------- ------- ------- ------
Preferred stock with mandatory
redemption provisions............ 113 113 (113)(f) --
------- ------- ------- ------- ------
Stockholder's equity
Series A Preferred Stock......... -- 295 (a) 295 295
Subordinated Tenneco Preferred
Stock......................... -- -- 200 (h) 200
Common Stock and paid-in
capital....................... 4,562 4,562 (20)(d) 914
(861)(e)
1,720 (f)
(335)(g)
113 (f)
(4,265)(k)
Cumulative translation
adjustments................... 9 (9)(c) -- --
Retained earnings (accumulated
deficit)...................... 62 2,653 (b) (3,294) 3,294 (k) --
(6,009)(c)
------- ------- ------- ------- ------
4,633 (3,070) 1,563 (154) 1,409
Less--Shares held as treasury stock,
at cost.......................... 971 971 (971)(k) --
------- ------- ------- ------- ------
3,662 (3,070) 592 817 1,409
------- ------- ------- ------- ------
Total liabilities and
stockholder's equity....... $13,977 $(9,015) $ 4,962 $ 630 $5,592
======= ======= ======= ======= ======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet.
<PAGE> 9
EL PASO TENNESSEE PIPELINE CO.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
RESTRUCTURING, REALIGNMENT, OFFERING AND DISTRIBUTIONS:
(a) To reflect the final terms of the public offering of $300 million of
Series A Preferred Stock, with an 8 1/4% dividend yield, for net
Offering Proceeds of $295 million, and the use of the net Offering
Proceeds for the repayment of Energy Consolidated Debt.
(b) To reflect the restructuring and realignment of the Company debt
pursuant to the Debt Realignment, the Distributions and the applicable
provisions of the Merger Agreement, and the assumed payment of accrued
interest on the Energy Consolidated Debt defeased, redeemed, tendered or
exchanged as part of the Debt Realignment. The amount of "Company as
Adjusted" debt immediately prior to the Merger will consist primarily of
borrowings under the Credit Agreement entered into in connection
with the transaction and is calculated from the provisions of the
Merger Agreement as follows (in millions):
<TABLE>
<S> <C>
Base Debt Amount per the Merger Agreement................... $2,611
Less: Offering Proceeds -- see footnote (a)................. (300)
------
2,311
Plus: Cash settlement payments.............................. 439
Less: Estimated collections subject to refund............... (270)
------
Assumed "Company as Adjusted" debt.......................... $2,480
======
</TABLE>
(c) To reflect the distribution of the common stock of New Tenneco and
Newport News pursuant to the Distributions.
MERGER AND REFINANCING TRANSACTIONS:
(d) To reflect the liability for the estimated legal, investment banking and
other costs of $20 million to be incurred by the Company in connection
with the Merger. These costs have been included in the purchase price
reflected in footnote (f).
(e) To reflect the preliminary estimated acquisition adjustments under the
purchase method of accounting, which will be reflected in the separate
financial statements of the Company to record assets acquired and
liabilities assumed at estimated fair value for: (i) reduction of
certain other assets, deferred charges and regulatory assets; (ii) the
revision of benefit plan assumptions relating to the retiree medical
plan obligation; (iii) adjustments related to other employee benefit
costs and environmental costs; and (iv) the accrual of an obligation to
New Tenneco which is expected to be paid after the completion of the
transaction as a result of the utilization of certain tax benefits
generated by the Debt Realignment. The following adjustments reflect El
Paso management's intended business strategies which may differ from the
business strategies employed by the Company's management prior to the
Merger (in millions):
<TABLE>
<S> <C>
Other assets and deferred charges....................... $590
Other current liabilities............................... 120
Other liabilities and deferred credits.................. 151
----
$861
====
</TABLE>
(f) To reflect the allocation to property, plant and equipment of the excess
purchase price of the Company, which will be reflected in the financial
statements of the Company, as follows (in millions):
<TABLE>
<S> <C>
Issuance of El Paso equity consideration in the Merger........................ $ 914
Less: Conversion of the $113 million book value of
Tenneco $4.50 and $7.40 Cumulative Preferred Stock.......................... (113)
Less: "Company as Adjusted" net common book value subsequent
to the Debt Realignment and Distributions................................... (297)
Acquisition adjustments to assets acquired and liabilities assumed............ 861
Transaction fees payable--see footnote (d).................................... 20
Deferred income taxes on allocation of purchase price and acquisition
adjustments................................................................. 335
------
$1,720
======
</TABLE>
The allocation above reflects El Paso's internal evaluation of the excess
purchase price and is subject to the completion of an independent appraisal
of the fair value of the property acquired. It is not expected that any
excess purchase price allocated to property, plant and equipment will be
allowed for regulatory purposes or recovery through rates. Should the
independent appraisal not support such allocation to property, plant and
equipment, the excess of total purchase price over the fair value of the net
assets acquired will be reflected as goodwill.
The following adjustments are made to adjust the historical values of
certain assets and liabilities to their estimated fair values (in millions):
<TABLE>
<S> <C>
Increase in property, plant and equipment..................................... $1,720
Reduce other assets and deferred charges...................................... (590)
Increase other current liabilities............................................ (140)
Increase other liabilities and deferred credits............................... (151)
Increase deferred income tax liability........................................ (335)
Eliminate Tenneco shareowners' equity:
Tenneco preferred stock.................................................. 113
"Company as Adjusted" common equity...................................... 297
------
Total El Paso equity consideration............................................ $ 914
======
</TABLE>
(g) To reflect the increase in deferred income taxes of $335 million which have
been provided for temporary differences after the allocation of the pro
forma purchase price and acquisition adjustments. The following pro forma
adjustments were required for estimated book and tax basis differences
resulting from the allocation of the pro forma purchase price, at an assumed
effective tax rate of 39% (in millions):
<TABLE>
<S> <C>
Property, plant and equipment................................................. $ 671
Other assets.................................................................. (230)
Other liabilities............................................................. (106)
-----
$ 335
=====
</TABLE>
(h) To reflect the contribution by El Paso to the Company of proceeds from an
assumed issuance of $200 million of El Paso Common Stock in exchange for
subordinated preferred stock of the Company with an assumed dividend
yield of 9%. The proceeds from the Company's issuance of subordinated
preferred stock to El Paso will be utilized by the Company to pay
down $200 million of the Credit Agreement.
(i) To reflect the assumed monetization of $500 million of assets through sales
or project financings, at book value, and to reflect the Company's remaining
$80 million investment in certain Australian projects using the equity
method. These proceeds are assumed to be utilized for the repayment of a
portion of the indebtedness outstanding under the Credit Agreement.
(j) To reflect the replacement of the remaining balance under the Credit
Agreement with short-term and long-term financing at interest rates of 6%
and 8%, respectively.
(k) To reflect the retirement and cancellation of Tenneco Common Stock held as
treasury stock and the capitalization of the pre-Merger "Company as
Adjusted" accumulated equity.
<PAGE> 10
EL PASO TENNESSEE PIPELINE CO.
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(MILLIONS)
<TABLE>
<CAPTION>
PRE-MERGER PRO FORMA PRO FORMA MERGER
------------------------------------------ -----------------------------
RESTRUCTURING,
CONSOLIDATED REALIGNMENT, COMPANY MERGER AND CONSOLIDATED
COMPANY OFFERING AND AS REFINANCING COMPANY
HISTORICAL DISTRIBUTIONS ADJUSTED TRANSACTIONS PRO FORMA
------------ ------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues................................... $ 8,320 $ (6,323)(c) $ 1,997 $ (36)(g) $ 1,961
Operating costs and expenses............... 7,599 (5,785)(c) 1,814 32 (d) 1,821
6 (e)
(31)(g)
--------- ---------- -------- --------- ---------
Operating Income......................... 721 (538) 183 (43) 140
Other (income) expense, net................ (242) 118 (c) (124) (124)
Interest expense........................... 268 (112)(b) 156 (42)(f) 106
(3)(g)
(5)(h)
--------- ---------- -------- --------- ---------
Income before income taxes and
minority interest...................... 695 (544) 151 7 158
Provision for income taxes*................ 247 43 (b) 34 3 (g) 36
(256)(c) (1)(i)
Minority interest.......................... 15 (15)(c) -- --
--------- ---------- -------- --------- ---------
Net income from continuing operations.... 433 (316) 117 5 122
Preferred stock dividends.................. 7 19 (a) 26 (7)(j) 33
14 (k)
--------- ---------- -------- --------- ---------
Earnings from continuing operations
available to common stock.............. $ 426 $ (335) $ 91 $ (2) $ 89
========= ========== ======== ========= =========
</TABLE>
- ----------------
* The provision for income taxes for the Company reflects the realization of
unrecognized deferred tax assets; therefore, the overall actual effective
tax rate is significantly lower than the assumed effective tax rate of 39%.
If the assumed effective tax rate had been used, the pro forma provision for
income taxes would have increased by $26 million and the pro forma amount
for earnings from continuing operations available to common stock would have
been $63 million.
See accompanying Notes to Unaudited Pro Forma Consolidated Income Statements.
<PAGE> 11
EL PASO TENNESSEE PIPELINE CO.
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(MILLIONS)
<TABLE>
<CAPTION>
PRE-MERGER PRO FORMA PRO FORMA MERGER
--------------------------------------------------- -------------------------------
RESTRUCTURING,
CONSOLIDATED REALIGNMENT, COMPANY MERGER AND CONSOLIDATED
COMPANY OFFERING AND AS REFINANCING COMPANY
HISTORICAL DISTRIBUTIONS ADJUSTED TRANSACTIONS PRO FORMA
------------ ------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . $8,899 $(6,978)(c) $1,921 $(47)(g) $1,874
Operating costs and
expenses . . . . . . . . . . 8,028 (6,278)(c) 1,750 43 (d) 1,760
8 (e)
(41)(g)
------ ------- ------ ---- ------
Operating income . . . . . . 871 (700) 171 (57) 114
Other (income) expense, net. . (225) 119 (c) (106) (106)
Interest expense . . . . . . . 306 (92)(b) 214 (56)(f) 149
(3)(g)
(6)(h)
------ ------- ------ ---- ------
Income before income taxes
and minority interest. . . 790 (727) 63 8 71
Provision for income taxes
(benefit)* . . . . . . . . . 279 35 (b) (44) (1)(g) (41)
(358)(c) 4 (i)
Minority interest. . . . . . . 22 (22)(c) -- --
------ ------- ------ ---- ------
Net income from continuing
operations . . . . . . . . 489 (382) 107 5 112
Preferred stock dividends. . . 12 25 (a) 37 (12)(j) 43
18 (k)
------ ------- ------ ---- ------
Earnings from continuing
operations available
to common stock. . . . . . $ 477 $ (407) $ 70 $ (1) $ 69
====== ======= ====== ==== ======
</TABLE>
- --------------
* The provision for income taxes for the Company reflects the realization of
unrecognized deferred tax assets; therefore, the overall actual effective tax
rate is significantly lower than the assumed effective tax rate of 39%. If
the assumed effective tax rate had been used, the pro forma provision for
income taxes (benefit) would have increased by $69 million and the pro forma
amount for earnings from continuing operations available to common stock
would have been $1 million.
See accompanying Notes to Unaudited Pro Forma Consolidated Income Statements.
<PAGE> 12
EL PASO TENNESSEE PIPELINE CO.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENTS
RESTRUCTURING, REALIGNMENT, OFFERING AND DISTRIBUTIONS:
(a) To reflect dividends in the Consolidated Pro Forma Income Statement on
the Series A Preferred Stock issued at a dividend yield of 8 1/4%.
(b) To reflect the effect on interest expense of the restructuring and
realignment of the Company debt pursuant to the Debt Realignment, the
Distributions and the applicable provisions of the Merger Agreement, and
the related effect on the provision for income taxes (benefit) at an
assumed effective tax rate of 39%. The "Company as Adjusted" debt consists
primarily of borrowing under the Credit Agreement at an estimated annual
interest rate of 8%.
(c) To reflect the effects on the Company's results of operations from the
Distributions.
MERGER AND REFINANCING TRANSACTIONS:
(d) To reflect depreciation expense related to the increase in estimated fair
value of property, plant and equipment, depreciated over a 40-year period
which approximates the FERC approved depreciation rate for the regulated
property, plant and equipment of the Company prospectively.
(e) To reflect the assumed pro forma postretirement benefit cost for the
Company employees.
(f) To reflect an interest expense reduction relating to debt repaid with
proceeds from the $200 million subordinated preferred stock issued
to El Paso by the Company and proceeds from the monetization of $500
million of assets, and certain project financings, at book value.
(g) To remove the historical operating results of Tenneco Energy's exploration
and production business which is assumed to be disposed of at book value.
(h) To reflect the interest expense reduction relating to the replacement of
the remaining balance under the Tenneco Credit Facility with short-term
and long-term financing at interest rates of 6% and 8%, respectively.
A 1/8% change in interest rates would have the impact of increasing pro
forma interest expense by approximately $1.7 million and $2.3 million
for the nine months ended September 30, 1996 and the year ended
December 31, 1995, respectively.
(i) To reflect the income tax expense (benefit) effects of pro forma
adjustments at an assumed effective tax rate of 39%.
(j) To reflect the elimination of dividends on the $7.40 Preferred Stock and
$4.50 Preferred Stock which will be converted into El Paso Common Stock as
part of the Merger.
(k) To reflect dividends in the Consolidated Pro Forma Income Statement on the
subordinated preferred stock issued to El Paso by the Company with an
assumed dividend yield of 9%.
-12-
<PAGE> 13
(c) Exhibits.
See the Exhibit Index following the signature page of this Current
Report on Form 8-K, which is incorporated by reference herein.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
El Paso Tennessee Pipeline Co.
(Registrant)
By /s/ H. BRENT AUSTIN
-------------------------------
H. Brent Austin
Executive Vice President
Date: December 26, 1996
-13-
<PAGE> 15
EL PASO TENNESSEE PIPELINE CO.
EXHIBIT INDEX
to
FORM 8-K CURRENT REPORT
Date of Report: December 26, 1996
Exhibit
Number Description
- ------- -----------
2.1 Amended and Restated Agreement and Plan of Merger, dated as of
June 19, 1996, among El Paso, El Paso Merger Company and Old Tenneco.
2.2 Distribution Agreement, dated as of November 1, 1996, among Old
Tenneco, New Tenneco and Newport News.
2.3 Amendment No. 1 to Distribution Agreement entered into as of December
11, 1996, by and among Old Tenneco, New Tenneco and Newport News.
2.4 Letter Agreement, dated December 11, 1996, between El Paso and New
Tenneco.
4.1 Certificate of Designation, Preferences and Rights of 8 1/4%
Cumulative Junior Preferred Stock
99.1 List of Lenders under the Credit Agreement.
99.2 Press Release, dated December 23, 1996.
<PAGE> 1
EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF
JUNE 19, 1996
AMONG
EL PASO NATURAL GAS COMPANY,
EL PASO MERGER COMPANY
AND
TENNECO INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
ARTICLE II THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
2.1 Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
2.2 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
2.3 Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . B-8
2.4 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
2.5 Conversion of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
2.6 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
2.7 New Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
ARTICLE III CLOSING AND FILING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
3.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF TENNECO . . . . . . . . . . . . . . . . . . . . . . B-12
4.1 Organization and Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12
4.3 Authority and Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12
4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-13
4.5 Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . . . . B-13
4.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-14
4.7 Tenneco SEC Documents; Accuracy of Information . . . . . . . . . . . . . . . . . . . . B-14
4.8 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-14
4.9 Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-14
4.10 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-14
4.11 Amendments to Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-15
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUBSIDIARY . . . . . . . . . . . . . . B-15
5.1 Organization and Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-15
5.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-15
5.3 Authority and Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16
5.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16
5.5 Consent and Approvals; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . B-16
5.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17
5.7 Acquiror SEC Documents; Accuracy of Information . . . . . . . . . . . . . . . . . . . B-17
5.8 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17
5.9 Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17
5.10 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17
5.11 Due Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17
5.12 No Active Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17
5.13 Ownership of Tenneco Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17
ARTICLE VI COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-18
6.1 Conduct of Tenneco and its Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . B-18
6.2 Conduct of the Business of Acquiror and its Subsidiaries . . . . . . . . . . . . . . . B-21
6.3 Access to Information; Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . B-22
6.4 Directors' and Officers' Indemnification and Insurance. . . . . . . . . . . . . . . . B-22
6.5 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-24
6.6 Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
6.7 Registration Statement; Joint Proxy Statement; NPS Materials; Tender and Exchange
Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
</TABLE>
B-i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.8 Stockholders' Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-28
6.9 Further Action; Reasonable Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . B-28
6.10 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-29
6.11 Listing of Acquiror Common Stock and Depositary Shares. . . . . . . . . . . . . . . . B-30
6.12 Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-30
6.13 The Spinoffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-30
6.14 Antitrust Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-30
6.15 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31
6.16 Debt Realignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31
6.17 No Solicitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31
6.18 Performance of Agreement and Distribution Agreement . . . . . . . . . . . . . . . . . B-31
6.19 Affiliates of Tenneco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
6.20 Antitakeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
6.21 Equity Issuance by Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
6.22 Ruhrgas AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
6.23 Additional Covenants of Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
ARTICLE VII CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-34
7.1 Conditions to Obligations of Each Party to Effect the Merger . . . . . . . . . . . . . B-34
7.2 Additional Conditions to Obligations of Acquiror and Subsidiary. . . . . . . . . . . . B-35
7.3 Additional Conditions to Obligations of Tenneco . . . . . . . . . . . . . . . . . . . B-36
ARTICLE VIII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-36
8.1 Grounds for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-36
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-38
8.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-38
ARTICLE IX EXTENT AND SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-38
9.1 Scope of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-38
9.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-38
ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-39
10.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-39
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40
10.3 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40
10.4 Consent to Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40
10.5 Successors and Assignors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40
10.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40
10.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40
10.8 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40
10.9 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-41
10.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-41
10.11 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-41
10.12 Incorporation of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-41
10.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-41
</TABLE>
B-ii
<PAGE> 4
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
EXHIBIT A Distribution Agreement--[Intentionally Omitted from Joint Proxy Statement-Prospectus]
EXHIBIT B Certificate of Designation Respecting Acquiror Preferred Stock--[Intentionally Omitted from Joint
Proxy Statement-Prospectus]
EXHIBIT C Debt Realignment Plan
EXHIBIT D [Intentionally Omitted from Joint Proxy Statement-Prospectus]
EXHIBIT E Certificate of Designation Respecting New Preferred Stock--[Intentionally Omitted from Joint Proxy
Statement-Prospectus]
EXHIBIT F Pro Forma Financial Information Concerning the Energy Business--[Intentionally Omitted from Joint Proxy
Statement-Prospectus]
EXHIBIT G Certain Permitted Actions, Transactions and Other Matters--[Intentionally Omitted from Joint Proxy
Statement-Prospectus]
EXHIBIT H Text of Section 14 of Article IV of the By-Laws of the Surviving Corporation--[Intentionally Omitted from
Joint Proxy Statement-Prospectus]
EXHIBIT I Certain Deferred Intercompany Gains--[Intentionally Omitted from Joint Proxy Statement-Prospectus]
EXHIBIT J Representations in Connection with IRS Ruling Letter--[Intentionally Omitted from Joint Proxy
Statement-Prospectus]
EXHIBIT K Benefits for Employees of the Energy Business--[Intentionally Omitted from Joint Proxy Statement-Prospectus]
EXHIBIT L Guarantees--[Intentionally Omitted from Joint Proxy Statement-Prospectus]
EXHIBIT M Form of Rule 145 Letter--[Intentionally Omitted from Joint Proxy Statement-Prospectus]
EXHIBIT N Form of Jenner & Block Tax Opinion--[Intentionally Omitted from Joint Proxy Statement-Prospectus]
EXHIBIT O Form of Depositary Agreement--[Intentionally Omitted from Joint Proxy Statement-Prospectus]
ANNEX 1 Form of Amendment to Tenneco Certificate of Incorporation--[Intentionally Omitted from Joint Proxy
Statement-Prospectus]
Omitted exhibits and annex available upon request.
</TABLE>
B-iii
<PAGE> 5
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER is entered into as
of June 19, 1996 (the ''AGREEMENT EFFECTIVE DATE''), by and among Tenneco Inc.,
a Delaware corporation (''TENNECO''), El Paso Natural Gas Company, a Delaware
corporation (''ACQUIROR''), and El Paso Merger Company, a Delaware corporation
and an indirect wholly-owned subsidiary of Acquiror (''SUBSIDIARY'').
W I T N E S S E T H:
WHEREAS, the board of directors of Tenneco has approved a plan of
distribution set forth in the form of agreement attached hereto as EXHIBIT A
(which, together with any exhibits, schedules or attachments thereto, is
hereinafter referred to as the ''DISTRIBUTION AGREEMENT'') which will be
entered into prior to the Effective Time (as defined below) and pursuant to
which, prior to the Effective Time,
(i) Tenneco and its subsidiaries will, through various intercompany
transfers and distributions, restructure, divide and separate their
existing automotive, packaging and shipbuilding businesses so that all of
the assets, liabilities and operations of
(a) the automotive and packaging businesses will be owned,
directly and indirectly, by a wholly-owned subsidiary of Tenneco (the
''INDUSTRIAL SUBSIDIARY''), and
(b) the shipbuilding business will be owned, directly and
indirectly, by a wholly-owned subsidiary of Tenneco (the
''SHIPBUILDING SUBSIDIARY''), and
(ii) all of the shares of capital stock of each of the Industrial
Subsidiary and the Shipbuilding Subsidiary will be distributed on a pro
rata basis as a dividend to the holders of Tenneco's issued and
outstanding common stock (the ''SPINOFFS'');
WHEREAS, Acquiror (which is the ultimate parent company of its
consolidated group) desires to acquire Tenneco and its direct and indirect
subsidiaries remaining immediately following the Spinoffs pursuant to the
merger of Subsidiary with and into Tenneco (the ''MERGER''), with Tenneco
surviving as an indirect subsidiary of Acquiror (the ''SURVIVING
CORPORATION'');
WHEREAS, the respective boards of directors of Acquiror, Subsidiary and
Tenneco, deeming the Merger to be advisable and in the best interests of their
respective stockholders, have authorized and approved the execution and
delivery of this Agreement and the performance of their respective obligations
hereunder;
WHEREAS, for federal income tax purposes, the parties hereto intend that
(i) the Spinoffs will qualify as tax-free distributions within the
meaning of Section 355 of the Internal Revenue Code of 1986, as amended
(the ''CODE''), and
(ii) the Merger will be treated as a reorganization pursuant to the
provisions of Section 368(a)(1)(B) of the Code;
WHEREAS, this Agreement is intended to be, and is adopted as, a plan of
reorganization.
WHEREAS, the parties entered into an Agreement and Plan of Merger (the
''PRIOR AGREEMENT'') as of June 19, 1996, and now desire to amend and restate
the Prior Agreement in its entirety effective as of the Agreement Effective
Date.
NOW, THEREFORE, in consideration of the premises and of the mutual and
dependent promises, representations, warranties and covenants herein contained,
the parties agree as follows:
B-1
<PAGE> 6
ARTICLE I
DEFINITIONS
Unless otherwise defined herein or unless the context otherwise requires,
the following terms shall have the meanings set forth below:
''ACQUIROR COMMON STOCK'' means the Common Stock, par value $3.00 per
share, of Acquiror.
''ACQUIROR PREFERRED STOCK'' means the series of voting preferred
stock of Acquiror to be designated as Adjustable Rate Cumulative Preferred
Stock and described in the form of Certificate of Designation therefor
attached hereto as EXHIBIT B; provided, however, that if either Tenneco or
Acquiror determines, in good faith after consultation with the other party
and its advisors, that there exists a reasonable likelihood that the
issuance of Acquiror Preferred Stock (or Depositary Shares (as defined
below) in respect thereof) in connection with the Merger would cause the
Merger to be taxable to the stockholders of Tenneco, Acquiror shall have
the absolute obligation (at Acquiror's sole cost) to amend, if legally
possible, the terms of the Acquiror Preferred Stock in a manner reasonably
acceptable to Tenneco so that the issuance would not cause the Merger to
be so taxable. In the event that the terms of the Acquiror Preferred Stock
are amended pursuant to the proviso in the immediately preceding sentence,
the parties hereto hereby agree, if required by applicable Law, they shall
(i) prepare and execute an appropriate amendment to this Agreement
reflecting said amendment to the terms of the Acquiror Preferred Stock,
(ii) subject to SECTIONS 6.7(A) and 6.8 hereof, prepare, file and mail an
appropriate supplement to the Joint Proxy Statement reflecting the terms
of this Agreement and of the Merger as so amended, and (iii) if such
amendment is made after the approval of the Merger by the stockholders of
Tenneco, resubmit for the approval of the stockholders of Tenneco this
Agreement and the Merger as so amended.
''ACQUIROR COMMON STOCKHOLDERS' MEETING'' has the meaning set forth in
SECTION 6.8 hereof.
''ACQUIROR SEC DOCUMENTS'' means all filings made by Acquiror or its
subsidiaries, including Subsidiary, with the SEC from January 1, 1995
through the Agreement Effective Date, including notes, schedules,
amendments and exhibits thereto.
''ACQUIROR STOCK'' means the Acquiror Common Stock and the Acquiror
Preferred Stock.
''ACQUIROR STOCK FUND'' has the meaning set forth in SECTION 2.6(A)
hereof.
''ACQUISITION TRANSACTION'' has the meaning set forth in SECTION 6.17
hereof.
''ADJUSTED COMMON EQUITY CONSIDERATION'' means the product of (i) the
Average Acquiror Price, and (ii) the quotient determined by dividing the
Common Equity Consideration by the Average Acquiror Common Equity Price.
''AFFILIATE'' means, when used with respect to a specified Person,
another Person that directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control
with the Person specified.
''AGREEMENT'' means this Amended and Restated Agreement and Plan of
Merger, as the same may be amended from time to time in accordance with
the terms hereof.
''AGREEMENT EFFECTIVE DATE'' means June 19, 1996, the date on which
the Prior Agreement was entered into.
''ALLOCATION AGREEMENT'' means the Debt and Cash Allocation Agreement
included in the Distribution Agreement as an exhibit.
''APPRAISAL CONSIDERATION'' has the meaning set forth in SECTION
2.6(H) hereof.
''ACQUIROR PRICE'' means the closing price of the Acquiror Common
Stock on the NYSE Composite Transactions Reporting System, as reported in
The Wall Street Journal, for the trading day immediately
B-2
<PAGE> 7
preceding the day on which the holders of Tenneco Stock entitled to vote
at the Tenneco Stockholders' Meeting vote with respect to Merger;
provided, however, if there is no closing price for Acquiror Common Stock
on such trading day, the Acquiror Price shall be the closing price for
Acquiror Common Stock on the next preceding trading day on which a trade
of Acquiror Common Stock occurred.
''AVERAGE ACQUIROR PRICE'' means the average of the closing prices of
the Acquiror Common Stock on the NYSE Composite Transactions Reporting
System, as reported in The Wall Street Journal, for the Average Period
(but subject to correction for typographical or other manifest errors in
such reporting), rounded to four decimal places.
''AVERAGE ACQUIROR COMMON EQUITY PRICE'' means the Average Acquiror
Price; provided that if the Average Acquiror Price is greater than
$38.3625, the Average Acquiror Common Equity Price shall be $38.3625 and
if the Average Acquiror Price is less than $31.3875, the Average Acquiror
Common Equity Price shall be $31.3875; provided further, however, that the
aforesaid dollar amounts shall be subject to appropriate adjustments,
reasonably satisfactory to Tenneco and Acquiror in all respects, to
reflect any recapitalization, reclassification, stock split, combination
of shares, issuance of equity (other than issuances of shares pursuant to
the exercise of employee stock options) or options for less than full
market value or the like of or involving Acquiror.
''AVERAGE PERIOD'' means the 20 trading days on the NYSE immediately
preceding the second trading day prior to the Effective Time.
''BENEFITS AGREEMENT'' means the Benefits Agreement attached to the
Distribution Agreement as Exhibit A.
''BLACK-OUT PERIOD'' means the Average Period and the 20 trading days
preceding the Average Period.
''CERTIFICATES'' has the meaning set forth in SECTION 2.6(B) hereof.
''CLAIM'' has the meaning set forth in SECTION 6.4(B) hereof.
''CLAIMS ADMINISTRATION'' means the handling of claims made under the
D&O Policies, including the management, defense and settlement of claims.
''CLOSING'' has the meaning set forth in SECTION 3.1 hereof.
''CLOSING DATE'' has the meaning set forth in SECTION 3.1 hereof.
''COMMISSION'' means the United States Securities and Exchange
Commission.
''COMMON CONVERSION NUMBER CASE A'' means the number of shares
(rounded to the nearest one-thousandth of a share) of Acquiror Common
Stock to be issued upon conversion of a single share of Tenneco Common
Stock at the Effective Time pursuant to SECTION 2.5 hereof and the other
terms and conditions of this Agreement, determined by dividing the Common
Equity Consideration by the Average Acquiror Common Equity Price and
dividing the result by the number of shares of Tenneco Common Stock
outstanding immediately prior to the Effective Time as certified to
Acquiror by Tenneco's principal registrar and transfer agent, which are to
be converted into the right to receive Acquiror Stock pursuant to the
provisions of SECTION 2.5 hereof.
''COMMON CONVERSION NUMBER CASE B'' means the number of shares
(rounded to the nearest one-thousandth of a share) of Acquiror Common
Stock to be issued upon conversion of a single share of Tenneco Common
Stock at the Effective Time pursuant to SECTION 2.5 hereof and the other
terms and conditions of this Agreement, determined by dividing (x) the
excess of (i) 7,000,000 over (ii) the number of shares of Acquiror Common
Stock issued in exchange for shares of $4.50 Preferred Stock and $7.40
Preferred Stock in the Merger by (y) the number of shares of Tenneco
Common Stock outstanding immediately prior to the Effective Time as
certified to Acquiror by Tenneco's principal registrar and transfer agent,
which are to be converted into the right to receive Acquiror Stock
pursuant to the provisions of SECTION 2.5 hereof.
''COMMON EQUITY CONSIDERATION'' means the Equity Consideration less
the Preferred Stock Amount.
''CORPORATE RESTRUCTURING TRANSACTIONS'' has the meaning ascribed to
that term in the Distribution Agreement.
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''DEBT'' means any indebtedness representing an obligation for the
repayment of money borrowed by a subject Person (including short-term debt
and current maturities of long-term obligations), and any accrued but
unpaid or accreted interest related to such indebtedness.
''DEBT REALIGNMENT'' means the plan for repayment, exchange and/or
modification of the indebtedness of Tenneco, as described in EXHIBIT C
attached hereto.
''DEPOSITARY'' means The First National Bank of Boston, N.A.
''DEPOSITARY AGREEMENT'' means the Depositary Agreement attached
hereto as EXHIBIT O.
''DEPOSITARY RECEIPT'' means a depositary receipt issued by the
Depositary to evidence a Depositary Share.
''DEPOSITARY SHARE'' means a unit representing a one twenty-fifth
fractional interest in a whole share of Acquiror Preferred Stock which
shall be evidenced by a Depositary Receipt issued to the Person entitled
to such fractional interest and which shall entitle the holder thereof,
pursuant to the Depositary Agreement, to rights equivalent to those of a
holder of a whole share of Acquiror Preferred Stock (to the extent of such
one twenty-fifth fractional interest therein).
''DISSENTING SHARES'' has the meaning set forth in SECTION 2.6(H)
hereof.
''DGCL'' means the Delaware General Corporation Law, as amended.
''D&O POLICIES'' has the meaning set forth in SECTION 6.4(D) hereof.
''EFFECTIVE TIME'' has the meaning set forth in SECTION 3.2 hereof.
''ENERGY ASSETS'' has the meaning ascribed to that term in the
Distribution Agreement.
''ENERGY BUSINESS'' has the meaning ascribed to that term in the
Distribution Agreement.
''ENERGY GROUP'' has the meaning ascribed to that term in the
Distribution Agreement.
''ENERGY SUBSIDIARIES'' means the direct and indirect consolidated
subsidiaries of Tenneco immediately following the Spinoffs, including the
Major Subsidiaries.
''EQUITY CONSIDERATION'' means $750,000,000.
''EXCHANGE ACT'' means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
''EXCHANGE AGENT'' means First Chicago Trust Company of New York, or
such other trust company or bank designated by Acquiror and acceptable to
Tenneco, who shall act as agent for the holders of Tenneco Stock in
connection with the Merger to receive the Exchange Fund (as defined in
SECTION 2.6(A) hereof).
''$4.50 PREFERRED STOCK'' means the $4.50 Cumulative Preferred Stock of
Tenneco.
''$4.50 PREFERRED CONVERSION NUMBER'' means the number of shares
(rounded to the nearest one-thousandth of a share) of Acquiror Common
Stock to be issued upon conversion of a single share of $4.50 Preferred
Stock at the Effective Time pursuant to SECTION 2.5 and the other terms
and conditions of this Agreement, determined by dividing (i) $115, by (ii)
the Acquiror Price.
''GAAP'' means United States generally accepted accounting principles
and practices, as in effect on the date of this Agreement, as promulgated
by the Financial Accounting Standards Board and its predecessors.
''GAINS TAX'' has the meaning set forth in SECTION 10.1(C) hereof.
''GOVERNMENTAL AUTHORITY'' means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal,
state or local, domestic or foreign.
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''HIGHER PROPOSAL'' has the meaning set forth in SECTION 6.17 hereof.
''HSR ACT'' means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
''INDEMNIFIED PARTIES'' has the meaning set forth in SECTION 6.4(B)
hereof.
''INDUSTRIAL BUSINESS'' has the meaning ascribed to that term in the
Distribution Agreement.
''INDUSTRIAL GROUP'' has the meaning ascribed to that term in the
Distribution Agreement.
''INSURANCE ADMINISTRATION'' means, with respect to a D&O Policy, the
accounting for premiums, defense costs, indemnity payments, deductibles
and retentions, as appropriate, under the terms and conditions of such D&O
Policy, and the distribution of Insurance Proceeds.
''INSURANCE PROCEEDS'' means, with respect to an insured party, those
monies, net of any applicable premium adjustment, deductible, retention or
similar cost paid or held by or for the benefit of such insured party,
which are either
(i) received by an insured from an insurance carrier, or
(ii) paid by an insurance carrier on behalf of an insured.
''IRS RULING LETTER'' has the meaning set forth in SECTION 7.1(G)
hereof.
''JOINT PROXY STATEMENT'' has the meaning set forth in SECTION 6.7
hereof.
''LAW'' means any constitutional provision, statute, law, ordinance,
rule, regulation, permit, decree, injunction, judgment, order, decree,
ruling, determination, finding or writ of any Governmental Authority.
''LAZARD'' means Lazard Freres & Co. LLC.
''MAJOR SUBSIDIARIES'' means the following subsidiaries of Tenneco
after giving effect to the Spinoffs:
<TABLE>
<CAPTION>
JURISDICTION
NAME OF ORGANIZATION
- ---- ---------------
<S> <C>
Tennessee Gas Pipeline Company Delaware
Tenneco Energy Resources Corporation Delaware
Tenneco Gas Australia, Inc. Delaware
Tenneco Corporation Delaware
Tenneco Ventures Corporation Delaware
Midwestern Gas Transmission Company Delaware
East Tennessee Natural Gas Company Tennessee
</TABLE>
''MATERIAL ADVERSE EFFECT ON ACQUIROR'' means an event, change or
effect that:
(i) is or is reasonably likely to be materially adverse to the
business, operations, properties or financial condition of Acquiror
and its consolidated subsidiaries, taken as a whole; or
(ii) prevents Acquiror or Subsidiary from consummating the
transactions contemplated hereby, including the Merger, prior to the
date specified in SECTION 8.1(II) hereof.
''MATERIAL ADVERSE EFFECT ON TENNECO'' means an event, change or
effect that:
(i) is or is reasonably likely to be materially adverse to the
business, operations, properties or financial condition of the Energy
Business, taken as a whole; or
(ii) prevents Tenneco from consummating the transactions
contemplated hereby, including the Spinoffs and the Merger, prior to
the date specified in SECTION 8.1(II) hereof.
''NEW CERTIFICATES'' has the meaning set forth in SECTION 2.6(A)
hereof.
''NEW PREFERRED STOCK'' means the series of junior preferred stock of
Tenneco to be issued prior to the Closing Date as set forth in SECTION
6.1(D) hereof and described in the form of Certificate of Designation
therefor attached hereto as EXHIBIT E.
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''NPS MATERIALS'' means any registration statement, private placement
memorandum and/or other documents or filings prepared by or on behalf of
Tenneco or Acquiror (or their Affiliates or representatives) and
(i) distributed to prospective purchasers or other receivers of
New Preferred Stock, or
(ii) filed with the Commission or other Governmental Authority,
or the NYSE or other stock exchange, relating to the issuance of New
Preferred Stock.
''NPS VALUE'' means the market value of the New Preferred Stock issued
and outstanding at and as of the Effective Time, as jointly determined by
the financial advisors identified in SECTIONS 4.10 and 5.10 below on the
Closing Date (or, if they are unable to so agree, by Morgan Stanley & Co.
Incorporated later on the Closing Date). If the New Preferred Stock is
issued pursuant to a public issuance or private placement (as opposed to a
stock dividend), the gross proceeds of the issuance or placement shall be
presumptive evidence of the NPS Value (subject only to adjustment for
changes in value, if any, occurring between the date of the issuance or
placement and the Closing Date).
''NYSE'' means the New York Stock Exchange.
''1981 STOCK PLAN'' means the 1981 Tenneco Inc. Key Employee Stock
Option Plan.
''1994 STOCK PLAN'' means the 1994 Tenneco Inc. Stock Ownership Plan.
''OPTION PLANS'' means the 1981 Stock Plan and the 1994 Stock Plan.
''PERSON'' means any natural person, corporation, business trust,
joint venture, association, company, partnership, limited liability
company or other entity, or any government, or any agency or political
subdivision thereof.
''PREFERRED STOCK AMOUNT'' means an amount equal to the Acquiror Price
times the number of shares of Acquiror Common Stock issued to the holders
of the $4.50 Preferred Stock and the $7.40 Preferred Stock pursuant to the
terms of SECTION 2.5 hereof.
''PREFERRED STOCK CONVERSION NUMBER'' means the result obtained by (x)
subtracting from the Adjusted Common Equity Consideration the product of
(i) the excess of (A) 7,000,000 over (B) the number of shares of Acquiror
Common Stock issued in exchange for shares of $4.50 Preferred Stock and
$7.40 Preferred Stock in the Merger and (ii) the Average Acquiror Price,
(y) dividing the result obtained pursuant to clause (x) by the ''Assigned
Value'' (as set forth in EXHIBIT B attached hereto) (being the liquidation
value) of the Acquiror Preferred Stock and (z) dividing the result
obtained pursuant to clause (y) by the number of shares of Tenneco Common
Stock outstanding immediately prior to the Effective Time as certified to
Acquiror by Tenneco's principal registrar and transfer agent.
''RIGHTS'' shall mean the preferred stock purchase rights issued
pursuant to the Rights Agreement.
''RIGHTS AGREEMENT'' shall mean the Rights Agreement dated as of May
24, 1988, as amended and restated as of October 1, 1989, between Tenneco
and First Chicago Trust Company of New York.
''REGISTRATION STATEMENT'' has the meaning set forth in SECTION 6.7
hereof.
''REPLACEMENT D&O POLICY'' has the meaning set forth in SECTION 6.4(D)
hereof.
''SECT'' means the Stock Employee Compensation Trust currently
maintained by Tenneco.
''SECURITIES ACT'' means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
''$7.40 PREFERRED STOCK'' means the $7.40 Cumulative Preferred Stock
of Tenneco.
''$7.40 PREFERRED CONVERSION NUMBER'' means the number of shares
(rounded to the nearest one-thousandth of a share) of Acquiror Common
Stock to be issued upon conversion of a single share of $7.40
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<PAGE> 11
Preferred Stock at the Effective Time pursuant to SECTION 2.5 and the
other terms and conditions of this Agreement, determined by dividing (i)
$115, by (ii) the Acquiror Price.
''S/I TRANSACTION'' has the meaning set forth in SECTION 6.13 hereof.
''SHIPBUILDING BUSINESS'' has the meaning ascribed to that term in the
Distribution Agreement.
''SHIPBUILDING GROUP'' has the meaning ascribed to that term in the
Distribution Agreement.
''STOCKHOLDERS' MEETINGS'' has the meaning set forth in SECTION 6.8
hereof.
''TAKEOVER STATUTE'' means any ''fair price,'' ''moratorium,''
''control share acquisition'' or other similar antitakeover statute or
regulation enacted under state or federal laws in the United States or any
foreign jurisdiction.
''TENDER AND EXCHANGE MATERIALS'' means any registration statement,
private placement memorandum, offer to purchase and/or other documents or
filings prepared by or on behalf of Tenneco or Acquiror (or their
Affiliates or representatives), either separately or jointly, and
(i) distributed to the record and/or beneficial holders of
Tenneco consolidated Debt in connection with the Debt Realignment,
and/or
(ii) filed with the Commission or other Governmental Authority,
or the NYSE or other stock exchange, relating to Debt Realignment.
''TENNECO COMMON STOCK'' means the Common Stock, par value $5.00 per
share, of Tenneco.
''TENNECO SEC DOCUMENTS'' means all filings made by Tenneco or its
subsidiaries with the SEC since January 1, 1995 through the Agreement
Effective Date, including notes, schedules, amendments and exhibits
thereto.
''TENNECO STOCK'' means the Tenneco Common Stock, the $7.40 Preferred
Stock and the $4.50 Preferred Stock (but not the New Preferred Stock).
''TENNECO STOCKHOLDERS' MEETING'' has the meaning set forth in
SECTION 6.8 hereof.
''TRANSFER TAXES'' has the meaning set forth in SECTION 10.1(C)
hereof.
''$'' is a reference to United States dollars. All monetary amounts
set forth in this Agreement are intended to be United States currency
amounts.
ARTICLE II
THE MERGER
2.1 MERGER. Upon the terms and subject to the conditions herein set forth,
Subsidiary shall be merged with and into Tenneco at the Effective Time.
2.2 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time the separate existence and corporate
organization of Subsidiary shall cease and Tenneco shall continue as the
Surviving Corporation, and all the identity, purposes, properties, rights,
privileges, powers, assets, franchises, debts and duties of Tenneco and
Subsidiary shall, except as expressly provided herein or in the DGCL, vest in
the Surviving Corporation and become the identity, purposes, properties,
rights, privileges, powers, assets, franchises, debts and duties of the
Surviving Corporation.
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<PAGE> 12
2.3 CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) At the Effective Time, the certificate of incorporation of Tenneco in
effect immediately prior to the Effective Time shall be amended as set forth in
ANNEX 1 hereto, and as so amended shall be the certificate of incorporation of
the Surviving Corporation.
(b) From and after the Effective Time, the by-laws of Subsidiary, as in
effect immediately prior to the Effective Time (but, in any event, to be in
form and substance reasonably acceptable to Tenneco), shall, until further
amended as provided by law, constitute the by-laws of the Surviving
Corporation, except that the by-laws of the Surviving Corporation shall include
the provisions specified in SECTION 6.4(A)(I) of this Agreement.
2.4 DIRECTORS. The directors of Subsidiary at the Effective Time shall be
the initial directors of the Surviving Corporation, each to hold office from
the Effective Time in accordance with the certificate of incorporation and
bylaws of the Surviving Corporation and until his or her successor is duly
elected and qualified.
2.5 CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of any stockholder of either Tenneco or
Subsidiary, as applicable, but subject to SECTION 2.6 hereof, each outstanding
share of Subsidiary's capital stock and Tenneco Stock (but not New Preferred
Stock) shall be cancelled or converted in accordance with the following
provisions of this SECTION 2.5:
(a) CAPITAL STOCK OF SUBSIDIARY. Each share of Subsidiary's capital
stock issued and outstanding immediately prior to the Effective Time shall
be converted into and become one fully paid and nonassessable share of
Common Stock, par value $5.00 per share, of the Surviving Corporation.
(b) CANCELLATION OF TREASURY AND ACQUIROR-OWNED STOCK. Each share of
Tenneco Stock owned immediately prior to the Effective Time (after giving
effect to the Spinoffs) by Tenneco, directly as treasury stock or
indirectly through one or more of its wholly-owned subsidiaries, or by
Acquiror or any direct or indirect wholly-owned subsidiary of Acquiror,
shall be cancelled and retired and shall cease to exist and no Acquiror
Stock or other consideration shall be delivered in exchange therefor or
with respect thereto.
(c) CONVERSION OF $7.40 PREFERRED STOCK. Each share of $7.40 Preferred
Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be cancelled in accordance with SECTION 2.5(B)
above) shall be converted into the right to receive that number of fully
paid and nonassessable shares of Acquiror Common Stock that is equal to
the $7.40 Preferred Conversion Number.
(d) CONVERSION OF $4.50 PREFERRED STOCK. Each share of $4.50 Preferred
Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be cancelled in accordance with SECTION 2.5(B)
above) shall be converted into the right to receive that number of fully
paid and nonassessable shares of Acquiror Common Stock that is equal to
the $4.50 Preferred Conversion Number.
(e) CONVERSION OF TENNECO COMMON STOCK. Each share of Tenneco Common
Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be cancelled in accordance with SECTION 2.5(B)
above) shall be converted into the right to receive (i) that number of
fully paid and nonassessable shares of (i) Acquiror Common Stock that is
equal to the Common Conversion Number Case A if the issuance of Acquiror
Common Stock as contemplated by this SECTION 2.5(E)(I) is approved by the
requisite vote of the holders of the Acquiror Common Stock, or if such
vote is not required by law or the rules of any national securities
exchange on which the Acquiror Common Stock is listed, or (ii) if the
issuance of shares of Acquiror Common Stock as contemplated by SECTION
2.5(E)(I) is not approved by the requisite vote of the holders of the
Acquiror Common Stock and is not permissible as aforesaid without such
vote, (A) that number of fully paid and nonassessable shares of Acquiror
Common Stock that is equal to the Common Conversion Number Case B and (B)
that number of Depositary Shares representing interests in that fraction
of a fully paid and nonassessable share of Acquiror Preferred Stock that
is equal to the Preferred Stock Conversion Number.
(f) REDEMPTION OF PREFERRED STOCK. Subject to the consent of Acquiror
(which shall not be unreasonably withheld or delayed), Tenneco may at any
time hereafter, prior to the Effective Time, redeem the $4.50 Preferred
Stock and/or the $7.40 Preferred Stock in accordance with their respective
terms.
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2.6 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Promptly after the Effective Time, Acquiror shall
deposit with the Exchange Agent, for the benefit of the holders of shares of
Tenneco Stock, for exchange in accordance with this SECTION 2.6, certificates
and Depositary Receipts, if any (together, the ''NEW CERTIFICATES'')
representing shares of Acquiror Stock and any Depositary Shares, respectively,
in amounts sufficient to allow the Exchange Agent to make all deliveries of New
Certificates that may be required in exchange for Certificates (as defined
below) pursuant to this SECTION 2.6 (the ''ACQUIROR STOCK FUND'') (such
Acquiror Stock Fund, together with any dividends or distributions with respect
thereto contemplated by SECTION 2.6(D) hereof and cash in lieu of fractional
shares or any fractional Depositary Shares contemplated by SECTION 2.6(C)
hereof, being hereinafter referred to as the ''EXCHANGE FUND'').
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective Time,
the Surviving Corporation shall cause the Exchange Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Tenneco Stock which were
converted pursuant to SECTION 2.5 hereof into the right to receive shares of
Acquiror Stock and Depositary Shares, if any (the ''CERTIFICATES'')
(i) a letter of transmittal (which shall be in such form and have such
provisions as Acquiror and Tenneco may reasonably specify), and
(ii) instructions for use in effecting the surrender of the
Certificates in exchange for New Certificates.
Upon surrender of a Certificate for cancellation to the Exchange Agent together
with such letter of transmittal, duly completed in accordance with the
instructions thereto and executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a New Certificate or New Certificates
representing that number of whole shares of Acquiror Stock (and any whole
Depositary Shares) which such holder has the right to receive pursuant to the
provisions of SECTION 2.5 hereof (after giving effect to SECTIONS 2.6(C) and
2.6(H) hereof) and any cash paid in lieu of fractional shares (or any
fractional Depositary Shares) and any dividends or distributions with respect
thereto as contemplated by SECTIONS 2.6(C) and 2.6(D) hereof, after giving
effect to any required tax withholdings, and the Certificate so surrendered
shall forthwith be cancelled. In the event of a transfer of ownership of
Tenneco Stock that is not registered in the transfer records of Tenneco, a New
Certificate representing the proper number of shares of Acquiror Stock (and any
Depositary Shares) may be issued to a transferee if the Certificate formerly
representing such Tenneco Stock is presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this SECTION 2.6(B), each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender a New Certificate or New Certificates representing such whole shares
of Acquiror Stock (and any whole Depositary Shares), any dividends or
distributions in respect of such shares of Acquiror Stock (and any Depositary
Shares) and cash in lieu of any fractional shares of Acquiror Stock (or any
fractional Depositary Shares), as is contemplated by SECTIONS 2.5 and 2.6 of
this Agreement.
(c) FRACTIONAL SHARES. Notwithstanding anything to the contrary contained
herein (but except for the issuance of Depositary Receipts), no scrip or
certificates for fractional shares of Acquiror Stock or for any fractional
Depositary Shares shall be issued, and no Person otherwise entitled to any such
fractional share or fractional Depositary Share shall be entitled to vote, to
receive dividends, or to any other rights of a holder of a share or Depositary
Share with respect to such fractional interest. Instead, the Exchange Agent
shall act as agent for the holders of Tenneco Stock and shall sell on the NYSE,
as promptly as possible, but in any event not later than 30 days after the
Closing Date, for the account of the Persons otherwise entitled to such
fractional shares or fractional Depositary Shares, shares of Acquiror Stock or
Depositary Shares equivalent to the aggregate of such fractional interests. The
Exchange Agent shall, until December 31, 1998, pay to such Persons upon
surrender of their Certificate(s) their respective pro rata shares of the net
proceeds of such sale, without interest. On December 31, 1998, any remaining
proceeds of the sale shall be paid over to Acquiror, after which the Persons
otherwise entitled to such fractional interests represented by such proceeds
shall look only to Acquiror for payment, subject to the requirements of escheat
laws of the various states that may be applicable.
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(d) DIVIDENDS AND OTHER DISTRIBUTIONS. Any dividend or other distribution
declared or made after the Effective Time with a record date after the
Effective Time in respect of Acquiror Stock issuable hereunder to the holder of
a Certificate not then surrendered pursuant to SECTION 2.6(B) hereof shall be
paid to the Exchange Agent (or, if payable after December 31, 1998, shall be
set aside and retained by Acquiror), and no such dividend or other distribution
payable in respect of such Acquiror Stock shall be paid to the holder of such
outstanding Certificate until such Certificate shall have been so surrendered
to the Exchange Agent (or, if after December 31, 1998, to Acquiror). Upon
surrender of such outstanding Certificate, there shall be paid by the Exchange
Agent (or, if after December 31, 1998, by Acquiror) to or at the direction of
the holder of the New Certificate(s) issued in exchange therefor the amount
(without interest thereon) of all dividends or distributions which have
theretofore been paid to the Exchange Agent (or, if after December 31, 1998,
set aside and retained by Acquiror) with respect to the number of shares of
Acquiror Stock and any Depositary Shares represented by the New Certificate(s)
issued upon such surrender and exchange.
(e) NO FURTHER OWNERSHIP RIGHTS IN TENNECO STOCK. All shares of Acquiror
Stock and any Depositary Shares issued upon the surrender for exchange of
shares of Tenneco Stock in accordance with the terms hereof (including any cash
paid pursuant to SECTION 2.6(C) hereof) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Tenneco Stock, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Tenneco Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this SECTION 2.6.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund held by
the Exchange Agent that remains undistributed to the stockholders of Tenneco
after December 31, 1998, shall be delivered to Acquiror, and any stockholders
of Tenneco who have not theretofore complied with this SECTION 2.6 shall
thereafter look only to Acquiror for payment of their claims for Acquiror
Stock, any Depositary Shares, any cash in lieu of fractional shares of Acquiror
Stock or in lieu of any fractional Depositary Shares and any dividends or
distributions with respect to Acquiror Stock.
(g) NO LIABILITY. None of Acquiror, Subsidiary, Tenneco, the Industrial
Subsidiary or the Shipbuilding Subsidiary (or any of their respective direct or
indirect subsidiaries or Affiliates) shall be liable to any holder of shares of
Tenneco Stock, Acquiror Stock or any Depositary Shares, as the case may be, for
such shares (or dividends or distributions with respect thereto) or cash for
payment in lieu of fractional shares or in lieu of any fractional Depositary
Shares delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. The Industrial Subsidiary, the Shipbuilding
Subsidiary and their respective direct and indirect subsidiaries and Affiliates
shall be deemed third party beneficiaries of this SECTION 2.6(G) and all other
provisions of this Agreement necessary or appropriate for purposes of enforcing
this SECTION 2.6(G).
(h) DISSENTING HOLDERS OF $4.50 PREFERRED STOCK AND DISSENTING HOLDERS OF
NEW PREFERRED STOCK. Notwithstanding anything in this Agreement to the
contrary, shares of $4.50 Preferred Stock and New Preferred Stock that are
issued and outstanding immediately prior to the Effective Time and are held by
stockholders who are entitled to appraisal rights in respect thereof under
Section 262 of the DGCL and who have
(i) not voted such shares in favor of the adoption of this Agreement
or otherwise waived or lost their right to demand appraisal of such shares
and
(ii) properly demanded appraisal of such shares in accordance with
Section 262 of the DGCL (the ''DISSENTING SHARES'')
shall not be converted as described in SECTION 2.5(D) above or remain
outstanding as described in SECTION 2.7 hereof, as the case may be, but shall
become the right to receive such consideration as may be determined to be due
to such stockholders pursuant to Section 262 of the DGCL (''APPRAISAL
CONSIDERATION''). If, after the Effective Time, any such stockholder withdraws
his demand for appraisal or fails to perfect or otherwise loses his right of
appraisal, in any case pursuant to the DGCL, his Dissenting Shares shall be
deemed to be converted as of the Effective Time into the right to receive
shares of Acquiror Common Stock (without any interest thereon)
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<PAGE> 15
as provided in SECTION 2.5(D) hereof or shall be deemed to have remained
outstanding as provided in SECTION 2.7 hereof, as the case may be. Promptly
upon receiving any demands for appraisal, withdrawals of demand for appraisal
or any other instrument served pursuant to Section 262 of the DGCL, Tenneco
shall so notify Acquiror and shall give Acquiror the opportunity to participate
in and direct all negotiations and proceedings with respect to any such
appraisal demands. Tenneco shall not, without the prior written consent of
Acquiror, make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such appraisal demands. From and after the Effective
Time, the Surviving Corporation shall be solely responsible for the payment of
any and all Appraisal Consideration, and shall indemnify, defend, protect and
hold harmless the Industrial Subsidiary, the Shipbuilding Subsidiary and their
respective direct and indirect subsidiaries from and against any and all
claims, losses, expenses, payments, liabilities and damages (including
attorneys' fees) relating to any Dissenting Shares or claims of stockholders
holding Dissenting Shares. In order to effect the payment of any Appraisal
Consideration, the Surviving Corporation shall establish an escrow with the
Exchange Agent (or other escrow agent reasonably acceptable to the Industrial
Subsidiary) consisting of an adequate amount of cash from the $25,000,000 of
cash required to be on hand at Tenneco as of the Effective Time pursuant to the
Allocation Agreement. The Industrial Subsidiary, the Shipbuilding Subsidiary
and their respective direct and indirect subsidiaries shall be deemed third
party beneficiaries of this SECTION 2.6(H) and all other provisions of this
Agreement necessary or appropriate for purposes of enforcing this SECTION
2.6(H).
2.7 NEW PREFERRED STOCK. Subject to SECTION 2.6(H) hereof, the shares of
New Preferred Stock outstanding immediately prior to the Effective Time shall
not be converted or otherwise exchanged pursuant to the Merger and shall remain
outstanding immediately after the Effective Time, held by the Persons who were
holders of the New Preferred Stock immediately prior to the Effective Time.
ARTICLE III
CLOSING AND FILING
3.1 CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to SECTION
8.1 hereof, and subject to the satisfaction or, if permissible, waiver of the
conditions set forth in ARTICLE VII hereof, the closing of the Merger (the
''CLOSING'') shall take place as promptly as practicable (and in any event
within two business days) after satisfaction or waiver of the conditions set
forth in ARTICLE VII hereof, at the offices of Tenneco Inc., 1010 Milam Street,
Houston, Texas, unless another date, time or place is agreed to in writing by
the parties hereto; provided, however, that if, (i) during the Black-out Period
there occurs an event or series of events that, in the opinion of either
Tenneco or Acquiror, could reasonably be expected to have a temporary effect on
the price of Acquiror Stock, and (ii) but for the provisions of this proviso
the Average Acquiror Price would be greater than $38.3625 or less than $31.3875
(said dollar amounts to be adjusted on the same basis as is described in the
definition of Average Acquiror Common Equity Price), then either Tenneco (in
the case the Average Acquiror Price would be greater than $38.3625 as
aforesaid) or Acquiror (in the case the Average Acquiror Price would be less
than $31.3875 as aforesaid) may, by written notice to the other, elect to delay
or to restart the commencement of the Average Period (and thereby the Closing)
until such day as such temporary effect has ended (but in no event shall the
Closing be delayed by more than 15 days and in no event beyond the dated
specified in SECTION 8.1(II) hereof), as determined and specified by the
notifying party. The date on which the Closing occurs is referred to in this
Agreement as the ''CLOSING DATE''.
3.2 EFFECTIVE TIME. As promptly as practicable after the satisfaction or,
if permissible, waiver of the conditions set forth in ARTICLE VII hereof, but
subject to the terms of SECTION 3.1 hereof, the parties hereto shall cause the
Merger to be consummated by filing a certificate of merger with the Secretary
of State of the State of Delaware in such form as required by, and executed in
accordance with the relevant provisions of, the DGCL (the date and time of the
acceptance of such filing, or such later date or time as set forth therein,
being the ''EFFECTIVE TIME'').
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TENNECO
Tenneco hereby represents and warrants to Acquiror and Subsidiary as
follows:
4.1 ORGANIZATION AND EXISTENCE. Each of Tenneco and the Major Subsidiaries
is a corporation validly existing and in good standing under the laws of the
jurisdiction of its organization with the corporate power and authority to own
its properties and assets and to carry on its business as now being conducted,
except where the failure to be so existing and in good standing or to have such
power and authority would not have a Material Adverse Effect on Tenneco.
4.2 CAPITALIZATION.
(a) As of the dates indicated below, the authorized and outstanding
capital stock of Tenneco was as follows:
<TABLE>
<CAPTION>
AUTHORIZED AS
OF THE
CLASS DATE HEREOF OUTSTANDING AS OF MARCH 31, 1996
----- ------------------- --------------------------------
<S> <C> <C>
Common Stock 350,000,000 191,354,932 shares (including 17,358,445
shares held in treasury or by subsidiaries of Tenneco)
Preferred Stock 15,000,000 803,723 shares of $4.50 Preferred Stock; 391,519
shares of $7.40 Preferred Stock
Junior Preferred Stock 50,000,000 none
</TABLE>
(b) Between March 31, 1996 and the Agreement Effective Date, Tenneco has
issued no shares of its capital stock except for shares of Tenneco Common Stock
issued upon the exercise of options granted pursuant to the Option Plans or to
executives of Tenneco outside the Option Plans.
(c) As of March 31, 1996, except for
(i) Rights issued pursuant to the Rights Agreement and
(ii) options to acquire an aggregate of 5,207,655 shares of Tenneco
Common Stock,
there were no outstanding options, warrants, rights, puts, calls, commitments
or other contracts, arrangements, or understandings issued by or binding upon
Tenneco requiring or providing for, and there were no outstanding securities of
Tenneco or its subsidiaries which upon the conversion, exchange or exercise
thereof would require or provide for, the issuance by Tenneco of any new or
additional equity interests in Tenneco or any other securities of Tenneco
which, with notice, lapse of time and/or payment of monies, are or would be
convertible into or exercisable or exchangeable for equity interests in Tenneco
(each, a ''TENNECO EQUITY RIGHT''). Between March 31, 1996 and the Agreement
Effective Date, Tenneco has not issued or granted any Tenneco Equity Right
except for
(i) Rights issued in connection with the issuance of Tenneco Common
Stock as described in SECTION 4.2(B) hereof and
(ii) options to purchase 11,000 shares of Tenneco Common Stock granted
pursuant to the 1994 Stock Plan.
(d) As of the Agreement Effective Date all outstanding shares of Tenneco
Stock are, and immediately prior to the Effective Time all outstanding shares
of Tenneco Stock and New Preferred Stock will be, validly issued, fully paid
and nonassessable and free of any preemptive (or similar) right.
4.3 AUTHORITY AND APPROVAL. Tenneco has the corporate power and authority,
and no other corporate proceedings on the part of Tenneco are necessary, to
execute and deliver this Agreement and the Distribution Agreement and to
consummate the transactions contemplated hereby and thereby (subject to
securing the
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<PAGE> 17
approval of the stockholders of Tenneco as contemplated by SECTION 6.8 hereof,
and formal declaration of the dividends necessary to effectuate the Spinoffs
and the issuance of the New Preferred Stock). This Agreement has been duly
executed and delivered by Tenneco and, assuming this Agreement constitutes a
valid and binding obligation of each of Acquiror and Subsidiary, this Agreement
constitutes a valid and binding obligation of Tenneco, enforceable against
Tenneco in accordance with its terms.
4.4 FINANCIAL STATEMENTS. The audited financial statements of Tenneco and
consolidated subsidiaries as of December 31, 1995 and 1994 and for the three
years ended December 31, 1995, included in Tenneco's 1995 Annual Report on Form
10- K, as filed with the Commission, (i) were prepared in accordance with GAAP
applied on a consistent basis (except as indicated therein or in the notes
thereto) and (ii) fairly present the financial position of Tenneco and
consolidated subsidiaries as of the dates thereof and the results of their
operations and cash flows for the periods then ended. The unaudited financial
statements of Tenneco and consolidated subsidiaries as of March 31, 1996 and
1995 and for the three- month periods ended on each of such dates, included in
Tenneco's March 31, 1996 Quarterly Report on Form 10-Q as filed with the
Commission, (A) comply in all material respects with the published rules and
regulations of the Commission with respect thereto, (B) were prepared in
accordance with GAAP, except as otherwise permitted under the Exchange Act and
the rules and regulations thereunder, on a consistent basis (except as
indicated therein or in the notes thereto) and (C) fairly present the financial
position of Tenneco and consolidated subsidiaries as of the dates thereof and
the results of their operations and cash flows for the periods then ended,
subject to normal year-end adjustments and any other adjustments described
herein or in the notes or schedules thereto.
The unaudited pro forma financial information of the Energy Business
(including related notes thereto) as of December 31, 1995 included in EXHIBIT
F-1 attached to this Agreement (which were prepared without cash flow
statements and treating the Energy Business as if it were a separate entity for
the purpose of estimates and judgments of materiality) appropriately reflects
all significant pro forma adjustments necessary to and does fairly present the
financial position of the Energy Business as of December 31, 1995 and for the
year then ended, except that such financial information was prepared on the
assumption that the Energy Business had no long-term debt as of December 31,
1995. The historical financial balances included in the unaudited pro forma
financial balances included in EXHIBIT F-1 have been derived from amounts
included in the consolidated balances presented in the audited financial
statements of Tenneco and consolidated subsidiaries included in Tenneco's
December 31, 1995 Annual Report on Form 10-K as filed with the Commission.
The unaudited pro forma financial information of the Energy Business
(including related notes thereto) as of March 31, 1996 included in EXHIBIT F-2
attached to this Agreement (which were prepared without cash flow statements
and treating the Energy Business as if it were a separate entity for the
purpose of estimates and judgments of materiality) appropriately reflects all
significant pro forma adjustments necessary to and does fairly present the
financial position of the Energy Business as of March 31, 1996, except that
such financial information was prepared on the assumption that the Energy
Business had no long-term debt as of March 31, 1996. The historical financial
balances included in the unaudited pro forma financial balances included in
EXHIBIT F-2 have been derived from amounts included in the consolidated
balances presented in the audited financial statements of Tenneco and
consolidated subsidiaries included in Tenneco's March 31, 1996 Quarterly Report
on Form 10-Q as filed with the Commission.
The financial statements of Tennessee Gas Pipeline Company, Midwestern Gas
Transmission Company and East Tennessee Natural Gas Company as of and for the
years ended December 31, 1995 and 1994 included on pages 110 through 123 of
each company's respective Federal Energy Regulatory Commission Form 2 were
prepared in all material respects in accordance with the accounting
requirements of the Federal Energy Regulatory Commission as set forth in its
applicable Uniform System of Accounts and published accounting releases.
4.5 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution, delivery and,
subject to securing the approval of the stockholders of Tenneco as contemplated
by SECTION 6.8 hereof, formal declaration of the dividends necessary to
effectuate the Spinoffs and the issuance of the New Preferred Stock,
performance by Tenneco of
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<PAGE> 18
this Agreement and the Distribution Agreement and the consummation by Tenneco
of the transactions contemplated hereby or thereby do not or will not:
(i) conflict with or result in any breach of any provisions of the
certificate of incorporation or bylaws of Tenneco;
(ii) except as contemplated by this Agreement or the Distribution
Agreement, require any filing by Tenneco or any Energy Subsidiary with any
Governmental Authority, or require Tenneco or any Energy Subsidiary to
obtain any permit, authorization, consent or approval from any
Governmental Authority;
(iii) after giving effect to the Debt Realignment, result in a
violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement, franchise, permit, concession or other
instrument, obligation, understanding, commitment or other arrangement to
which Tenneco or any Energy Subsidiary is a party or by which any of them
or any of their respective material properties or assets may be bound or
affected; or
(iv) violate any Law applicable to Tenneco or any Energy Subsidiary;
except, in the case of each of clauses (ii) through (iv) above, for failures to
make filings or obtain permits, authorizations, consents or approvals,
violations, breaches or defaults that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Tenneco.
4.6 LITIGATION. Except as previously disclosed in writing to Acquiror, as
of the Agreement Effective Date there are no actions, suits, proceedings or, to
the knowledge of Tenneco, governmental investigations or inquiries pending
against Tenneco or any of its subsidiaries or their respective properties,
assets, operations or businesses which could reasonably be expected to delay,
prevent or hinder the consummation of the transactions contemplated hereby or
by the Distribution Agreement, and to the knowledge of Tenneco as of the
Agreement Effective Date, no such actions, suits, proceedings or governmental
investigations or inquiries are threatened.
4.7 TENNECO SEC DOCUMENTS; ACCURACY OF INFORMATION. The information
relating to the Energy Business contained in the Tenneco SEC Documents (A)
complied, as of the date of filing thereof (or, in the case of any registration
statement, on the date it was declared effective), in all material respects
with the applicable requirements of the Exchange Act or Securities Act and (B)
did not contain, as of the date of filing thereof (or, in the case of any
registration statement, on the date it was declared effective), any untrue
statement of a material fact or omit to state any material fact necessary in
order to have the statements made therein, in light of the circumstances under
which they were made, not misleading.
4.8 NO MATERIAL ADVERSE EFFECT. Except as previously disclosed to Acquiror
in writing prior to the date of this Agreement, between December 31, 1995 and
the Agreement Effective Date, there has occurred no Material Adverse Effect on
Tenneco.
4.9 ADVISORS. Except for Lazard, Morgan Stanley & Co. Incorporated, and
J.P. Morgan Securities Incorporated, which have been retained by Tenneco to
assist and advise Tenneco in connection with the transactions contemplated by
this Agreement and the Distribution Agreement, Tenneco has not employed any
broker, finder or intermediary in connection with such transactions who might
be entitled to a fee or commission upon the consummation of this Agreement, the
Distribution Agreement or the transactions contemplated hereby or thereby. A
copy of the engagement letter between Tenneco and each such advisor has been
provided to Acquiror.
4.10 OPINION OF FINANCIAL ADVISOR. Tenneco has received the opinion of
Lazard, dated as of the Agreement Efffective Date, to the effect that, as of
such date, the consideration to be received in the Merger by Tenneco's
stockholders is fair to Tenneco's stockholders from a financial point of view
(and Tenneco has the right to refer
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<PAGE> 19
to that opinion, so long as such reference is in form and substance
satisfactory to Lazard, in the Joint Proxy Statement and other appropriate
filings with the Commission and mailings to its stockholders).
4.11 AMENDMENTS TO RIGHTS AGREEMENT. Tenneco has caused the Rights
Agreement to be amended such that
(i) neither a ''Triggering Event'' nor a ''Distribution Date'' (in
each case as defined in the Rights Agreement) will occur solely by reason
of the execution of this Agreement and the consummation of the
transactions contemplated hereby, and
(ii) the Rights will expire at the Effective Time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUBSIDIARY
Acquiror and Subsidiary hereby represent and warrant, jointly and
severally, to Tenneco as follows:
5.1 ORGANIZATION AND EXISTENCE. Each of Acquiror and Subsidiary is a
corporation validly existing and in good standing under the laws of the
jurisdiction of its organization with the corporate power and authority to own
its properties and assets and to carry on its business as now being conducted,
except where the failure to be so existing and in good standing or to have such
power and authority would not have a Material Adverse Effect on Acquiror.
5.2 CAPITALIZATION.
(a) ACQUIROR.
(i) As of the Agreement Effective Date, the authorized capital stock of
Acquiror consists of:
(A) 100,000,000 shares of Acquiror Common Stock of which, at June 18,
1996, 35,582,074 shares were issued and outstanding and 1,769,151 shares
were held in treasury (including shares held in Acquiror's Benefits
Protection Trust); and
(B) 25,000,000 shares of Preferred Stock , $.01 par value, none of
which are issued and outstanding.
(ii) As of the Agreement Effective Date, except for rights issued pursuant
to the Shareholders Rights Agreement, dated as of July 7, 1992, between
Acquiror and The First National Bank of Boston and options to acquire an
aggregate of 4,066,487 shares of Acquiror Common Stock, there were no
outstanding options, warrants, rights, puts, calls, commitments or other
contracts, arrangements, or understandings issued by or binding upon Acquiror
requiring or providing for, and there were no outstanding securities of
Acquiror or its subsidiaries which upon the conversion, exchange or exercise
thereof would require or provide for, the issuance by Acquiror of any new or
additional equity interests in Acquiror or any other securities of Acquiror
which, with notice, lapse of time and/or payment of monies, are or would be
convertible into or exercisable or exchangeable for equity interests in
Acquiror (each, an ''ACQUIROR EQUITY RIGHT'').
(iii) As of the Agreement Effective Date all outstanding shares of the
capital stock of Acquiror are, and immediately prior to the Effective Time all
outstanding shares of the capital stock of Acquiror will be, validly issued,
fully paid and nonassessable and free of any preemptive (or similar) right.
(b) SUBSIDIARY.
(i) The authorized capital stock of Subsidiary consists of 1,000 shares of
common stock, $1.00 par value, all of which are issued and outstanding.
(ii) There are no outstanding options, warrants, rights, puts, calls,
commitments or other contracts, arrangements, or understandings issued by or
binding upon Subsidiary requiring or providing for, and there were
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<PAGE> 20
no outstanding securities of Subsidiary which upon the conversion, exchange or
exercise thereof would require or provide for, the issuance by Subsidiary of
any new or additional equity interests in Subsidiary or any other securities of
Subsidiary which, with notice, lapse of time and/or payment of monies, are or
would be convertible into or exercisable or exchangeable for equity interests
in Subsidiary.
(iii) All outstanding shares of the capital stock of Subsidiary are, and
immediately prior to the Effective Time all outstanding shares of the capital
stock of Subsidiary will be, validly issued, fully paid and nonassessable and
free of any preemptive (or similar) right.
5.3 AUTHORITY AND APPROVAL. Each of Acquiror and Subsidiary has the
corporate power and authority, and no other corporate proceedings on the part
of Acquiror or Subsidiary are necessary, to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Acquiror and Subsidiary and, assuming
this Agreement constitutes a valid and binding obligation of Tenneco, this
Agreement constitutes the valid and binding obligation of Acquiror and
Subsidiary, enforceable against each of them in accordance with its terms.
5.4 FINANCIAL STATEMENTS. Acquiror has heretofore delivered to Tenneco
complete and correct copies of all filings made by Acquiror pursuant to the
Exchange Act since January 1, 1995. The audited consolidated financial
statements of Acquiror included in such filings (i) were prepared in accordance
with GAAP applied on a consistent basis (except as indicated therein or in the
notes thereto) during the periods presented and (ii) fairly present the
financial position of Acquiror and its consolidated subsidiaries as of the
dates thereof and the results of their operations and cash flows for the
periods then ended. The unaudited financial statements included in such filings
(i) comply in all material respects with the published rules and
regulations of the Commission with respect thereto,
(ii) were prepared in accordance with GAAP, except as otherwise
permitted under the Exchange Act and the rules and regulations thereunder,
on a consistent basis (except as may be indicated therein or in the notes
or schedules thereto) during the periods presented and
(iii) fairly present the financial position of Acquiror and its
consolidated subsidiaries as at the dates thereof and the results of their
operations and cash flows for the periods then ended, subject to normal
year-end adjustments and any other adjustments described therein or in the
notes or schedules thereto.
5.5 CONSENT AND APPROVALS; NO VIOLATION. The execution, delivery and
performance by Acquiror and Subsidiary of this Agreement and the consummation
by Acquiror and Subsidiary of the transactions contemplated hereby do not and
will not:
(i) conflict with or result in any breach of any provisions of the
certificate of incorporation, bylaws or other governing documents of
Acquiror or Subsidiary,
(ii) except as contemplated by this Agreement, require any filing by
Acquiror or any of its subsidiaries (including Subsidiary) with any
Governmental Authority or require Acquiror or any of its subsidiaries
(including Subsidiary) to obtain any permit, authorization, consent or
approval of any Governmental Authority;
(iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement, franchise, permit,
concession or other instrument, obligation, understanding, commitment or
other arrangement to which Acquiror or any of its subsidiaries (including
Subsidiary) is a party or by which any of them or any of their respective
material properties or assets may be bound or affected; or
(iv) violate any Law applicable to Acquiror or any of its subsidiaries
(including Subsidiary);
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<PAGE> 21
except, in the case of each of clauses (ii) through (iv) above, for failures to
make filings or obtain permits, authorizations, consents or approvals,
violations, breaches or defaults which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
Acquiror.
5.6 LITIGATION. Except as previously disclosed in writing to Tenneco, as
of the Agreement Effective Date, there are no actions, suits, proceedings or,
to Acquiror's knowledge, governmental investigations or inquiries pending
against Acquiror or any of its subsidiaries (including Subsidiary) or their
respective properties, assets, operations or businesses which could reasonably
be expected to delay, prevent or hinder the consummation of the transactions
contemplated hereby and, to the knowledge of Acquiror, no such actions, suits,
proceedings or governmental investigations or inquiries are threatened.
5.7 ACQUIROR SEC DOCUMENTS; ACCURACY OF INFORMATION. The information
regarding Acquiror and its consolidated subsidiaries contained in the Acquiror
SEC Documents (A) complied, as of the date of filing thereof (or, in the case
of any registration statement, on the date it was declared effective), in all
material respects with the applicable requirements of the Exchange Act or
Securities Act and (B) did not contain, as of the date of filing thereof (or,
in the case of any registration statement, on the date it was declared
effective), any untrue statement of a material fact or omit to state any
material fact necessary in order to have the statements made therein, in light
of the circumstances under which they were made, not misleading.
5.8 NO MATERIAL ADVERSE EFFECT. Except as previously disclosed to Tenneco
in writing prior to the date of this Agreement, between December 31, 1995 and
the Agreement Effective Date, there has occurred no Material Adverse Effect on
Acquiror.
5.9 ADVISORS. Except for Donaldson, Lufkin & Jenrette (''DLJ''), which has
been retained by Acquiror to assist and advise Acquiror in connection with the
transactions contemplated by this Agreement, Acquiror has not employed any
broker, finder or intermediary in connection with such transactions who might
be entitled to a fee or commission upon the consummation of this Agreement or
the transactions contemplated hereby.
5.10 OPINION OF FINANCIAL ADVISOR. Acquiror has received the opinion of
DLJ, dated as of the Agreement Effective Date, to the effect that, as of such
date, the consideration to be paid in the Merger by Acquiror is fair to
Acquiror's stockholders from a financial point of view (and Acquiror has the
right to refer to that opinion, so long as such reference is in form and
substance satisfactory to DLJ, in the Joint Proxy Statement and other
appropriate filings with the Commission and mailings to its stockholders).
5.11 DUE AUTHORIZATION. The shares of Acquiror Stock and any Depositary
Shares issued in connection with the Merger as contemplated by this Agreement
will be duly authorized and will be validly issued, fully paid and
nonassessable.
5.12 NO ACTIVE BUSINESS. Subsidiary has not engaged in any business and
does not have any contractual liabilities, commitments, or obligations (other
than pursuant to this Agreement) or any assets (other than cash representing
its initial capitalization). Subsidiary has been formed solely for purposes of
effectuating the transactions contemplated by this Agreement and having such
transactions treated for federal income tax purposes as an acquisition of the
outstanding Tenneco Stock by Acquiror in exchange for Acquiror Stock through
the Merger of Subsidiary with and into Tenneco pursuant to this Agreement.
5.13 OWNERSHIP OF TENNECO STOCK. Neither Acquiror nor Subsidiary is
(i) an ''Interested Stockholder'' of Tenneco as defined in Article
NINTH of the Certificate of Incorporation of Tenneco or
(ii) an ''interested stockholder'' of Tenneco as defined in Section
203 of the DGCL.
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<PAGE> 22
As of the Agreement Effective Date, Acquiror and its Affiliates own
(directly or indirectly, beneficially or of record) no shares of Tenneco Stock
and neither Acquiror nor any of its Affiliates own any rights to acquire any
shares of Tenneco Stock, except pursuant to this Agreement.
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 CONDUCT OF TENNECO AND ITS SUBSIDIARIES.
(a) Between the Agreement Effective Date and the Effective Time, unless
Acquiror shall have consented in writing (such consent not to be unreasonably
withheld), and except for
(i) actions taken that either affect solely the Industrial Business or
the Shipbuilding Business or only adversely affect the Energy Business to
a de minimis extent and do not materially delay or prevent consummation of
the transactions contemplated hereby,
(ii) actions taken by Tenneco and its Affiliates and subsidiaries
(including the Energy Subsidiaries) in order to consummate any of the
Merger, the Spinoffs and the other transactions contemplated by this
Agreement or the Distribution Agreement, which actions are taken in good
faith and either are contemplated by this Agreement or the Distribution
Agreement (including the Corporate Restructuring Transactions described
therein) or do not have more than a de minimis effect on Tenneco or do not
materially delay or prevent consummation of the transactions contemplated
hereby, or
(iii) actions or matters set forth in EXHIBIT G attached hereto,
Tenneco shall, and shall cause each of the Energy Subsidiaries to:
(A) use its reasonable best efforts to
(I) operate the Energy Business in good faith and in the ordinary
course, consistent with past practices, including, without limitation,
with respect to the payment and administration of accounts payable and
the collection and administration of accounts receivable, inventory
management and control policies and implementation of capital programs
for the Energy Business in a timely manner,
(II) preserve substantially intact the present business
organization of the Energy Business,
(III) keep available, consistent with the past practices of the
Energy Business, the services of the present officers, employees and
consultants of Tenneco and each of the Energy Subsidiaries (to the
extent they customarily provide services to the Energy Business), and
(IV) preserve the relationships with customers, suppliers and
others having business dealings with the Energy Business,
it being understood that
(x) certain employees of Tenneco and the Energy Subsidiaries will
also be engaged in activities for the Industrial Business and the
Shipbuilding Business, and
(y) the failure of any officer, employee or consultant of the
Energy Business to remain an officer, employee or consultant of the
Energy Business or to become an officer, employee or consultant of
Acquiror or any subsidiary of Acquiror shall not constitute a breach
of this covenant;
(B) not amend or otherwise change the certificate of incorporation or
bylaws of Tenneco (except as may be necessary or appropriate to effect the
transactions contemplated hereby or by the Distribution Agreement);
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<PAGE> 23
(C) not issue or authorize the issuance of (except, as to Tenneco, in
the ordinary course of business consistent with past practices or as
contemplated in this Agreement) or the Distribution Agreement, any shares
of any class of the capital stock of Tenneco or any Energy Subsidiary
(other than New Preferred Stock) or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without
limitation, any phantom interest), of Tenneco or any of the Energy
Subsidiaries (other than the issuance of Rights and shares of Tenneco
Common Stock either
(I) in connection with any dividend reinvestment plan,
(II) upon the exercise of options granted prior to the Agreement
Effective
Date,
(III) pursuant to the terms of any other Tenneco employee benefit
plan with an employee stock fund or employee stock ownership plan
feature,
(IV) in accordance with the Rights Agreement, or
(V) as is otherwise permitted pursuant to this Agreement or the
Distribution Agreement);
(D) not reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any class of the capital stock
of Tenneco or of any of the Energy Subsidiaries other than acquisitions by
a dividend reinvestment plan or by any Tenneco employee benefit plan with
an employee stock fund or employee stock ownership plan feature,
consistent with the terms thereof and applicable securities laws;
(E) not declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any class of the capital stock of Tenneco or any of the Energy
Subsidiaries, except:
(I) in the case of Tenneco, regular dividends (including the
regular dividend for the dividend period in which the Effective Time
occurs) with respect to the $4.50 Preferred Stock, the $7.40 Preferred
Stock and the New Preferred Stock and regular quarterly dividends on
the Tenneco Common Stock at such times and in such amounts as the
Board of Directors of Tenneco in its sole discretion determines;
(II) the Spinoffs;
(III) the issuance of New Preferred Stock; and
(IV) cash dividends declared and paid by any of the Energy
Subsidiaries;
(F) with respect to the individuals who will be executive officers or
employees of the Energy Business after the Effective Time, not:
(I) increase the compensation payable or to become payable to any
of such executive officers or employees except for increases in the
ordinary course of business in accordance with past practices;
(II) grant any severance or termination pay to, or enter into any
employment or severance agreement with, any executive officer of the
Energy Subsidiaries; or
(III) except as contemplated in this Agreement or in the
Distribution Agreement, establish, adopt, enter into or amend or take
action to accelerate any rights or benefits under, any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust,
fund, policy or arrangement for the benefit of any such director,
executive officer or employee;
provided, however, that Tenneco may continue to provide benefits under
employee benefit plans and incentive compensation plans that are in effect
on the Agreement Effective Date;
(G) not take, or permit any of its subsidiaries in respect of which it
has the direct or indirect voting power to control to take, any action
that would reasonably likely result in any of the conditions to the
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Merger set forth in ARTICLE VII of this Agreement not being satisfied or
that would materially impair the ability of Tenneco to consummate the
Spinoffs in accordance with the terms of the Distribution Agreement or the
Merger in accordance with the terms hereof or would materially delay such
consummation or that would disqualify either of the Spinoffs as a tax free
distribution within the meaning of Section 355 of the Code;
(H) not implement any change in its accounting principles, practices
or methods, other than as (X) may be required by GAAP, the Financial
Accounting Standards Board, the Commission or any other Governmental
Authority or oversight agency and (Y) relating solely to the Shipbuilding
Group and/or the Industrial Group;
(I) except in the ordinary course of business, consistent with past
practices, with respect to inventory or services or except where the
effect on the Energy Business would be de minimis, not, with respect to
the Energy Business, transfer, lease, license, sell, mortgage, pledge or
dispose of any property or assets included in the Energy Assets or
otherwise encumber any property or assets included in the Energy Assets;
(J) not release any third party from, or amend, modify or waive any
provisions of, any confidentiality or standstill agreement to which
Tenneco is a party (except any that relate solely to the Industrial
Business or the Shipbuilding Business);
(K) file on or before the due date therefor all tax returns required
to be filed by Tenneco or any Energy Subsidiary, which tax returns shall,
to the extent such tax returns relate to the Energy Business, be (i)
complete and correct in all material respects and (ii) prepared in
accordance and on a basis consistent with the elections, accounting
methods, conventions and principles of tax returns used for the most
recent taxable periods for which tax returns involving similar tax items
have been filed; and
(L) not make, change or revoke any tax election relating to the Energy
Business to the extent such election may have more than a de minimis
effect on the Energy Business or Acquiror, or enter into any material
agreement or settlement regarding taxes relating to the Energy Business
with any tax authority to the extent such settlement or agreement may have
a more than de minimis effect on the Energy Business or Acquiror.
(b) Prior to the Effective Time, Tenneco shall cause all stock options
issued under the Option Plans (or to executives outside the Option Plans) to be
(i) converted to options to acquire the stock of the Industrial
Company or the Shipbuilding Company;
(ii) exercised; and/or
(iii) cancelled.
Tenneco shall also cause all such options not held by employees of the Energy
Business to be so converted if not exercised or cancelled prior to the
Effective Time in accordance with their terms. All such options held by
employees of the Energy Business shall become exercisable prior to the
Effective Time and, if not exercised by the Effective Time, shall be cancelled.
(c) Between the Agreement Effective Date and the Effective Time, Tenneco
shall cause the Industrial Subsidiary to succeed to sponsorship of the SECT. To
the extent the SECT continues to own Tenneco Stock, the SECT will participate
in the Merger, the Spinoffs and the conversion of shares pursuant to SECTION
2.5 hereof (and the other transactions contemplated by this Agreement and/or
the Distribution Agreement) as any other stockholder of Tenneco.
(d) Tenneco shall have the right, and shall use its reasonable best
efforts to, issue shares of New Preferred Stock prior to the Effective Time on
the following basis:
(i) the issuance may be effected through public sale or private
placement (either United States or foreign, but with a placement agent
mutually and reasonably acceptable to both Tenneco and Acquiror), or
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if such sale or placement is not reasonably practicable under the
circumstances, through a dividend-in-kind to the holders of Tenneco Common
Stock, but shall in any event be in accordance with all applicable
securities and other Laws (and, if publicly issued or issued as a
dividend-in-kind, shall be listed on the NYSE);
(ii) the NPS Value shall be approximately 25% (but in no event 20% or
less) of the sum of:
(x) the NPS Value, plus
(y) the market value of all outstanding Tenneco Common Stock (as
determined as of the Effective Time pursuant to the same procedure as
applies to determining the NPS Value).
(e) Prior to the Effective Time, Tenneco shall cause the elimination of
all intercompany accounts (including accounts and notes receivable and payable)
between members of the Energy Group, the Shipbuilding Group and the Industrial
Group, as the case may be (except trade accounts incurred in the ordinary
course of business), as set forth in the Distribution Agreement.
(f) From and after the Agreement Effective Date, Tenneco shall afford
Acquiror and its officers, employees, representatives and agents the
opportunity to participate with Tenneco in the process of obtaining the rulings
set forth in the IRS Ruling Request, including the right to participate in the
submission of written materials by Tenneco to the Internal Revenue Service, and
in-person and telephonic conferences between Tenneco and the Internal Revenue
Service, to the extent such communications relate to the IRS Ruling Request.
Notwithstanding the foregoing, Tenneco shall have the right, subject to prior
consultation with Acquiror, to determine, in its reasonable discretion, that
Acquiror's participation in certain communications with the Internal Revenue
Service (or any other aspects of the rulings process) may hinder or delay
Tenneco's ability to obtain the rulings requested in the IRS Ruling Request, in
which case Acquiror will be precluded from such participation; provided, that
Tenneco shall promptly inform Acquiror of the substance of any matter in which
Acquiror does not participate.
(g) In the event that, between the Agreement Effective Date and the
Closing Date, the General Counsel or an Executive Vice President of Tenneco
becomes aware that the Energy Business has the realistic opportunity to
exercise its right of first refusal with respect to the acquisition of
additional interests in the Oasis pipeline or otherwise to acquire additional
interests in the Oasis pipeline, Tenneco shall notify Acquiror thereof and
shall consult and cooperate with Acquiror prior to exercising its right of
first refusal or making any acquisition proposal. Any exercise of such right of
first refusal or other acquisition of interests in the Oasis pipeline by the
Energy Business shall be subject to the consent of Acquiror, which consent
shall not be unreasonably withheld or delayed.
6.2 CONDUCT OF THE BUSINESS OF ACQUIROR AND ITS SUBSIDIARIES.
(a) Between the Agreement Effective Date and the Effective Time, neither
Acquiror nor Subsidiary nor any of their Affiliates shall:
(i) take any action that would be reasonably likely to result in any
of the conditions to the Merger set forth in ARTICLE VII of this Agreement
not being satisfied or that would impair the ability of Acquiror or
Subsidiary to consummate the Merger in accordance with the terms hereof or
delay such consummation;
(ii) acquire (directly or indirectly, beneficially or of record), any
shares of Tenneco Stock (or any rights to acquire any such shares, except
pursuant to this Agreement); or
(iii) amend or otherwise change its certificate of incorporation
(except as is contemplated by this Agreement in respect of the designation
of the Acquiror Preferred Stock), bylaws or other organizational
documents; provided, however, that the provisions of this clause (iii)
shall not apply to any Affiliate of Acquiror or Subsidiary if the
amendment or other change would not adversely effect any of the rights or
benefits hereunder or under any of the Ancillary Agreements of Tenneco or
the holders of Tenneco Stock (other than to a de minimis extent) or
otherwise materially delay or prevent the consummation of the transactions
contemplated hereby.
(b) Acquiror shall not, and shall not permit any of its subsidiaries
(including Subsidiary) to, take or cause or permit to be taken any action that
would disqualify either of the Spinoffs as a tax-free distribution within the
meaning of Section 355 of the Code.
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(c) Between the Agreement Effective Date and the Effective Time,
Subsidiary shall not engage in any activities of any nature except as provided
in, or in connection with the transactions contemplated by, this Agreement.
6.3 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Between the date of this Agreement and the Effective Time, and except
as may otherwise be required by applicable law, each of Tenneco and Acquiror
shall (and shall cause its subsidiaries and officers, directors, employees,
auditors and agents to) afford the officers, employees and agents of the other
party (the ''RESPECTIVE REPRESENTATIVES'') reasonable access at all reasonable
times to its officers, employees, agents, properties, offices, plants and other
facilities, books and records, and shall furnish such Respective
Representatives with all financial, operating and other data and information as
may be reasonably requested, in each case to the extent that such access and
disclosure would not:
(i) violate the terms of any agreement to which the disclosing party
or any of its Affiliates is bound or any applicable law or regulation; or
(ii) impair any attorney-client privilege of the disclosing party.
Notwithstanding the foregoing, Tenneco shall not be required (and shall
not be required to cause its subsidiaries and officers, directors, employees,
auditors and agents) to provide the access, data and information described in
the preceding sentence with respect to the Industrial Business or the
Shipbuilding Business unless Acquiror has a reasonable interest in obtaining
such access, data or information in connection with the Merger.
(b) All information obtained by Tenneco, Acquiror or their Respective
Representatives pursuant to SECTION 6.3(A) hereof shall be kept confidential in
accordance with the confidentiality agreement, dated March 28, 1996, executed
by Acquiror and the confidentiality agreement, dated June 12, 1996, executed by
Tenneco.
(c) The Industrial Subsidiary and the Shipbuilding Subsidiary (and their
respective direct and indirect subsidiaries and Affiliates) shall be deemed
third party beneficiaries of this SECTION 6.3 and all other provisions of this
Agreement necessary or appropriate for purposes of enforcing this SECTION 6.3.
6.4 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) For a period of six years after the Effective Time, Acquiror shall not
cause or permit any amendment, repeal or other modification of the provisions
of
(i) Article IV, Section 14 of the by-laws of the Surviving
Corporation, as set forth in EXHIBIT H attached hereto, or
(ii) Article Eighth of the certificate of incorporation of the
Surviving Corporation,
in either case in any manner that would adversely affect the rights thereunder
of individuals who at any time prior to the Effective Time were directors,
officers or employees of Tenneco or any of its subsidiaries or Affiliates or
who are otherwise entitled to indemnification pursuant to such provisions in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this Agreement
and the Distribution Agreement), unless such modification is required by the
DGCL or applicable federal law, and then only to the extent of such applicable
requirements of the DGCL or federal law. To the extent the Surviving
Corporation is unable for any reason to fulfill its obligations under the bylaw
provisions set forth in EXHIBIT H attached hereto, Acquiror agrees to pay,
perform and discharge all such obligations.
(b) Prior to the Effective Time, Tenneco shall, and from and after the
Effective Time the Acquiror and the Surviving Corporation jointly and severally
shall, indemnify, defend and hold harmless each Person who is now, has been at
any time prior to the date of this Agreement or who becomes prior to Effective
Time an officer, director or employee of Tenneco or any of its subsidiaries
(collectively, the ''INDEMNIFIED PARTIES'') against all losses, expenses,
claims, damages, liabilities or amounts that are paid in settlement of, with
the approval of the
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<PAGE> 27
indemnifying party (which approval shall not unreasonably be withheld), or
otherwise in connection with any claim, action, suit, proceeding or
investigation (a ''CLAIM''), based in whole or in part on the fact that such
Person is or was a director, officer or employee of Tenneco or any of its
subsidiaries and arising out of actions or omissions occurring at or prior to
the Effective Time (including, without limitation, the transactions
contemplated by this Agreement and the Distribution Agreement), whether or not
such Claim was asserted prior to, at or after the Effective Time, in each case
to the fullest extent permitted under the DGCL or other applicable law (and
shall pay expenses in advance of the final disposition of any such Claim to
each Indemnified Party to the fullest extent permitted under the DGCL or other
applicable law, upon receipt from the Indemnified Party to whom expenses are
advanced of any undertaking to repay such advances required by Section 145(e)
of the DGCL or other applicable law). Notwithstanding anything contained
herein, Tenneco's obligation to indemnify any such person pursuant to this
SECTION 6.4 shall not affect the allocation of liability among the Energy
Group, the Industrial Group and Shipbuilding Group pursuant to the Distribution
Agreement and any corresponding indemnification rights thereunder.
(c) Without limiting the generality of the foregoing, in the event any
Claim is brought against any Indemnified Party (whether arising before or after
the Effective Time):
(i) the Indemnified Party may retain counsel satisfactory to him with
the consent of Tenneco (or the consent of Acquiror and the Surviving
Corporation after the Effective Time) which consent of Tenneco (or, after
the Effective Time, Acquiror and the Surviving Corporation) with respect
to such counsel retained by the Indemnified Party may not be unreasonably
withheld or delayed;
(ii) Tenneco (or, after the Effective Time, Acquiror and the Surviving
Corporation) shall pay all reasonable fees and expenses of such counsel
for the Indemnified Party promptly as statements therefor are received;
and
(iii) Tenneco (or, after the Effective Time, Acquiror and the
Surviving Corporation) will use all reasonable efforts to assist in the
vigorous defense of any such matter, provided that none of Tenneco,
Acquiror or the Surviving Corporation shall be liable for any settlement
of any Claim effected without its written consent, which consent, however,
shall not be unreasonably withheld.
Any Indemnified Party wishing to claim indemnification under this SECTION 6.4,
upon learning of any such Claim, shall notify Tenneco (or, after the Effective
Time, Acquiror and the Surviving Corporation) (but any failure so to notify
shall not relieve Tenneco, Acquiror or the Surviving Corporation from any
liability which it may have under this SECTION 6.4, except to the extent such
failure materially prejudices such party), and shall deliver to Tenneco (or,
after the Effective Time, Acquiror and the Surviving Corporation) any
undertaking required by Section 145(e) of the DGCL or other applicable law. The
Indemnified Parties as a group may retain only one law firm to represent them
with respect to each such Claim unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more Indemnified Parties.
(d) (i) MAINTENANCE OF D&O POLICIES. On or prior to the Closing Date,
Tenneco shall provide Acquiror with copies and a schedule of those Directors'
and Officers' Liability Insurance Policies which Tenneco shall enter into
effective as of the Closing Date (the ''D&O POLICIES''). For a period of seven
years after the Effective Time, Acquiror and the Surviving Corporation shall
cause to be maintained in full force and effect the D&O Policies. Acquiror and
the Surviving Corporation shall be jointly and severally responsible for
payment of all premiums due as respects the D&O Policies and shall take all
other actions necessary or appropriate to maintain the D&O Policies in full
force and effect (other than to the extent the available limit of liability of
any such D&O Policy may be reduced or exhausted solely as the result of the
payment of claims thereunder) for the agreed term of seven years after the
Effective Time. If at any time an insurance carrier under any of the D&O
Policies becomes unable or unwilling, or it becomes probable that such
insurance carrier will be unable or unwilling (which determination shall be
made in the reasonable discretion of the Industrial Subsidiary), to fulfill any
of its obligations under any D&O Policy, whether due to such insurance
carrier's dissolution, bankruptcy, insolvency or otherwise, then Acquiror and
the Surviving Corporation shall obtain a directors' and officers' liability
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<PAGE> 28
insurance policy in substitution (with an insurance carrier acceptable to the
Industrial Subsidiary) of each D&O Policy under which such insurance carrier
was to provide coverage (a ''REPLACEMENT D&O POLICY''), which shall provide at
least the same coverage and amounts, and contain terms and provisions which are
no less favorable to the insured parties, as existed under the D&O Policy so
replaced. Acquiror and the Surviving Corporation shall pay any costs associated
with the obtaining and maintenance of any Replacement D&O Policy as
contemplated hereby.
(ii) OWNERSHIP AND ADMINISTRATION OF POLICIES. The parties hereto agree
that the D&O Policies and any Replacement D&O Policy shall be owned by the
Industrial Subsidiary. From and after the Effective Time, the Industrial
Subsidiary shall be solely responsible for all aspects of service and
administration of such policies (other than the payment of any premiums due),
including the notification to insurers, and the management, negotiation and
settlement, of any claims made under the D&O Policies and any Replacement D&O
Policy. From and after the Effective Time, Acquiror and the Surviving
Corporation shall have the right to participate in the negotiation and
participate in and consent to settlement (such consent not to be unreasonably
withheld or delayed) of any claim under the D&O Policies and any Replacement
D&O Policy for which, and then only to the extent, that either is obligated to
indemnify any of the present or former directors or officers of Tenneco or any
of its present or past subsidiaries (''DIRECTORS OR OFFICERS'') for liabilities
associated with such claim. The Industrial Subsidiary's responsibilities for
administering and servicing the D&O Policies and any Replacement D&O Policy
shall in no manner restrict, reduce, limit or impair any of the Directors' or
Officers' rights to indemnification from Acquiror, the Surviving Corporation or
their respective successors or assigns in accordance with any applicable Law,
statute, charter or bylaw provision.
(iii) COOPERATION. Acquiror and the Surviving Corporation shall cooperate
with the Directors and Officers in the defense and settlement of any claim made
against them based upon or arising out of any actual or alleged wrongful act
(as such term may be defined in the applicable D&O Policies or Replacement D&O
Policy) occurring at or prior to the Effective Time. Acquiror and the Surviving
Corporation shall provide any reasonable assistance or information that may be
required by a Director or Officer in connection with any such claim. Neither
Acquiror, the Surviving Corporation nor any of their respective representatives
shall cause any action or inaction that could reasonably be expected to
jeopardize or otherwise impair the rights or ability of the Directors or
Officers to recover loss amounts due under the D&O Policies or any Replacement
D&O Policy.
(e) Neither Acquiror nor the Surviving Corporation shall take any action
that could reasonably be expected to jeopardize or otherwise interfere with the
ability of any of the Indemnified Parties to collect any proceeds payable under
any of the D&O Policies.
(f) Each of Tenneco, Acquiror and Subsidiary acknowledges and agrees that
the Industrial Subsidiary's responsibilities hereunder for Claims
Administration and Insurance Administration shall not relieve any Person
submitting an insured claim under any of the D&O Policies of
(i) the primary responsibility for giving notice of such insured claim
accurately, completely and in a timely manner, or
(ii) any other right or responsibility which such Person may have
pursuant to the terms of any of the D&O Policies.
(g) This SECTION 6.4 (and all other provisions of this Agreement necessary
or appropriate for purposes of enforcing this SECTION 6.4) is intended to be
for the benefit of, and shall be enforceable by, the Industrial Subsidiary and
the Indemnified Parties, their heirs and personal representatives and shall be
binding on Tenneco, the Surviving Corporation and Acquiror and each of their
respective successors and assigns.
6.5 NOTIFICATION OF CERTAIN MATTERS. Between the Agreement Effective Date
and the Effective Time, Tenneco and Acquiror shall give prompt notice to the
other of :
(i) the occurrence or nonoccurrence of any event, the occurrence or
nonoccurrence of which would likely cause
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(A) any of its representations or warranties contained in this
Agreement to be untrue or inaccurate, or
(B) any of its covenants, conditions or agreements contained in
this Agreement not to be complied with or satisfied; and
(ii) its (or in the case of Acquiror, Acquiror's or Subsidiary's)
failure to comply with or satisfy any of its covenants, conditions or
agreements to be complied with or satisfied by it (or, in the case of
Acquiror, Acquiror or Subsidiary) at or prior to the Effective Time;
provided, however, that the delivery of any notice pursuant to this SECTION 6.5
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
6.6 TAX TREATMENT.
(a) Each of Tenneco, on the one hand, and Acquiror and Subsidiary, on the
other hand, intend the Merger to qualify as a reorganization under Code Section
368(a)(1)(B) and the Spinoffs to be treated as tax-free distributions under
Code Section 355, and each such party shall use its reasonable best efforts to
cause the Merger and Spinoffs to so qualify. Neither Tenneco, on the one hand,
nor Acquiror or Subsidiary, on the other hand, shall take any action which
might cause
(i) the Merger to fail to qualify as a reorganization under Code
Section 368(a)(1)(B),
(ii) the Spinoffs to fail to qualify as tax free distributions under
Code Section 355,
(iii) any other transfer described in the Corporate Restructuring
Transactions that is intended (as described in Tenneco's request for
rulings from the Internal Revenue Service) to qualify as a tax free
transfer under Code Sections 332, 351, 355 or 368 to fail to so qualify,
or
(iv) Tenneco or any Energy Subsidiary to recognize any gains relating
to deferred intercompany transactions or excess loss accounts between or
among any members of the affiliated group of corporations of which Tenneco
is the common parent (other than those deferred intercompany gains listed
on EXHIBIT I attached hereto).
(b) In furtherance of SECTION 6.6(A) above, Tenneco shall make the
representations set forth in EXHIBIT J attached hereto, and such other
representations as are reasonably necessary to ensure the tax-free treatment of
the Merger, Spinoffs and related transactions described in SECTION 6.6(A)
above, and shall assure the continuing accuracy of such representations.
(c) In furtherance of SECTION 6.6(A) above, Acquiror and Subsidiary shall
each make the representations set forth in EXHIBIT J attached hereto, and such
other representations as are reasonably necessary to ensure the tax-free
treatment of the Merger, Spinoffs and related transactions described in SECTION
6.6(A) above, and shall assure the continuing accuracy of such representations.
(d) The Industrial Subsidiary and the Shipbuilding Subsidiary (and their
respective direct and indirect subsidiaries and Affiliates) shall be deemed
third party beneficiaries of this SECTION 6.6 and all other provisions of this
Agreement necessary or appropriate for purposes of enforcing this SECTION 6.6.
6.7 REGISTRATION STATEMENT; JOINT PROXY STATEMENT; NPS MATERIALS; TENDER
AND EXCHANGE MATERIALS.
(a) As promptly as practicable after the Agreement Effective Date, Tenneco
and Acquiror shall prepare and file, or cause to be prepared and filed, with
the Commission a joint proxy statement (the ''JOINT PROXY STATEMENT'') and
other proxy solicitation materials relating to the Stockholders' Meeting (as
defined in SECTION 6.8 hereof), and Acquiror shall prepare and file, or cause
to be prepared and filed, with the Commission a registration statement on Form
S-4 in which the Joint Proxy Statement shall be included as a prospectus (the
''REGISTRATION STATEMENT''), in connection with the registration under the
Securities Act of the shares of Acquiror Stock (and any Depositary Shares) to
be issued to the stockholders of Tenneco pursuant to the Merger.
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Each of Acquiror and Tenneco shall furnish or cause to be furnished to the
other party all information concerning itself and its subsidiaries as the other
party may reasonably request in connection with such actions and the
preparation of the Registration Statement and the Joint Proxy Statement (and in
connection with the preparation of the NPS Materials and the Tender and
Exchange Materials). Each of Acquiror and Tenneco hereby agree to take, and to
cause their respective subsidiaries to take,
(i) such actions as may be required to have the Registration Statement
and, to the extent applicable, the NPS Materials and the Tender and
Exchange Materials declared effective under the Securities Act and to have
the Joint Proxy Statement cleared by the Commission, in each case as
promptly as practicable, including by consulting with each other as to,
and responding promptly to, any Commission comments with respect thereto,
and
(ii) such actions as may be required to be taken under applicable
state securities or ''blue sky'' laws in connection with the issuance of
shares of Acquiror Stock (and any Depositary Shares) pursuant to the
Merger.
As promptly as practicable after the Registration Statement shall have become
effective, each of Tenneco and Acquiror shall mail the Joint Proxy Statement to
its respective stockholders (and Tenneco and Acquiror shall attempt to effect
their respective mailings on the same date), and the Joint Proxy Statement
shall include the recommendation of the board of directors of Tenneco in favor
of adoption and approval of this Agreement and the Merger and the Spinoffs, and
of the board of directors of Acquiror in favor of approval of the Stock
Issuance (as defined in SECTION 6.8 hereof); provided, however, that no
obligation of Tenneco pursuant to this SECTION 6.7(A) shall be required to be
performed if there is a substantial risk that the performance thereof would
constitute a breach of the fiduciary duties of the board of directors of
Tenneco as determined by the board of directors of Tenneco in good faith after
consultation with and based upon the advice of its independent legal counsel
(who may be its regularly engaged independent legal counsel).
(b) Acquiror covenants that the information supplied by or on behalf of
Acquiror for inclusion in the Registration Statement and the Joint Proxy
Statement shall not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading, at any of:
(i) the time the Registration Statement (or any amendment or
supplement thereto) is declared effective;
(ii) the time the Joint Proxy Statement (or any amendment or
supplement thereto) is first mailed to the stockholders of Tenneco and
Acquiror;
(iii) the time of each of the Stockholders' Meetings; and
(iv) the Effective Time.
Likewise, Acquiror covenants that the information and data supplied by or on
behalf of Acquiror for inclusion in the NPS Materials and Tender and Exchange
Materials (including, without limitation, all information and financial data
(pro forma or otherwise) relating to the business and operations of Tenneco
following consummation of the Merger supplied by or on behalf of Acquiror)
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, at all times through the completion of (A)
in the case of the NPS Materials, the offering and sale of the New Preferred
Stock, and (B) in the case of the Tender and Exchange Materials, the tender and
exchange offers pursuant to the Debt Realignment.
(c) Tenneco covenants that the financial information (including pro forma
financial data and information) supplied or to be supplied by Tenneco or its
representatives for inclusion or incorporation by reference in the Registration
Statement or the Joint Proxy Statement (or the NPS Materials and/or Tender and
Exchange Materials) shall comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the Commission with respect thereto, shall be prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto
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or, in the case of unaudited financial information, as permitted by the rules
of the Commission) and shall fairly present (subject, in the case of unaudited
financial information, to normal, recurring audit adjustments) the financial
information reflected therein as of the dates thereof or for the periods then
ended. The Joint Proxy Statement shall, as it relates to the Tenneco
Stockholders' Meeting, comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder, except
that no representation is herein made by Tenneco with respect to statements
made in the Joint Proxy Statement based on information supplied by Acquiror or
any of its representatives for inclusion in the Joint Proxy Statement or with
respect to information concerning Acquiror or any of its subsidiaries
(including Subsidiary) incorporated by reference in the Joint Proxy Statement.
If at any time prior to the Effective Time any event or circumstance relating
to Acquiror or any of its subsidiaries (including Subsidiary), their respective
officers or directors, or Acquiror's plans and intentions regarding its
operation of the Surviving Corporation after the Merger should be discovered by
Acquiror or any of its subsidiaries (including Subsidiary) that should be set
forth in an amendment or a supplement to the Registration Statement or Joint
Proxy Statement (or in any of the NPS Materials or Tender and Exchange
Materials), Acquiror shall promptly inform Tenneco in writing.
(d) Tenneco covenants that the information supplied by or on behalf of
Tenneco for inclusion in the Registration Statement and the Joint Proxy
Statement shall not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading, at
(i) the time the Registration Statement (or any amendment or
supplement thereto) is declared effective,
(ii) the time the Joint Proxy Statement (or any amendment or
supplement thereto) is first mailed to the stockholders of Tenneco and
Acquiror,
(iii) the time of each of the Stockholders' Meetings, and
(iv) the Effective Time.
Likewise, Tenneco covenants that the NPS Materials and Tender and Exchange
Materials shall not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading, at all times through the completion
of (A) in the case of the NPS Materials, the offering and sale of the New
Preferred Stock, and (B) in the case of the Tender and Exchange Materials, the
tender and exchange offers pursuant to the Debt Realignment; provided, that the
foregoing provisions of this sentence shall not apply to any information or
financial data (including pro forma financial information and data) supplied by
or on behalf of Acquiror, including information and data relating to the
business and operations of Tenneco following consummation of the Merger.
(e) Acquiror covenants that the financial information (including pro forma
financial data and information regarding Acquiror or Tenneco) supplied or to be
supplied by Acquiror or its representatives for inclusion or incorporation by
reference in the Registration Statement or the Joint Proxy Statement (or the
NPS Materials or Tender and Exchange Materials) shall comply as to form in all
material respects with applicable accounting requirements and with the
published rules and regulations of the Commission with respect thereto, shall
be prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited financial information, as permitted by the rules of the
Commission) and shall fairly present (subject, in the case of unaudited
financial information, to normal, recurring audit adjustments) the financial
information reflected therein as of the dates thereof or for the periods then
ended. Each of the Joint Proxy Statement, as it relates to the Acquiror Common
Stockholders' Meeting, and the Registration Statement will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder or the Securities Act and the rules and regulations
thereunder, as applicable, except that no representation is herein made by
Acquiror with respect to statements made in the Joint Proxy Statement or
Registration Statement based on information supplied by Tenneco or any of its
representatives for inclusion in the Joint Proxy Statement or Registration
Statement or with respect to information concerning Tenneco or any of its
subsidiaries incorporated by reference in the Joint Proxy Statement or
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Registration Statement. If at any time prior to the Effective Time any event or
circumstance relating to Tenneco or any of its subsidiaries, or their
respective officers or directors, should be discovered by Tenneco or any of its
subsidiaries which should be set forth in an amendment or a supplement to the
Registration Statement or Joint Proxy Statement (or in any of the NPS Materials
or Tender and Exchange Materials), Tenneco shall promptly inform Acquiror in
writing.
(f) None of the Joint Proxy Statement, the Registration Statement, the NPS
Materials or the Tender and Exchange Materials shall be filed or distributed,
and, prior to the termination of this Agreement, no amendment or supplement to
the Joint Proxy Statement or the Registration Statement shall be filed or
distributed, by or on behalf of Tenneco or Acquiror, without consultation with
the other party and its counsel.
6.8 STOCKHOLDERS' MEETINGS. Tenneco shall call and hold a meeting of its
stockholders (the ''Tenneco Stockholders' Meeting'') for the purpose of voting
upon the adoption and approval of this Agreement, the Merger and the Spinoffs.
Acquiror shall call and hold a meeting of its stockholders (the ''Acquiror
Common Stockholders' Meeting'') for the purpose of voting upon the approval of
the issuance of Acquiror Common Stock in connection with the Merger as
contemplated by this Agreement (the ''Stock Issuance'') (the Acquiror Common
Stockholders' Meeting and the Tenneco Stockholders' Meeting being collectively
referred to herein as the ''Stockholders' Meetings''). Each of Tenneco and
Acquiror shall use its reasonable best efforts to schedule and hold their
respective Stockholders' Meetings so that the Acquiror Common Stockholders'
Meeting occurs at least one business day prior to the Tenneco Stockholders'
Meeting, and otherwise so as not to delay the transactions contemplated hereby
(it being intended that the Joint Proxy Statement shall be mailed and the
Stockholders' Meetings shall be scheduled to occur as soon as practicable after
the receipt of the IRS Ruling Letter). Each of Tenneco and Acquiror shall use
its reasonable best efforts to solicit from its stockholders proxies in favor
of the approval and adoption of this Agreement, the Merger and the Spinoffs or
the Stock Issuance, as applicable, and shall take all other action necessary or
advisable to secure the vote or consent of stockholders required therefor by
applicable Law and/or its certificate of incorporation or other governing
instrument or document. The stockholders of Tenneco will vote on the Spinoffs
and the Merger as a single transaction. Notwithstanding the foregoing, Tenneco
shall not be required to take any action if there is a substantial risk that
the subject action would constitute a breach of the fiduciary duties of the
board of directors of Tenneco as determined by the board of directors of
Tenneco in good faith after consultation with and based upon the advice of
independent legal counsel (who may be its regularly engaged independent legal
counsel).
6.9 FURTHER ACTION; REASONABLE BEST EFFORTS.
(a) Upon the terms and subject to the provisions of this Agreement, each
of the parties hereto shall use its reasonable best efforts to take, or cause
to be taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations promptly
to consummate and make effective the transactions contemplated hereby and by
the Distribution Agreement (subject, however, to the vote of the stockholders
of Tenneco and, to the extent required, Acquiror as provided herein),
including, without limitation, using its reasonable best efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Authorities and parties to contracts with Tenneco and,
to the extent required, Acquiror and their respective subsidiaries as are
necessary for the consummation of the transactions contemplated by this
Agreement. Each party hereto shall promptly consult with each other party with
respect to, and provide to each other party all such information or
documentation which shall be reasonably requested with respect to, all filings
made by such party with any Governmental Authority in connection with this
Agreement and the transactions contemplated hereby. In case at any time after
the Effective Time any further action is necessary or desirable to carry out
the purposes of this Agreement, the proper officers and directors of each party
to this Agreement shall use their reasonable best efforts to take all such
action.
(b) Between the Agreement Effective Date and the Closing Date,
(i) Tenneco and Acquiror shall, and shall cause their respective
Affiliates and representatives to, consult, cooperate and work together in
good faith and with reasonable best efforts and all deliberate speed to
attempt jointly to obtain a favorable resolution prior to the Effective
Time with respect to pending
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regulatory proceedings affecting the Energy Business, including sharing
ideas and information concerning alternative approaches to resolving such
regulatory proceedings and coordinating the timing and content of
communications with customers of the Energy Business, affecting the Energy
Business, and regulatory authorities having jurisdiction over the
operations of the Energy Business; provided, that any settlement (or
proposed settlement) of any such regulatory proceedings shall require the
consent of both Tenneco and Acquiror, such consent not to be arbitrarily
withheld; and
(ii) Tenneco shall, and shall cause its Affiliates and representatives
to, consult and work with Acquiror and its Affiliates and representatives
to attempt to obtain favorable resolutions of material litigation
affecting the Energy Business; provided that, except as otherwise set
forth on EXHIBIT G attached hereto, any settlement (or proposed
settlement) of any such litigation shall require the consent of Acquiror,
such consent not to be arbitrarily withheld.
(c) Except as set forth on EXHIBIT G attached hereto, between the
Agreement Effective Date and the Closing Date, the Energy Business shall not
incur any additional off balance sheet indebtedness for the purpose of
monetization of any Energy Assets. Subject to the terms of the previous
sentence, Acquiror and Tenneco shall consult and cooperate with each other with
respect to off-balance sheet financing opportunities for the Australian assets
of the Energy Business, the Orange Cogeneration Project and the South Sulawesi
Project and any such off-balance sheet financing may be incurred by mutual
agreement between Acquiror and Tenneco.
Between the Agreement Effective Date and the Closing Date, Tenneco shall
attempt to cooperate with Acquiror to the extent reasonably requested by
Acquiror in connection with sales by the Energy Business after the Closing Date
of material Energy Assets; provided that any such transactions shall be subject
to the covenants, restrictions and limitations set forth in SECTION 6.6 hereof.
(d) Between the Agreement Effective Date and the Closing Date, Tenneco
shall, to the extent permitted by law, consult and work in good faith with
Acquiror with respect to the payment and administration of accounts payable,
inventory levels and policies and the collection and administration of accounts
receivable of the Energy Business and the making of capital expenditures by the
Energy Business to preserve the value of the Energy Business and not to
artificially delay payment of accounts payable, accelerate collections of
accounts receivable, alter inventory levels or unreasonably delay capital
expenditures; provided, however, that Tenneco shall have the right to effect
the actions and transactions identified on EXHIBIT G attached hereto. To the
extent permitted by Law, Tenneco shall consult with Acquiror with respect to
other matters pertaining to the operation of the Energy Business. Each of
Tenneco and Acquiror shall designate one or more members of management to act
as coordinators with respect to the matters covered by this SECTION 6.9.
(e) Each party shall use its reasonable best efforts to not take any
action, or enter into any transaction, that would cause any of its
representations or warranties contained in this Agreement to be untrue or
result in a breach of any covenant made by it in this Agreement.
(f) The Industrial Subsidiary shall be a deemed third party beneficiary of
this SECTION 6.9 and all other provisions of this Agreement necessary or
appropriate for purposes of enforcing this SECTION 6.9.
6.10 PUBLIC ANNOUNCEMENTS. Each party hereto shall consult with each other
before issuing any press release or otherwise issuing any other similar written
public statement with respect to this Agreement or the Merger and shall not
issue any such press release or make any such public statement without the
prior consent of each other party, which shall not be unreasonably withheld;
provided, however, that a party may, without the prior consent of any other
party, issue such press release or other similar written public statement as
may be required by law or any listing agreement with a national securities
exchange to which Tenneco or Acquiror is a party if it has used all reasonable
efforts to consult with such other party and to obtain such party's consent but
has been unable to do so in a timely manner. Further, the parties shall use
their respective reasonable best efforts to coordinate and jointly schedule and
interface with the various Governmental Authorities and ratings agencies and
other applicable bodies and groups involved or otherwise interested in the
transactions contemplated by this Agreement.
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6.11 LISTING OF ACQUIROR COMMON STOCK AND DEPOSITARY SHARES. Acquiror
shall use its reasonable best efforts to cause the shares of Acquiror Common
Stock and any Depositary Shares to be issued in or in connection with the
Merger to be approved for listing on the NYSE and any other national securities
exchange on which shares of Acquiror Common Stock may at such time be listed,
subject to official notice of issuance prior to the Effective Time.
6.12 RIGHTS AGREEMENT. Except as contemplated by this Agreement, prior to
the Effective Time the Board of Directors of Tenneco shall not, without the
prior written approval of Acquiror,
(i) amend or supplement the Rights Agreement in any manner that would
cause either a ''Triggering Event'' or a ''Distribution Date'' (in each
case as defined in the Rights Agreement) to occur or to be deemed to have
occurred solely by reason of the execution of this Agreement and the
consummation of the transactions contemplated hereby, or
(ii) redeem the Rights.
6.13 THE SPINOFFS. Prior to the Closing, Tenneco shall enter into the
Distribution Agreement (with only such amendments or modifications as are not
prejudicial, other than to a de minimis extent, to the Energy Business or do
not materially delay or prevent consummation of the Merger) and shall cause the
Industrial Subsidiary and the Shipbuilding Subsidiary to enter into the
Distribution Agreement (with only such amendments), and Tenneco shall take, or
cause to be taken, all actions and do, or cause to be done, all things
necessary to effect the Spinoffs pursuant to the terms of the Distribution
Agreement (with only such amendments). Notwithstanding the foregoing, after
prior notice to Acquiror, Tenneco may furnish information or enter into
negotiations regarding, or enter into an agreement for, any sale, merger or
other disposition transaction(s) involving either or both of the Shipbuilding
Business and/or the Industrial Business, or any portion of either (an ''S/I
TRANSACTION''), which may render either or both of the Spinoffs (or any portion
thereof) impossible or impracticable; provided, that Tenneco shall not solicit
any S/I Transaction involving the Industrial Subsidiary, the Shipbuilding
Subsidiary, the Industrial Business as a whole, the Shipbuilding Business as a
whole or any other S/I Transaction which could be reasonably predicted to
render the Merger impossible or impracticable or materially delay or prevent
consummation thereof. Tenneco may enter into any such S/I Transaction in its
sole discretion if the subject S/I Transaction would not be adverse, other than
to a de minimis extent, to Acquiror or the Energy Business (including with
respect to any covenants or obligations of a party under this Agreement or the
Distribution Agreement) and would not render the Merger impossible or
impracticable or materially delay or prevent consummation thereof. If the S/I
Transaction would be so adverse to Acquiror or the Energy Business, or would
render the Merger impossible or impracticable or materially delay or prevent
consummation thereof, then S/I Transaction may be pursued and/or entered into
only (a) prior to the approval of this Agreement, the Merger and the Spinoffs
by the Tenneco stockholders and (b) if Tenneco's board of directors determines
in good faith, after consultation with and based upon the advice of independent
legal counsel (which may be Tenneco's regularly engaged independent legal
counsel), that there is a substantial risk that the failure to do so would
constitute a breach of its fiduciary duties under applicable Law.
6.14 ANTITRUST MATTERS.
(a) Tenneco and Acquiror shall file with the Federal Trade Commission and
the Department of Justice, as promptly as practicable but in any event within
20 business days of the Agreement Effective Date, the notification and report
form required for the transactions contemplated hereby and shall promptly
provide any supplemental information which may be reasonably requested in
connection therewith pursuant to the HSR Act, which notification, report and
supplemental information shall comply in all material respects with the
requirements of the HSR Act.
(b) Although the parties do not believe that the Merger has any antitrust
implications, Acquiror shall use all reasonable efforts to resolve antitrust
objections, if any, that may be asserted with respect to the transactions
contemplated hereby by the Federal Trade Commission, the Antitrust Division of
the Department of Justice or any other federal or state agency. Acquiror shall
make such divestitures, or enter into such hold-separate
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agreements, as may be necessary to prevent the entry of, or effect the
dissolution of, any injunction, temporary restraining order or other order that
has the effect of preventing for any period of time the consummation of the
Merger in any respect. Acquiror shall reimburse Tenneco for reasonable
attorneys' fees and costs incurred by Tenneco in connection with defending any
antitrust investigation or other proceeding brought by any of the above
identified entities.
6.15 EMPLOYEE MATTERS.
(a) Prior to the Effective Time, Tenneco shall enter into the Benefits
Agreement and shall take the actions with respect to compensation and benefits
described elsewhere in this Agreement or in the Distribution Agreement.
(b) Acquiror shall provide, or shall cause the Surviving Corporation (or
any of its subsidiaries, as appropriate) to provide, to the employees and
former employees of the Energy Business and the dependents of either, as
applicable, the benefits described in EXHIBIT K attached hereto.
6.16 DEBT REALIGNMENT. Each of Tenneco and Acquiror shall use its
reasonable best efforts so that, immediately prior to the Spinoffs, the Debt
Realignment has been effected (with only such modifications as are not adverse,
except to a de minimis extent, to Acquiror, the Energy Business, the Industrial
Subsidiary or the Shipbuilding Subsidiary).
6.17 NO SOLICITATIONS. Tenneco shall immediately cease any existing
discussions or negotiations with any third parties conducted prior to the date
hereof with respect to any merger, consolidation, business combination, sale of
the Energy Business, sale of a Major Subsidiary, tender or exchange offer or
similar transaction involving the Energy Business as a whole or any Major
Subsidiary as a whole, other than the transactions contemplated by this
Agreement or the Distribution Agreement (an ''ACQUISITION TRANSACTION'').
Neither Tenneco nor any of its subsidiaries nor any of their respective
directors and officers shall, and Tenneco shall use its best efforts to ensure
that none of its or its subsidiaries' Affiliates, representatives or agents
shall, directly or indirectly, solicit any person, entity or group concerning
any Acquisition Transaction; provided, however, that, after prior notice to
Acquiror and prior to the approval of this Agreement, the Merger and the
Spinoffs by the Tenneco stockholders, Tenneco may furnish information or enter
into negotiations regarding, or enter into an agreement for, an Acquisition
Transaction if Tenneco's board of directors determines in good faith, after
consultation with and based upon the advice of independent legal counsel (which
may be Tenneco's regularly engaged independent legal counsel), that there is a
substantial risk that the failure to do so would be found to constitute a
breach of its fiduciary duties under applicable Law, but only in response to a
proposal (which may be subject to due diligence) for an Acquisition Transaction
received by Tenneco which the board of directors of Tenneco determines in good
faith after consultation with its financial advisors is reasonably likely to
result in consummation of an Acquisition Transaction more favorable, from a
financial point of view, to the stockholders of Tenneco than the transactions
contemplated hereby, taking into account the financial responsibility of the
party making such proposal, as then reasonably determinable by Tenneco, and
such party's ability, as then reasonably determinable by Tenneco, to obtain
regulatory approvals for such Acquisition Transaction (a ''HIGHER PROPOSAL'').
Tenneco shall advise Acquiror immediately if any proposal of or other
indication of interest in a Higher Proposal is received by Tenneco and the
terms and conditions thereof and keep Acquiror promptly informed of the status
thereof.
6.18 PERFORMANCE OF AGREEMENT AND DISTRIBUTION AGREEMENT. After the
Effective Time, Acquiror shall, and shall cause the Surviving Corporation and
the Energy Subsidiaries to, perform their respective obligations under this
Agreement and the Distribution Agreement and their respective obligations under
each and every other agreement to be entered into pursuant to the Distribution
Agreement and/or the Spinoffs, and Acquiror hereby guarantees the full and
timely payment and performance of all of the respective obligations and
covenants of Tenneco, the Surviving Corporation and the Energy Subsidiaries
under this Agreement and the Distribution Agreement and their respective
obligations under each and every other agreement to be entered into pursuant to
the Distribution Agreement and/or the Spinoffs, which are to be performed from
and after the Effective Time. Without limiting the generality of the foregoing
sentence, the foregoing covenant and guarantee of Acquiror shall
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specifically be deemed to apply to the obligations of the Surviving Corporation
to make any payments due to the Industrial Subsidiary pursuant to Section 6 of
the Tax Sharing Agreement attached to the Distribution Agreement in respect of
any Tax Benefit attributable to any Debt Discharge Item (as those terms are
defined in the Tax Sharing Agreement). The Industrial Subsidiary and the
Shipbuilding Subsidiary are hereby designated as, and deemed to be, third party
beneficiaries of this SECTION 6.18 (and all other provisions of this Agreement
necessary or appropriate for purposes of enforcing the terms of this SECTION
6.18). The covenants and guarantees of Acquiror set forth in this SECTION 6.18
are not in limitation of or substitution for, but are in addition to, the
Guarantees attached hereto as EXHIBIT L, which shall be executed by Acquiror
and delivered to the Industrial Subsidiary and the Shipbuilding Subsidiary on
the Closing Date.
6.19 AFFILIATES OF TENNECO. Tenneco shall promptly deliver to Acquiror a
letter
(i) identifying all Persons who may be deemed affiliates of Tenneco
under Rule 145 of the Securities Act, including, without limitation, all
directors and executive officers of Tenneco, and
(ii) representing to Acquiror that Tenneco has advised the Persons
identified in such letter of the resale restrictions with respect to
shares of Acquiror Common Stock and any Depositary Shares received in
connection with the Merger imposed by applicable securities laws. Tenneco
shall use its reasonable best efforts to obtain from each Person
identified in such letter a written agreement, substantially in the form
of EXHIBIT M.
Tenneco shall use its reasonable best efforts to obtain as soon as practicable
from any Person who may be deemed to have become an Affiliate of Tenneco after
Tenneco's delivery of the letter referred to above and prior to the Effective
Time, a written agreement substantially in the form of EXHIBIT M.
6.20 ANTITAKEOVER STATUTES. If any Takeover Statute is or may become
applicable to the transactions contemplated hereby, each of the parties hereto
and the members of its board of directors shall grant such approvals and take
such actions as are necessary so that the transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
any Takeover Statute on any of the transactions contemplated by this Agreement;
provided however, that no party hereto shall be required to take any action if
there is a substantial risk that the subject action would be held to constitute
a breach of the fiduciary duties of the board of directors of the subject
party, as determined by the subject board of directors in good faith after
consultation with and based upon the advice of independent legal counsel (who
may be the subject party's regularly engaged independent counsel).
6.21 EQUITY ISSUANCE BY ACQUIROR. Acquiror intends, subject to market
conditions, to issue, after the Closing Date, $150,000,000 to $250,000,000 of
equity securities. The initial press release with respect to the transactions
contemplated hereby will include disclosure of Acquiror's intention to effect
such issuances of additional equity securities.
6.22 RUHRGAS AG. Between the Agreement Effective Date and the Closing
Date, Tenneco shall use its reasonable best efforts to repurchase for cash the
equity interest of Ruhrgas AG in Tenneco Energy Resources Corporation, provided
that the terms of any such repurchase shall be acceptable to Acquiror. Acquiror
shall have the right to participate in any discussions or negotiations with
Ruhrgas AG with respect to the foregoing.
6.23 ADDITIONAL COVENANTS OF ACQUIROR.
(a) From the Agreement Effective Date through the Effective Time, Acquiror
shall not take, enter into or propose, or allow any of its subsidiaries to
take, enter into or propose, any action or transaction (other than actions or
transactions expressly permitted under this Agreement) which is primarily for
the purpose of reducing the value of the transactions contemplated by this
Agreement and the Distribution Agreement to the stockholders of Tenneco.
(b) From the Agreement Effective Date through the Effective Time, Acquiror
shall not enter into any internal corporate restructuring involving Acquiror
and one or more of its direct or indirect subsidiaries.
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(c) During the Black-out Period, except as expressly contemplated by this
Agreement or the Distribution Agreement in order to effect the transactions
described herein or therein:
(i) Acquiror and its subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted and use all reasonable efforts to
preserve intact their present business organizations, and preserve their
relationships with customers, suppliers and others having business
dealings with them to the end that their goodwill and ongoing businesses
shall not be impaired in any material respect at the Effective Time.
(ii) Acquiror shall not, nor shall Acquiror permit any of its
subsidiaries to, nor shall Acquiror or any of its subsidiaries propose to,
(A) declare or pay any dividends on or make other distributions in respect
of any of its capital stock (other than intercompany dividends and regular
quarterly dividends on Acquiror Common Stock), (B) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (C) repurchase or
otherwise acquire any shares of capital stock.
(iii) Except for the issuance of shares of Acquiror Common Stock upon
the exercise of outstanding stock options disclosed in Section 5.2 hereof,
Acquiror shall not issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any
class, any debt or securities convertible into, or any rights, warrants or
options to acquire, any such shares or convertible securities or debt.
(iv) Acquiror shall not amend or propose to amend its Certificate of
Incorporation or By-laws or other organizational documents.
(v) Acquiror shall not, nor shall it permit any of its subsidiaries
to, acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof or otherwise acquire or agree to acquire any assets, in each case
which are material, individually or in the aggregate, to Acquiror and its
subsidiaries taken as a whole.
(vi) Except for sales of inventory and services in the ordinary course
of business, Acquiror shall not, nor shall it permit any of its
subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree
to sell, lease, encumber or otherwise dispose of, any of its assets, which
are material, individually or in the aggregate, to Acquiror and its
subsidiaries taken as a whole.
(d) If the Stock Issuance is not approved by the requisite vote of the
holders of Acquiror Common Stock at the Acquiror Common Stockholders' Meeting,
Acquiror, prior to or as of the Effective Time, shall: (i) enter into the
Depositary Agreement with the Depositary so that the holders of Tenneco Common
Stock are issued Depositary Shares in connection with the Merger and such
holders of Depositary Shares will have rights equivalent to those of holders of
whole shares of Acquiror Preferred Stock (to the extent of their fractional
interest therein); and (ii) issue to the Depositary, and deliver to the
Depositary certificates for, the number of shares of Acquiror Preferred Stock
provided for in the SECTION 2.5 (E) (II) (B) hereof.
(e) From and after the Agreement Effective Date, Acquiror shall use its
reasonable best efforts, and shall cause its subsidiaries and Affiliates to use
their respective reasonable best efforts, to cause each of the ''EPNGC
Facilities'' (as defined in that certain $3 Billion Revolving Credit and
Competitive Advance Facility Agreement (the ''$3 Billion Credit Agreement'')
among Tenneco Inc., the several banks and other financial institutions (the
''Bank Group'') from time to time parties to the $3 Billion Credit Agreement
and The Chase Manhattan Bank, as agent (''Chase''), to become in full force and
effect no later than the ''Effective Date'' under Section 3.1 of the $3 Billion
Credit Agreement, and to remain in full force and effect from said Effective
Date through the ''Closing Date'' under Section 3.2 of the $3 Billion Credit
Agreement. From and after the Agreement Effective Date, Tenneco shall use its
reasonable best efforts, and shall cause its subsidiaries and Affiliates to use
their respective reasonable best efforts, to cause the $3 Billion Credit
Agreement to become in full force and effect in order to effect the
transactions contemplated by the Debt Realignment.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party hereto to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction, at or
prior to the Closing, of the following conditions, any or all of which may be
waived, in whole or in part, to the extent permitted by applicable law:
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the Commission under the
Securities Act, no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and no
proceedings for that purpose shall have been initiated or, to the
knowledge of Tenneco or Acquiror, threatened by the Commission.
(b) STOCKHOLDER APPROVAL. This Agreement, the Merger and the Spinoffs
(and/or any S/I Transaction, if requiring such approval) shall have been
approved and adopted by the requisite vote of the stockholders of Tenneco
in accordance with the certificate of incorporation of Tenneco and the
DGCL.
(c) HSR ACT. The waiting period under the HSR Act applicable to the
transactions contemplated hereby shall have expired or been terminated.
(d) OTHER APPROVALS. All authorizations, consents, orders and
approvals of, and declarations or filings with, and expirations of waiting
periods imposed by, any Governmental Authority or other Person which if
not obtained or filed would have a Material Adverse Effect on Acquiror or
a Material Adverse Effect on Tenneco shall have been obtained or filed, as
applicable, and shall be in full force and effect.
(e) NO ORDER. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and which
materially restricts, prevents or prohibits consummation of the Merger or
any transaction contemplated by this Agreement; it being understood that
the parties hereto hereby agree to use their reasonable best efforts to
cause any such decree, judgment, injunction or other order to be vacated
or lifted as promptly as possible.
(f) NYSE LISTING. The Acquiror Common Stock and any Depositary Shares
issuable to stockholders of Tenneco in accordance with SECTION 2.5 hereof
shall have been authorized for listing on the NYSE upon official notice of
issuance.
(g) TAX RULING. Tenneco shall have received rulings from the Internal
Revenue Service (the ''IRS RULING LETTER''), reasonably acceptable to
Tenneco and Acquiror, to the effect that:
(i) the distribution of the capital stock of the Industrial
Subsidiary on a pro rata basis to the stockholders of Tenneco as
contemplated under the Distribution Agreement will be tax-free for
federal income tax purposes to Tenneco under Section 355(c)(1) of the
Code and to the stockholders of Tenneco under Section 355(a) of the
Code;
(ii) the distribution of the capital stock of the Shipbuilding
Subsidiary on a pro rata basis to the stockholders of Tenneco as
contemplated under the Distribution Agreement will be tax-free for
federal income tax purposes to Tenneco under Section 355(c)(1) of the
Code and to the stockholders of Tenneco under Section 355(a) of the
Code;
(iii) The following distributions will be tax free to the
respective transferor corporations under Section 355(c)(1) or 361a) of
the Code and to the respective stockholders of the transferor
corporation under Section 355(a) of the Code: (A) the distribution by
the Shipbuilding Subsidiary of the capital stock of Tenneco Packaging
Inc. to Tenneco Corporation as contemplated under the Distribution
Agreement, (B) the distribution by Tenneco Corporation of the capital
stock of the Shipbuilding Subsidiary and the Industrial Subsidiary to
Tennessee Gas Pipeline Company as contemplated under
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the Distribution Agreement and (C) the distribution by Tennessee Gas
Pipeline Company of the capital stock of the Shipbuilding Subsidiary
and the Industrial Subsidiary to Tenneco Inc. as contemplated under
the Distribution Agreement.
(h) SPINOFFS CONSUMMATED. The Distribution Agreement, in substantially the
form attached hereto with such changes as do not adversely affect, other than
to a de minimis extent, the Energy Business, shall have been duly executed and
delivered by each of Tenneco, the Industrial Subsidiary and the Shipbuilding
Subsidiary, and the transactions contemplated thereby, including the Spinoffs
(and/or any S/I Transaction) and the Debt Realignment, shall have been
consummated (with only such changes).
(i) TAX OPINION. Tenneco shall have received an opinion of Jenner & Block,
in form and substance substantially as set forth in EXHIBIT N attached hereto,
dated the Closing Date, which opinion may be based on appropriate
representations of Tenneco and Acquiror that are in form and substance
reasonably satisfactory to Jenner & Block. The condition set forth in this
SECTION 7.1(I) shall be deemed satisfied to the extent the matters referred to
as to be covered by the tax opinion are instead covered by the IRS Ruling
Letter.
(j) NEW PREFERRED STOCK. The New Preferred Stock shall have been issued by
Tenneco and shall be outstanding as set forth in SECTION 6.1(D) hereof and, if
publicly issued or issued as a dividend-in-kind to the stockholders of Tenneco,
shall have been authorized for listing on the NYSE upon official notice of
issuance.
(k) DEBT REALIGNMENT. The Debt Realignment shall have been effected in
accordance with EXHIBIT C attached hereto.
(l) CHARTER AMENDMENT. The Charter Amendment shall have become effective.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND SUBSIDIARY. The
obligations of Acquiror and Subsidiary to consummate the Merger and the other
transactions contemplated herein are also subject to the satisfaction, at the
Closing, of all of the following conditions, any one or more of which may be
waived, in whole or in part, by Acquiror and Subsidiary:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Tenneco contained in this Agreement, without giving effect
to any notification to Acquiror delivered pursuant to SECTION 6.5 hereof,
shall be true and correct as of the Closing Date as though made on and as
of the Closing Date, except
(i) for changes specifically permitted by this Agreement, and
(ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as
of such date,
except in any case for such failures to be true and correct which would
not, individually or in the aggregate, have a Material Adverse Effect on
Tenneco.
(b) AGREEMENTS AND COVENANTS. Tenneco shall have performed or complied
in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the
Closing.
(c) OFFICERS' CERTIFICATES. Acquiror shall have received certificates,
dated the Closing Date, of
(i) the President or any Vice President of Tenneco certifying as
to the matters specified in SECTIONS 7.2(A) and (B) hereof and
(ii) the Secretary of Tenneco certifying as to (A) the content
and continuing effectiveness as of the Closing Date of the resolutions
of the board of directors of Tenneco approving this Agreement and the
transactions contemplated hereby, and (B) the fact that this Agreement
and the transactions contemplated hereby have been duly approved by
the requisite vote of the stockholders of Tenneco in accordance with
the certificate of incorporation of Tenneco and the DGCL and that such
approval is in full force and effect.
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(d) CERTAIN LEGISLATION. There shall not have occurred any
announcement or introduction of legislation by an Appropriate Person as a
result of which Acquiror reasonably determines, in good faith after
consultation with Tenneco and its advisors, that there exists a reasonable
likelihood that the Spinoffs or the Merger would not be tax free for
federal income tax purposes to Tenneco and Acquiror. For purposes of this
SECTION 7.2(D), an ''Appropriate Person'' is a member of the House Ways
and Means Committee or the Senate Finance Committee, the President or a
President-elect, a cabinet-level member of the Executive Branch, an
Assistant Secretary of the Treasury, the Reporting Assistant Secretary of
the Treasury for Tax Policy, the Tax Legislation Counsel, the Chief of
Staff of the Joint Committee of Taxation or a current or presumptive
Majority or Minority Leader of the House or Senate.
7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TENNECO. The obligations of
Tenneco to consummate the transactions contemplated hereby are also subject to
the satisfaction, at the Closing, of all of the following conditions, any one
or more of which may be waived, in whole or in part, by Tenneco:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Acquiror and Subsidiary contained in this Agreement, without
giving effect to any notification made by Acquiror to Tenneco pursuant to
SECTION 6.5 hereof, shall be true and correct as of the Closing Date, as
though made on and as of the Closing Date, except
(i) for changes specifically permitted by this Agreement, and
(ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as
of such date,
except in any case for such failures to be true and correct which would not,
individually or in the aggregate, have a Material Adverse Effect on Acquiror.
(b) AGREEMENTS AND COVENANTS. Each of Acquiror and Subsidiary shall
have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with
by it at or prior to the Closing.
(c) OFFICERS' CERTIFICATES. Tenneco shall have received certificates,
dated the Closing Date, of
(i) the President or any Vice President of each of Acquiror and
Subsidiary certifying as to the matters specified in SECTIONS 7.3(A)
and (B) hereof and
(ii) the Secretaries or Assistant Secretaries of Acquiror and
Subsidiary certifying as to (A) the content and continuing
effectiveness as of the Closing Date of the resolutions of the sole
stockholder of Subsidiary and of the boards of directors of Acquiror
and Subsidiary approving this Agreement and the transactions
contemplated hereby, and (B) the fact that the Stock Issuance has been
duly approved, if required, by the requisite vote of the stockholders
of Acquiror in accordance with the rules and regulations of the NYSE,
any other applicable Law and the certificate of incorporation and/or
other governing document or instrument of Acquiror, and that such
approval is in full force and effect, or, alternatively, that no such
vote of the stockholders is so required.
ARTICLE VIII
TERMINATION
8.1 GROUNDS FOR TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after adoption and approval of
this Agreement, the Merger and the Spinoffs by the stockholders of Tenneco and
approval of the Stock Issuance by the stockholders of Acquiror:
(i) by the mutual written agreement of Tenneco and Acquiror authorized
by their respective boards of directors;
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(ii) by Tenneco or by Acquiror if the Merger shall not have been
consummated prior to June 30, 1997 unless such eventuality shall be due to
the failure of the party seeking to terminate this Agreement to perform or
observe any of the covenants, agreements and conditions hereof to be
performed or observed by such party on or prior to the Closing Date;
(iii) by Tenneco or by Acquiror if Tenneco enters into an S/I
Transaction pursuant to the last sentence of SECTION 6.13 above;
(iv) by Acquiror if
(A) there has been a material breach on the part of Tenneco in
the representations, warranties or covenants of Tenneco set forth
herein, or any failure on the part of Tenneco to comply with its
obligations hereunder or any other events or circumstances shall have
occurred such that, in any such case, any of the conditions to the
consummation of the Merger set forth in SECTIONS 7.1 or 7.2 hereof
could not be satisfied on or prior to the termination date
contemplated by paragraph (ii) of this SECTION 8.1,
(B) Tenneco's stockholders entitled to vote thereat do not adopt
and approve this Agreement, and the Merger and the Spinoffs as
contemplated by Section 7.1(B) hereof at the Tenneco Stockholders'
Meeting,
(C) the board of directors of Tenneco withdraws, amends, or
modifies in a manner materially adverse to Acquiror its favorable
recommendation of this Agreement or the Merger, or approves an
agreement for or recommends to the stockholders of Tenneco an
Acquisition Transaction, provided that any action taken by Tenneco
pursuant to PARAGRAPH (V)(A) of this SECTION 8.1 or any public
announcement by Tenneco relating thereto shall not give rise to any
right of termination by Acquiror, or
(D) there has occurred since the Agreement Effective Date of any
event, change or effect which, in the aggregate with all other events,
changes or effects (giving effect to both positive and negative
events, changes and events), reduces the value of the Energy Business
as of the Agreement Effective Date by more than $75,000,000, but
excluding any negative events, changes or effects which result from
(A) any action by Acquiror or any of its subsidiaries, Affiliates,
officers, employees, agents or representatives, (B) changes in general
economic, financial (including, without limitation, equity and debt)
markets or industrial conditions, and (C) any ruling by the Federal
Energy Regulatory Commission Administrative Law Judge in the
proceedings regarding the Energy Business pending as of the Agreement
Effective Date before the Federal Energy Regulatory Commission
Administrative Law Judge, or
(v) by Tenneco if
(A) there has been a material breach on the part of Acquiror or
Subsidiary in the representations, warranties or covenants of Acquiror
or Subsidiary set forth herein, or any failure on the part of Acquiror
or Subsidiary to comply in any material respect with its obligations
hereunder or any other events or circumstances shall have occurred
such that, in any such case, any of the conditions to the consummation
of the Merger set forth in SECTIONS 7.1 or 7.3 hereof could not be
satisfied on or prior to the termination date contemplated by
paragraph (ii) of this SECTION 8.1,
(B) Tenneco's stockholders entitled to vote thereat do not adopt
and approve this Agreement,the Merger and the Spinoffs as contemplated
by SECTION 7.1(B) hereof at the Tenneco Stockholders' Meeting,
(C) the board of directors of Acquiror withdraws, amends, or
modifies in a manner materially adverse to Tenneco its favorable
recommendation of this Agreement, the Merger or the Stock Issuance, or
approves an agreement for or recommends to the stockholders of
Acquiror an Acquisition Transaction, provided that any action taken by
Acquiror pursuant to PARAGRAPH (IV)(A) of this SECTION 8.1 or any
public announcement by Acquiror relating thereto shall not give rise
to any right of termination by Tenneco, or
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(D) there has occurred since the Agreement Effective Date any
event, change or effect which, in the aggregate with all other events,
changes or effects (giving effect to both positive and negative
events, changes and events), reduces the value of Acquiror as of the
Agreement Effective Date by more than $75,000,000, but excluding any
negative events, changes or effects which result from (i) any action
by Tenneco or any of its subsidiaries, Affiliates, officers,
employees, agents or representatives, and (ii) changes in general
economic, financial (including, without limitation, equity and debt)
market or industrial conditions; or
(vi) by Tenneco or by Acquiror (but only prior to the approval of this
Agreement by Tenneco's stockholders) if
(1) Tenneco receives a Higher Proposal that it advises Acquiror
in writing Tenneco wishes to accept and
(2) Acquiror does not make, within five business days of receipt
of written notice of Tenneco's desire to accept such Higher Proposal,
an offer that the board of directors of Tenneco believes, in good
faith after consultation with its financial advisors, is at least as
favorable, from a financial point of view, to the stockholders of
Tenneco as the Higher Proposal.
8.2 EFFECT OF TERMINATION. If this Agreement is terminated by Tenneco or
by Acquiror as permitted under SECTION 8.1 hereof, except as provided in
SECTION 10.1(B) such termination shall be without liability to the terminating
party, or any stockholder, director, officer, employee, agent, consultant or
representative of such party, but such termination shall not relieve any other
party of any damages or other amounts for which it would otherwise be liable.
8.3 WAIVER. Any time prior to the Effective Time any party hereto, by
action taken or authorized by its board of directors, may, to the extent
legally allowed:
(i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties of
the other parties contained herein or in any document delivered pursuant
hereto, and
(iii) waive compliance by any of the other parties hereto with any of
the agreements or conditions contained herein. Any waiver of rights by any
party hereto shall be valid only if set forth in a written instrument
signed on behalf of such party.
ARTICLE IX
EXTENT AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS
9.1 SCOPE OF REPRESENTATIONS. Except as set forth in ARTICLES IV and V
hereof, the parties make no representations or warranties whatsoever, and each
party disclaims all liability and responsibility for any other representation,
warranty, statement or information made or communicated (orally or in writing)
to another party (including, but not limited to, any opinion, information or
advice which may have been provided to Acquiror or Subsidiary by any officer,
stockholder, director, employee, agent or consultant of Tenneco, Lazard or any
other agent or representative of Tenneco). Acquiror acknowledges and affirms
that it has made its own independent investigation, analysis and evaluation of
Tenneco and its subsidiaries, their properties and assets, operations, business
and prospects, and that it is relying exclusively upon such investigation,
analysis and evaluation in entering into this Agreement.
9.2 SURVIVAL. The representations, warranties, covenants and agreements
set forth in this Agreement and in any certificate delivered in connection
herewith shall survive until the Effective Time and, except for SECTIONS 2.3,
2.6, 6.2(B), 6.3(B), 6.4, 6.6, 6.9(A) AND (F), 6.10, 6.14(B), 6.15, 6.18, 9.1
AND 9.2 and ARTICLE X hereof and
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EXHIBIT J attached hereto, shall terminate and expire at the Effective Time and
shall be of no force or effect thereafter. If the Merger is consummated, no
party to this Agreement (or any of its present or former Affiliates) shall have
any liability to any other party (or any of its present or former Affiliates)
for any breaches of this Agreement that occurred prior to the Effective Time,
whether or not known at the Effective Time.
ARTICLE X
MISCELLANEOUS
10.1 EXPENSES.
(a) All legal and other costs and expenses shall be paid by Acquiror,
Subsidiary or Tenneco, as the case may be, depending upon which party incurred
such expenses. Subsequent to the Merger, Acquiror shall cause the Surviving
Corporation promptly to pay any and all such costs and expenses (including,
without limitation, the fees and expenses of the Exchange Agent and Tenneco's
financial advisors, and all legal, accounting and actuarial fees and expenses
incurred by Tenneco in connection with this Agreement and the transactions
contemplated hereby) incurred by Tenneco prior to the Effective Time which have
not been paid as of such time.
(b) In the event that this Agreement shall be terminated pursuant to
SECTION 8.1(III), 8.1(IV)(B), 8.1(V)(B) or 8.1(VI), Tenneco shall pay to
Acquiror, as liquidated damages, in exchange for a complete release of any
liabilities of Tenneco hereunder, the amount of $25,000,000 plus actual out of
pocket expenses (up to $10,000,000) incurred by Acquiror to third parties in
connection with the transactions contemplated hereby, payable to an account
specified by Acquiror in writing by wire transfer of immediately available
funds within 5 business days after the effective date of the subject
termination (except that (i) no such amounts shall be payable unless
concurrently therewith, Tenneco receives the aforesaid complete release (other
than with respect to the items referred to in clause (ii), as to which Acquiror
shall deliver a complete release concurrently with the receipt of payment
therefor) and (ii) the aforesaid payment for Acquiror's out of pocket expenses
shall not be payable unless and until 5 business days after receipt of
reasonably satisfactory documentation of the subject expenses). Notwithstanding
the foregoing, Tenneco shall have no obligations under this SECTION 10.1(B) due
to any termination of this Agreement pursuant to either SECTION 8.1(IV)(B) or
8.1(V)(B) unless Tenneco's Board of Directors has withdrawn, amended or
modified in a manner materially adverse to Acquiror (other than by reason of a
matter referred to in SECTION 8.1(V)(A) hereof) its recommendation concerning
the Merger or the Spinoffs prior to the vote of Tenneco's stockholders which is
the subject of SECTION 8.1(IV)(B) or 8.1(V)(B), as the case may be.
(c) Acquiror shall cause the Surviving Corporation to pay any New York
State Tax on Gains Derived from Certain Real Property Transfers (the ''Gains
Tax''), New York State Real Estate Transfer Tax and New York City Real Property
Transfer Tax (the ''Transfer Taxes'') and any similar taxes in any other
jurisdiction (and any penalties and interest with respect to such taxes) that
become payable in connection with the Merger, on behalf of the stockholders of
Tenneco. Tenneco and Acquiror shall cooperate in the preparation, execution
and filing of any required returns with respect to such taxes (including
returns on behalf of the stockholders of Tenneco) and in the determination of
the portion of the consideration allocable to the real property of Tenneco and
the Tenneco subsidiaries in New York State and City (or in any other
jurisdiction, if applicable). In order to effect the payment of any transfer
taxes subject to this SECTION 10.1(C), Tenneco shall establish a separately
maintained escrow account consisting of an adequate amount of cash from the
$25,000,000 of cash required to be on hand at Tenneco as of the Effective Time
pursuant to the Allocation Agreement. The terms of the Joint Proxy Statement
shall provide that the stockholders of Tenneco shall be deemed to have agreed
to be bound by the allocation established pursuant to this SECTION 10.1(C) in
the preparation of any return with respect to the Gains Tax and the Transfer
Taxes and any similar taxes, if applicable.
(d) This SECTION 10.1 (and all other provisions of this Agreement
necessary or appropriate for purposes of enforcing this SECTION 10.1) shall be
enforceable by the Industrial Subsidiary, which is hereby deemed a third party
beneficiary hereof.
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10.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail, return receipt requested, to the parties at the
following addresses:
(A) If to Tenneco, to:
Tenneco Inc.
1275 King Street
Greenwich, Connecticut 06831
Attention: Corporate Secretary
(B) If to the Acquiror or Subsidiary, to:
El Paso Natural Gas Company
One Paul Kayser Center
100 North Stanton Street
El Paso, Texas 79901
Attention: William A. Wise
Chairman and Chief Executive Officer
10.3 REMEDIES. Any party having any rights under any provision of this
Agreement will have all rights and remedies set forth in this Agreement and all
rights and remedies which such party may have been granted at any time under
any other agreement or contract and all of the rights which such party may have
under any law. Any party having any rights or remedies under this Agreement
will be entitled to enforce such rights specifically, without posting a bond or
other security, to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law.
10.4 CONSENT TO AMENDMENTS. Prior to the Effective Time, whether before or
after approval and adoption of this Agreement by the stockholders of Tenneco,
the provisions of this Agreement may be amended by a written agreement executed
and delivered by the parties hereto, subject to applicable law (and shall be so
amended if expressly required by the terms of this Agreement). After the
Effective Time, the provisions of this Agreement may be amended only by a
written agreement executed and delivered by Acquiror, the Surviving Corporation
and the Industrial Subsidiary. Any purported amendment to this Agreement that
does not strictly comply with the foregoing provisions of this SECTION 10.4
shall be null and void ab initio. This SECTION 10.4 (and all other provisions
of this Agreement necessary or appropriate for purposes of enforcing this
SECTION 10.4) shall be enforceable by the Industrial Subsidiary, which is
hereby deemed a third party beneficiary hereof.
10.5 SUCCESSORS AND ASSIGNORS. No party hereto may assign or delegate any
of such party's rights or obligations under or in connection with this
Agreement without the written consent of the other parties hereto, and any
attempted assignment without such consent shall be null and void ab initio. All
covenants and agreements contained in this Agreement by or on behalf of any of
the parties hereto will be binding upon and enforceable against the respective
successors and assigns of such party and will be enforceable by and will inure
to the benefit of the respective successors and permitted assigns of such
party.
10.6 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
10.7 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together will constitute one
and the same Agreement.
10.8 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
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10.9 NO THIRD-PARTY BENEFICIARIES. Except as expressly provided in
SECTIONS 2.6(G), 2.6(H), 6.3, 6.4, 6.6, 6.9, 6.18, 10.1 and 10.4 hereof, this
Agreement will not confer any rights or remedies upon any person other than the
parties hereto and their respective successors and permitted assigns.
10.10 ENTIRE AGREEMENT. Except for the Confidentiality Agreements
identified in SECTION 6.3(B) hereof, this Agreement constitutes the entire
agreement among the parties and supersedes any prior understandings, agreements
or representations by or among the parties, written or oral, that may have
related in any way to the subject matter hereof.
10.11 CONSTRUCTION. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent and no
rule of strict construction will be applied against any party. The use of the
word ''including'' in this Agreement means ''including without limitation'' and
is intended by the parties to be by way of example rather than limitation.
10.12 INCORPORATION OF EXHIBITS. The Exhibits identified in this Agreement
are incorporated herein by reference and made a part hereof.
10.13 GOVERNING LAW. ALL QUESTIONS AND/OR DISPUTES CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS
HERETO SHALL BE GOVERNED BY THE INTERNAL LAWS, AND NOT THE LAW OF CONFLICTS, OF
THE STATE OF DELAWARE. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
AND UNCONDITIONALLY AGREES TO BE SUBJECT TO, AND HEREBY CONSENTS AND SUBMITS
TO, THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE AND OF THE FEDERAL
COURTS SITTING IN THE STATE OF DELAWARE.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement, as
of the date first written above.
TENNECO INC.
By /s/ ROBERT G. SIMPSON
-------------------------------------
Title: Vice President
EL PASO NATURAL GAS COMPANY
By /s/ BRITTON WHITE, JR.
-------------------------------------
Title: Senior Vice President and
General Counsel
EL PASO MERGER COMPANY
By /s/ BRITTON WHITE, JR.
-------------------------------------
Title: Vice President
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EXHIBIT C TO
AGREEMENT AND PLAN OF MERGER
DEBT REALIGNMENT PLAN
(Capitalized terms used but not otherwise defined herein have the meanings
ascribed to them in the Agreement and Plan of Merger to which this is
attached.)
1. On or prior to the effectiveness of the Spinoffs (which will occur prior
to the Merger), Tenneco shall, or shall cause Tennessee Gas Pipeline
Company (''TGP'') and/or Tenneco Credit Corporation (''TCC'') to, tender
for, redeem, prepay, defease or let mature, or cause Industrial Subsidiary
to offer to exchange its debt for, one or more of the issues of
Consolidated Debt (as defined below) (collectively, the ''Debt
Realignment''). Concurrently with the Debt Realignment, Tenneco, TGP and
TCC will solicit the consent of the holders of such Consolidated Debt to
provide that the relevant debt instruments are amended and that the
tendered-for debt is accepted in each case immediately before the
Spinoffs. Tenneco reserves the right to determine whether or not it, TGP
and/or TCC tenders for, redeems, prepays, defeases, lets mature or leaves
outstanding, or causes Industrial Subsidiary to offer to exchange its debt
for, any particular issue of Consolidated Debt. The term ''Consolidated
Debt'' means indebtedness for money borrowed of Tenneco and its
consolidated Energy Subsidiaries (including accrued and accreted interest
and fees and expenses).
2. There will not be any restriction on the right of Tenneco and/or its
consolidated subsidiaries to incur after the date of the Agreement and
Plan of Merger and on or prior to the closing of the Merger additional
Consolidated Debt.
3. Tenneco shall, at its expense, have the sole right and authority to, and
will use its commercially reasonable efforts to, have in place a credit
facility for itself (with such guarantees of its obligations thereunder by
the Energy Subsidiaries as it deems necessary) in an aggregate principal
amount sufficient (together with other funds available to Tenneco) to fund
such tenders, redemptions, prepayments, defeasances and maturities; to pay
all the fees, costs and expenses incurred by Tenneco and its subsidiaries
in preparing for, negotiating and effecting the Spinoffs, the Merger and
the Debt Realignment and any financings in connection therewith; and for
other general corporate purposes (including, without limitation, working
capital, the repayment or refinancing of Consolidated Debt and the
payments of dividends). This facility shall be in effect at, and have a
maturity date at least 180 days following, the Effective Time. The
aggregate amount of debt including accrued and accreted interest and fees
and expenses outstanding as of the Effective Time under this facility is
hereinafter called the ''Tenneco Revolving Debt''. Acquiror shall
cooperate with Tenneco in arranging such facility and will provide,
effective as of the Effective Time, such credit support and undertakings
as shall be reasonably requested of it by the providers thereof.
4. All aspects of (x) the Debt Realignment and any financing thereof, and (y)
the terms of any consents solicited in respect of or amendments with
respect to Consolidated Debt, shall be controlled solely and exclusively
by Tenneco. As appropriate, Tenneco shall consult with and update
Acquiror from time to time in respect thereof, and Acquiror shall
cooperate with Tenneco in connection therewith. Tenneco shall select in
its sole discretion the dealer manager for any and all consent
solicitations, debt tenders and debt exchanges in respect of Consolidated
Debt.
Tenneco and Industrial Subsidiary shall have the right, in their sole
discretion, to fix the timing, tender and/or exchange prices, conditions
and other terms of and the strategy and amounts of the fees, costs and
expenses payable with respect to any and all such consent solicitations,
tenders and exchanges.
5. Tenneco, Industrial Subsidiary and Acquiror shall comply with all
applicable securities, blue sky and other laws in connection with the Debt
Realignment Plan and the other transactions contemplated hereunder.
6. Industrial Subsidiary shall transfer to Tenneco on or prior to the
Effective Time all Consolidated Debt acquired by it in any exchange offer
undertaken by it.
B-C-1
<PAGE> 48
7. Adjustments shall be made in respect of Consolidated Debt outstanding as
of the Effective Time as set forth in the Debt and Cash Allocation
Agreement attached as Exhibit C to the Distribution Agreement.
8. Notwithstanding anything contained herein, (a) contemporaneously with the
Spinoffs, Tenneco and the Energy Subsidiaries shall be removed as obligor
under (and released from liability with respect to) any indebtedness for
borrowed money for which Tenneco or its subsidiaries are liable and which
are assumed by the Industrial Subsidiary or the Shipbuilding Subsidiary,
(b) any Tenneco Revolving Debt shall be prepayable without penalty,
subject to customary notice provisions, (c) in respect of publicly-traded
Consolidated Debt, between the date of the Merger Agreement and the
Effective Time there shall be no (i) extension of maturity or average
life, (ii) increase in interest rates or (iii) adverse change in
defeasance or redemption provisions with respect to any indebtedness for
borrowed money for which Tenneco or the Energy Subsidiaries will be liable
on or after the Effective Time and (d) except for the Tenneco Revolving
Debt, no indebtedness for borrowed money of Tenneco or the Energy
Subsidiaries at the Effective Time shall contain any affirmative or
negative financial or operational covenants other than ones that are (x)
mutually acceptable to Tenneco and Acquiror or (y) no more restrictive in
the aggregate and substantially equivalent to those set forth in the
Indenture dated as of January 1, 1992 of El Paso Natural Gas Company as in
effect as of the date of the Merger Agreement (other than Section 10.05 of
the Indenture).
B-C-2
<PAGE> 1
EXHIBIT 2.2
DISTRIBUTION AGREEMENT
AMONG
TENNECO INC.,
NEW TENNECO INC.
AND
NEWPORT NEWS SHIPBUILDING INC.
(FORMERLY KNOWN AS TENNECO INTERAMERICA INC.)
DATED AS OF
NOVEMBER 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01 General . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02 References . . . . . . . . . . . . . . . . . 12
ARTICLE II PRE-DISTRIBUTION TRANSACTIONS; CERTAIN COVENANTS . . . . . . 13
SECTION 2.01 Corporate Restructuring Transactions . . . . 13
SECTION 2.02 Pre-Distribution Stock Dividends to Tenneco . 13
SECTION 2.03 Charters and Bylaws . . . . . . . . . . . . . 13
SECTION 2.04 Election of Directors of Industrial Company
and Shipbuilding Company . . . . . . . . . . 13
SECTION 2.05 Transfer and Assignment of Certain Licenses
and Permits . . . . . . . . . . . . . . . . . 14
SECTION 2.06 Transfer and Assignment of Certain
Agreements . . . . . . . . . . . . . . . . . . 14
SECTION 2.07 Consents . . . . . . . . . . . . . . . . . . 15
SECTION 2.08 Other Transactions . . . . . . . . . . . . . 15
SECTION 2.09 Election of Officers . . . . . . . . . . . . 15
SECTION 2.10 Registration Statements . . . . . . . . . . . 16
SECTION 2.11 State Securities Laws . . . . . . . . . . . . 16
SECTION 2.12 Listing Application . . . . . . . . . . . . . 16
SECTION 2.13 Certain Financial and Other Arrangements . . 16
SECTION 2.14 Director, Officer and Employee Resignations. . 17
SECTION 2.15 Transfers Not Effected Prior to the
Distributions; Transfers Deemed Effective
as of the Distribution Date . . . . . . . . . 17
SECTION 2.16 Ancillary Agreements . . . . . . . . . . . . 18
ARTICLE III THE DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.01 Tenneco Action Prior to the Distributions . . 18
SECTION 3.02 The Distributions . . . . . . . . . . . . . . 19
SECTION 3.03 Fractional Shares . . . . . . . . . . . . . . 19
ARTICLE IV CONDITIONS TO THE DISTRIBUTIONS . . . . . . . . . . . . . . 20
SECTION 4.01 Conditions Precedent to the Distributions . . 20
SECTION 4.02 No Constraint . . . . . . . . . . . . . . . . 21
SECTION 4.03 Deferral of Distribution Date . . . . . . . . 21
SECTION 4.04 Public Notice of Deferred Distribution
Date . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.01 Further Assurances . . . . . . . . . . . . . 22
SECTION 5.02 Tenneco Name . . . . . . . . . . . . . . . . 22
SECTION 5.03 Supplies and Documents . . . . . . . . . . . 22
SECTION 5.04 Assumption and Satisfaction of Liabilities . . 23
SECTION 5.05 No Representations or Warranties; Consents . . 23
SECTION 5.06 Removal of Certain Guarantees . . . . . . . . 24
SECTION 5.07 Public Announcements . . . . . . . . . . . . 24
SECTION 5.08 Intercompany Agreements . . . . . . . . . . . 25
SECTION 5.09 Tax Matters . . . . . . . . . . . . . . . . . 25
ARTICLE VI ACCESS TO INFORMATION . . . . . . . . . . . . . . . . . . . 25
SECTION 6.01 Provision, Transfer and Delivery of
Applicable Corporate Records . . . . . . . . . 25
SECTION 6.02 Access to Information . . . . . . . . . . . . 26
SECTION 6.03 Reimbursement; Other Matters . . . . . . . . 26
SECTION 6.04 Confidentiality . . . . . . . . . . . . . . . 26
SECTION 6.05 Witness Services . . . . . . . . . . . . . . 27
SECTION 6.06 Retention of Records . . . . . . . . . . . . 27
SECTION 6.07 Privileged Matters . . . . . . . . . . . . . 27
</TABLE>
A-i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE VII INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 7.01 Indemnification by Tenneco . . . . . . . . . 28
SECTION 7.02 Indemnification by Industrial Company . . . . 28
SECTION 7.03 Indemnification by Shipbuilding Company . . . 28
SECTION 7.04 Limitations on Indemnification Obligations . . 29
SECTION 7.05 Procedures for Indemnification . . . . . . . 30
SECTION 7.06 Indemnification Payments . . . . . . . . . . 31
SECTION 7.07 Other Adjustments . . . . . . . . . . . . . . 31
SECTION 7.08 Obligations Absolute . . . . . . . . . . . . 32
SECTION 7.09 Survival of Indemnities . . . . . . . . . . . 32
SECTION 7.10 Remedies Cumulative . . . . . . . . . . . . . 32
SECTION 7.11 Cooperation of the Parties With Respect to
Actions and Third Party Claims . . . . . . . 32
SECTION 7.12 Contribution . . . . . . . . . . . . . . . . 33
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 8.01 Complete Agreement; Construction . . . . . . 33
SECTION 8.02 Ancillary Agreements . . . . . . . . . . . . 33
SECTION 8.03 Counterparts . . . . . . . . . . . . . . . . 33
SECTION 8.04 Survival of Agreements . . . . . . . . . . . 33
SECTION 8.05 Responsibility for Expenses . . . . . . . . . 34
SECTION 8.06 Notices . . . . . . . . . . . . . . . . . . . 34
SECTION 8.07 Waivers . . . . . . . . . . . . . . . . . . . 34
SECTION 8.08 Amendments . . . . . . . . . . . . . . . . . 34
SECTION 8.09 Assignment . . . . . . . . . . . . . . . . . 35
SECTION 8.10 Successors and Assigns . . . . . . . . . . . 35
SECTION 8.11 Termination . . . . . . . . . . . . . . . . . 35
SECTION 8.12 Third Party Beneficiaries . . . . . . . . . . 35
SECTION 8.13 Attorney Fees . . . . . . . . . . . . . . . . 35
SECTION 8.14 Title and Headings . . . . . . . . . . . . . 35
SECTION 8.15 Exhibits and Schedules . . . . . . . . . . . 35
SECTION 8.16 Specific Performance . . . . . . . . . . . . 35
SECTION 8.17 Governing Law . . . . . . . . . . . . . . . . 35
SECTION 8.18 Severability . . . . . . . . . . . . . . . . 36
SECTION 8.19 Subsidiaries . . . . . . . . . . . . . . . . 36
SECTION 8.20 Shipbuilding Hedging Transactions . . . . . . 36
</TABLE>
A-ii
<PAGE> 4
EXHIBITS
EXHIBIT A Benefits Agreement--[Intentionally Omitted from Joint
Proxy Statement-Prospectus]
EXHIBIT B Corporate Restructuring Transactions--[Intentionally
Omitted from Joint Proxy Statement-Prospectus]
EXHIBIT C Debt and Cash Allocation Agreement
EXHIBIT D Energy Business Pro Forma Balance Sheet--[Intentionally
Omitted from Joint Proxy Statement-Prospectus]
EXHIBIT E Energy Subsidiaries--[Intentionally Omitted from Joint
Proxy Statement-Prospectus]
EXHIBIT F Industrial Business Pro Forma Balance Sheet--[Intentionally
Omitted from Joint Proxy Statement-Prospectus]
EXHIBIT G Industrial Subsidiaries--[Intentionally Omitted from
Joint Proxy Statement-Prospectus]
EXHIBIT H Insurance Agreement--[Intentionally Omitted from Joint
Proxy Statement-Prospectus]
EXHIBIT I Shipbuilding Business Pro Forma Balance Sheet--
[Intentionally Omitted from Joint Proxy Statement-Prospectus]
EXHIBIT J Shipbuilding Subsidiaries--[Intentionally Omitted from
Joint Proxy Statement-Prospectus]
EXHIBIT K Tax Sharing Agreement--[Intentionally Omitted from Joint
Proxy Statement-Prospectus]
EXHIBIT L TBS Services Agreement--[Intentionally Omitted from Joint
Proxy Statement-Prospectus]
EXHIBIT M Transition Services Agreement--[Intentionally Omitted from
Joint Proxy Statement-Prospectus]
EXHIBIT N Form of Restated Certificate of Incorporation--
[Intentionally Omitted from Joint Proxy Statement-Prospectus]
EXHIBIT O Form of Bylaws--[Intentionally Omitted from Joint Proxy
Statement-Prospectus]
EXHIBIT P Tenneco Transition Trademark License--[Intentionally Omitted
from Joint Proxy Statement-Prospectus]
EXHIBIT Q Shipbuilding Transition Trademark License--[Intentionally
Omitted from Joint Proxy Statement-Prospectus]
Omitted exhibits available upon request.
A-iii
<PAGE> 5
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT is made and entered into as of this first day
of November, 1996 by and among TENNECO INC., a Delaware corporation
("TENNECO"), NEW TENNECO INC., a Delaware corporation ("INDUSTRIAL
COMPANY"), and NEWPORT NEWS SHIPBUILDING INC. (formerly known as Tenneco
InterAmerica Inc.), a Delaware corporation ("SHIPBUILDING COMPANY").
R E C I T A L S
WHEREAS, Tenneco, El Paso Natural Gas Company, a Delaware corporation
("ACQUIROR"), and El Paso Merger Company, a Delaware corporation and an
indirect wholly owned subsidiary of Acquiror ("ACQUIROR SUBSIDIARY"), have
entered into an Amended and Restated Agreement and Plan of Merger, dated as of
June 19, 1996 (as amended from time to time, the "MERGER AGREEMENT"),
providing for the merger of Acquiror Subsidiary with and into Tenneco (the
"MERGER"), with Tenneco continuing as the surviving corporation of the Merger
(the "SURVIVING CORPORATION"), upon the terms and subject to the conditions
set forth in the Merger Agreement;
WHEREAS, the Board of Directors of Tenneco has deemed it appropriate and
advisable, prior to the Merger and as contemplated by the Merger Agreement, to:
(a) separate and divide the existing businesses of Tenneco so that (i)
the automotive, packaging and business services businesses shall be owned
directly and indirectly by Industrial Company, and (ii) the shipbuilding
business shall be owned directly and indirectly by Shipbuilding Company;
and
(b) distribute, following such separation and division and immediately
prior to the Merger, as a dividend to the holders of shares of Common
Stock, par value $5.00 per share, of Tenneco (the "TENNECO COMMON
STOCK") all of the outstanding shares of common stock, $.01 par value, of
Industrial Company (the "INDUSTRIAL COMMON STOCK") and all of the
outstanding shares of common stock, $.01 par value, of Shipbuilding
Company (the "SHIPBUILDING COMMON STOCK");
WHEREAS, following such separation, division and distributions, the
remaining businesses, operations, assets and liabilities of Tenneco and its
remaining direct and indirect subsidiaries shall be acquired by Acquiror
pursuant to the Merger; and
WHEREAS, each of Tenneco, Industrial Company and Shipbuilding Company has
determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect such separation, division and
distributions and to set forth other agreements that will govern certain other
matters prior to and following such separation, division and distributions.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. GENERAL. Unless otherwise defined herein or unless the
context otherwise requires, the following terms will have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined).
"ACTION" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority or any arbitration
tribunal.
"ACQUIROR SUBSIDIARY" has the meaning ascribed to such term in the
recitals to this Agreement.
"AFFILIATE" means, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control
with the Person specified.
A-1
<PAGE> 6
"AGENT" means First Chicago Trust Company of New York, or such other
trust company or bank designated by Tenneco, who shall act as agent for
the holders of Tenneco Common Stock in connection with the Distributions.
"AGREEMENT" means this Distribution Agreement by and among Tenneco,
Industrial Company and Shipbuilding Company, including any amendments
hereto and each Schedule and Exhibit attached hereto.
"ANCILLARY AGREEMENTS" means all of the written agreements,
instruments, understandings, assignments or other arrangements (other than
this Agreement or the Merger Agreement) entered into by the parties hereto
or any other member of their respective Group in connection with the
Corporate Restructuring Transactions, the Distributions and the other
transactions contemplated hereby or thereby, including, without
limitation, the following:
(i) the Debt and Cash Allocation Agreement;
(ii) the Insurance Agreement;
(iii) the Conveyancing and Assumption Instruments;
(iv) the Benefits Agreement;
(v) the Tax Sharing Agreement;
(vi) the Transition Services Agreement;
(vii) the TBS Services Agreement; and
(viii) the Transition Trademark License.
"BENEFITS AGREEMENT" means the Benefits Agreement by and among
Tenneco, Industrial Company and Shipbuilding Company, which agreement
shall be entered into on or prior to the Distribution Date in the form
attached hereto as EXHIBIT A, except for such changes or modifications
thereto that do not, individually or in the aggregate, adversely affect
the Energy Business other than to a de minimis extent.
"BOOKS AND RECORDS" means all books, records, manuals, agreements
and other materials (in any form or medium), including without limitation,
all mortgages, licenses, indentures, contracts, financial data, customer
lists, marketing materials and studies, advertising materials, price
lists, correspondence, distribution lists, supplier lists, production
data, sales and promotional materials and records, purchasing materials
and records, personnel records, manufacturing and quality control records
and procedures, blue prints, research and development files, records, data
and laboratory books, accounts records, sales order files, litigation
files, computer files, microfiche, tape recordings and photographs.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor law.
"COMMISSION" means the United States Securities and Exchange
Commission.
"CONSENTS" has the meaning ascribed to such term in SECTION 2.07
hereof.
"CONVEYANCING AND ASSUMPTION INSTRUMENTS" means, collectively, the
various written agreements, instruments and other documents to be entered
into to effect the Corporate Restructuring Transactions or to otherwise
effect the transfer of assets and the assumption of Liabilities in the
manner contemplated by this Agreement, the Ancillary Agreements and the
Corporate Restructuring Transactions.
"CORPORATE RESTRUCTURING TRANSACTIONS" means, collectively, (a) each
of the distributions, transfers, conveyances, contributions, assignments
and other transactions described and set forth on EXHIBIT B attached
hereto, and (b) such other distributions, transfers, conveyances,
contributions, assignments and other transactions (so long as such other
distributions, transfers, conveyances, contributions, assignments and
other transactions do not, individually or in the aggregate, adversely
affect the Energy Business (other than to a de minimis extent) or
materially delay or prevent the consummation of the Merger) that may be
required to be accomplished, effected or consummated by any of Tenneco,
Industrial Company,
A-2
<PAGE> 7
Shipbuilding Company or any of their respective Subsidiaries and
Affiliates in order to separate and divide, in a series of transactions
that, to the extent intended to qualify for tax-free transactions under
the Code, shall qualify for tax-free treatment under the Code, the
existing businesses of Tenneco so that, except as otherwise expressly set
forth on EXHIBIT B hereto:
(i) the Industrial Assets, Industrial Liabilities and Industrial
Business shall be owned, directly and indirectly, by Industrial
Company;
(ii) the Shipbuilding Assets, Shipbuilding Liabilities and
Shipbuilding Business shall be owned, directly and indirectly, by
Shipbuilding Company; and
(iii) the businesses, assets and liabilities of Tenneco that
remain after the separations and divisions described in clauses (i)
and (ii) above, including, without limitation, the Energy Assets,
Energy Liabilities and Energy Business, are, after giving effect to
the Distributions, owned, directly and indirectly, by Tenneco.
"DEBT AND CASH ALLOCATION AGREEMENT" means the Debt and Cash
Allocation Agreement by and among Tenneco, Industrial Company and
Shipbuilding Company, which agreement shall be entered into on or prior to
the Distribution Date in the form attached hereto as EXHIBIT C, except for
such changes or modifications thereto that do not, individually or in the
aggregate, adversely affect the Energy Business (other than to a de
minimis extent) or materially delay or prevent the consummation of the
Merger.
"DEBT REALIGNMENT" has the meaning ascribed to such term in the
Merger Agreement.
"DEBT REALIGNMENT DOCUMENTS" means all documents furnished by
Tenneco or Industrial Company to any holders of indebtedness or debt
securities of Tenneco or any of its Subsidiaries or filed by Tenneco or
Industrial Company in connection therewith with any Governmental Authority
or securities exchange in connection with the Debt Realignment.
"DISTRIBUTIONS" means the Industrial Distribution and the
Shipbuilding Distribution.
"DISTRIBUTION DATE" means such date as may hereafter be determined
by Tenneco's Board of Directors as the date on which the Distributions
shall be effected.
"DISTRIBUTION RECORD DATE" means the close of business on the date
determined by the Board of Directors of Tenneco for the purpose of
determining the holders of record of Tenneco Common Stock entitled to
participate in the Distributions.
"DGCL" means the Delaware General Corporation Law, as amended.
"ENERGY ASSETS" means, collectively, all the rights and assets owned
by Tenneco or any of its Subsidiaries as of the close of business on the
Distribution Date other than the Industrial Assets, the Shipbuilding
Assets and the capital stock of Industrial Company and Shipbuilding
Company, including without limitation:
(i) the capital stock of the Energy Subsidiaries;
(ii) all of the assets included on the Energy Business Pro Forma
Balance Sheet which are owned by Tenneco and its Subsidiaries as of
the close of business on the Distribution Date and any other asset
acquired by Tenneco or any of its Subsidiaries from the date of the
Energy Business Pro Forma Balance Sheet to the close of business on
the Distribution Date that is owned by Tenneco and its Subsidiaries as
of the close of business on the Distribution Date and that is of a
type or nature that would have resulted in such asset being included
as an asset on the Energy Business Pro Forma Balance Sheet had it been
acquired on or prior to the date of the Energy Business Pro Forma
Balance Sheet, determined on a basis consistent with the determination
of assets included on the Energy Business Pro Forma Balance Sheet; and
(iii) all of the assets and rights expressly allocated to Tenneco
or any of the Energy Subsidiaries under this Agreement, any of the
Ancillary Agreements or the Merger Agreement.
"ENERGY BUSINESS" means the businesses (other than the Industrial
Business and the Shipbuilding Business) that, after giving effect to the
Corporate Restructuring Transactions, are or were conducted by:
(i) Tenneco, the Energy Subsidiaries or any of the other members
of the Energy Group;
(ii) any other division, Subsidiary or investment of Tenneco, or
any Energy Subsidiary or any of the other members of the Energy Group
managed or operated or in existence as of the date of this Agreement
or any prior time, unless such other division, Subsidiary or
investment is expressly included
A-3
<PAGE> 8
in either the Industrial Group or the Shipbuilding Group immediately
after giving effect to the Corporate Restructuring Transactions; and
(iii) any business entity acquired or established by or for
Tenneco or any of the Energy Subsidiaries between the date of this
Agreement and the close of business on the Distribution Date that is
engaged in, or intends to engage in, any business that is of a type or
nature that would have resulted in such business being included either
as a Subsidiary or an asset of Tenneco on the Energy Business Pro
Forma Balance Sheet had it been acquired or established on or prior to
the date of the Energy Business Pro Forma Balance Sheet, determined on
a basis consistent with the determination of the Subsidiaries and
assets included on the Energy Business Pro Forma Balance Sheet.
"ENERGY BUSINESS PRO FORMA BALANCE SHEET" means the Pro Forma
Consolidated Balance Sheet for Tenneco and the Energy Subsidiaries as of
June 30, 1996 attached hereto as EXHIBIT D.
"ENERGY GROUP" means Tenneco, the Energy Subsidiaries and the
corporations, partnerships, joint ventures, investments and other entities
that represent equity investments of Tenneco or any of the Energy
Subsidiaries following consummation of the Corporate Restructuring
Transactions and the Distributions.
"ENERGY INDEMNITEES" means:
(i) Tenneco, the Energy Subsidiaries and each Affiliate thereof
after giving effect to the Corporate Restructuring Transactions and
the Distributions; and
(ii) each of the respective past, present and future directors,
officers, employees and agents of any of the entities described in the
immediately preceding clause (i) and each of the heirs, executors,
successors and assigns of such directors, officers, employees and
agents.
"ENERGY LIABILITIES" means, collectively, all of the Liabilities of
Tenneco and the Energy Subsidiaries and each of the other members of the
Energy Group remaining after giving effect to the Corporate Restructuring
Transactions, the Distributions and the transactions contemplated under
the Debt and Cash Allocation Agreement, including without limitation:
(i) all of the Liabilities included on the Energy Business Pro
Forma Balance Sheet which remain outstanding as of the close of
business on the Distribution Date;
(ii) all Liabilities which are incurred or which otherwise accrue
or are accrued at any time on, prior to or after the date of the
Energy Business Pro Forma Balance Sheet and which arise or arose out
of, or in connection with, the Energy Assets or the Energy Business,
determined on a basis consistent with the determination of Liabilities
of Tenneco included on the Energy Business Pro Forma Balance Sheet;
(iii) all of the Liabilities of Tenneco, the Energy Subsidiaries
or any of the other members of the Energy Group under, or to be
retained or assumed by Tenneco, any Energy Subsidiary or any of the
other members of the Energy Group pursuant to the Corporate
Restructuring Transactions, this Agreement, any of the Ancillary
Agreements or the Merger Agreement;
(iv) all of the Liabilities of the parties hereto or their
respective Subsidiaries (whenever arising whether prior to, on or
following the Distribution Date) arising out of or in connection with
or otherwise relating to the management or conduct before or after the
Distribution Date of the Energy Business;
(v) all Securities Liabilities relating to or arising out of the
information and data (financial or otherwise and including pro forma
financial data) provided by or on behalf of Acquiror for inclusion in
the Registration Statement on Form S-4 of Industrial Company
registering certain debt securities of New Tenneco to be exchanged for
certain existing debt securities of Tenneco and certain of its
Subsidiaries in connection with the Debt Realignment, including,
without limitation, information, disclosures and data relating to or
concerning Acquiror, Acquiror Subsidiary, the business, operations and
management of the Energy Business and/or Energy Group following the
Merger and any refinancing or other transactions which Acquiror,
Acquiror Subsidiary and/or any member of the Energy Group anticipates
consummating following the Merger (collectively "ENERGY EXCHANGE
LIABILITIES"); and
A-4
<PAGE> 9
(vi) all other Liabilities of Tenneco, the Energy Subsidiaries or
any of the other members of the Energy Group (which do not constitute
Industrial Liabilities or Shipbuilding Liabilities), which other
Liabilities of Tenneco, the Energy Subsidiaries or any of the other
members of the Energy Group shall include, without limitation, any and
all Liabilities arising out of or relating to any Action or Third
Party Claim by any Governmental Authority or any other Person that is
based on (A) any violations or alleged violations by Tenneco, its
Subsidiaries (prior to giving effect to the Distributions) and/or any
of their respective directors, officers, employees, agents or
representatives of any of the provisions of the Exchange Act,
Securities Act, or the rules and regulations of the Commission
promulgated thereunder or any other securities or similar Law (other
than Liabilities (collectively "INFORMATION STATEMENT LIABILITIES")
for violations or alleged violations that arise out of, or in
connection with, the Industrial Information Statement, the
Shipbuilding Information Statement or information or data in the Joint
Proxy Statement or the Debt Realignment Documents concerning the
Shipbuilding Business or the Industrial Business), (B) any alleged
breach of fiduciary duty by the Board of Directors of Tenneco or any
member thereof, or (C) any stockholder derivative suit or other
similar Actions.
"ENERGY RECORDS" has the meaning ascribed to such term in SECTION
6.01(C) hereof.
"ENERGY SUBSIDIARIES" means the Subsidiaries of Tenneco set forth on
EXHIBIT E hereto and all other Subsidiaries of Tenneco other than
Shipbuilding Company, Industrial Company, the Shipbuilding Subsidiaries
and the Industrial Subsidiaries.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions (including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. 9601, et seq.), whether now or hereafter in existence, relating to
the environment, natural resources or human health and safety or
endangered or threatened species of fish, wildlife and plants or to
emissions, discharges or releases of pollutants, contaminants, petroleum
or petroleum products, chemicals or industrial, toxic or hazardous
substances or wastes into the environment, including, without limitation,
ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic or hazardous substances
or wastes or the cleanup or other remediation thereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE FILE MATERIAL" means the Registration Statements, as
amended at the times they were declared effective under the Exchange Act,
the related Information Statements or any amendment or supplement thereto,
the related letter of transmittal, any related stockholder communication,
any other exhibits to any of the foregoing and any amendment or supplement
thereto, in each case including all information incorporated by reference
therein.
"GAAP" means United States generally accepted accounting principles
and practices, as in effect on the date of this Agreement, as promulgated
by the Financial Accounting Standards Board and its predecessors.
"GOVERNMENTAL AUTHORITY" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal,
state or local, domestic or foreign.
"GROUP" means (i) with respect to Tenneco, the Energy Group, (ii)
with respect to Industrial Company, the Industrial Group, and (iii) with
respect to Shipbuilding Company, the Shipbuilding Group.
"INDEMNIFIABLE LOSSES" means, with respect to any Person, any and
all losses, liabilities, penalties, claims, damages, demands, costs and
expenses (including, without limitation, reasonable attorneys' fees,
investigation expenses and any and all other out-of-pocket expenses, but
excluding any punitive or consequential damages) or other Liabilities
whatsoever that are assessed, imposed, awarded against, incurred or
accrued by such Person either (a) in investigating, preparing for,
defending against or otherwise arising out of or in connection with any
Actions, any potential or threatened Actions or any Third Party
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Claims for which such Person would be entitled to indemnification under
ARTICLE VII hereof, or (b) in respect of any other event, occurrence or
matter for which such Person would be entitled to indemnification under
ARTICLE VII hereof, in each case whether accrued or incurred on, before or
after the date of this Agreement.
"INDEMNIFYING PARTY" has the meaning ascribed to such term in
SECTION 7.04(A) hereof.
"INDEMNITEE" has the meaning ascribed to such term in SECTION
7.04(A) hereof.
"INDUSTRIAL ASSETS" means, collectively, all of the following rights
and assets that are owned by Tenneco or any of its Subsidiaries as of the
close of business on the Distribution Date:
(i) the capital stock of the Industrial Subsidiaries;
(ii) all of the assets included on the Industrial Business Pro
Forma Balance Sheet that are owned by Tenneco or any of its
Subsidiaries as of the close of business on the Distribution Date;
(iii) all of the assets and rights expressly allocated to
Industrial Company or any of the Industrial Subsidiaries under this
Agreement or any of the Ancillary Agreements; and
(iv) any other asset acquired by Tenneco or any of its
Subsidiaries from the date of the Industrial Business Pro Forma
Balance Sheet to the close of business on the Distribution Date that
is owned by Tenneco or any of its Subsidiaries as of the close of
business on the Distribution Date and that is of a type or nature that
would have resulted in such asset being included as an asset on the
Industrial Business Pro Forma Balance Sheet had it been acquired on or
prior to the date of the Industrial Business Pro Forma Balance Sheet,
determined on a basis consistent with the determination of the assets
included on the Industrial Business Pro Forma Balance Sheet.
"INDUSTRIAL BUSINESS" means the businesses that, after giving effect
to the Corporate Restructuring Transactions, are conducted by:
(i) the Industrial Company, the Industrial Subsidiaries or any of
the other members of the Industrial Group; and
(ii) any business entity acquired or established by or for
Tenneco, Industrial Company or any of the Industrial Subsidiaries
between the date of this Agreement and the close of business on the
Distribution Date that is engaged in, or intends to engage in, any
business that is of a type or nature that would have resulted in such
business being included either as a Subsidiary or an asset of
Industrial Company on the Industrial Business Pro Forma Balance Sheet
had it been acquired or established on or prior to the date of the
Industrial Business Pro Forma Balance Sheet, determined on a basis
consistent with the determination of the Subsidiaries and assets
included on the Industrial Business Pro Forma Balance Sheet.
"INDUSTRIAL BUSINESS PRO FORMA BALANCE SHEET" means the Pro Forma
Consolidated Balance Sheet for Industrial Company and the Industrial
Subsidiaries as of June 30, 1996 attached hereto as EXHIBIT F.
"INDUSTRIAL COMMON SHARES" means the shares of Industrial Common
Stock owned by Tenneco after giving effect to the stock dividend provided
for in SECTION 2.02(A) hereof.
"INDUSTRIAL COMMON STOCK" has the meaning ascribed to such term in
the recitals to this Agreement.
"INDUSTRIAL COMPANY" means New Tenneco Inc., a Delaware corporation.
"INDUSTRIAL DISTRIBUTION" means the distribution on the Distribution
Date as a dividend to holders of record of shares of Tenneco Common Stock
as of the Distribution Record Date of all of the outstanding Industrial
Common Shares owned by Tenneco on the basis provided in SECTION 3.02
hereof.
"INDUSTRIAL GROUP" means Industrial Company, the Industrial
Subsidiaries and the corporations, partnerships, joint ventures,
investments and other entities that represent equity investments of any of
Industrial Company or any of the Industrial Subsidiaries following the
consummation of the Corporate Restructuring Transactions and the
Distributions.
"INDUSTRIAL INDEMNITEES" means:
(i) Industrial Company and each Affiliate thereof after giving
effect to the Corporate Restructuring Transactions and the
Distributions; and
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(ii) each of the respective past, present and future directors,
officers, employees and agents of any of the entities described in the
immediately preceding clause (i) and each of the heirs, executors,
successors and assigns of any of such directors, officers, employees
and agents.
"INDUSTRIAL INFORMATION STATEMENT" means the information statement
or registration statement relating to Industrial Company and the
transactions contemplated hereby to be distributed to holders of Tenneco
Common Stock pursuant to the terms of this Agreement.
"INDUSTRIAL LIABILITIES" means, collectively, all of the Liabilities
of Industrial Company, the Industrial Subsidiaries and each of the other
members of the Industrial Group after giving effect to the Corporate
Restructuring Transactions, the Distributions and the transactions
contemplated under the Debt and Cash Allocation Agreement, including,
without limitation:
(i) all of the Liabilities included on the Industrial Business
Pro Forma Balance Sheet which remain outstanding as of the close of
business on the Distribution Date;
(ii) all Liabilities (other than Energy Exchange Liabilities)
which are incurred or which otherwise accrue or are accrued at any
time on, prior to or after the date of the Industrial Business Pro
Forma Balance Sheet and which arise or arose out of, or in connection
with (A) the Industrial Assets, the Industrial Business or the Prior
Industrial Businesses, determined on a basis consistent with the
determination of Liabilities of Industrial Company on the Industrial
Business Pro Forma Balance Sheet, including Information Statement
Liabilities which arise or arose out of or in connection with, the
Industrial Information Statement or which arise or arose out of or in
connection with information or data in the Joint Proxy Statement or
the Debt Realignment Documents concerning the Industrial Business
(except to the extent such Liabilities constitute Shipbuilding
Securities Liabilities or are otherwise based on any of (i) the
actions or inactions of Shipbuilding Company, any other member of the
Shipbuilding Group, or any director, officer or employee of the
Shipbuilding Company or any other member of the Shipbuilding Group or
any underwriter or investment banking firm of any member of the
Shipbuilding Group (or any of their directors, officers, employees,
advisors or representatives) (collectively, the "SHIPBUILDING
PARTIES," or individually, a "SHIPBUILDING PARTY"), or (ii) the
information or data provided in writing by any Shipbuilding Party
expressly for inclusion in the Industrial Information Statement), or
(B) the Shipbuilding Information Statement to the extent such
Information Statement Liabilities are based on information or data
concerning directly and solely the Industrial Company or the
Industrial Business that is provided in writing by Industrial Company
(or any other member of its Group or any Affiliate thereof after
giving effect to the Distributions) expressly for inclusion in the
Shipbuilding Information Statement;
(iii) all of the Liabilities of Industrial Company, the
Industrial Subsidiaries or any of the other members of the Industrial
Group under, or to be retained or assumed by Industrial Company, any
Industrial Subsidiary or any of the other members of the Industrial
Group pursuant to this Agreement or any of the Ancillary Agreements;
and
(iv) all of the Liabilities of the parties hereto or their
respective Subsidiaries (whenever arising whether prior to, at or
following the Distribution Date) arising out of or in connection with
or otherwise relating to the management or conduct before or after the
Distribution Date of the Industrial Business.
"INDUSTRIAL RECORDS" has the meaning ascribed to such term in
SECTION 6.01(A) hereof.
"INDUSTRIAL REGISTRATION STATEMENT" means the Registration Statement
on Form 10 to be filed with the Commission pursuant to the requirements of
Section 12 of the Exchange Act and the rules and regulations thereunder in
order to register the Industrial Common Stock under Section 12(b) of the
Exchange Act.
"INFORMATION STATEMENT LIABILITIES" has the meaning ascribed to such
term in CLAUSE (V) of the definitions herein of Energy Liabilities.
"INFORMATION STATEMENTS" means the Industrial Information Statement
and the Shipbuilding Information Statement.
"INDUSTRIAL SUBSIDIARIES" means the Subsidiaries listed on EXHIBIT G
hereto.
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"INSURANCE AGREEMENT" means the Insurance Agreement by and among
Tenneco, Industrial Company and Shipbuilding Company, which agreement
shall be entered into on or prior to the Distribution Date in the form
attached hereto as EXHIBIT H except for such changes or modifications
thereto that do not, individually or in the aggregate, adversely affect
the Energy Business other than to a de minimis extent.
"INSURANCE PROCEEDS" means, with respect to any insured party, those
monies, net of any applicable premium adjustment, retrospectively-rated
premium, deductible, retention, or cost of reserve paid or held by or for
the benefit of such insured, which are either:
(i) received by an insured from an insurance carrier; or
(ii) paid by an insurance carrier on behalf of an insured.
"JOINT PROXY STATEMENT" has the meaning ascribed to such term in the
Merger Agreement.
"LAW" means all laws, statutes and ordinances and all regulations,
rules and other pronouncements of Governmental Authorities having the
effect of law of the United States, any foreign country, or any domestic
or foreign state, province, commonwealth, city, country, municipality,
territory, protectorate, possession or similar instrumentality, or any
Governmental Authority thereof.
"LIABILITIES" means any and all debts, liabilities, obligations,
responsibilities, response actions, losses, damages (whether compensatory,
punitive or treble), fines, penalties and sanctions, absolute or
contingent, matured or unmatured, liquidated or unliquidated, foreseen or
unforeseen, joint, several or individual, asserted or unasserted, accrued
or unaccrued, known or unknown, whenever arising, including, without
limitation, those arising under or in connection with any Law (including
any Environmental Law), Action, threatened Action, order or consent decree
of any Governmental Authority or any award of any arbitration tribunal,
and those arising under any contract, guarantee, commitment or
undertaking, whether sought to be imposed by a Governmental Authority,
private party, or party to this Agreement, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil
statute, or otherwise, and including any costs, expenses, interest,
attorneys' fees, disbursements and expense of counsel, expert and
consulting fees and costs related thereto or to the investigation or
defense thereof.
"MERGER" has the meaning ascribed to such term in the recitals to
this Agreement.
"MERGER AGREEMENT" has the meaning ascribed to such term in the
recitals to this Agreement.
"NYSE" means the New York Stock Exchange.
"PERSON" means any natural person, corporation, business trust,
joint venture, association, company, partnership, limited liability
company or other entity, or any government, or any agency or political
subdivision thereof.
"PRIOR INDUSTRIAL BUSINESSES" means, collectively, all divisions,
Subsidiaries, other business entities or investments of Tenneco (or one of
its Subsidiaries) that, at any time prior to the date of the Industrial
Business Pro Forma Balance Sheet, were included in the "automotive
parts" or "packaging" segments for purposes of segment reporting in any
of Tenneco's Annual Reports on Form 10-K, and were sold, transferred,
otherwise disposed of or discontinued prior to such date.
"PRIOR SHIPBUILDING BUSINESSES" means, collectively, all divisions,
Subsidiaries, other business entities or investments of Tenneco (or one of
its Subsidiaries) that, at any time prior to the date of the Shipbuilding
Business Pro Forma Balance Sheet, were included in the "shipbuilding"
segment for purposes of segment reporting in any of Tenneco's Annual
Reports on Form 10-K, and were sold, transferred, otherwise disposed of or
discontinued prior to such date.
"PRIVILEGE" has the meaning ascribed to such term in SECTION 6.07(A)
hereof.
"PRIVILEGED INFORMATION" has the meaning ascribed to such term in
SECTION 6.07(A) hereof.
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"REGISTRATION STATEMENTS" means the Industrial Registration
Statement and the Shipbuilding Registration Statement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES LIABILITIES" means any and all losses, liabilities,
penalties, claims, damages, demands, costs or expenses or other
Liabilities whatsoever that are assessed, imposed, awarded against,
incurred or accrued by a Person arising out of or relating in whole or in
part to any Action, any potential or threatened Action or any Third Party
Claim (or potential or threatened Third Party Claim) by any Governmental
Authority or any other Person that is based on any violations or alleged
violations of the Securities Act, Exchange Act, any of the rules or
regulations of the Commission promulgated under the Securities Act or
Exchange Act, or any other securities or other similar Law.
"SHIPBUILDING ASSETS" means, collectively, all of the following
rights and assets that are owned by Tenneco and or any of its Subsidiaries
as of the close of business on the Distribution Date:
(i) the capital stock of the Shipbuilding Subsidiaries;
(ii) all of the assets included on the Shipbuilding Business Pro
Forma Balance Sheet that are owned by Tenneco or any of its
Subsidiaries as of the close of business on the Distribution Date;
(iii) all of the assets and rights expressly allocated to
Shipbuilding Company or any of the Shipbuilding Subsidiaries under
this Agreement or any of the Ancillary Agreements; and
(iv) any other asset acquired by Tenneco or any of its
Subsidiaries from the date of the Shipbuilding Business Pro Forma
Balance Sheet to the close of business on the Distribution Date that
is owned by Tenneco or any of its Subsidiaries as of the close of
business on the Distribution Date and that is of a nature or type that
would have resulted in such asset being included as an asset on the
Shipbuilding Business Pro Forma Balance Sheet had it been acquired on
or prior to the date of the Shipbuilding Business Pro Forma Balance
Sheet, determined on a basis consistent with the determination of the
assets included on the Shipbuilding Business Pro Forma Balance Sheet.
"SHIPBUILDING BUSINESS" means the businesses that, after giving
effect to the Corporate Restructuring Transactions, are conducted by:
(i) the Shipbuilding Company, the Shipbuilding Subsidiaries or
any of the other members of the Shipbuilding Group; and
(ii) any business entity acquired or established by or for
Tenneco, Shipbuilding Company or any of the Shipbuilding Subsidiaries
between the date of this Agreement and the close of business on the
Distribution Date that is engaged in, or intends to engage in, any
business that is of a type or nature that would have resulted in such
business being included either as a Subsidiary or an asset of
Shipbuilding Company on the Shipbuilding Business Pro Forma Balance
Sheet had it been acquired or established on or prior to the date of
the Shipbuilding Business Pro Forma Balance Sheet, determined on a
basis consistent with the determination of the Subsidiaries and assets
included on the Shipbuilding Business Pro Forma Balance Sheet.
"SHIPBUILDING BUSINESS PRO FORMA BALANCE SHEET" means the Pro Forma
Consolidated Balance Sheet for Shipbuilding Company and the Shipbuilding
Subsidiaries (prepared in accordance with GAAP) as of June 30, 1996
attached hereto as EXHIBIT I.
"SHIPBUILDING COMMON SHARES" means the Shares of Shipbuilding Common
Stock owned by Tenneco after giving effect to the stock dividend provided
for in SECTION 2.02(B) hereof.
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"SHIPBUILDING COMMON STOCK" has the meaning ascribed to such term in
the recitals to this Agreement.
"SHIPBUILDING COMPANY" means Newport News Shipbuilding Inc.
(formerly known as Tenneco InterAmerica Inc.), a Delaware corporation.
"SHIPBUILDING DISTRIBUTION" means the distribution on the
Distribution Date as a dividend to holders of record of shares of Tenneco
Common Stock as of the Distribution Record Date, of all of the outstanding
Shipbuilding Common Shares owned by Tenneco on the basis provided in
SECTION 3.02 hereof.
"SHIPBUILDING FINANCING MATERIALS" means any registration statement,
private placement memorandum, offering circular, prospectus, information
memorandum and/or any other document or filing (with the Commission or any
Governmental Authority or the NYSE or other stock exchange) prepared by or
on behalf of Shipbuilding Company (or its Affiliates) and distributed to
prospective lenders or prospective purchasers of any debt or equity
securities of the Shipbuilding Company (or any other member of the
Shipbuilding Group) in connection with any of the transactions
contemplated under this Agreement, the Merger Agreement or any of the
Ancillary Agreements, including, without limitation, the Confidential
Information Memorandum dated September 1996 relating to the Senior Credit
Facility (as defined in the Shipbuilding Information Statement), the 144A
Offering Memorandum relating to the Senior Subordinated Notes and Senior
Notes (as such terms are defined in the Shipbuilding Information
Statement), and the registration statement on Form S-1 to be filed by
Shipbuilding Company after the Distribution Date to register the Senior
Subordinated Notes and Senior Notes under the Securities Act and all
related documents.
"SHIPBUILDING GROUP" means Shipbuilding Company, the Shipbuilding
Subsidiaries and the corporations, partnerships, joint ventures,
investments and other entities that represent equity investments of
Shipbuilding Company or any of the Shipbuilding Subsidiaries following the
consummation of the Corporate Restructuring Transactions and the
Distributions.
"SHIPBUILDING INDEMNITEES" means:
(i) Shipbuilding Company and each Affiliate thereof after giving
effect to the Corporate Restructuring Transactions and the
Distributions; and
(ii) each of the respective past, present and future directors,
officers, employees and agents of any of the entities described in the
immediately preceding clause (i) and each of the heirs, executors,
successors and assigns of any of such directors, officers, employees
and agents.
"SHIPBUILDING INFORMATION STATEMENT" means the information statement
or registration statement relating to Shipbuilding Company and the
transactions contemplated hereby to be distributed to holders of Tenneco
Common Stock pursuant to the terms of this Agreement.
"SHIPBUILDING LIABILITIES" means, collectively, all of the
Liabilities of Shipbuilding Company, the Shipbuilding Subsidiaries and
each of the other members of the Shipbuilding Group after giving effect to
the Corporate Restructuring Transactions, the Distributions and the
transactions contemplated by the Debt and Cash Allocation Agreement,
including, without limitation:
(i) all of the Liabilities included on the Shipbuilding Business
Pro Forma Balance Sheet that remain outstanding as of the close of
business on the Distribution Date;
(ii) all other Liabilities that are incurred or which accrue or
are accrued at any time on, prior to or after the date of the
Shipbuilding Business Pro Forma Balance Sheet and that arise or arose
out of, or in connection with, the Shipbuilding Assets, the
Shipbuilding Business or the Prior Shipbuilding Businesses, determined
on a basis consistent with the determination of Liabilities of
Shipbuilding Company on the Shipbuilding Business Pro Forma Balance
Sheet, including, without limitation,
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Shipbuilding Securities Liabilities and Information Statement
Liabilities to the extent such Information Statement Liabilities (A)
arise or arose out of or in connection with the Shipbuilding
Information Statement or information or data in the Joint Proxy
statement or the Debt Realignment Documents concerning the
Shipbuilding Business or (B) are based on information or data provided
in writing by Shipbuilding Company (or any member of its Group or any
Affiliate (after giving effect to the Distributions) thereof)
expressly for inclusion in the Industrial Information Statement;
(iii) all of the Liabilities of Shipbuilding Company, the
Shipbuilding Subsidiaries or any of the other members of the
Shipbuilding Group under, or to be retained or assumed by Shipbuilding
Company, any Shipbuilding Subsidiary or any of the other members of
the Shipbuilding Group pursuant to, this Agreement or any of the
Ancillary Agreements; and
(iv) all the Liabilities of the parties hereto or their
respective Subsidiaries (whenever arising whether prior to, on or
following the Distribution Date) arising out of or in connection with
or otherwise relating to the management or conduct before or after the
Distribution Date of the Shipbuilding Business.
"SHIPBUILDING RECORDS" has the meaning ascribed to such term in SECTION
6.01(B) hereof.
"SHIPBUILDING REGISTRATION STATEMENT" means the Registration
Statement on Form 10 to be filed with the Commission pursuant to the
requirements of Section 12 of the Exchange Act and the rules and
regulations promulgated thereunder in order to register the Shipbuilding
Common Stock under Section 12(b) of the Exchange Act.
"SHIPBUILDING SECURITIES LIABILITIES" means any and all Securities
Liabilities arising out of, or in connection with, or relating in whole or
in part to any of the following: (i) the Shipbuilding Registration
Statement; (ii) the Shipbuilding Information Statement (whether in the
form as an Appendix to the Joint Proxy Statement or as the Information
Statement included in the Shipbuilding Registration Statement); (iii) the
Shipbuilding Financing Materials; (iv) any of the information, data
(financial or otherwise) or disclosures in (or any alleged failure to set
forth certain information, data or disclosures in) the Shipbuilding
Registration Statement, Shipbuilding Information Statement (whether in the
form as an Appendix to the Joint Proxy Statement or as the Information
Statement included in the Shipbuilding Registration Statement) or
Shipbuilding Financing Materials, irrespective of (A) who authored,
prepared or provided such information, data or disclosures (or, as the
case may be, the section or discussion in which certain information, data
or disclosure is alleged to have been omitted), or (B) the form in which,
or medium through which (e.g., verbally, in writing, etc.), such
information, data, disclosures, discussion or section were provided; or
(v) any of the information, data (financial or otherwise) or disclosures
in (or any alleged failure to set forth certain information, data or
disclosures in) the Joint Proxy Statement or the Debt Realignment
Documents concerning any matter relating to the business, operations,
management, financial results or potential risks of (or pending or
threatened claims or investigations relating to) the Shipbuilding
Business, Prior Shipbuilding Businesses, Shipbuilding Assets or
Shipbuilding Liabilities, irrespective of (A) who authored, prepared or
provided such information data or disclosures (or, as the case may be, the
section or discussion in which certain information, data or disclosure is
alleged to have been omitted), or (B) the form in which, or medium through
which (e.g., verbally, in writing, etc.), such information, data,
disclosure, section or discussion were provided.
"SHIPBUILDING SUBSIDIARIES" means the Subsidiaries listed on EXHIBIT
J hereto.
"SUBSIDIARY" means, with respect to any Person:
(i) any corporation of which at least a majority in interest of
the outstanding voting stock (having by the terms thereof voting power
under ordinary circumstances to elect a majority of the directors of
such corporation, irrespective of whether or not at the time stock of
any other class or classes of such corporation shall have or might
have voting power by reason of the happening of a contingency) is at
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the time, directly or indirectly, owned or controlled by such Person
or by such Person and one or more of its Subsidiaries; or
(ii) any non-corporate entity in which such Person or such Person
and one or more Subsidiaries of such Person either (a) directly or
indirectly, at the date of determination thereof, has at least
majority ownership interest, or (b) at the date of determination is a
general partner or an entity performing similar functions (e.g.,
manager of a Limited Liability Company or a trustee of a trust).
"SURVIVING CORPORATION" has the meaning ascribed to such term in the
recitals to this Agreement.
"TAX" or "TAXES" means any income, gross income, gross receipts,
profits, capital stock, franchise, withholding, payroll, social security,
workers compensation, unemployment, disability, property, ad valorem,
stamp, excise, occupation, services, sales, use, license, lease, transfer,
import, export, value added, alternative minimum, estimated or other
similar tax (including any fee, assessment or other charge in the nature
of or in lieu of any tax) imposed by any governmental entity or political
subdivision thereof, and any interest, penalties, additions to tax, or
additional amounts in respect of the foregoing.
"TAX SHARING AGREEMENT" means the Tax Sharing Agreement by and among
Tenneco, Shipbuilding Company, Industrial Company and Acquiror, which
agreement shall be entered into on or prior to the Distribution Date in
the form attached hereto as EXHIBIT K, except for such changes or
modifications thereto that do not, individually or in the aggregate,
adversely affect the Energy Business other than to a de minimis extent.
"TENNECO" means Tenneco Inc., a Delaware corporation.
"TENNECO COMMON STOCK" has the meaning ascribed to such term in the
recitals to this Agreement.
"TENNECO CORPORATE RECORDS" has the meaning ascribed to such term in
SECTION 6.01(A) hereof.
"TENNECO HOLDERS" means the holders of record of Tenneco Common
Stock as of the Distribution Record Date.
"TENNECO TRADEMARKS AND TRADENAMES" means all trademarks, service
marks, and tradenames containing "TENNECO", "TEN", or "TENN" or
variations thereof, along with their respective applications and
registrations wherever used or registered; provided, however, that the
term shall not include the word "Tennessee" to the extent such word is
used in the business and operations of Tennessee Gas Pipeline Company or
otherwise in the Energy Business.
"TERMINATION DATE" means the date on which this Agreement is
terminated pursuant to and in accordance with the provisions of SECTION
8.11 of this Agreement.
"THIRD PARTY CLAIM" has the meaning as defined in SECTION 7.05(A)
hereof.
"TBS SERVICES AGREEMENT" means the Services Agreement by and among
Industrial Company, Shipbuilding Company and Tenneco Business Services
Inc., which agreement shall be entered into on or prior to the
Distribution Date in substantially the form attached hereto as EXHIBIT L
and which agreement Tenneco and the Energy Business will not become a
party to and not be bound by without the consent of Acquiror, which
Acquiror may withhold in its sole discretion.
"TRANSITION SERVICES AGREEMENT" means the Transition Services
Agreement by and between Tenneco and Tenneco Business Services Inc., which
agreement shall be entered into on or prior to the Distribution Date in
the form attached hereto as EXHIBIT M.
"TRANSITION TRADEMARK LICENSE" has the meaning ascribed to such term
in SECTION 5.02 hereof.
SECTION 1.02. REFERENCES. References to an "EXHIBIT" or to a "SCHEDULE"
are, unless otherwise specified, to one of the Exhibits or Schedules attached
to this Agreement, and references to a "SECTION" are, unless otherwise
specified, to one of the Sections of this Agreement.
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ARTICLE II
PRE-DISTRIBUTION TRANSACTIONS;
CERTAIN COVENANTS
SECTION 2.01. CORPORATE RESTRUCTURING TRANSACTIONS. On or prior to the
Distribution Date (but in all events prior to the Distributions) and otherwise
in accordance with the terms and provisions set forth in EXHIBIT B hereto, each
of Tenneco, Industrial Company and Shipbuilding Company shall, and shall cause
each of their respective Subsidiaries to, as applicable, take such action or
actions as is necessary to cause, effect and consummate the Corporate
Restructuring Transactions. Each of Tenneco, Shipbuilding Company and
Industrial Company hereby agrees that any one or more of the Corporate
Restructuring Transactions may be modified, supplemented or eliminated;
provided such modification, supplement or elimination (a) is determined to be
necessary or appropriate (i) to divide the existing businesses of Tenneco so
that the automotive, packaging and business services businesses shall be owned,
directly and indirectly, by Industrial Company and the shipbuilding business
shall be owned, directly and indirectly, by Shipbuilding Company, or (ii) to
obtain a ruling from the Internal Revenue Service as described in Section
7.1(g) of the Merger Agreement, and (b) does not, individually or in the
aggregate, adversely affect the Energy Business (other than to a de minimis
extent) or materially delay or prevent the consummation of the Merger.
SECTION 2.02. PRE-DISTRIBUTION STOCK DIVIDENDS TO TENNECO. On or prior to
the Distribution Date (but in all events prior to the Distributions):
(a) INDUSTRIAL COMPANY STOCK DIVIDEND. Industrial Company shall issue
to Tenneco, as a stock dividend, the number of shares of Industrial Common
Stock as is required to effect the Industrial Distribution, as certified
by the Agent. In connection therewith, Tenneco shall deliver to Industrial
Company for cancellation the share certificate (or certificates) currently
held by it representing all Industrial Common Stock, and Industrial
Company shall issue a new certificate (or certificates) to Tenneco
representing the total number of Industrial Common Shares to be owned by
Tenneco after giving effect to such stock dividend.
(b) SHIPBUILDING COMPANY STOCK DIVIDEND. Shipbuilding Company shall
issue to Tenneco, as a stock dividend, the number of shares of
Shipbuilding Common Stock as is required to effect the Shipbuilding
Distribution, as certified by the Agent. In connection therewith, Tenneco
shall deliver to Shipbuilding Company for cancellation the share
certificate (or certificates) currently held by it representing all
Shipbuilding Common Stock, and Shipbuilding Company shall issue a new
certificate (or certificates) representing the total number of
Shipbuilding Common Shares to be owned by Tenneco after giving effect to
such stock dividend.
SECTION 2.03. CHARTERS AND BYLAWS.
(a) CERTIFICATE OF INCORPORATION AND BYLAWS OF INDUSTRIAL COMPANY. On
or prior to the Distribution Date (but in all events prior to the
Distributions), Tenneco and Industrial Company shall each take all
necessary actions so that, as of the Distribution Date, the Restated
Certificate of Incorporation and Bylaws of Industrial Company will be
substantially in the forms set forth in EXHIBITS N and O, respectively.
(b) CERTIFICATE OF INCORPORATION AND BYLAWS OF SHIPBUILDING COMPANY.
On or prior to the Distribution Date (but in all events prior to the
Distributions), Tenneco and Shipbuilding Company shall each take all
necessary actions so that, as of the Distribution Date, the Restated
Certificate of Incorporation and Bylaws of Shipbuilding Company will be
substantially in the forms set forth in EXHIBITS N and O, respectively.
SECTION 2.04. ELECTION OF DIRECTORS OF INDUSTRIAL COMPANY AND SHIPBUILDING
COMPANY. On or prior to the Distribution Date, Tenneco, as the sole stockholder
of each of Industrial Company and Shipbuilding Company, shall take all
necessary action so that as of the Distribution Date the directors of
Industrial Company and of Shipbuilding Company will be as set forth in the
Industrial Information Statement and the Shipbuilding Information Statement,
respectively.
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SECTION 2.05. TRANSFER AND ASSIGNMENT OF CERTAIN LICENSES AND PERMITS.
(a) LICENSES AND PERMITS RELATING TO THE INDUSTRIAL BUSINESS. On or
prior to the Distribution Date, or as soon as reasonably practicable
thereafter, each of Tenneco and Shipbuilding Company shall (and, if
applicable, shall cause any other Person over which it has legal or
effective direct or indirect control to), severally but not jointly, duly
and validly transfer or cause to be duly and validly transferred to the
appropriate member of the Industrial Group (as directed by Industrial
Company) all transferrable licenses, permits and authorizations issued by
any Governmental Authority that relate to the Industrial Business but
which are held in the name of any member of the Energy Group or the
Shipbuilding Group, or any of their respective employees, officers,
directors, stockholders or agents.
(b) LICENSES AND PERMITS RELATING TO THE SHIPBUILDING BUSINESS. On or
prior to the Distribution Date, or as soon as reasonably practicable
thereafter, each of Tenneco and Industrial Company shall (and, if
applicable, shall cause any other Person over which it has legal or
effective direct or indirect control to), severally but not jointly, duly
and validly transfer or cause to be duly and validly transferred to the
appropriate member of the Shipbuilding Group (as directed by Shipbuilding
Company) all transferrable licenses, permits and authorizations issued by
any Governmental Authority that relate to the Shipbuilding Business but
which are held in the name of any member of the Energy Group or the
Industrial Group, or any of their respective employees, officers,
directors, stockholders or agents.
(c) LICENSES AND PERMITS RELATING TO THE ENERGY BUSINESS. On or prior
to the Distribution Date, or as soon as reasonably practicable thereafter,
each of Industrial Company and Shipbuilding Company shall (and, if
applicable, shall cause any other Person over which it has legal or
effective direct or indirect control to), severally but not jointly, duly
and validly transfer or cause to be duly and validly transferred to the
appropriate member of the Energy Group (as directed by Tenneco) all
transferrable licenses, permits and authorizations issued by any
Governmental Authority that relate to the Energy Business but which are
held in the name of any member of the Industrial Group or the Shipbuilding
Group, or any of their respective employees, officers, directors,
stockholders or agents.
SECTION 2.06. TRANSFER AND ASSIGNMENT OF CERTAIN AGREEMENTS.
(a) TRANSFER AND ASSIGNMENT OF ENERGY BUSINESS AGREEMENTS. On or prior to
the Distribution Date, or as soon as reasonably practicable thereafter, and
subject to the limitations set forth in this SECTION 2.06, each of Industrial
Company and Shipbuilding Company shall (and, if applicable, shall cause any of
the other members of its Group over which it has legal or effective direct or
indirect control to), severally but not jointly, assign, transfer and convey to
Tenneco (or such other member of the Energy Group as Tenneco shall direct) all
of its (or such other member of its Group's) right, title and interest in and
to any and all agreements that relate exclusively to the Energy Business or any
member of the Energy Group.
(b) TRANSFER AND ASSIGNMENT OF INDUSTRIAL BUSINESS AGREEMENTS. On or prior
to the Distribution Date, or as soon as reasonably practicable thereafter, and
subject to the limitations set forth in this SECTION 2.06, each of Tenneco and
Shipbuilding Company shall (and, if applicable, shall cause any of the other
members of its Group over which it has legal or effective direct or indirect
control to), severally but not jointly, assign, transfer and convey to
Industrial Company (or such other member of the Industrial Group as Industrial
Company shall direct) all of its (or such other member of its Group's) right,
title and interest in and to any and all agreements that relate exclusively to
the Industrial Business or any member of the Industrial Group.
(c) TRANSFER AND ASSIGNMENT OF SHIPBUILDING BUSINESS AGREEMENTS. On or
prior to the Distribution Date, or as soon as reasonably practicable
thereafter, and subject to the limitations set forth in this SECTION 2.06, each
of Tenneco and Industrial Company shall (and, if applicable, shall cause any of
the other members of its Group over which it has legal or effective direct or
indirect control to), severally but not jointly, assign, transfer and convey to
Shipbuilding Company (or such other member of the Shipbuilding Group as
Shipbuilding Company shall direct) all of its (or such other member of its
Group's) right, title and interest in and to any and all agreements that relate
exclusively to the Shipbuilding Business or any member of the Shipbuilding
Group.
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(d) JOINT AGREEMENTS. Subject to the provisions of SECTION 2.06(F) below,
any agreement to which any party hereto (or any other member of such party's
Group) is a party that inures to the benefit of more than one of the Energy
Business, the Industrial Business and the Shipbuilding Business shall be
assigned in part, at the expense and risk of the assignee, on or prior to the
Distribution Date or as soon as reasonably practicable thereafter, so that each
party (or such other member of such party's Group) shall be entitled to the
rights and benefits inuring to its business under such agreement.
(e) OBLIGATIONS OF ASSIGNEES. The assignee of any agreement assigned, in
whole or in part, hereunder (an "ASSIGNEE") shall, as a condition to such
assignment, assume and agree to pay, perform, and fully discharge all
obligations of the assignor under such agreement (whether such obligations
arose or were incurred prior to, on or subsequent to the Distribution Date and
irrespective of whether such obligations have been asserted as of the
Distribution Date) or, in the case of a partial assignment under SECTION
2.06(D) above, such Assignee's related portion of such obligations as
determined in accordance with the terms of the relevant agreement, where
determinable on the face thereof, and otherwise as determined in accordance
with the practice of the parties prior to the Distributions. Furthermore, the
Assignee shall use its commercially reasonable efforts to cause the assignor of
such agreement to be released from its obligations under the assigned
agreements.
(f) NO ASSIGNMENT OF CERTAIN AGREEMENTS. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall not constitute an agreement to
assign any agreement, in whole or in part, or any rights thereunder if the
agreement to assign or attempt to assign, without the consent of a third party,
would constitute a breach thereof or in any way adversely affect the rights of
the Assignee thereof until such consent is obtained. If an attempted assignment
thereof would be ineffective or would adversely affect the rights of any party
hereto so that the Assignee would not, in fact, receive all such rights, the
parties hereto will cooperate with each other to effect any arrangement
designed reasonably to provide for the Assignee the benefits of, and to permit
the Assignee to assume liabilities under, any such agreement, subject to the
remaining sentences of this SECTION 2.06(F). There are certain software license
agreements held in the name of a member of the Industrial Group that presently
inure to the benefit of the Energy Business, the Industrial Business and the
Shipbuilding Business. Notwithstanding any other provision of this Agreement,
each such license agreement shall continue to be held by that member of the
Industrial Group without any obligation of any party to cause the assignment or
inurement to the benefit of such license agreement, or to effect any
arrangement to provide such benefit, to the Energy Business or the Shipbuilding
Business, except where the license agreement expressly permits the benefits and
obligations to be divided among the Businesses or as may be negotiated with the
licensor by that member of the Industrial Group and such other parties and the
Industrial Business shall use commercially reasonable efforts to do so.
SECTION 2.07. CONSENTS. The parties hereto shall use their best efforts to
obtain any third-party consents or approvals that are required to consummate
the Corporate Restructuring Transactions, the Distributions and the other
transactions contemplated herein (the "CONSENTS").
SECTION 2.08. OTHER TRANSACTIONS. On or prior to the Distribution Date
(but in all events prior to the Distributions), each of Tenneco, Industrial
Company and Shipbuilding Company shall have consummated those other
transactions in connection with the Corporate Restructuring Transactions and
the Distributions that are contemplated by the Information Statements and the
ruling request submission by Tenneco to the Internal Revenue Service dated June
27, 1996 (as subsequently supplemented), and not specifically referred to in
SECTIONS 2.01 through 2.07 above, subject, however, to the limitations set
forth in SUBPARAGRAPH (B) of SECTION 2.01 above.
SECTION 2.09. ELECTION OF OFFICERS. On or prior to the Distribution Date,
each of Tenneco, Industrial Company and Shipbuilding Company shall, as
applicable, take all actions necessary and desirable so that as of the
Distribution Date the officers of Industrial Company and of Shipbuilding
Company will be as set forth in the Industrial Information Statement and the
Shipbuilding Information Statement, respectively.
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SECTION 2.10. REGISTRATION STATEMENTS. Each of Tenneco, Industrial Company
and Shipbuilding Company shall prepare, and shall file with the Commission, the
Registration Statements in accordance with the terms of this SECTION 2.10.
(a) PREPARATION AND FILING OF INDUSTRIAL REGISTRATION STATEMENT.
Tenneco, Industrial Company and Shipbuilding Company shall prepare or
cause to be prepared, and Industrial Company shall file or cause to be
filed with the Commission, the Industrial Registration Statement. The
Industrial Registration Statement shall include or incorporate by
reference the Industrial Information Statement setting forth appropriate
disclosure concerning Tenneco, Industrial Company, Shipbuilding Company,
the Distributions and such other matters as may be required to be
disclosed therein by the provisions of the Exchange Act and the rules and
regulations promulgated thereunder. Tenneco and Industrial Company shall
take all such actions as may be reasonably necessary or appropriate in
order to cause the Industrial Registration Statement to become effective
by order of the Commission pursuant to the Exchange Act.
(b) PREPARATION AND FILING OF SHIPBUILDING REGISTRATION STATEMENT.
Tenneco, Industrial Company and Shipbuilding Company shall prepare or
cause to be prepared, and Shipbuilding Company shall file or cause to be
filed with the Commission, the Shipbuilding Registration Statement. The
Shipbuilding Registration Statement shall include or incorporate by
reference the Shipbuilding Information Statement setting forth appropriate
disclosure concerning Tenneco, Shipbuilding Company, Industrial Company,
the Distributions and such other matters as may be required to be
disclosed therein by the provisions of the Exchange Act and the rules and
regulations promulgated thereunder. Tenneco and Shipbuilding Company
shall take all such actions as may be reasonably necessary or appropriate
in order to cause the Shipbuilding Registration Statement to become
effective by order of the Commission pursuant to the Exchange Act.
SECTION 2.11. STATE SECURITIES LAWS. Prior to the Distribution Date,
Tenneco, Industrial Company and Shipbuilding Company shall take all such action
as may be necessary or appropriate under the securities or blue sky laws of
states or other political subdivisions of the United States in order to effect
the Distributions.
SECTION 2.12. LISTING APPLICATION. Prior to the Distribution Date,
Tenneco, Industrial Company and Shipbuilding Company shall prepare and file
with the NYSE listing applications and related documents and shall take all
such other actions with respect thereto as shall be necessary or desirable in
order to cause the NYSE to list on or prior to the Distribution Date, subject
to official notice of issuance, the Industrial Common Shares and the
Shipbuilding Common Shares.
SECTION 2.13. CERTAIN FINANCIAL AND OTHER ARRANGEMENTS.
(a) SETTLEMENT OF INTERCOMPANY ACCOUNTS BETWEEN INDUSTRIAL GROUP AND
ENERGY GROUP. All intercompany receivables, payables and loans (other than
receivables, payables and loans otherwise specifically provided for in any of
the Ancillary Agreements or hereunder), including, without limitation, in
respect of any cash balances, any cash balances representing deposited checks
or drafts for which only a provisional credit has been allowed or any cash held
in any centralized cash management system, between any member of the Industrial
Group, on the one hand, and any member of the Energy Group, on the other hand,
shall, as of the close of business on the Distribution Date, be settled,
capitalized or converted into ordinary trade accounts, in each case as may be
agreed in writing prior to the Distribution Date by duly authorized
representatives of Tenneco, Industrial Company and the Acquiror.
(b) SETTLEMENT OF INTERCOMPANY ACCOUNTS BETWEEN SHIPBUILDING GROUP AND
ENERGY GROUP. All intercompany receivables, payables and loans (other than
receivables, payables and loans otherwise specifically provided for in any of
the Ancillary Agreements or hereunder), including, without limitation, in
respect of any cash balances, any cash balances representing deposited checks
or drafts for which only a provisional credit has been allowed or any cash held
in any centralized cash management system, between any member of the
Shipbuilding Group, on the one hand, and any member of the Energy Group, on the
other hand, shall, as of the close of business on the Distribution Date, be
settled, capitalized or converted into ordinary trade accounts, in each case as
may be agreed in writing prior to the Distribution Date by duly authorized
representatives of Tenneco, Shipbuilding Company and the Acquiror.
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(c) SETTLEMENT OF INTERCOMPANY ACCOUNTS BETWEEN INDUSTRIAL GROUP AND
SHIPBUILDING GROUP. All intercompany receivables, payables and loans (other
than receivables, payables and loans otherwise specifically provided for in any
of the Ancillary Agreements or hereunder), including, without limitation, in
respect of any cash balances, any cash balances representing deposited checks
or drafts for which only a provisional credit has been allowed or any cash held
in any centralized cash management system, between any member of the Industrial
Group, on the one hand, and any member of the Shipbuilding Group, on the other
hand, shall, as of the close of business on the Distribution Date, be settled,
capitalized or converted into ordinary trade accounts, in each case as may be
agreed in writing prior to the Distribution Date by duly authorized
representatives of Industrial Company and Shipbuilding Company.
(d) OPERATIONS IN ORDINARY COURSE. Except as otherwise provided in this
Agreement, the Merger Agreement or any Ancillary Agreement, during the period
from the date of this Agreement through the Distribution Date, each of Tenneco,
Industrial Company and Shipbuilding Company shall, and shall cause any entity
that is a Subsidiary of such party at any time during such period to, conduct
its business in a manner substantially consistent with current and past
operating practices and in the ordinary course, including, without limitation,
with respect to the payment and administration of accounts payable and the
collection and administration of accounts receivable, the purchase of capital
assets and equipment and the management of inventories.
SECTION 2.14. DIRECTOR, OFFICER AND EMPLOYEE RESIGNATIONS. Subject to the
provisions of SECTION 2.04 and SECTION 2.09 above:
(a) RESIGNATIONS BY DIRECTORS AND EMPLOYEES OF THE ENERGY GROUP.
Tenneco shall cause all of its directors and all employees of the Energy
Group to resign, effective as of the close of business on the Distribution
Date, from all boards of directors or similar governing bodies of each
member of the Industrial Group or the Shipbuilding Group on which they
serve, and from all positions as officers or employees of any member of
the Industrial Group or the Shipbuilding Group, except as otherwise set
forth in the Information Statements or mutually agreed to in writing on or
prior to the Distribution Date by Tenneco, on the one hand, and, as
applicable, Industrial Company and/or Shipbuilding Company, on the other
hand.
(b) RESIGNATIONS BY DIRECTORS AND EMPLOYEES OF THE INDUSTRIAL GROUP.
Industrial Company shall cause all of its directors and all employees of
the Industrial Group to resign, effective as of the close of business on
the Distribution Date, from all boards of directors or similar governing
bodies of each member of the Energy Group or the Shipbuilding Group on
which they serve, and from all positions as officers or employees of any
member of the Energy Group or the Shipbuilding Group, except as otherwise
set forth in the Information Statements or mutually agreed to in writing
on or prior to the Distribution Date by Industrial Company, on the one
hand, and, as applicable, Tenneco and/or Shipbuilding Company, on the
other hand.
(c) RESIGNATIONS BY DIRECTORS AND EMPLOYEES OF THE SHIPBUILDING GROUP.
Shipbuilding Company shall cause all of its directors and all employees of
the Shipbuilding Group to resign, effective as of the close of business on
the Distribution Date, from all boards of directors or similar governing
bodies of each member of the Energy Group or the Industrial Group on which
they serve, and from all positions as officers or employees of any member
of the Energy Group or the Industrial Group, except as otherwise set forth
in the Information Statements or mutually agreed to in writing on or prior
to the Distribution Date by Shipbuilding Company, on the one hand, and, as
applicable, Industrial Company and/or Tenneco, on the other hand.
SECTION 2.15. TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTIONS; TRANSFERS
DEEMED EFFECTIVE AS OF THE DISTRIBUTION DATE. To the extent that any transfers
contemplated by this ARTICLE II shall not have been consummated on or prior to
the Distribution Date, the parties hereto shall cooperate (and shall cause each
of their respective Affiliates and each member of their respective Groups over
which they have legal or effective direct or indirect control to cooperate) to
effect such transfers as promptly following the Distribution Date as shall be
practicable. Nothing herein shall be deemed to require the transfer of any
assets or the assumption of any Liabilities which by their terms or operation
of Law cannot be transferred or assumed; provided, however, that the parties
hereto shall cooperate (and shall cause each of their respective Affiliates and
each member of their respective Groups over which they have legal or effective
direct or indirect control to cooperate) to seek to
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obtain any necessary consents or approvals for the transfer of all assets and
Liabilities contemplated to be transferred pursuant to this ARTICLE II. In the
event that any such transfer of assets or Liabilities has not been consummated,
from and after the Distribution Date the party retaining such asset or
Liability (or, as applicable, such other member or members of such party's
Group) shall hold such asset in trust for the use and benefit of the party
entitled thereto (at the expense of the party entitled thereto) or retain such
Liability for the account of the party by whom such Liability is to be assumed
pursuant hereto, as the case may be, and take such other action as may be
reasonably requested by the party to whom such asset is to be transferred, or
by whom such Liability is to be assumed, as the case may be, in order to place
such party, insofar as is reasonably possible, in the same position as would
have existed had such asset or Liability been transferred or assumed as
contemplated hereby. As and when any such asset or Liability becomes
transferable or assumable, such transfer shall be effected forthwith. As of the
Distribution Date, each party hereto (or, if applicable, such other members of
such party's Group) shall be deemed to have acquired (or, as applicable,
retained) complete and sole beneficial ownership over all of the assets,
together with all rights, powers and privileges incident thereto, and shall be
deemed to have assumed in accordance with the terms of this Agreement all of
the Liabilities, and all duties, obligations and responsibilities incident
thereto, which such party (or any other member of such party's Group) is
entitled to acquire or required to assume pursuant to the terms of this
Agreement.
SECTION 2.16. ANCILLARY AGREEMENTS. Prior to the Distribution Date, each
of Tenneco, Industrial Company and Shipbuilding Company shall enter into,
and/or where applicable shall cause such other members of their respective
Groups to enter into, (a) the Ancillary Agreements and (b) any other agreements
in respect of the Corporate Restructuring Transactions and the Distributions as
are reasonably necessary or appropriate in connection with the transactions
contemplated hereby and thereby so long as such agreements do not materially
delay or prevent consummation of the Merger or adversely affect the Energy
Business other than to a de minimis extent.
ARTICLE III
THE DISTRIBUTIONS
SECTION 3.01. TENNECO ACTION PRIOR TO THE DISTRIBUTIONS. Subject to the
terms and conditions set forth herein, Tenneco shall take, or cause to be
taken, the following acts or actions in connection with, and to otherwise
effect in accordance with the terms of this Agreement, the Distributions.
(a) DECLARATION OF DISTRIBUTIONS AND ESTABLISHMENT OF DISTRIBUTION
DATE. The Board of Directors of Tenneco shall, in its sole discretion and
subject to and in accordance with the applicable rules of the NYSE and
provisions of the DGCL, declare the Distributions and establish the
Distribution Record Date, the Distribution Date, the date on which
Industrial Common Shares, Shipbuilding Common Shares and any cash in lieu
of fractional shares shall be mailed to the Tenneco Holders and all
appropriate procedures in connection with the Distributions to the extent
not provided for herein; provided, however, that no such action shall
create any obligation on the part of Tenneco to effect the Distributions
or in any way limit Tenneco's power of termination as set forth in SECTION
8.11 hereof or alter the consequences of any such termination from those
specified in such Section.
(b) NOTICE TO NYSE. Tenneco shall, to the extent possible, give the
NYSE not less than ten days advance notice of the Distribution Record Date
in compliance with Rule 10b-17 under the Exchange Act.
(c) MAILING OF INDUSTRIAL INFORMATION STATEMENT. Tenneco shall, as
soon as practicable after the Industrial Registration Statement shall have
been declared effective under the Exchange Act, cause the Industrial
Information Statement to be mailed to the Tenneco Holders.
(d) MAILING OF SHIPBUILDING INFORMATION STATEMENT. Tenneco shall, as
soon as practicable after the Shipbuilding Registration Statement shall
have been declared effective under the Exchange Act, cause the
Shipbuilding Information Statement to be mailed to the Tenneco Holders.
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SECTION 3.02. THE DISTRIBUTIONS.
(a) DUTIES AND OBLIGATIONS OF TENNECO. Subject to the conditions contained
herein, on the Distribution Date but effective immediately following the close
of business on the Distribution Date Tenneco shall:
(i) deliver to the Agent the share certificates representing the
Industrial Common Shares and Shipbuilding Common Shares issued to
Tenneco by Industrial Company and Shipbuilding Company, respectively,
pursuant to SECTION 2.02 hereof, endorsed by Tenneco in blank, for the
benefit of the Tenneco Holders; and
(ii) instruct the Agent to distribute, as soon as practicable
following consummation of the Distributions, to the Tenneco Holders
the following:
(A) one share of Industrial Common Stock for every one share
of Tenneco Common Stock;
(B) one share of Shipbuilding Common Stock for every five
shares of Tenneco Common Stock; and
(C) cash, if applicable, in lieu of fractional shares
obtained in the manner provided in SECTION 3.03 hereof.
(b) DUTIES AND RESPONSIBILITIES OF INDUSTRIAL COMPANY AND SHIPBUILDING
COMPANY. Industrial Company and Shipbuilding Company shall provide, or cause to
be provided, to the Agent sufficient certificates representing Industrial
Common Stock and Shipbuilding Common Stock, respectively, in such denominations
as the Agent may request in order to effect the Distributions. All shares of
Industrial Common Stock issued pursuant to the Industrial Distribution will be
validly issued, fully paid and nonassessable and free of any preemptive (or
similar) rights. All shares of Shipbuilding Common Stock issued pursuant to the
Shipbuilding Distribution will be validly issued, fully paid and nonassessable
and free of any preemptive (or similar) rights.
SECTION 3.03. FRACTIONAL SHARES.
(a) NO FRACTIONAL SHARES. Notwithstanding anything herein to the contrary,
no certificate or scrip evidencing a fractional share of Industrial Common
Stock or Shipbuilding Common Stock shall be issued in connection with the
Distributions, and any such fractional share interests to which a Tenneco
Holder would otherwise be entitled will not entitle such Tenneco Holder to vote
or to any rights of a stockholder of Industrial Company or Shipbuilding
Company, as the case may be. In lieu of any such fractional shares, each
Tenneco Holder who, but for the provisions of this SECTION 3.03, would be
entitled to receive a fractional share interest of Industrial Common Stock or
Shipbuilding Common Stock pursuant to the Distributions shall be paid cash,
without any interest thereon, as hereinafter provided. Tenneco shall instruct
the Agent to determine the number of whole shares and fractional shares of
Industrial Common Stock and Shipbuilding Common Stock allocable to each Tenneco
Holder, to aggregate all such fractional shares into whole shares, to sell the
whole shares obtained thereby in the open market at the then prevailing prices
on behalf of Tenneco Holders who otherwise would be entitled to receive
fractional share interests and to distribute to each such Tenneco Holder his,
her or its ratable share of the total proceeds of such sale, after making
appropriate deductions of the amount required for federal income tax
withholding purposes and after deducting any applicable transfer taxes. All
brokers' fees and commissions incurred in connection with such sales shall be
paid by Tenneco.
(b) UNCLAIMED STOCK OR CASH. Any Industrial Common Stock, Shipbuilding
Common Stock or cash in lieu of fractional shares and dividends or
distributions with respect to Industrial Common Stock or Shipbuilding Common
Stock that remain unclaimed by any Tenneco Holder 180 days after the
Distribution Date shall be returned to Tenneco and any such Tenneco Holders
shall look only to Tenneco for the Industrial Common Stock, Shipbuilding Common
Stock, cash, if any, in lieu of fractional share interests and any such
dividends or distributions to which they are entitled, subject in each case to
applicable escheat or other abandoned property laws.
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(c) BENEFICIAL OWNERS. Solely for purposes of computing fractional share
interests pursuant to SECTION 3.03(A), the beneficial owner of shares of
Tenneco Common Stock held of record in the name of a nominee will be treated as
the holder of record of such shares.
ARTICLE IV
CONDITIONS TO THE DISTRIBUTIONS
SECTION 4.01. CONDITIONS PRECEDENT TO THE DISTRIBUTIONS. The obligation of
Tenneco to cause the Distributions to be consummated shall be subject, at the
option of Tenneco, to the fulfillment or waiver, on or prior to the Termination
Date, of each of the following conditions.
(a) TAX SHARING AGREEMENT. Tenneco, Industrial Company, Shipbuilding
Company and Acquiror shall have executed and delivered the Tax Sharing
Agreement and such agreement shall be in full force and effect.
(b) BENEFITS AGREEMENT. Tenneco, Industrial Company and Shipbuilding
Company shall have executed and delivered the Benefits Agreement and such
agreement shall be in full force and effect.
(c) TRANSITION SERVICES AGREEMENT. Tenneco and Tenneco Business
Services Inc. shall have executed and delivered the Transition Services
Agreement and such agreement shall be in full force and effect.
(d) INSURANCE AGREEMENT. Tenneco, Industrial Company and Shipbuilding
Company shall have executed and delivered the Insurance Agreement and such
agreement shall be in full force and effect.
(e) DEBT AND CASH ALLOCATION AGREEMENT. Tenneco, Industrial Company
and Shipbuilding Company shall have executed and delivered the Debt and
Cash Allocation Agreement and such agreement shall be in full force and
effect.
(f) EFFECTIVE DATE OF REGISTRATION STATEMENT. Each of the Registration
Statements shall have been declared effective by order of the Commission
and no stop order shall have been entered, and no proceeding for that
purpose shall have been initiated or threatened by the Commission with
respect thereto.
(g) NYSE LISTING. The Industrial Common Shares and the Shipbuilding
Common Shares shall have been approved for listing on the NYSE, subject to
official notice of issuance.
(h) TAX RULING. Tenneco shall have received rulings from the Internal
Revenue Service reasonably acceptable to Tenneco and Acquiror, which
rulings shall be in full force and effect as of the Distribution Date, to
the effect that:
(i) The Industrial Distribution as contemplated hereunder will
be tax-free for federal income tax purposes to Tenneco under
Section 355(c)(1) of the Code and to the stockholders of
Tenneco under Section 355(a) of the Code;
(ii) The Shipbuilding Distribution as contemplated hereunder will
be tax-free for federal income tax purposes to Tenneco under
Section 355(c)(1) of the Code and to the stockholders of
Tenneco under Section 355(a) of the Code; and
(iii) The following distributions will be tax free to the
respective transferor corporations under Section 355(c)(1)
of the Code and to the respective stockholders of the
transferor corporations under Section 355(a) of the Code:
(A) the distribution by the Shipbuilding Company of the
capital stock of Tenneco Packaging Inc. to Tenneco
Corporation contemplated under the Corporate Restructuring
Transactions; (B) the distribution by Tenneco Corporation of
the capital stock of the Shipbuilding Company and the
Industrial Company to Tennessee Gas Pipeline Company as
contemplated under the Corporate Restructuring Transactions;
and (C) the distribution by Tennessee Gas Pipeline Company
of the capital stock of the Shipbuilding Company and the
Industrial Company to Tenneco Inc. as contemplated under the
Corporate Restructuring Transactions.
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(i) PRE-DISTRIBUTION TRANSACTIONS. Each of the transactions and other
matters contemplated by ARTICLE II and SECTION 3.01 hereof (including,
without limitation, each of the distributions, transfers, conveyances,
contributions, assignments or other transactions included in, or otherwise
necessary to consummate, the Corporate Restructuring Transactions) shall
have been fully effected, consummated and accomplished.
(j) COVENANTS. The covenants contained in ARTICLE V of this Agreement
that are required to be performed on or before the Distribution Date shall
have been fully performed.
(k) NO PROHIBITIONS. Consummation of the transactions contemplated
hereby shall not be prohibited by Law and no Governmental Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which materially restricts, prevents or prohibits
consummation of the Distributions, the Merger or any transaction
contemplated by this Agreement or the Merger Agreement, it being
understood that the parties hereto hereby agree to use their reasonable
best efforts to cause any such decree, judgment, injunction or other order
to be vacated or lifted as promptly as possible.
(l) CONSENTS. Tenneco, Industrial Company, Shipbuilding Company and
the other members of their respective Groups shall have obtained all
Consents the failure of which to obtain would, in the determination of the
Board of Directors of Tenneco, have a material adverse effect on the
Energy Group, the Industrial Group or the Shipbuilding Group, each taken
as a whole, and such Consents shall be in full force and effect.
(m) STOCKHOLDER APPROVAL. The Distributions shall have been approved
by the requisite vote of the holders of the outstanding Tenneco Common
Stock and the holders of the outstanding $7.40 Cumulative Preferred Stock
of Tenneco, voting together as a class, by the requisite vote of the
holders of the outstanding $4.50 Cumulative Preferred Stock of Tenneco and
the holders of the outstanding $7.40 Cumulative Preferred Stock of
Tenneco, voting together as a class, and by any requisite vote of the
holders of the outstanding New Preferred Stock (as defined in the Merger
Agreement), voting separately as a class, in accordance with the DGCL and
the provisions of Tenneco's Certificate of Incorporation.
(n) HSR ACT. The waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, applicable to the transactions
contemplated under the Merger Agreement shall have expired or been
terminated.
(o) DEBT REALIGNMENT. Each of the transactions and other matters
contemplated under the Debt Realignment (as defined under the Merger
Agreement) shall have been fully effected, consummated and accomplished.
SECTION 4.02. NO CONSTRAINT. Notwithstanding the provisions of SECTION
4.01 above (but subject to Tenneco's obligations under the Merger Agreement),
the fulfillment or waiver of any or all of the conditions precedent to the
Distributions set forth therein shall not:
(i) create any obligation on the part of Tenneco or any other party
hereto to effect the Distributions;
(ii) in any way limit Tenneco's right and power under SECTION 8.11
hereof to terminate this Agreement and the process leading to the
Distributions and to abandon the Distributions; or
(iii) alter the consequences of any such termination under SECTION
8.11 hereof from those specified in such Section.
SECTION 4.03. DEFERRAL OF DISTRIBUTION DATE. If the Distribution Date
shall have been established by the Board of Directors of Tenneco but all the
conditions precedent to the Distributions set forth in this Agreement have not
theretofore been fulfilled or waived, or Tenneco does not reasonably anticipate
that they will be fulfilled or waived, on or prior to the date established as
the Distribution Date, Tenneco may, by resolution of its Board of Directors (or
a committee thereof, so authorized), defer the Distribution Date to a later
date.
SECTION 4.04. PUBLIC NOTICE OF DEFERRED DISTRIBUTION DATE. If the Board of
Directors (or a committee thereof, so authorized) of Tenneco shall defer the
Distribution Date in accordance with SECTION 4.03 above and public announcement
of the prior Distribution Date has theretofore been made, Tenneco shall
promptly thereafter
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issue, in accordance with the advice of legal counsel, a public announcement
with respect to such deferment and shall, with the advice of legal counsel,
take such other actions as may be deemed necessary or desirable with respect to
the dissemination of such information.
ARTICLE V
COVENANTS
SECTION 5.01. FURTHER ASSURANCES. Each of Tenneco, Industrial Company and
Shipbuilding Company shall use all reasonable efforts to:
(a) take or cause to be taken all actions, and to do or cause to be
done all things reasonably necessary, proper or advisable under applicable
Law and agreements or otherwise to consummate and make effective the
transactions contemplated hereby, including without limitation using
commercially reasonable efforts to obtain any consents and approvals from,
enter into any amendatory agreements with and make any applications,
registrations or filings with, any third Person or any Governmental
Authority necessary or desirable in order to consummate the transactions
contemplated hereby or to carry out the purposes of this Agreement; and
(b) execute and deliver such further instruments and documents and
take such other actions as the other party may reasonably request in order
to consummate the transactions contemplated hereby and effectuate the
purposes of this Agreement.
SECTION 5.02. TENNECO NAME. Industrial Company shall grant to each of
Tenneco and Shipbuilding Company transition licenses, in the forms of EXHIBIT P
and Q, respectively (the "Transition Trademark License"), to use the Tenneco
Trademarks and Tradenames for the limited use as more fully described below in
this SECTION 5.02 and in SECTION 5.03. Each of Tenneco and Shipbuilding
Company shall, and shall cause each of the other members of its Group over
which it has legal or effective direct or indirect control to, at its own
expense:
(a) Within 30 days following the Distribution Date, change, if
necessary, its corporate name to delete therefrom the word "Tenneco" or
any other word that is confusingly similar to the word "Tenneco" (except
the word "Tennessee"); and
(b) With respect to Tenneco, within two years following the
Distribution Date, and, with respect to Shipbuilding Company, within one
year following the Distribution Date, remove any and all references to the
Tenneco Trademark and Tradenames from any and all signs, displays or other
identification or advertising material (excluding any such material that
is the subject of SECTION 5.03 below). After the conclusion of such
period, each of Tenneco, Shipbuilding Company, and each other member of
its respective Group or over which it has legal or effective direct or
indirect control shall not use or display any of the Tenneco Trademarks
and Tradenames without the prior written consent of Industrial Company,
which consent may be withheld for any reason or no reason whatsoever.
After the Distribution Date, no party hereto shall represent or permit to
be represented to any third Person that it or any member of its Group has
a business affiliation with any other party hereto or any member of such
other party's Group, except as expressly permitted by any of the Ancillary
Agreements.
SECTION 5.03. SUPPLIES AND DOCUMENTS. Notwithstanding the provisions of
SECTION 5.02 above, for a period of six (6) months following the Distribution
Date, the Transition Trademark License shall license (on a nonexclusive basis)
to each of the members of the Energy Group and the Shipbuilding Group the right
to use existing supplies and documents which have imprinted thereon any of the
Tenneco Trademarks and Tradenames to the extent that such supplies and
documents were existing in the inventory of such member of the Energy Group or
Shipbuilding Group, as applicable, as of the Distribution Date.
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SECTION 5.04. ASSUMPTION AND SATISFACTION OF LIABILITIES. Except as
otherwise specifically set forth in any Ancillary Agreement, from and after the
Distribution Date:
(a) Tenneco shall, and shall cause each of the other members of the
Energy Group over which it has legal or effective direct or indirect
control to, assume, pay, perform and discharge all Energy Liabilities in
accordance with their terms, when determinable, and otherwise as
determined in accordance with the practice of the parties prior to the
Distributions;
(b) Industrial Company shall, and shall cause each of the other
members of the Industrial Group over which it has legal or effective
direct or indirect control to, assume, pay, perform and discharge all
Industrial Liabilities in accordance with their terms, when determinable,
and otherwise as determined in accordance with the practice of the parties
prior to the Distributions; and
(c) Shipbuilding Subsidiary shall, and shall cause each of the other
members of the Shipbuilding Group over which it has legal or effective
direct or indirect control to, assume, pay, perform and discharge all
Shipbuilding Liabilities in accordance with their terms, when
determinable, and otherwise as determined in accordance with the practice
of the parties prior to the Distributions.
SECTION 5.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS.
(a) GENERAL. Each of the parties hereto understands and agrees that no
party hereto is, in this Agreement or in any other agreement or document
contemplated by this Agreement (including the Ancillary Agreements) or
otherwise, making any representation or warranty whatsoever, including without
limitation, any representation or warranty:
(i) as to the value or freedom from encumbrance of, or any other
matter concerning, any assets of such party; or
(ii) as to the legal sufficiency to convey title to any asset as of
the execution, delivery and filing of this Agreement or any Ancillary
Agreement, including, without limitation, any Conveyancing and Assumption
Instrument.
(b) DISCLAIMER OF MERCHANTABILITY OR FITNESS OF ASSETS. Each party hereto
further understands and agrees that there are no warranties, express or
implied, as to the merchantability or fitness of any of the assets either
transferred to or retained by the Energy Group, the Industrial Group or the
Shipbuilding Group, as the case may be, pursuant to Corporate Restructuring
Transactions and the other terms and provisions of this Agreement, any
Conveyancing and Assumption Agreement or any Ancillary Agreement, and all such
assets which are so transferred will be transferred on an "AS IS, WHERE IS"
basis, and the party to which any such assets are transferred hereunder, or
which retains assets hereunder, shall bear the economic and legal risk that any
conveyances of such assets shall prove to be insufficient or that the title of
such party or any other member of its respective Group to any such assets shall
be other than good and marketable and free from encumbrances.
(c) ACKNOWLEDGEMENT OF DISCLOSURE AND WAIVER. Each of Industrial Company
and Shipbuilding Company acknowledges, for itself and on behalf of each other
member of its respective Group, that:
(i) Tenneco and the other members of the Energy Group have disclosed,
and Industrial Company and Shipbuilding Company have knowledge of, all
matters pertaining to the assets and properties to be conveyed to
Industrial Company, Shipbuilding Company or any member of their respective
Group pursuant to the Corporate Restructuring Transactions or otherwise
pursuant to the other terms of this Agreement to the same extent that
Tenneco and the other members of the Energy Group have knowledge of such
matters; and
(ii) such knowledge constitutes notice and disclosure of such matters.
Each of Industrial Company and Shipbuilding Company waives, to the fullest
extent permitted by law, for itself and for each other member of its respective
Group, any and all claims or causes of action which any of them may have
arising out of such matters or the failure of any Conveyancing and Assumption
Instrument to describe or refer to, or provide notice of, any such matters.
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(d) NO REPRESENTATIONS OR WARRANTIES REGARDING CONSENTS. Each of the
parties hereto understands and agrees that no party hereto is, in this
Agreement or any Ancillary Agreement or in any other agreement or document
contemplated by this Agreement or any Ancillary Agreement or otherwise,
representing or warranting in any way that the obtaining of any consents or
approvals, the execution and delivery of any amendatory agreements and the
making of any filings or applications contemplated by this Agreement will
satisfy the provisions of any or all applicable agreements or the requirements
of any or all applicable Law. Each of the parties hereto further agrees and
understands that the party to which any assets are transferred as contemplated
by the Corporate Restructuring Transactions or the other provisions of this
Agreement shall bear the economic and legal risk that any necessary consents or
approvals are not obtained, that any necessary amendatory agreements are not
executed and delivered or that any requirements of Laws are not complied with.
(e) COVENANT TO USE REASONABLE EFFORTS TO OBTAIN CONSENTS. Notwithstanding
the provisions of SECTION 5.05(D) above, each of the parties hereto shall (and
shall cause each other member of its respective Group over which it has direct
or indirect legal or effective control to) use commercially reasonable efforts
to obtain all consents and approvals, to enter into all amendatory agreements
and to make all filings and applications which may be reasonably required for
the consummation of the transactions contemplated by this Agreement and shall
take all such further reasonable actions as shall be reasonably necessary to
preserve for each of the Energy Group, the Industrial Group and the
Shipbuilding Group, to the greatest extent feasible, the economic and
operational benefits of the allocation of assets and Liabilities contemplated
by this Agreement. In case at any time after the Distribution Date any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall take
all such necessary or desirable action.
SECTION 5.06. REMOVAL OF CERTAIN GUARANTEES.
(a) REMOVAL OF ENERGY GROUP AS GUARANTOR OF INDUSTRIAL AND SHIPBUILDING
LIABILITIES. Except as otherwise contemplated in the Corporate Restructuring
Transactions or otherwise specified in any Ancillary Agreement, each of
Tenneco, Industrial Company and Shipbuilding Company shall use its commercially
reasonable efforts to have, on or prior to the Distribution Date, or as soon as
practicable thereafter, Tenneco and any other member of the Energy Group
removed as a guarantor of, or obligor under or for, any Industrial Liability or
Shipbuilding Liability.
(b) REMOVAL OF INDUSTRIAL GROUP AS GUARANTOR OF ENERGY AND SHIPBUILDING
LIABILITIES. Except as otherwise contemplated in the Corporate Restructuring
Transactions or otherwise specified in any Ancillary Agreement, each of
Tenneco, Industrial Company and Shipbuilding Company shall use its commercially
reasonable efforts to have, on or prior to the Distribution Date, or as soon as
practicable thereafter, Industrial Company and any other member of the
Industrial Group removed as a guarantor of, or obligor under or for, any Energy
Liability or Shipbuilding Liability.
(c) REMOVAL OF SHIPBUILDING GROUP AS GUARANTOR OF ENERGY AND INDUSTRIAL
LIABILITIES. Except as otherwise contemplated in the Corporate Restructuring
Transactions or otherwise specified in any Ancillary Agreement, each of
Tenneco, Industrial Company and Shipbuilding Company shall use their
commercially reasonable efforts to have, on or prior to the Distribution Date,
or as soon as practicable thereafter, Shipbuilding Company and any other member
of the Shipbuilding Group removed as a guarantor of, or obligor under or for,
any Energy Liability or Industrial Liability.
SECTION 5.07. PUBLIC ANNOUNCEMENTS. Each party hereto shall consult with
each other before issuing any press release or otherwise issuing any other
similar written public statement with respect to this Agreement or the
Distributions and shall not issue any such press release or make any such
public statement without the prior consent of each other party, which shall not
be unreasonably withheld; provided, however, that a party may, without the
prior consent of any other party, issue such press release or other similar
written public statement as may be required by law or any listing agreement
with a national securities exchange to which any party hereto (or any member of
such party's Group) is a party if it has used all reasonable efforts to consult
with such other party and to obtain such party's consent but has been unable to
do so in a timely manner.
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SECTION 5.08. INTERCOMPANY AGREEMENTS. Effective as of the consummation of
the Distributions, each of Industrial Company, Shipbuilding Company and Tenneco
shall (and shall cause each other member of its respective Group over which it
has legal or effective direct or indirect control) to terminate each and every
agreement between it and any member of any of the other Groups other than this
Agreement, any of the Ancillary Agreements and any of the license agreements
referred to in SECTION 2.06(F) above; provided, however, that such termination
shall not have any effect whatsoever on any of its rights and/or obligations
that accrued or were incurred prior to the Distribution Date (subject to the
terms of SECTION 2.13 above).
SECTION 5.09. TAX MATTERS. Each of Tenneco, the Industrial Company and the
Shipbuilding Company intend the Distributions to be treated as tax-free
distributions under Code Section 355 and each such party shall use its
reasonable best efforts to cause the Distributions to so qualify. Neither
Tenneco, on the one hand, nor the Industrial Company and Shipbuilding Company,
on the other hand, shall take any action (other than the Merger) which might
cause:
(i) the Distributions to fail to qualify as tax-free distributions
under Code Section 355;
(ii) any other transfer described in the Corporate Restructuring
Transactions that is intended (as described in Tenneco's request for
rulings from the Internal Revenue Service) to qualify as a tax free
transfer under Code Sections 332, 351, 355 or 368 to fail to so qualify;
or
(iii) Tenneco or any Energy Subsidiary to recognize any gains relating
to deferred intercompany transactions or excess loss accounts between or
among any member of affiliated group of corporations of which Tenneco is
the common parent, other than those defined intercompany gains listed on
EXHIBIT H to the Merger Agreement.
ARTICLE VI
ACCESS TO INFORMATION
SECTION 6.01. PROVISION, TRANSFER AND DELIVERY OF APPLICABLE CORPORATE
RECORDS.
(a) PROVISION, TRANSFER AND DELIVERY OF INDUSTRIAL RECORDS. Each of
Tenneco and Shipbuilding Company shall (and shall cause each other member of
its respective Group over which it has legal or effective direct or indirect
control to) arrange as soon as practicable following the Distribution Date for
the transportation (at Industrial Company's cost) to Industrial Company of the
Books and Records in its possession (i) that relate primarily to the Industrial
Business or are necessary to operate the Industrial Business (collectively, the
"INDUSTRIAL RECORDS"), and (ii) that consist of the corporate minutes of the
Board of Directors (or committees thereof) of Tenneco or otherwise relate to
the business, administrative and management operations of Tenneco as the parent
holding company of the Energy Business, Industrial Business and Shipbuilding
Business (collectively, the "TENNECO CORPORATE RECORDS") except to the extent
such items are already in the possession of any member of the Industrial Group.
The Industrial Records and the Tenneco Corporate Records shall be the property
of Industrial Company, but shall be available to each of Tenneco and
Shipbuilding Company for review and duplication, at their cost, pursuant to the
terms of this Agreement.
(b) PROVISION, TRANSFER AND DELIVERY OF SHIPBUILDING RECORDS. Each of
Tenneco and Industrial Company shall (and shall cause each other member of its
respective Group over which it has legal or effective direct or indirect
control to) arrange as soon as practicable following the Distribution Date for
the transportation (at Shipbuilding Company's cost) to Shipbuilding Company of
the Books and Records in its possession that relate primarily to the
Shipbuilding Business or are necessary to operate the Shipbuilding Business
(collectively, the "SHIPBUILDING RECORDS"), except to the extent such items
are already in the possession of any member of the Shipbuilding Group. The
Shipbuilding Records shall be the property of Shipbuilding Company, but shall
be available to each of Tenneco and Industrial Company for review and
duplication , at their cost, pursuant to the terms of this Agreement.
(c) PROVISION, TRANSFER AND DELIVERY OF ENERGY RECORDS. Each of Industrial
Company and Shipbuilding Company shall (and shall cause each other member of
its respective Group over which it has legal or effective direct or indirect
control to) arrange as soon as practicable following the Distribution Date for
the transportation (at Tenneco's cost) to Tenneco of the Books and Records in
its possession that relate primarily to the Energy
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Business or are necessary to operate the Energy Business (collectively, the
"ENERGY RECORDS"), except to the extent such items are already in the
possession of any member of the Energy Group. The Energy Records shall be the
property of Tenneco, but shall be available to each of Industrial Company and
Shipbuilding Company for review and duplication, at their cost, pursuant to the
terms of this Agreement.
SECTION 6.02. ACCESS TO INFORMATION.
(a) ACCESS TO BOOKS AND RECORDS. Unless otherwise contemplated by SECTION
6.06 hereof, from and after the Distribution Date, each of Tenneco, Industrial
Company and Shipbuilding Company shall (and shall cause each of the other
members of its respective Group over which it has legal or effective direct or
indirect control to) afford to each other party and its authorized accountants,
counsel and other designated representatives reasonable access and duplicating
rights (all such duplicating costs to be borne by the requesting party) during
normal business hours, subject to appropriate restrictions for classified,
privileged or confidential information, to the personnel, properties, Books and
Records and other data and information of such party and each other member of
such party's Group relating to operations prior to the Distributions insofar as
such access is reasonably required by the other requesting party for the
conduct of the requesting party's business (but not for competitive purposes).
(b) PROVISION OF POST-DISTRIBUTION COMMISSION FILINGS. For a period of
five years following the Distribution Date, each of Tenneco, Industrial Company
and Shipbuilding Company shall (and shall cause each of the other members of
its respective Group over which it has legal or effective direct or indirect
control to) provide to the other, promptly following such time at which such
documents are filed with the Commission, all documents (other than documents or
portions thereof for which confidential treatment has been granted or a request
for confidential treatment is pending) filed by it and by each other member of
such party's Group with the Commission pursuant to the Securities Act or the
periodic and interim reporting requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder.
SECTION 6.03. REIMBURSEMENT; OTHER MATTERS. Except to the extent otherwise
contemplated hereby or by any Ancillary Agreement, a party providing Books and
Records or access to information to any other party (or such party's
representatives) under this ARTICLE VI shall be entitled to receive from such
other party, upon the presentation of invoices therefor, payments for such
amounts, relating to supplies, disbursements and other out-of-pocket expenses,
as may be reasonably incurred in providing such Books and Records or access to
information.
SECTION 6.04. CONFIDENTIALITY.
(a) GENERAL RESTRICTION ON DISCLOSURE. Each of Tenneco, Industrial Company
and Shipbuilding Company shall not (and shall not permit any other member of
its respective Group over which it has legal or effective direct or indirect
control to) use or permit the use of (without the prior written consent of the
other) and shall hold, and shall cause its consultants, advisors and other
representatives and any other member of its respective Group (over which it has
legal or effective direct or indirect control) to hold, in strict confidence,
all information concerning each other party hereto and the other members of
such other party's Group in its possession, custody or control to the extent
such information either
(i) relates to the period up to the Distribution Date,
(ii) relates to any Ancillary Agreement, or
(iii) is obtained in the course of performing services for the other
party pursuant to any Ancillary Agreement, and each party hereto shall not
(and shall cause each other member of its respective Group over which it
has legal or effective direct or indirect control not to) otherwise
release or disclose such information to any other Person, except its
auditors, attorneys, financial advisors, bankers and other consultants and
advisors, without the prior written consent of the other affected party or
parties, unless compelled to disclose such information by judicial or
administrative process or unless such disclosure is required by Law and
such party has used commercially reasonable efforts to consult with the
other affected party or parties prior to such disclosure.
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(b) COMPELLED DISCLOSURE. To the extent that a party hereto is compelled
by judicial or administrative process to disclose such information under
circumstances in which any evidentiary privilege would be available, such party
agrees to assert such privilege in good faith prior to making such disclosure.
Each of the parties shall consult with each relevant other party in connection
with any such judicial or administrative process, including, without
limitation, in determining whether any privilege is available, and shall not
object to each such relevant party and its counsel participating in any hearing
or other proceeding (including, without limitation, any appeal of an initial
order to disclose) in respect of such disclosure and assertion of privilege.
(c) EXCEPTIONS TO CONFIDENTIAL TREATMENT. Anything herein to the contrary
notwithstanding, no party hereto shall be prohibited from using or permitting
the use of, or required to hold in confidence, any information to the extent
that (i) such information has been or is in the public domain through no fault
of such party, (ii) such information is, after the Distribution Date, lawfully
acquired from other sources by such party, or (iii) this Agreement, any
Ancillary Agreement or any other agreement entered into pursuant hereto permits
the use or disclosure of such information by such party.
SECTION 6.05. WITNESS SERVICES. At all times from and after the
Distribution Date, each of Tenneco, Industrial Company and Shipbuilding Company
shall use its reasonable efforts to make available to each other party hereto,
upon reasonable written request, the officers, directors, employees and agents
of each member of its respective Group for fact finding, consultation or
interviews and as witnesses to the extent that:
(a) such persons may reasonably be required in connection with the
prosecution or defense of any Action in which the requesting party or any
member of its respective Group may from time to time be involved; and
(b) there is no conflict in the Action between the requesting party or
any member of its respective Group and the party to which a request is
made pursuant to this SECTION 6.05 or any member of such party's Group.
Except as otherwise agreed by the parties, a party providing witness
services to any other party under this Section shall be entitled to
receive from the recipient of such services, upon the presentation of
invoices therefor, payments for such amounts, relating to supplies,
disbursements and other out-of-pocket expenses (but not salary expenses)
and direct and indirect costs of employees who participate in fact
finding, consultation or interviews or are witnesses, as are actually and
reasonably incurred in providing such fact finding, consulting, interviews
or witness services by the party providing such services.
SECTION 6.06. RETENTION OF RECORDS. Except when a longer period is
required by Law or is specifically provided for herein or in any Ancillary
Agreement, each party hereto shall cause the members of its Group over which it
has legal or effective direct or indirect control, to retain, for a period of
at least seven years following the Distribution Date, all material information
(including without limitation all material Books and Records) relating to such
Group and its operations prior to the Distribution Date. Notwithstanding the
foregoing, any party hereto may offer in writing to deliver to the other
parties all or a portion of such information as it relates to members of the
offering party's Group and, if such offer is accepted in writing within 90 days
after receipt thereof, the offering party shall promptly arrange for the
delivery of such information (or copies thereof) to each accepting party (at
the expense of such accepting party). If such offer is not so accepted, the
offered information may be destroyed or otherwise disposed of by the offering
party at any time thereafter.
SECTION 6.07. PRIVILEGED MATTERS.
(a) PRIVILEGED INFORMATION. Each of the parties hereto shall, and
shall cause the members of its Group over which it has legal or effective
direct or indirect control to, use its reasonable efforts to maintain,
preserve, protect and assert all privileges including, without limitation,
all privileges arising under or relating to the attorney-client
relationship (including without limitation the attorney-client and
attorney work product privileges) that relate directly or indirectly to
any member of any other Group for any period prior to the Distribution
Date ("PRIVILEGE" or "PRIVILEGES"). Each of the parties hereto shall
use its reasonable efforts not to waive, or permit any member of its Group
over which it has legal or effective direct or indirect control to waive,
any such Privilege that could be asserted under applicable Law without the
prior written consent of the other parties. With respect to each party,
the rights and obligations created by this SECTION 6.07 shall apply to all
information as to which a member of any Group did assert or, but for the
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Distributions, would have been entitled to assert the protection of a
Privilege ("PRIVILEGED INFORMATION") including, but not limited to, any
and all information that either:
(i) was generated or received prior to the Distribution Date but
which, after the Distributions, is in the possession of a member of
another Group; or
(ii) is generated or received after the Distribution Date but
refers to or relates to Privileged Information that was generated or
received prior to the Distribution Date.
(b) PRODUCTION OF PRIVILEGED INFORMATION. Upon receipt by a party or
any member of its Group of any subpoena, discovery or other request that
arguably calls for the production or disclosure of Privileged Information,
or if a party or any member of its Group obtains knowledge that any
current or former employee of such party or any member of its Group has
received any subpoena, discovery or other request which arguably calls for
the production or disclosure of Privileged Information, such party shall
promptly notify the other parties of the existence of the request and
shall provide the other parties a reasonable opportunity to review the
information and to assert any rights it may have under this SECTION 6.07
or otherwise to prevent the production or disclosure of Privileged
Information. No party will, or will permit any member of its Group over
which it has direct or indirect legal or effective control to, produce or
disclose any information arguably covered by a Privilege under this
SECTION 6.07 unless:
(i) each other party has provided its express written consent to
such production or disclosure; or
(ii) a court of competent jurisdiction has entered an order which
is not then appealable or a final, nonappealable order finding that
the information is not entitled to protection under any applicable
privilege.
(c) NO WAIVER. The parties hereto understand and agree that the
transfer of any Books and Records or other information between any members
of the Energy Group, the Industrial Group, or the Shipbuilding Group shall
be made in reliance on the agreements of Tenneco, Industrial Company and
Shipbuilding Company, as set forth in SECTION 6.04 and SECTION 6.07
hereof, to maintain the confidentiality of Privileged Information and to
assert and maintain all applicable Privileges. The Books and Records being
transferred pursuant to SECTION 6.01 hereof, the access to information
being granted pursuant to SECTION 6.02 hereof, the agreement to provide
witnesses and individuals pursuant to SECTION 6.05 hereof and the transfer
of Privileged Information to either party pursuant to this Agreement shall
not be deemed a waiver of any Privilege that has been or may be asserted
under this Section or otherwise.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. INDEMNIFICATION BY TENNECO. Except as otherwise specifically
set forth in any provision of this Agreement or of any Ancillary Agreement,
Tenneco shall, to the fullest extent permitted by law, indemnify, defend and
hold harmless the Industrial Indemnitees and the Shipbuilding Indemnitees from
and against any and all Indemnifiable Losses of the Industrial Indemnitees and
the Shipbuilding Indemnitees, respectively, arising out of, by reason of or
otherwise in connection with either (i) the Energy Liabilities, or (ii) the
breach by Tenneco of any provision of this Agreement or any Ancillary
Agreement.
SECTION 7.02. INDEMNIFICATION BY INDUSTRIAL COMPANY. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, Industrial Company shall, to the fullest extent permitted by law,
indemnify, defend and hold harmless the Energy Indemnitees and the Shipbuilding
Indemnitees from and against any and all Indemnifiable Losses of the Energy
Indemnitees and the Shipbuilding Indemnitees, respectively, arising out of, by
reason of or otherwise in connection with either (i) the Industrial
Liabilities, or (ii) the breach by Industrial Company of any provision of this
Agreement or any Ancillary Agreement.
SECTION 7.03. INDEMNIFICATION BY SHIPBUILDING COMPANY. Except as otherwise
specifically set forth in any provision of this Agreement or of any Ancillary
Agreement, Shipbuilding Company shall, to the fullest
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extent permitted by law, indemnify, defend and hold harmless the Energy
Indemnitees and the Industrial Indemnitees from and against any and all
Indemnifiable Losses of the Energy Indemnitees and the Industrial Indemnitees,
respectively, arising out of, by reason of or otherwise in connection with
either (i) the Shipbuilding Liabilities, or (ii) the breach by Shipbuilding
Company of any provision of this Agreement or any Ancillary Agreement. In
addition, and without limiting the generality of the foregoing indemnification
provisions of this SECTION 7.03, Shipbuilding Company shall, to the fullest
extent permitted by law, indemnify, defend and hold harmless the Industrial
Indemnitees and the Energy Indemnitees from and against any and all
Indemnifiable Losses of the Industrial Indemnitees and the Energy Indemnitees,
respectively, arising out of, by reason of or otherwise in connection with any
matter, of whatever kind or nature, relating in any way to the commercial ships
commonly known as the "Double Eagle" product tankers, including without
limitation, (i) the design, engineering or construction of any of the Double
Eagle product tankers, (ii) the sale or other disposition of any of the Double
Eagle product tankers (or the sale or other disposition of any direct or
indirect equity interest in any of the Double Eagle product tankers), (iii) the
direct or indirect financing of the construction of any of the Double Eagle
product tankers or any other financing relating to any of the Double Eagle
product tankers, (iv) the direct or indirect equity investments in any of the
Double Eagle product tankers, (v) the purchase of raw materials and other
materials and services in connection with the design, construction or
engineering of any of the Double Eagle product tankers, (vi) the negotiation of
any contract for the construction of or financing for the construction of, any
of the Double Eagle product tankers, or (vii) the operation by any Person
whatsoever of any of the Double Eagle product tankers.
SECTION 7.04. LIMITATIONS ON INDEMNIFICATION OBLIGATIONS.
(a) REDUCTIONS FOR INSURANCE PROCEEDS AND OTHER RECOVERIES. The amount
that any party (an "INDEMNIFYING PARTY") is or may be required to pay to any
other Person (an "INDEMNITEE") pursuant to SECTION 7.01, SECTION 7.02 or
SECTION 7.03 above, as applicable, shall be reduced (retroactively or
prospectively) by any Insurance Proceeds or other amounts actually recovered
from third parties by or on behalf of such Indemnitee in respect of the related
Indemnifiable Losses (except that nothing herein shall be construed as
requiring any Indemnitee in respect of any Shipbuilding Securities Liability to
file any claim for insurance). The existence of a claim by an Indemnitee for
insurance or against a third party in respect of any Indemnifiable Loss shall
not, however, delay any payment pursuant to the indemnification provisions
contained herein and otherwise determined to be due and owing by an
Indemnifying Party. Rather the Indemnifying Party shall make payment in full of
such amount so determined to be due and owing by it against an assignment by
the Indemnitee to the Indemnifying Party of the entire claim of the Indemnitee
for such insurance or against such third party. Notwithstanding any other
provisions of this Agreement, it is the intention of the parties hereto that no
insurer or any other third party shall be (i) entitled to a benefit it would
not be entitled to receive in the absence of the foregoing indemnification
provisions or (ii) relieved of the responsibility to pay any claims for which
it is obligated. If an Indemnitee shall have received the payment required by
this Agreement from an Indemnifying Party in respect of any Indemnifiable
Losses and shall subsequently actually receive Insurance Proceeds or other
amounts in respect of such Indemnifiable Losses, then such Indemnitee shall
hold such Insurance Proceeds in trust for the benefit of such Indemnifying
Party and shall pay to such Indemnifying Party a sum equal to the amount of
such Insurance Proceeds or other amounts actually received, up to the aggregate
amount of any payments received from such Indemnifying Party pursuant to this
Agreement in respect of such Indemnifiable Losses.
(b) FOREIGN CURRENCY ADJUSTMENTS. In the event that any indemnification
payment required to be made hereunder or under any Ancillary Agreement shall be
denominated in a currency other than U.S. Dollars, the amount of such payment
shall be translated into U.S. Dollars using the foreign exchange rate for such
currency determined in accordance with the following rules:
(i) with respect to any Indemnifiable Losses arising from the payment
by a financial institution under a guarantee, comfort letter, letter of
credit, foreign exchange contract or similar instrument, the foreign
exchange rate for such currency shall be determined as of the date on
which such financial institution shall have been reimbursed;
(ii) with respect to any Indemnifiable Losses covered by insurance,
the foreign exchange rate for such currency shall be the foreign exchange
rate employed by the insurance company providing such insurance in
settling such Indemnifiable Losses with the Indemnifying Party; and
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(iii) with respect to any Indemnifiable Losses not covered by either
clause (i) or (ii) above, the foreign exchange rate for such currency
shall be determined as of the date that notice of the claim with respect
to such Indemnifiable Losses shall be given to the Indemnitee.
SECTION 7.05. PROCEDURES FOR INDEMNIFICATION. Except as otherwise
specifically provided in any Ancillary Agreement, including, without
limitation, the Tax Sharing Agreement and the Benefits Agreement:
(a) NOTICE OF THIRD PARTY CLAIMS. If a claim or demand is made against an
Indemnitee by any Person who is not a member of the Energy Group, Industrial
Group or Shipbuilding Group (a "THIRD PARTY CLAIM") as to which such
Indemnitee is entitled to indemnification pursuant to this Agreement, such
Indemnitee shall notify the Indemnifying Party in writing, and in reasonable
detail, of the Third Party Claim promptly (and in any event within 15 business
days) after receipt by such Indemnitee of written notice of the Third Party
Claim; provided, however, that failure to give such notification shall not
affect the Indemnitee's right to indemnification hereunder except to the extent
the Indemnifying Party shall have been actually prejudiced as a result of such
failure (except that the Indemnifying Party shall not be liable for any
expenses incurred during the period in which the Indemnitee failed to give such
notice). Thereafter, the Indemnitee shall deliver to the Indemnifying Party,
promptly (and in any event within 15 business days) after the Indemnitee's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnitee relating to the Third Party Claim.
(b) LEGAL DEFENSE OF THIRD PARTY CLAIMS. If a Third Party Claim is made
against an Indemnitee, the Indemnifying Party shall be entitled to participate
in the defense thereof and, if it so chooses, to assume the defense thereof
with counsel selected by the Indemnifying Party, which counsel shall be
reasonably satisfactory to the Indemnitee. Should the Indemnifying Party so
elect to assume the defense of a Third Party Claim, the Indemnifying Party
shall not be liable to the Indemnitee for legal or other expenses subsequently
incurred by the Indemnitee in connection with the defense thereof. If the
Indemnifying Party assumes such defense, the Indemnitee shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Party, it being
understood that the Indemnifying Party shall control such defense. The
Indemnifying Party shall be liable for the reasonable fees and expenses of
counsel employed by the Indemnitee for any period during which the Indemnifying
Party has failed to assume the defense of the Third Party Claim (other than
during the period prior to the time the Indemnitee shall have given notice of
the Third Party Claim as provided above). If the Indemnifying Party so elects
to assume the defense of any Third Party Claim, all of the Indemnitees shall
cooperate with the Indemnifying Party in the defense or prosecution thereof.
Notwithstanding the foregoing:
(i) the Indemnifying Party shall not be entitled to assume the
defense of any Third Party Claim (and shall be liable to the Indemnitee
for the reasonable fees and expenses of counsel incurred by the Indemnitee
in defending such Third Party Claim) if the Third Party Claim either (A)
seeks an order, injunction or other equitable relief or relief for other
than money damages against the Indemnitee which the Indemnitee reasonably
determines, after conferring with its counsel, cannot be separated from
any related claim for money damages; provided, however, that if such
equitable relief or other relief portion of the Third Party Claim can be
so separated from that for money damages, the Indemnifying Party shall be
entitled to assume the defense of the portion relating to money damages;
or (B) relates to or arises out of any Shipbuilding Securities Liability.
(ii) an Indemnifying Party shall not be entitled to assume the defense
of any Third Party Claim (and shall be liable for the reasonable fees and
expenses of counsel incurred by the Indemnitee in defending such Third
Party Claim) if, in the Indemnitee's reasonable judgment, a conflict of
interest between such Indemnitee and such Indemnifying Party exists in
respect of such Third Party Claim; and
(iii) if at any time after assuming the defense of a Third Party Claim
an Indemnifying Party shall fail to prosecute or withdraw from the defense
of such Third Party Claim, the Indemnitee shall be entitled to resume the
defense thereof and the Indemnifying Party shall be liable for the
reasonable fees and expenses of counsel incurred by the Indemnitee in such
defense.
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(c) SETTLEMENT OF THIRD PARTY CLAIMS. Except as otherwise provided below
in this SECTION 7.05(C), or as otherwise specifically provided in any Ancillary
Agreement, including without limitation, the Tax Sharing Agreement and the
Benefits Agreement, if the Indemnifying Party has assumed the defense of any
Third Party Claim, then
(i) in no event will the Indemnitee admit any liability with respect
to, or settle, compromise or discharge, any Third Party Claim without the
Indemnifying Party's prior written consent; provided, however, that the
Indemnitee shall have the right to settle, compromise or discharge such
Third Party Claim without the consent of the Indemnifying Party if the
Indemnitee releases the Indemnifying Party from its indemnification
obligation hereunder with respect to such Third Party Claim and such
settlement, compromise or discharge would not otherwise adversely affect
the Indemnifying Party, and
(ii) the Indemnitee will agree to any settlement, compromise or
discharge of a Third Party Claim that the Indemnifying Party may recommend
and that by its terms obligates the Indemnifying Party to pay the full
amount of the liability in connection with such Third Party Claim and
releases the Indemnitee completely in connection with such Third Party
Claim and that would not otherwise adversely affect the Indemnitee.
provided, however, that the Indemnitee may refuse to agree to any such
settlement, compromise or discharge if the Indemnitee agrees that the
Indemnifying Party's indemnification obligation with respect to such Third
Party Claim shall not exceed the amount that would be required to be paid by or
on behalf of the Indemnifying Party in connection with such settlement,
compromise or discharge. If the Indemnifying Party has not assumed the defense
of a Third Party Claim then in no event shall the Indemnitee settle, compromise
or discharge such Third Party Claim without providing prior written notice to
the Indemnifying Party, which shall have the option within 15 business days
following receipt of such notice to
(i) approve and agree to pay the settlement,
(ii) approve the amount of the settlement, reserving the right to
contest the Indemnitee's right to indemnity pursuant to this Agreement,
(iii) disapprove the settlement and assume in writing all past and
future responsibility for such Third Party Claim (including all of
Indemnitee's prior expenditures in connection therewith), or
(iv) disapprove the settlement and continue to refrain from
participation in the defense of such Third Party Claim, in which event the
Indemnifying Party shall have no further right to contest the amount or
reasonableness of the settlement if the Indemnitee elects to proceed
therewith.
In the event the Indemnifying Party does not respond to such written notice
from the Indemnitee within such 15 business- day period, the Indemnifying Party
shall be deemed to have elected option (i).
(d) OTHER CLAIMS. Any claim on account of an Indemnifiable Loss which does
not result from a Third Party Claim shall be asserted by written notice given
by the Indemnitee to the applicable Indemnifying Party. Such Indemnifying Party
shall have a period of 15 business days after the receipt of such notice within
which to respond thereto. If such Indemnifying Party does not respond within
such 15 business-day period, such Indemnifying Party shall be deemed to have
refused to accept responsibility to make payment. If such Indemnifying Party
does not respond within such 15 business- day period or rejects such claim in
whole or in part, such Indemnitee shall be free to pursue such remedies as may
be available to such party under applicable Law or under this Agreement.
SECTION 7.06. INDEMNIFICATION PAYMENTS. Indemnification required by this
ARTICLE VII shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or loss,
liability, claim, damage or expense is incurred.
SECTION 7.07. OTHER ADJUSTMENTS.
(a) ADJUSTMENTS FOR TAXES. The amount of any Indemnifiable Loss shall be:
(i) increased to take into account any net Tax cost actually incurred
by the Indemnitee arising from any payments received from the Indemnifying
Party (grossed up for such increase); and
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(ii) reduced to take account of any net Tax benefit actually realized
by the Indemnitee arising from the incurrence or payment of any such
Indemnifiable Loss.
In computing the amount of such Tax cost or Tax benefit, the Indemnitee shall
be deemed to recognize all other items of income, gain, loss, deduction or
credit before recognizing any item arising from the receipt of any payment with
respect to an Indemnifiable Loss or the incurrence or payment of any
Indemnifiable Loss.
(b) REDUCTIONS FOR SUBSEQUENT RECOVERIES OR OTHER EVENTS. In addition to
any adjustments required pursuant to SECTION 7.04 hereof or SECTION 7.07(A)
above, if the amount of any Indemnifiable Losses shall, at any time subsequent
to any indemnification payment made by the Indemnifying Party pursuant to this
ARTICLE VII, be reduced by recovery, settlement or otherwise, the amount of
such reduction, less any expenses incurred in connection therewith, shall
promptly be repaid by the Indemnitee to the Indemnifying Party, up to the
aggregate amount of any payments received from such Indemnifying Party pursuant
to this Agreement in respect of such Indemnifiable Losses.
SECTION 7.08. OBLIGATIONS ABSOLUTE. The foregoing contractual obligations
of indemnification set forth in this ARTICLE VII shall:
(i) also apply to any and all Third Party Claims that allege that any
Indemnitee is independently, directly, vicariously or jointly and
severally liable to such third party;
(ii) to the extent permitted by applicable law, apply even if the
Indemnitee is partially negligent or otherwise partially culpable or at
fault, whether or not such liability arises under any doctrine of strict
liability; and
(iii) be in addition to any liability or obligation that an
Indemnifying Party may have other than pursuant to this Agreement.
SECTION 7.09. SURVIVAL OF INDEMNITIES. The obligations of Tenneco,
Industrial Company and Shipbuilding Company under this ARTICLE VII shall
survive the sale or other transfer by any of them of any assets or businesses
or the assignment by any of them of any Liabilities, with respect to any
Indemnifiable Loss of any Indemnitee related to such assets, businesses or
Liabilities.
SECTION 7.10. REMEDIES CUMULATIVE. The remedies provided in this ARTICLE
VII shall be cumulative and shall not preclude assertion by any Indemnitee of
any other rights or the seeking of any and all other remedies against any
Indemnifying Party.
SECTION 7.11. COOPERATION OF THE PARTIES WITH RESPECT TO ACTIONS AND THIRD
PARTY CLAIMS.
(a) IDENTIFICATION OF PARTY IN INTEREST. Any party to this Agreement that
has responsibility for an Action or Third Party Claim shall identify itself as
the true party in interest with respect to such Action or Third Party Claim and
shall use its commercially reasonable efforts to obtain the dismissal of any
other party to this Agreement from such Action or Third Party Claim.
(b) DISPUTES REGARDING RESPONSIBILITY FOR ACTIONS AND THIRD PARTY CLAIMS.
If there is uncertainty or disagreement concerning which party to this
Agreement has responsibility for any Action or Third Party Claim, the following
procedure shall be followed in an effort to reach agreement concerning
responsibility for such Action or Third Party Claim:
(i) The parties in disagreement over the responsibility for an Action
or Third Party Claim shall exchange brief written statements setting forth
their position concerning which party has responsibility for the Action or
Third Party Claim in accordance with the provisions of this ARTICLE VII.
These statements shall be exchanged within 5 days of a party putting
another party on written notice that the other party is or may be
responsible for the Action or Third Party Claim.
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(ii) If within 5 days of the exchange of the written statement of each
party's position agreement is not reached on responsibility for the Action
or Third Party Claim, the General Counsel for each of the parties in
disagreement over responsibility for the Action or Third Party Claim shall
speak either by telephone or in person to attempt to reach agreement on
responsibility for the Action or Third Party Claim.
(c) EFFECT OF FAILURE TO FOLLOW PROCEDURE. Failure to follow the procedure
set forth in clause (b) above shall not affect the rights and responsibilities
of the parties as established by the other provisions of this ARTICLE VII.
(d) EXCHANGE OF INFORMATION. In connection with the handling of current or
future Actions or Third Party Claims, the parties may determine that it is in
their mutual interest to exchange privileged or confidential information. If
so, the parties agree to discuss whether it is in their mutual interest to
enter into a joint defense agreement or information exchange agreement to
maintain the confidentiality of their communications and to permit them to
maintain the confidentiality of proprietary information or information that is
otherwise confidential or subject to an applicable privilege, including but not
limited to the attorney-client, work product, executive, deliberative process,
or self- evaluation privileges.
SECTION 7.12. CONTRIBUTION. To the extent that any indemnification
provided for under SECTION 7.01, SECTION 7.02 or SECTION 7.03 is unavailable to
an Indemnified Party or is insufficient in respect of any the Indemnifiable
Lossess of such Indemnified Party then the Indemnifying Party under such
Section, in lieu of indemnifying such Indemnified Party thereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Indemnifiable Losses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Indemnifying Party on the one
hand and the Indemnified Party on the other hand from the transaction or other
matter which resulted in the Indemnifiable Losses or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Indemnifying Party on
the one hand and of the Indemnified Party on the other hand in connection with
the action, inaction, statements or omissions that resulted in such
Indemnifiable Losses as well as any other relevant equitable considerations.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. COMPLETE AGREEMENT; CONSTRUCTION. This Agreement, including
the Exhibits and Schedules hereto, and the Ancillary Agreements shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter. In the event of any inconsistency
between this Agreement and any Schedule or Exhibit hereto, the Schedule or
Exhibit, as the case may be, shall prevail. Notwithstanding any other
provisions in this Agreement to the contrary, in the event and to the extent
that there shall be a conflict between the provisions of this Agreement and the
provisions of any Ancillary Agreement, such Ancillary Agreement shall control.
SECTION 8.02. ANCILLARY AGREEMENTS.20 This Agreement is not intended to
address, and should not be interpreted to address, the matters specifically and
expressly covered by the Ancillary Agreements.
SECTION 8.03. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 8.04. SURVIVAL OF AGREEMENTS. Except as otherwise expressly
provided herein, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
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SECTION 8.05. RESPONSIBILITY FOR EXPENSES.
(a) EXPENSES INCURRED ON OR PRIOR TO DISTRIBUTION DATE. Subject to the
provisions of SECTION 8.05(C) below and except as otherwise set forth in this
Agreement or any Ancillary Agreement, all costs and expenses incurred on or
prior to the Distribution Date (whether or not paid on or prior to the
Distribution Date) in connection with the preparation, execution, delivery and
implementation of this Agreement and any Ancillary Agreement, the Information
Statements and the Distribution, and the consummation of the transactions
contemplated hereby and thereby shall be charged to and paid by Tenneco;
provided, however, that (i) such amounts shall be included in the calculation
of the Actual Energy Debt Amount to the extent expressly provided in the Debt
and Cash Allocation Agreement, and (ii) each of Industrial Company and
Shipbuilding Company shall be solely responsible and liable for any expenses,
fees, or other costs that it separately and directly incurs in connection with
any of the transactions contemplated under this Agreement or any of the
Ancillary Agreements.
(b) EXPENSES INCURRED OR ACCRUED AFTER DISTRIBUTION DATE. Subject to the
provisions of SECTION 8.05(C) below and except as otherwise set forth in this
Agreement or any Ancillary Agreement, each party shall bear its own costs and
expenses first incurred or accrued after the Distribution Date.
(c) ENVIRONMENTAL EXPENSES. Notwithstanding the provisions of SECTION
8.05(A) and SECTION 8.05(B) above, expenses and other costs incurred in
connection with compliance with any Environmental Laws applicable to the
transactions contemplated hereby shall be paid by the party that after the
Distribution Date will, or that this Agreement contemplates will, own the
assets or operate the business subject to such Environmental Laws.
SECTION 8.06. NOTICES. All notices and other communications to a party
hereunder shall be in writing and hand delivered or mailed by registered or
certified mail (return receipt requested) or sent by any means of electronic
message transmission with delivery confirmed (by voice or otherwise) to such
party (and will be deemed given on the date on which the notice is received by
such party) at the address for such party set forth below (or at such other
address for the party as the party shall, from time to time, specify by like
notice to the other parties):
If to Tenneco, at: 1010 Milam Street
Houston, Texas 77002
Telecopier:
Attention: Corporate Secretary
If to Industrial Company, at: 1275 King Street
Greenwich, CT 06831
Telecopier:
Attention: Corporate Secretary
If to Shipbuilding Company, at: 4101 Washington Avenue
Newport News, Virginia 23607
Telecopier:
Attention: Corporate Secretary
SECTION 8.07. WAIVERS. The failure of any party hereto to require strict
performance by any other party of any provision in this Agreement will not
waive or diminish that party's right to demand strict performance thereafter of
that or any other provision hereof.
SECTION 8.08. AMENDMENTS. Subject to the terms of SECTION 8.11 hereof,
this Agreement may not be modified or amended except by an agreement in writing
signed by the parties hereto; provided, however, any such amendments or
modifications prior to the termination of the Merger Agreement or consummation
of the Merger may only be made with the prior consent of Acquiror unless such
modifications or amendments do not, individually or in the aggregate, adversely
affect the Energy Business (other than to a de minimis extent) or materially
delay or prevent the consummation of the Merger.
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SECTION 8.09. ASSIGNMENT. This Agreement shall be assignable in whole in
connection with a merger or consolidation or the sale of all or substantially
all the assets of a party hereto so long as the resulting, surviving or
transferee entity assumes all the obligations of the relevant party hereto by
operation of law or pursuant to an agreement in form and substance reasonably
satisfactory to the other parties to this Agreement. Otherwise this Agreement
shall not be assignable, in whole or in part, directly or indirectly, by any
party hereto without the prior written consent of the others, and any attempt
to assign any rights or obligations arising under this Agreement without such
consent shall be void.
SECTION 8.10. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the
parties and their respective permitted successors and permitted assigns.
SECTION 8.11. TERMINATION. This Agreement may be terminated and the
Distributions may be amended, modified or abandoned at any time prior to the
Distributions by and in the sole discretion of Tenneco without the approval of
Industrial Company or Shipbuilding Company or the stockholders of Tenneco;
provided, however, any such termination, abandonment, amendments or
modifications prior to the termination of the Merger Agreement or consummation
of the Merger may only be made with the prior written consent of Acquiror
unless, in the case of a modification or amendment only, such modification or
amendment does not, individually or in the aggregate, adversely affect the
Energy Business (other than to a de minimis extent) or materially delay or
prevent the consummation of the Merger. In the event of such termination, no
party shall have any liability of any kind to any other party or any other
person. After the Distributions, this Agreement may not be terminated except by
an agreement in writing signed by all of the parties hereto; provided, however,
that ARTICLE VIII shall not be terminated or amended after the Distributions in
respect of the third party beneficiaries thereto without the consent of such
persons. Nothing in this SECTION 8.11 shall relieve Tenneco of its obligations,
under Section 6.13 of the Merger Agreement.
SECTION 8.12. THIRD PARTY BENEFICIARIES. Except as provided in ARTICLE VII
hereof (relating to Indemnitees), this Agreement is solely for the benefit of
the parties hereto, the members of their respective Groups and Affiliates and
the Acquiror, after giving effect to the Distributions, and should not be
deemed to confer upon third parties any remedy, claim, liability, right of
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
SECTION 8.13. ATTORNEY FEES. A party in breach of this Agreement shall, on
demand, indemnify and hold harmless the other parties hereto for and against
all out-of-pocket expenses, including, without limitation, reasonable legal
fees, incurred by such other party by reason of the enforcement and protection
of its rights under this Agreement. The payment of such expenses is in addition
to any other relief to which such other party may be entitled hereunder or
otherwise.
SECTION 8.14. TITLE AND HEADINGS. Titles and headings to sections herein
are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
SECTION 8.15. EXHIBITS AND SCHEDULES. The Exhibits and Schedules attached
hereto shall be construed with and as an integral part of this Agreement to the
same extent as if the same had been set forth verbatim herein.
SECTION 8.16. SPECIFIC PERFORMANCE.20 Each of the parties hereto
acknowledges that there is no adequate remedy at law for the failure by such
parties to comply with the provisions of this Agreement and that such failure
would cause immediate harm that would not be adequately compensable in damages.
Accordingly, each of the parties hereto agrees that their agreements contained
herein may be specifically enforced without the requirement of posting a bond
or other security, in addition to all other remedies available to the parties
hereto under this Agreement.
SECTION 8.17. GOVERNING LAW. ALL QUESTIONS AND/OR DISPUTES CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE SCHEDULES
AND EXHIBITS HERETO SHALL BE GOVERNED BY THE INTERNAL LAWS, AND NOT THE LAW
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OF CONFLICTS, OF THE STATE OF DELAWARE. EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY IRREVOCABLY AND UNCONDITIONALLY (i) AGREES TO BE SUBJECT TO, AND HEREBY
CONSENTS AND SUBMITS TO, THE JURISDICTION OF THE COURTS OF THE STATE OF
DELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE OF DELAWARE, (ii) TO
THE EXTENT SUCH PARTY IS NOT OTHERWISE SUBJECT TO SERVICE OF PROCESS IN THE
STATE OF DELAWARE, HEREBY APPOINTS THE CORPORATION TRUST COMPANY, AS SUCH
PARTY'S AGENT IN THE STATE OF DELAWARE FOR ACCEPTANCE OF LEGAL PROCESS AND
(iii) AGREES THAT SERVICE MADE ON ANY SUCH AGENT SET FORTH IN (ii) ABOVE SHALL
HAVE THE SAME LEGAL FORCE AND EFFECT AS IF SERVED UPON SUCH PARTY PERSONALLY
WITHIN THE STATE OF DELAWARE.
SECTION 8.18. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 8.19. SUBSIDIARIES. Each of the parties hereto shall cause to be
performed, and hereby guarantee the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such party
which is contemplated to be a Subsidiary of such party on and after the
Distribution Date.
SECTION 8.20. SHIPBUILDING HEDGING TRANSACTIONS. Notwithstanding any other
provisions of this Agreement or any other document or instrument (including any
of the other Ancillary Agreements), any gains or losses relating to hedging or
similar transactions undertaken by Shipbuilding Company or any other member of
the Shipbuilding Group which are in effect on the date hereof or at any time
hereafter through the Distribution Date shall be for the account of
Shipbuilding Company, and, without limiting the generality of the foregoing,
(i) Shipbuilding Company and the other members of the Group shall finance and
fund any such losses through their own finance facilities, and (ii) no cash or
debt relating to any such gains or losses shall be taken into account in making
any of the determinations under the Debt and Cash Allocation Agreement,
including determinations regarding the amount of the Allocated Shipbuilding
Debt and/or the Guaranteed Shipbuilding Cash Amount.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
TENNECO INC.
By
---------------------------------------
Name:
Title:
NEW TENNECO INC.
By
---------------------------------------
Name:
Title:
NEWPORT NEWS SHIPBUILDING INC.
By
---------------------------------------
Name:
Title:
A-36
<PAGE> 41
EXHIBIT C
TO
DISTRIBUTION AGREEMENT
DEBT AND CASH ALLOCATION AGREEMENT
THIS DEBT AND CASH ALLOCATION AGREEMENT (this "Agreement") is made and
entered into as of this day of December, 1996 by and among Tenneco Inc.,
a Delaware corporation ("Tenneco"), Newport News Shipbuilding Inc. (formerly
known as Tenneco InterAmerica Inc.), a Delaware corporation ("Shipbuilding
Company"), and New Tenneco Inc., a Delaware corporation ("Industrial
Company").
WHEREAS, pursuant to the terms of that certain Distribution Agreement by
and among the parties hereto and dated as of November 1, 1996 (the
"Distribution Agreement"), the parties have entered into this Agreement
regarding the allocation of the Cash and Cash Equivalents and Consolidated Debt
of Tenneco and its consolidated subsidiaries as of the Effective Time. For
purposes of this Agreement only, the "Effective Time" means 12:01 AM, Houston
time, on the date on which the Merger Effective Time occurs.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement and the Distribution Agreement, each of
the parties hereto, on behalf of itself and each of the other members of its
Group over which it has direct or indirect legal or effective control, hereby
agrees as follows:
1. Certain Definitions. Capitalized terms which are used herein but which
are not defined below in this SECTION 1 or in any of the other provisions or
Sections of this Agreement or in the Distribution Agreement, shall have the
meaning ascribed to such terms in the Debt Realignment Plan attached as Exhibit
C to the Merger Agreement.
(a) "Actual Energy Debt Amount" means the aggregate amount, as of
the Effective Time, of the following, without duplication:
(i) the then outstanding amount of the Tenneco Revolving Debt
plus accrued and accreted interest and fees and expenses in respect
thereof (as reflected on the Energy Adjusted Closing Balance Sheet) ;
plus
(ii) the Consolidated Public Debt Value; plus
(iii) the then outstanding principal amount of Consolidated Debt
of Tenneco and the Energy Subsidiaries other than that which is
described in clauses (i) and (ii) above (for this purpose undrawn
letters of credit and guarantees shall not be treated as outstanding)
plus accrued and accreted interest and fees and expenses in respect
thereof as reflected on the Energy Adjusted Closing Balance Sheet;
plus
(iv) except as otherwise expressly provided in the Merger
Agreement or the Distribution Agreement, the unpaid amount of all
direct and out of pocket fees, costs and expenses (as reflected on the
Energy Adjusted Closing Balance Sheet) incurred on or prior to the
Effective Time by Tenneco and its subsidiaries in respect of the
transactions contemplated under the Debt Realignment, with respect to
the Merger Agreement, the NPS Issuance and with respect to the
Distribution Agreement, including, without limitation, the Corporate
Restructuring Transactions, the Distributions, the Merger and the
other related transactions, including by way of example items
specifically set forth on Schedule 1 to the extent incurred in respect
of the aforesaid transactions (collectively, the "Tenneco Transaction
Expenses");
(v) any sales and use, gross receipts or other transfer Taxes
(including Gains Taxes and Transfer Taxes, as defined in the Merger
Agreement) imposed as a result of the Corporate Restructuring
Transactions or otherwise occurring pursuant to the Distribution
Agreement or the Merger Agreement, excluding, however, any stamp duty
imposed by the Stamp Act 1894 (Queensland) as a result of the Merger;
plus
(vi) Restructuring Taxes (as defined in the Tax Sharing
Agreement), except (A) for Taxes resulting from the deferred
intercompany items on Schedule 2, and (B) to the extent the IRS ruling
provides the Transactions (as defined in the Tax Sharing Agreement)
are tax-free; plus
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(vii) the then outstanding amount of any off-balance sheet
indebtedness incurred after June 19, 1996 and before the Effective
Time to finance the acquisition of any additional interest in the
Oasis Pipeline;
(viii) dividends declared by Tenneco on its common stock, $4.50
Preferred Stock and $7.40 Preferred Stock which have not been paid
prior to the Effective Time but as to which the record date is before
the Effective Time; plus
(ix) the total amount of dividends accrued on the shares of New
Preferred Stock issued pursuant the NPS Issuance that remain unpaid as
of the Effective Time.
The parties hereto hereby acknowledge and agree that the Actual Energy
Debt Amount shall include any amounts (including interest, fees and other
charges) that may be due and owing ASCC under or as a result of the factoring
arrangement between ASCC and Tenneco (and/or any of its Subsidiaries) other
than the amount of Factored Proceeds (the "ASCC Amount").
(b) "Actual Energy Expenditures Amount" means the actual amount of
capital expenditures (determined on a basis consistent with the past
accounting practices of the Energy Business and the 1996 capital budget
provided to Acquiror) made and paid for by the Energy Business from and
after January 1, 1996 to and including the Effective Time, including,
without limitation any capital expenditures in respect of the 70 MW
Dunaferr power project in Hungary; provided, however, that any amount paid
for the acquisition of any additional interest in either Tenneco Energy
Resources Inc. or the Oasis Pipeline or to repair any gas pipeline shall
not be capital expenditures for any purpose under this Agreement and shall
not be included in the Actual Energy Expenditures Amount.
(c) "Allocated Energy Debt" means the total amount of indebtedness
(including accrued and accreted interest and fees and expenses)
outstanding as of the Effective Time under each of the Tenneco Revolving
Debt, the Consolidated Debt (other than the Tenneco Revolving Debt) of
Tenneco and the Energy Subsidiaries and the Tenneco Transaction Expenses,
and any and all such indebtedness outstanding or other obligations and
liabilities incurred or accrued under any of the foregoing from time to
time and at any time after the Effective Time.
(d) "Allocated Industrial Debt" means the total amount of
indebtedness (including accrued and accreted interest and fees and
expenses) outstanding under the Industrial Debt Securities as of the
Effective Time, any and all such indebtedness outstanding from time to
time thereafter and all other obligations and liabilities incurred or
accrued at any time under the Industrial Debt Securities.
(e) "Allocated Shipbuilding Debt" means the total amount of
indebtedness (including accrued and accreted interest and fees and
expenses) outstanding under the Shipbuilding Credit Facility as of the
Effective Time, any and all such indebtedness outstanding from time to
time at any time thereafter and all other obligations and liabilities
incurred or accrued at any time under the Shipbuilding Credit Facility.
(f) "Auditors" has the meaning ascribed to such term in SECTION 6
below.
(g) "Base Amount" means an amount equal to $2,650,000,000, (i) plus,
without duplication, the sum of (A) with respect to Tenneco gas purchase
contracts, the amount of all cash payments made by Tenneco and/or any of
its Subsidiaries during the period commencing on the date of Merger
Agreement and ending as of the Effective Time as a result or in respect of
any settlement, judgment or satisfaction of a bond in excess of the market
price for gas received by Tenneco and/or any of its Subsidiaries reduced
by the amount of any cash payments received from customers, insurers or
other third parties with respect thereto (other than ones refunded prior
to the Effective Time) or with respect to any gas supply realignment costs
which are so recovered (and not refunded) on or prior to the Effective
Time, (B) the purchase price paid by Tenneco and/or any of its
subsidiaries to acquire any additional interest in the Oasis Pipeline, (C)
the amount of all cash payments made by Tenneco and/or any of the Energy
Subsidiaries during the period commencing on the date of the Merger
Agreement and ending on the Closing Date in settlement of any significant
claim, action, suit or proceeding to the extent such matter would be an
Energy Liability and with the consent of Acquiror, which shall not be
arbitrarily withheld (including, without limitation, cash
A-C-2
<PAGE> 43
payments in settlement of claims against Tenneco and/or any of its
affiliates arising from the Stock Purchase Agreement dated as of July 31,
1986 by and between Tenneco Inc. and I.C.H. Corporation) reduced by the
amount of any cash payments received by Tenneco or any of the Energy
Subsidiaries during such period from customers, insurers or other third
parties with respect thereto, and (D) the total amount of the specific
additions or increases to the Base Amount set forth on SCHEDULE 4 attached
hereto, (ii) less, without duplication, the sum of (A) the gross amount of
cash proceeds from the NPS Issuance (as defined in the Merger Agreement)
less the amount of any expenses, fees or other out-of-pocket costs related
thereto which are included in the Actual Energy Debt Amount), and (B) the
total amount of the specific subtractions and reductions to the Base
Amount set forth on SCHEDULE 4 attached hereto.
(h) "Cash and Cash Equivalents" has the meaning ascribed to such
term under United States generally accepted accounting principles;
provided, that in all events checks issued by Tenneco and the Energy
Subsidiaries which remain unpaid as of the Effective Time shall be
deducted from Cash and Cash Equivalents, and checks received by Tenneco
and the Energy Subsidiaries which remain uncollected prior to the
Effective Time (other than checks that have been dishonored) shall be
included in Cash and Cash Equivalents.
(i) "Consolidated Public Debt Value" means the value (including any
accrued and unpaid interest thereon) of publicly-held Consolidated Debt of
Tenneco and the Energy Subsidiaries outstanding as of the Effective Time
(as reflected on the Energy Adjusted Closing Balance Sheet), calculated
and determined by Tenneco and Acquiror or if, they are unable to agree, by
a nationally recognized investment banking firm selected by mutual
agreement between Tenneco and Acquiror, as of the close of business on the
fifth (5th) business day preceding the Effective Time based on the
applicable spreads to treasuries and the applicable benchmark treasury
securities listed on Schedule 3.
(j) "Closing Calendar Month" means the calendar month in which the
Effective Time occurs.
(k) "Debt Realignment" has the meaning ascribed to such term in the
Merger Agreement.
(l) "Dispute" has the meaning ascribed to such term in SECTION 6
below.
(m) "Energy Adjusted Closing Balance Sheet" has the meaning ascribed
to such term in SECTION 6 below.
(n) "Energy Closing Balance Sheet" has the meaning ascribed to such
term in SECTION 6 below.
(o) "Energy Receivables" means any and all accounts receivable of
the Energy Business (after giving effect to the Corporate Restructuring
Transactions and the Distributions and, therefore, specifically excluding
receivables relating to the business of Case Corporation and the
Industrial Business).
(p) "Factored Proceeds" means the total amount of outstanding cash
proceeds received by Tenneco from ASCC, as of the last business day of the
month preceding the Closing Calendar Month, through the factoring of
Energy Receivables, which amount shall not exceed $100,000,000.
(q) "Guaranteed Energy Cash Amount" has the meaning ascribed to such
term in SECTION 5 below.
(r) "Guaranteed Shipbuilding Cash Amount" has the meaning ascribed
to such term in SECTION 5 below.
(s) "Independent Auditors" has the meaning ascribed to such term in
SECTION 6 below.
(t) "Industrial Debt Securities" means, collectively, the notes,
debentures and other debt securities issued by Industrial Company in
exchange for certain issues of the Consolidated Debt pursuant to and in
accordance with the debt exchange by Industrial Company contemplated under
the Debt Realignment.
(u) "Merger Agreement" means the Amended and Restated Agreement and
Plan of Merger, dated as of June 19, 1996, among Tenneco, El Paso Natural
Gas Company and El Paso Merger Company, as amended from time to time.
(v) "Merger Closing Date" means the date on which the Merger is
consummated.
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<PAGE> 44
(w) "Required Energy Expenditures Amount" means an aggregate amount
of capital expenditures (determined on a basis consistent with the past
accounting practices of the Energy Business and the 1996 capital budget
provided to Acquiror) by the Energy Business for 1996 equal to
$333,200,000, plus an amount of capital expenditures by the Energy
Business for 1997 equal to $27,750,000 per month for each month (or pro
rata portion thereof) from January 1, 1997 to the Effective Time.
(x) "Shipbuilding Adjusted Closing Balance Sheet" has the meaning
ascribed to such term in SECTION 6 below.
(y) "Shipbuilding Closing Balance Sheet" has the meaning ascribed to
such term in SECTION 6 below.
(z) "Shipbuilding Credit Facility" has the meaning ascribed to such
term in SECTION 3 below.
(aa) "Tenneco Allocation Percentage" means a fraction, the numerator
of which is the total number of business days remaining in the Closing
Calendar Month from and after the Effective Time (including the day on
which the Effective Time occurs), and the denominator of which is the
total number of business days in the Closing Calendar Month.
(bb) "Tenneco Revolving Debt" has the meaning ascribed to such term
in SECTION 2 below.
2. Tenneco Credit Facility and Tenneco Revolving Debt. Tenneco shall, at
its expense, have the sole right and authority to, and will use its
commercially reasonable efforts to, have in place prior to the Distribution
Date a credit facility for itself (with such guarantees of its obligations
thereunder by the Energy Subsidiaries as it deems necessary) in an aggregate
principal amount sufficient (together with other available funds to Tenneco) to
fund the tenders, redemptions, prepayments, defeasances and maturities
contemplated under the Debt Realignment; to pay all the fees, costs and
expenses incurred by Tenneco and its subsidiaries in preparing for, negotiating
and effecting the Distributions, the Merger and the Debt Realignment and any
financings in connection therewith; and for other general corporate purposes
(including, without limitation, working capital, the repayment or refinancing
of Consolidated Debt and the payments of dividends). This facility shall be in
effect at, and shall have a remaining stated maturity of at least 180 days
following, the closing of the Merger and the Distributions. The aggregate
amount of debt (including accrued and accreted interest and fees and expenses)
outstanding as of the Effective Time under this facility is hereinafter called
the "Tenneco Revolving Debt".
Notwithstanding anything contained herein, (a) contemporaneously with the
Distributions, Tenneco and the Energy Subsidiaries shall be removed as obligor
under (and released from liability with respect to) any indebtedness for
borrowed money for which Tenneco or its subsidiaries are liable and which are
assumed by the Industrial Company or the Shipbuilding Company pursuant to the
terms hereof and the Distribution Agreement, (b) any Tenneco Revolving Debt
shall be prepayable without penalty, subject to customary notice provisions,
(c) in respect of publicly-traded Consolidated Debt, between the date of the
Merger Agreement and the Effective Time there shall be no (i) extension of
maturity or average life, (ii) increase in interest rates or (iii) adverse
change in defeasance or redemption provisions with respect to any indebtedness
for borrowed money for which Tenneco or the Energy Subsidiaries will be liable
on or after the Effective Time and (d) except for the Tenneco Revolving Debt,
no indebtedness for borrowed money of Tenneco or the Energy Subsidiaries at the
Effective Time shall contain any affirmative or negative financial or
operational covenants other than ones that are (x) mutually acceptable to
Tenneco and Acquiror or (y) no more restrictive in the aggregate and
substantially equivalent to those set forth in the Indenture dated as of
January 1, 1992 of El Paso Natural Gas Company as in effect as of the date of
the Merger Agreement (other than Section 10.05 of the Indenture).
3. Shipbuilding Credit Facility and Shipbuilding Revolving Debt. Prior to
the Distributions (and at such time as Tenneco shall request), Shipbuilding
Company shall, at its expense, obtain and have in place a credit facility (the
"Shipbuilding Credit Facility") for itself (with such guarantees of its
obligations thereunder by the Shipbuilding Subsidiaries as is necessary to
obtain the Shipbuilding Credit Facility) in an aggregate principal amount of at
least $600 million (the "Minimum Debt Amount") and shall borrow the Minimum
Debt Amount thereunder and distribute the proceeds of such borrowing to Tenneco
(or such subsidiary of Tenneco as Tenneco shall designate) at such time on or
prior to the consummation of the Distributions as Tenneco shall request.
A-C-4
<PAGE> 45
4. Allocation and Assumption of Debt.
(a) Allocated Energy Debt. On the Distribution Date, Tenneco shall assume,
and shall thereafter be solely liable and responsible for, the Allocated Energy
Debt. Tenneco hereby acknowledges and agrees that the Allocated Energy Debt
shall constitute an Energy Group Liability as defined in the Distribution
Agreement.
(b) Allocated Industrial Debt. On the Distribution Date, Industrial
Company shall assume, and shall thereafter be solely liable and responsible
for, the Allocated Industrial Debt. Industrial Company hereby acknowledges and
agrees that the Allocated Industrial Debt shall constitute an Industrial Group
Liability as defined in the Distribution Agreement.
(c) Allocated Shipbuilding Debt. On the Distribution Date, Shipbuilding
Company shall assume, and shall thereafter be solely liable and responsible
for, the Allocated Shipbuilding Debt. Shipbuilding Company hereby acknowledges
and agrees that the Allocated Shipbuilding Debt shall constitute a Shipbuilding
Group Liability as defined in the Distribution Agreement.
5. Allocation of Cash and Cash Equivalents. Prior to or contemporaneously
with the consummation of the Distributions, each of the parties hereto shall
make such transfers of the Cash and Cash Equivalents of Tenneco and its
consolidated subsidiaries (prior to giving effect to the Distributions) so that
to the extent possible, based on estimates of the aggregate amount of Cash and
Cash Equivalents of Tenneco and its consolidated subsidiaries then on hand, (a)
Tenneco and the Energy Subsidiaries, on a consolidated basis, shall, as of the
Effective Time, have an aggregate amount of Cash and Cash Equivalents equal to
the sum of the following:
(i) $25.0 million,
(ii) the product of (A) the Tenneco Allocation Percentage, and (B) the
lesser of (I) $100 million and (II) the total amount of the Factored
Proceeds (the lesser of such amounts being referred to as the "Section 5
Amount") and
(iii) should the Effective Time occur after the day of the month on
which Tenneco generally collects receivables from customers of its
regulated pipeline business (typically, the 25th day of a month), the
lesser of the amount of (A) the Section 5 Amount owing to ASCC as of the
Effective Time, and (B) the total amount of such receivables actually
collected by Tenneco or any of its Subsidiaries during the period
beginning on the day such receivables are first collected and ending at
the Effective Time (the "Actual Collection Amount"), so long as that
amount is owing to ASCC as of the Effective Time. It is expressly
understood that as of the Effective Time all payables and receivables are
for the account of Acquiror.
(the sum of the amounts described in the immediately preceding clause (i),
(ii) and (iii) is hereinafter, referred to as the "Guaranteed Energy Cash
Amount"), and (b) Shipbuilding Company and the Shipbuilding Subsidiaries, on a
consolidated basis, shall, as of the close of business on the Merger Closing
Date, have an aggregate of $5 million of Cash and Cash Equivalents (the
"Guaranteed Shipbuilding Cash Amount"). All remaining Cash and Cash
Equivalents of Tenneco and its consolidated subsidiaries shall be allocated to
Industrial Company and the Industrial Subsidiaries.
6. Post Distribution Audit.
(a) Preparation of Closing Balance Sheets. As soon as practicable after
the Merger Closing Date, but in any event within 60 days following the Merger
Closing Date, Industrial Company shall cause Arthur Andersen LLP (the
"Auditors") to:
(i) conduct an audit of Tenneco and the Energy Subsidiaries to
determine the aggregate amount, as of the Effective Time, of each of the
Factored Proceeds, the Section 5 Amount, the Actual Collection Amount, the
Tenneco Revolving Debt, the Consolidated Debt (other than the Tenneco
Revolving Debt) of Tenneco and the Energy Subsidiaries, the Tenneco
Transaction Expenses, the Cash and Cash Equivalents of Tenneco
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<PAGE> 46
and the Energy Subsidiaries and the Actual Energy Expenditures Amount, and
to prepare and deliver to each of Industrial Company and Tenneco a
consolidated balance sheet for Tenneco and the Energy Subsidiaries as of
the Effective Time reflecting (x) the amount of each of the foregoing
(other than the aggregate amount of the Factored Proceeds, the Section 5
Amount, the Actual Collection Amount (which shall be set forth in a
footnote to such consolidated balance sheet) and the Consolidated Debt
valued as part of the Consolidated Public Debt Value) and (y) the
Consolidated Public Debt Value (the "Energy Closing Balance Sheet"); and
(ii) conduct an audit of Shipbuilding Company and the Shipbuilding
Subsidiaries to determine the aggregate amount of the Cash and Cash
Equivalents of Shipbuilding Company and the Shipbuilding Subsidiaries as
of the Effective Time, and to prepare and deliver to each of Industrial
Company and Shipbuilding Company a consolidated balance sheet for
Shipbuilding Company and the Shipbuilding Subsidiaries as of the Effective
Time reflecting the aggregate amount of such Cash and Cash Equivalents
(the "Shipbuilding Closing Balance Sheet").
The Energy Closing Balance Sheet and the Shipbuilding Closing Balance
Sheet shall each be prepared on the basis of an audit conducted by the Auditors
in accordance with generally accepted auditing standards and prepared in
accordance with generally accepted accounting principles consistently applied
and without giving effect to any change in accounting principles required on
account of the consummation of the Merger or the Distributions, except that, to
the extent that any definition contained herein contemplates inclusion or
exclusion of an item that would not be included or excluded under generally
accepted accounting principles, the Auditors shall compute such item in
accordance with such definition. During the course of the preparation of the
Energy Closing Balance Sheet and the Shipbuilding Closing Balance Sheet by the
Auditors, and during any period in which there is a dispute regarding either
the Energy Closing Balance Sheet or the Shipbuilding Closing Balance Sheet,
each of Tenneco, Industrial Company and Shipbuilding Company, as the case may
be, shall cooperate with the Auditors and each other and shall have access to
all work papers of the Auditors and all pertinent accounting and other records
of Tenneco and the Energy Subsidiaries and Shipbuilding Company and the
Shipbuilding Subsidiaries, as applicable. Tenneco shall pay the fees and
expenses of the Auditors. Notwithstanding any provision of this Agreement or
the Distribution Agreement, the Claims Deposit (as defined in Insurance
Agreement) shall not be included as Cash and Cash Equivalents of Tenneco and
the Energy Subsidiaries.
(b) Disputes Regarding Closing Balance Sheet. Unless (i) in the case of
the Energy Closing Balance Sheet, Tenneco delivers written notice to Industrial
Company on or prior to the 30th day after its receipt of the Energy Closing
Balance Sheet that it disputes any of the amounts set forth on the Energy
Closing Balance Sheet (hereinafter, an "Energy Dispute"), or (ii) in the case
of the Shipbuilding Closing Balance Sheet, Shipbuilding Company delivers
written notice to Industrial Company on or prior to the 30th day after its
receipt of the Shipbuilding Closing Balance Sheet that it disputes the amount
of Cash and Cash Equivalents set forth on the Shipbuilding Closing Balance
Sheet (hereinafter, a "Shipbuilding Dispute") then, as applicable, Tenneco
and/or Shipbuilding Company shall be deemed to have accepted and agreed to the
Energy Closing Balance Sheet or the Shipbuilding Closing Balance Sheet, as
applicable, in the form in which it was delivered to it by the Auditors. If
such a notice of an Energy Dispute is given by Tenneco or a notice of a
Shipbuilding Dispute is given by Shipbuilding Company (in either case such
party being hereinafter referred to as the "Disputing Party") within such
30-day period, then Industrial Company and the Disputing Party shall, within 15
days after the giving of any such notice, attempt to resolve such Energy
Dispute or Shipbuilding Dispute, as the case may be, and agree in writing upon
the final content of the Energy Closing Balance Sheet or Shipbuilding Closing
Balance Sheet, as the case may be. In the event that the Disputing Party and
Industrial Company are unable to resolve any Energy Dispute or Shipbuilding
Dispute, as the case may be, within such 15-day period, then the certified
public accounting firm of Ernst & Young or another mutually acceptable
independent accounting firm (the "Independent Auditors") shall be employed as
arbitrator hereunder to settle such Energy Dispute and/or Shipbuilding Dispute,
as the case may be, as soon as practicable. The Independent Auditors shall have
access to all documents and facilities necessary to perform its function as
arbitrator. The determination of the Independent Auditors with respect to any
Energy Dispute and/or Shipbuilding Dispute, as the case may be, shall be final
and binding on the applicable parties hereto. Industrial Company and the
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<PAGE> 47
Disputing Party shall each pay one-half (1/2) of the fees and expenses of the
Independent Auditors for such services. Industrial Company and the Disputing
Party each agree to execute, if requested by the Independent Auditors, a
reasonable engagement letter. The term "Energy Adjusted Closing Balance
Sheet," as used herein, shall mean the definitive Energy Closing Balance Sheet
agreed to by Tenneco and Industrial Company or, as the case may be, the
definitive Energy Closing Balance Sheet resulting from the determinations made
by the Independent Auditors in accordance with this Section 6(b) (in addition
to the matters theretofore agreed to by Tenneco and Industrial Company). The
term "Shipbuilding Closing Balance Sheet," as used herein, shall mean the
definitive Shipbuilding Closing Balance Sheet agreed to by Shipbuilding Company
and Industrial Company or, as the case may be, the definitive Shipbuilding
Closing Balance Sheet resulting from the determinations made by the Independent
Auditors in accordance with this SECTION 6(B) (in addition to the matters
theretofore agreed to by Shipbuilding Company and Industrial Company). The date
on which the Energy Adjusted Closing Balance Sheet is determined and provided
to each of Industrial Company and Tenneco pursuant to this SECTION 6(B) is
hereinafter referred to as the "Energy Determination Date". The date on which
the Shipbuilding Adjusted Closing Balance Sheet is determined and provided to
each of Industrial Company and Shipbuilding Company pursuant to this SECTION
6(B) is hereinafter referred to as the "Shipbuilding Determination Date".
7. Post Distribution Adjustments and Cash Payments.
(a) Adjustments and Payments Relating to Consolidated Debt. If the Actual
Energy Debt Amount exceeds the Base Amount, Industrial Company shall pay
Tenneco the amount of such excess in cash within 10 days after the Energy
Determination Date. If, on the other hand, the Actual Energy Debt Amount is
less than the Base Amount, Tenneco shall pay Industrial Company the amount of
such deficiency in cash within 10 days after the Energy Determination Date.
(b) Adjustments and Payments Relating to Cash and Cash Equivalents.
(i) Adjustments and Payments Relating to Shipbuilding Company. If
the amount of Cash and Cash Equivalents of Shipbuilding Company and
the Shipbuilding Subsidiaries as reflected on the Shipbuilding
Adjusted Closing Balance Sheet is less than the Guaranteed
Shipbuilding Cash Amount, Industrial Company shall pay Shipbuilding
Company the amount of such deficiency in cash within 10 days after the
Shipbuilding Determination Date. If, on the other hand, the amount of
Cash and Cash Equivalents of Shipbuilding Company and the Shipbuilding
Subsidiaries as reflected on the Shipbuilding Adjusted Closing Balance
Sheet exceeds the Guaranteed Shipbuilding Cash Amount, Shipbuilding
shall pay Industrial Company the amount of such excess in cash within
10 days after the Shipbuilding Determination Date.
(ii) Adjustments and Payments Relating to Tenneco. (A) If the
amount of Cash and Cash Equivalents of Tenneco and the Energy
Subsidiaries as reflected on the Energy Adjusted Closing Balance Sheet
is less than the Guaranteed Energy Cash Amount, Industrial Company
shall pay Tenneco the amount of such deficiency in cash within 10 days
after the Energy Determination Date. If, on the other hand, the amount
of Cash and Cash Equivalents of Tenneco and the Energy Subsidiaries as
reflected on the Energy Adjusted Closing Balance Sheet exceeds the
Guaranteed Energy Cash Amount, Tenneco shall pay Industrial Company
the amount of such excess in cash within 10 days after the Energy
Determination Date.
(B) If the Actual Energy Expenditures Amount as reflected on the
Energy Adjusted Closing Balance Sheet is less than the Required Energy
Expenditures Amount, Industrial Company shall pay Tenneco the amount
of such deficiency in cash within 10 days after the Energy
Determination Date. If, on the other hand, the Actual Energy
Expenditures Amount as reflected on the Energy Adjusted Closing
Balance Sheet is greater than the Required Energy Expenditures Amount,
Tenneco shall pay to Industrial Company the amount of such excess in
cash within 10 days after the Energy Determination Date.
(C) Each of Tenneco and Industrial Company hereby agrees that the
amount of any cash payment otherwise due it under any provision of
this SECTION 7 may be offset against and reduced, on a dollar for
dollar basis, in respect of any cash payment it may otherwise be
required to make to the other pursuant to and in accordance with any
other provision of this SECTION 7, and that the amount of such offset
and reduction shall be treated as payment of its obligations under any
provision of this SECTION 7 to the extent of such offset and
reduction.
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8. Miscellaneous Provisions.
(a) Termination. This Agreement may not be terminated except upon the
written agreement of each of the parties hereto.
(b) Best Efforts. If at any time after the Merger Closing Date any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of Tenneco, Industrial Company and Shipbuilding Company shall, on the
written request of any of them, take (or cause the appropriate member of its
Group over which it has direct or indirect legal or effective control to take)
all such reasonably necessary or desirable action.
(c) Cooperation. The parties hereto agree to use their reasonable best
efforts to cooperate with respect to the various matters contemplated by this
Agreement.
(d) Successors and Assigns. Except as otherwise expressly provided herein,
no party hereto may assign or delegate, whether by operation of law or
otherwise, any of such party's rights or obligations under or in connection
with this Agreement without the written consent of each other party hereto. No
assignment will, however, release the assignor of any of its obligations under
this Agreement or waive or release any right or remedy the other parties may
have against such assignor hereunder. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto will be binding upon and enforceable
against the respective successors and assigns of such party and will be
enforceable by and will inure to the benefit of the respective successors and
permitted assigns of such party.
(e) Modification; Waiver; Severabilitys20 . This Agreement may not be
amended or modified except in a writing executed by each of the parties hereto.
The failure by any party to exercise or a delay in exercising any right
provided for herein shall not be deemed a waiver of any right hereunder.
Whenever possible, each provision of this Agreement will be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which
taken together shall constitute one and the same Agreement.
(g) Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
(h) Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
five business days after mailing by certified or registered mail, return
receipt requested and postage prepaid, to the recipient at such recipient's
address as indicated in the Distribution Agreement or to such other address or
to the attention of such other person as the recipient party has specified by
prior written notice to the sending party.
(i) Survival. Each of the agreements of the parties herein shall survive
the Merger Closing Date.
(j) No Third Party Beneficiaries. This Agreement is made solely for the
benefit of the parties hereto and the other members of their respective Groups,
and shall not give rise to any rights of any kind to any other third parties.
(k) Governing Law and Consent to Jurisdiction. ALL QUESTIONS AND/OR
DISPUTES CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS
AGREEMENT AND THE SCHEDULES AND EXHIBITS HERETO SHALL BE GOVERNED BY THE
INTERNAL LAWS, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE. EACH OF
THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES TO
BE SUBJECT TO, AND HEREBY CONSENTS AND SUBMITS TO, THE JURISDICTION OF THE
COURTS OF THE STATE OF DELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE
OF DELAWARE.
A-C-8
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
TENNECO INC.
By
---------------------------------------
Name:
Title:
NEW TENNECO INC.
By
---------------------------------------
Name:
Title:
NEWPORT NEWS SHIPBUILDING INC.
(formerly known as Tenneco InterAmerica Inc.)
By
---------------------------------------
Name:
Title:
A-C-9
<PAGE> 50
Schedule 1
to Debt and Cash Allocation Agreement
Accounting fees and expenses
Actuarial fees and expenses
Appraisal fees and expenses
Audit fees and expenses
Broker/dealer fees and expenses
Consulting fees and expenses
Exchange/paying agent fees and expenses
Exit consent fees
Fees and expenses incurred in connection with arranging the Revolving Debt,
including commitment fees, drawdown fees, agent's fees, facility fees and
similar fees and expenses, and lender's costs and expenses payable by the
borrower
Filing fees, including SEC, NYSE, NASD, HSR and other similar fees
Information agent fees and expenses
Investment banking fees and expenses, dealer manager fees and expenses, and
similar fees and expenses
Fees and expenses with respect to legal matters pertaining to the transactions
Mailing expenses
Newspaper advertising costs
Printing fees and expenses
Proxy solicitation fees and expenses
Soliciting dealer fees and expenses
Rating Agency fees
Underwriting, placement, registration and similar fees, commissions and
discounts payable in connection with the NPS Preferred Stock
A-C-10
<PAGE> 51
Schedule 2
to Debt and Cash Allocation Agreement
The deferred intercompany items referred to in SECTION 1(A)(VI) of the
Debt and Cash Allocation agreement are the following intercompany transactions
<TABLE>
<CAPTION>
SELLER BUYER PROPERTY TRANSFERRED
------ ----- --------------------
<S> <C> <C>
Tenneco Corporation Tenneco Inc. Stock of Kern County Land Co.
Tenneco Corporation Tenneco Inc. Stock of Tenneco Credit Corp.
Tenneco Corporation Tennessee Gas Pipeline Co. Stock of Tenneco International Inc.
Channel Gas Marketing Channel Industries Gas DT Line
Tenngasco Gas Supply Channel Industries Gas Transmission facilities
Tennessee Gas Pipeline Co. Energy TRACS Software assignment agreement
</TABLE>
A-C-11
<PAGE> 52
TENNECO INC.
Schedule 3
<TABLE>
<CAPTION>
PRE-DETERMINED
-----------------------------------------------------------
SECURITY DESCRIPTION BENCHMARK TREASURY SPREAD TO TREASURY(1)
- --------------------------------------------------------- ----------------------------- ---------------------------
INDENTURE FACE COUPON MATURITY COUPON MATURITY CASE A CASE B
--------- ----------- ----------- ---------- ----------------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Inc. . . . . $ 300.0 6.500% 12/15/05 5.875% 11/05 84 bp 76 bp
Inc. . . . . 300.0 7.250% 12/15/25 pricing 30yr UST 125 113
Inc. . . . . 500.0 7.875% 10/01/02 6.375% 08/02 73 66
Inc. . . . . 250.0 8.000% 11/15/99 7.750% 11/99 58 52
Inc. . . . . 150.0 9.000% 11/15/12 pricing 30yr UST 95 86
Inc. . . . . 200.0 9.875% 02/01/01 7.750% 02/01 66 59
Inc. . . . . 250.0 10.000% 03/15/08 pricing 30yr UST 91 82
Inc. . . . . 500.0 10.000% 08/01/98 5.875% 08/98 51 46
Inc. . . . . 175.0 10.375% 11/15/00 5.625% 11/00 64 58
TGP . . . . . 400.0 6.000% 12/15/11 pricing 30yr UST 95 86
TGP . . . . . 75.0 8.000% 05/15/97 NA NA NA NA
TGP . . . . . 250.0 9.000% 01/15/97 NA NA NA NA
TCC . . . . . 7.5 8.500% 01/30/97 NA NA NA NA
TCC . . . . . 0.5 8.500% 03/17/97 NA NA NA NA
TCC . . . . . 3.0 8.500% 03/24/97 NA NA NA NA
TCC . . . . . 5.0 8.520% 03/28/97 NA NA NA NA
TCC . . . . . 6.6 8.570% 03/18/97 NA NA NA NA
TCC . . . . . 150.0 9.250% 11/01/96 NA NA NA NA
TCC . . . . . 12.0 9.470% 09/21/98 5.875% 08/98 48 43
TCC . . . . . 10.0 9.480% 01/28/02 7.500% 11/01 69 62
TCC . . . . . 250.0 9.625% 08/15/01 7.875% 08/01 68 61
TCC . . . . . 7.6 9.720% 09/15/01 7.875% 08/01 68 61
TCC . . . . . 10.0 9.720% 09/25/01 7.875% 08/01 69 62
TCC . . . . . 5.0 9.900% 12/02/96 7.500% 12/96 45 41
TCC . . . . . 3.0 9.900% 08/19/98 5.875% 08/98 48 43
TCC . . . . . 4.5 10.000% 08/19/98 5.875% 08/98 48 43
TCC . . . . . 5.0 10.000% 12/13/01 7.500% 11/01 70 63
TCC . . . . . 50.0 10.500% 08/17/98 5.875% 08/98 48 43
TCC . . . . . 150.0 10.125% 12/01/97 5.250% 12/97 48 43
Inc. . . . . $ 2,625
TGP . . . . . 725
TCC . . . . . 680
. . . . . . . $ 4,030
</TABLE>
NOTE: (1) Case A represents the spread to treasury for each security in the
event that the percentage of the aggregate principal amount of the
bonds participating in any tender or exchange, measured as a group
for all bonds tendered or exchanged for, equals or exceeds 80% of all
such bonds eligible to participate. In the event that the percentage
of bonds participating in any tender or exchange falls short of 80%
(calculated as aforesaid), the market value of all bonds remaining
outstanding will be determined by using the spread to treasury
indicated in Case B.
A-C-12
<PAGE> 53
SCHEDULE 4
TO
DEBT AND CASH ALLOCATION AGREEMENT
ADDITIONAL ADJUSTMENTS TO BASE AMOUNT
1. Indonesia (the South Sulawesi Project)
(a) All expenditures made by Acquiror at any time from and after June 19,
1996 with respect to this project shall have no effect whatsoever on the Base
Amount or the calculation thereof.
(b) All expenditures actually incurred and paid by any of Tenneco or its
consolidated subsidiaries at any time between June 19, 1996 and the Effective
Time (the "PRE-CLOSING PERIOD") shall be added to the Base Amount (but shall
not be included as a capital expenditure for purposes of determining the Actual
Energy Expenditures Amount); provided, however, the Base Amount will be reduced
by the amount of any Net Cash Proceeds (as defined) received by Tenneco or any
of its consolidated subsidiaries during the Pre-Closing Period from any
monetization of this project during the Pre- Closing Period. As used in the
Schedule 4, the term "Net Cash Proceeds" means the total amount of cash
proceeds actually received by the party in question during the Pre-Closing
Period from the consummation during the Pre-Closing Period of the transaction
or transactions in question, less the sum of any and all costs, expenses and
taxes related to the transaction or transactions in question which either are
(i) actually incurred and paid by Tenneco or any of its consolidated
subsidiaries prior to or at the Effective Time (other than taxes based upon
income, which shall not be deducted from cash proceeds in determining Net Cash
Proceeds), or (ii) incurred but not paid prior to or at the Effective Time by
any member of either the Industrial Group and/or Shipbuilding Group and which
will remain an obligation or liability of such entity (or any member of its
Group) after giving effect to the Distributions without reimbursement therefor
by Tenneco or any other member of the Energy Group.
2. Orange Cogeneration Project
(a) All expenditures made by Acquiror at any time from and after June 19,
1996 with respect to this project shall have no effect whatsoever on the Base
Amount or the calculation thereof.
(b) All expenditures actually incurred and paid by any of Tenneco or its
consolidated subsidiaries at any time during the Pre-Closing Period shall be
added to the Base Amount (but shall not be included as a capital expenditure
for purposes of determining the Actual Energy Expenditures Amount); provided,
however, the Base Amount will be reduced by the amount of any Net Cash Proceeds
received by Tenneco or any of its consolidated subsidiaries during the
Pre-Closing Period from any monetization of this project during the Pre-Closing
Period.
3. Australian Infrastructure Bonds
(a) The Base Amount shall be reduced by any Net Cash Proceeds received by
Tenneco or any of its consolidated subsidiaries during the Pre-Closing Period
from any off-balance sheet financing in respect of this project.
4. Asset Sales
(a) Microwave Licenses. The Base Amount shall be reduced by the aggregate
amount of Microwave Net Cash Proceeds (as defined below) from any sale or
assignment during the Pre-Closing Period of private operational-fixed microwave
licenses issued by the Federal Communications Commission. As used herein,
"Microwave Net Cash Proceeds" means the gross cash proceeds actually received
by Tenneco or any of its consolidated subsidiaries less the sum of (i) the
total amount of relocation costs and cost and expenses of rebuilding an
acceptable replacement communication system that are actually incurred and paid
by Tenneco or any of its consolidated subsidiaries during the Pre-Closing
Period (or incurred by any member of the Industrial Group or Shipbuilding Group
and remain unpaid as of the Effective Time), and (ii) the amount of any taxes
incurred in connection with any such sale or assignment which are either (A)
actually incurred and paid by Tenneco or any of its consolidated subsidiaries
prior to the Effective Time (other than taxes based upon income, which shall
not be deducted from cash proceeds in determining Net Cash Proceeds), or (B)
incurred by any member of the Shipbuilding Group or Industrial Group and remain
unpaid as of the Effective Time and which will remain an obligation or
liability of such entity (or any member of its Group) after giving effect to
the Distributions without reimbursement therefor by Tenneco or any other member
of the Energy Group.
A-C-13
<PAGE> 54
5. Land Sales
(a) 960 Acre Parcel Located Along Galveston Bay at Ingleside, Texas. The
Base Amount shall be reduced by the total amount of Net Cash Proceeds actually
received by Tenneco or any of its consolidated subsidiaries at any time during
the Pre-Closing Period, in connection with the sale of the above referenced
property.
(b) Westchase Development in West Houston (also known as Tract 6A). The
Base Amount shall be reduced by the total amount of Net Cash Proceeds actually
received by Tenneco or any of its consolidated subsidiaries at any time during
the Pre-Closing Period in connection with the sale of the above referenced
property.
(c) 1625 West Loop (also known as Post Oak Ranch). The Base Amount shall
be reduced by the total amount of Net Cash Proceeds actually received by
Tenneco or any of its consolidated subsidiaries at any time during the
Pre-Closing Period in connection with the sale of the above referenced
property.
6. Sales of Gas Turbines
The Base Amount shall be reduced by the total amount of Net Cash Proceeds
actually received by Tenneco or any of its consolidated subsidiaries (and
credited to the account of Industrial Company under the Debt and Cash
Allocation Agreement) from its sale of any gas turbines at any time during the
Pre-Closing Period.
7. ICH Tax Indemnity Matter
The Base Amount shall be increased (without duplication) by any cash
payment (up to a maximum amount, however, of $19.0 million) made by Tenneco or
any of its consolidated subsidiaries during the Pre-Closing Period in respect
of the settlement of the ICH tax indemnity matter.
8. Payments due on Settlement of Certain Lawsuits During the Pre-Closing Period
All cash payments actually received by Tenneco or any of its consolidated
subsidiaries during the Pre-Closing Period in respect of any settlement of any
of the lawsuits or other proceedings identified and referred to in paragraph 9
of, and Schedule G-2 to, Exhibit G to the Merger Agreement shall, to the extent
provided for under the terms described under paragraph 9 of such Exhibit G, be
for the account of Industrial Company and shall not be included in the
Guaranteed Energy Cash Amount or have any effect on the Base Amount or the
calculation thereof.
9. Hedging Transactions
Any hedging transactions and all costs and expenses with respect thereto
that are entered into in connection with or in anticipation of the Debt
Realignment shall be for the benefit or detriment of Industrial Company and
shall have no effect whatsoever on the Base Amount or the calculation thereof.
10. Rate Refunds Payable to Customers
The Base Amount shall be reduced by the amount, calculated as of the
Effective Time, of any rate refunds, including interest, which would be payable
to customers pursuant to the rate settlement filed with the Federal Energy
Regulatory Commission at Docket No. RP95-112 and have not been paid as of the
Effective Time, whether such amounts are to be paid to customers or credited
against gas supply realignment costs pursuant to a settlement with customers.
11. Sale of Tenneco Ventures
The Base Amount shall be reduced by the aggregate amount of Net Cash
Proceeds actually received by Tenneco or any of its subsidiaries from any sale
of Tenneco Ventures during the Pre-Closing Period.
12. Bonuses for Energy Employees
(a) The total amount of cash bonuses for Energy Employees for the calendar
year 1996 (the "1996 Bonus Amount") shall be pro rated based on the date on
which the Effective Time occurs and shall be shared between Tenneco and
Industrial Company based on such pro ration as follows:
A-C-14
<PAGE> 55
(i) Tenneco shall be responsible and liable for the payment of that
portion (the "Tenneco Bonus Portion") of the 1996 Bonus Amount that
equals the product of (A) the 1996 Bonus Amount, and (B) a fraction, the
numerator of which is the number of days remaining in the 1996 calendar
year following the day on which the Effective Time occurs (the "Effective
Day"), and the denominator of which is 365.
(ii) New Tenneco shall be responsible and liable for the payment of
that portion of the 1996 Bonus Amount that equals the amount by which the
1996 Bonus Amount exceeds the Tenneco Bonus Portion.
(b) Each of Tenneco's and New Tenneco's liability for its share of the
1996 Bonus Amount shall be accounted for in the Merger as follows:
(i) If 100% of the 1996 Bonus Amount is paid on or before the
Effective Time, the Base Amount shall be increased by the Tenneco Bonus
Portion.
(ii) If as of the Effective Time, the amount of the 1996 Bonus Amount
that has not been paid exceeds the Tenneco Bonus Portion, the Base Amount
shall be reduced by the amount of such excess.
(iii) If as of the Effective Time, the amount of the 1996 Bonus Amount
that has not been paid equals the Tenneco Bonus Portion, the Base Amount
shall not be increased or decreased in respect of the 1996 Bonus Amount.
(c) The 1996 Bonus Amount shall be determined by Tenneco prior to the
Effective Time with the consent of Acquiror which shall not be unreasonably
withheld.
13. Non Cash Proceeds
Any proceeds received by Tenneco or any of its subsidiaries from the
transactions described in paragraphs 1, 2, 3, 4, 5, 6 and 11 other than cash
proceeds shall be for the account of Acquiror and shall be retained by or
distributed to the Energy Business.
A-C-15
<PAGE> 1
EXHIBIT 2.3
El Paso Natural Gas Company
One Paul Kayser Center
100 North Stanton Street
El Paso, Texas 79901
December 11, 1996
New Tenneco Inc.
1275 King Street
Greenwich, CT 06831
Ladies and Gentlemen:
This letter is to confirm certain understandings of El Paso Natural Gas
Company ("El Paso") and New Tenneco Inc. ("New Tenneco") relating to the Amended
and Restated Agreement and Plan of Merger (the "Merger Agreement") dated as of
June 19, 1996 among El Paso, El Paso Merger Company and Tenneco Inc. ("Tenneco")
and the Debt and Cash Allocation Agreement (including the schedules thereto, the
"Debt and Cash Agreement") dated the date hereof among Tenneco, Newport News
Shipbuilding Inc. and New Tenneco.
Capitalized terms used but not defined in this letter agreement have the
respective meanings ascribed to them in the Merger Agreement or the Debt and
Cash Agreement, as the case may be, it being understood that the term
("Effective Time" has the meaning set forth in the Merger Agreement except where
such term is used in connection with adjustments to the Base Amount, in which
case "Effective Time" has the meaning set forth in the Debt and Cash Agreement.
1. The Base Amount shall be reduced by the cash proceeds received by
Tenneco and its Subsidiaries, during the Pre-Closing Period, from sales of
assets (other than inventory or services in the ordinary course of business
consistent with past practice) by the entities comprising the Tenneco Ventures
business during the Pre-Closing Period. The estimate of this amount is set forth
in Schedule A hereto under (c)(6) of "Subtraction from Base Amount."
2. New Tenneco and its Subsidiaries will be entitled to retain the amount
received by Tenneco and its Subsidiaries with respect to the Poe Note and the
sale of the property securing such note (sometimes referred to as the San Emedio
Ranch).
3. New Tenneco and its Subsidiaries will be entitled to retain any and all
regular and/or extraordinary dividends received by Tenneco and/or its
Subsidiaries with respect to its investment in Oasis Pipeline from June 19, 1996
to the Effective Time.
<PAGE> 2
New Tenneco Inc.
December 11, 1996
Page 2
4. New Tenneco shall indemnify and hold harmless Tenneco, the Energy
Subsidiaries and their respective Affiliates (the "Energy Entities") from and
against all fines and penalties incurred by the Energy Entities arising out of
or resulting from the failure of Tenneco or any of its Subsidiaries to take any
action required to be taken, or to duly make any filing or obtain any consent
required to be made or obtained from any Governmental Authority, under any state
or local Environmental Laws (as defined in the Distribution Agreement),
including, without limitation, the New Jersey Industrial Site Remediation Act
(ISRA), in connection with the transactions contemplated by the Merger Agreement
or the Distribution Agreement. New Tenneco's agreement to indemnify the Energy
Entities under this paragraph does not in any way change, alter and/or modify
the provisions of the Merger Agreement and/or the Distribution Agreement as such
provisions pertain to the remediation of the assets of the Energy Entities.
Notwithstanding any of the provisions of the Environmental Laws, the provisions
of the Merger Agreement and/or the Distribution Agreement shall determine which
Person (as defined in the Distribution Agreement) has the obligation to
remediate any asset of the Energy Entities. To the extent that any fine and/or
penalty imposed, or sought to be imposed, by any Governmental Authority includes
the remediation of any asset of the Energy Entities, any such remediation will
be performed and financed by the Person who has that obligation under the Merger
Agreement and/or the Distribution Agreement.
5. The Base Amount shall be reduced by $7,500,000 to reflect certain
adjustments arising out of the Effective Time occurring at 12:01 a.m. on
December 12, 1996.
6. New Tenneco shall pay all fees and expenses for printing and
mailing relating to the transactions contemplated by the Merger Agreement and
the Distribution Agreement (estimated to be approximately $13,000,000) and, in
connection therewith, the Base Amount shall be increased by $1,753,939 and
Tenneco and El Paso and their Subsidiaries shall have no liability with respect
thereto.
7. The Actual Energy Expenditures Amount shall include actual cash
expenditures of $20,000,000 paid by Tenneco and its Subsidiaries after December
31, 1995 through the Effective Time with respect to capital expenditures of the
Energy Business (determined on a basis consistent with past accounting
practices of the Energy Business) incurred (but not paid for) prior to January
1, 1996.
<PAGE> 3
New Tenneco Inc.
December 11, 1996
Page 3
8. New Tenneco shall be responsible for all severance benefit payments,
estimated to be $356,250, made to Thomas C. Livengood and Tenneco and El Paso
and their Subsidiaries shall have no liability with respect thereto, provided
that the Base Amount shall be increased by 50% of the amount of such payments.
9. Schedule A hereto contains the Purchase Price Adjustment Schedule
reflecting the parties' calculations as of the date hereof of the estimated
amount of the Actual Energy Debt Amount, the Base Amount, the Actual Energy
Expenditures Amount, Cash and Cash Equivalents of Tenneco and the Energy
Subsidiaries and various items included in such calculations. The methodology
for calculating the amounts set forth on such schedule has been agreed by the
parties and is reflected therein. Except in the case of items marked with an
asterisk on Schedule A the amounts of which shall be conclusive and binding on
the parties absent manifest mathematical error in the calculation of such
amounts, the amount of each item set forth on such Schedule is a preliminary
estimate only and is subject to post-closing adjustment pursuant to the
procedures set forth in the Debt and Cash Agreement.
Very truly yours,
EL PASO NATURAL GAS COMPANY
By: /s/ BRITTON WHITE, JR.
--------------------------
Britton White, Jr.
Senior Vice President
and General Counsel
Agreed and Acknowledged:
NEW TENNECO INC.
By: /s/ KARL A. STEWART
----------------------
Karl A. Stewart
Vice President and
Secretary
<PAGE> 4
FINANCIAL REPORT
<TABLE>
<CAPTION>
Reference Page Tenneco El Paso Merger Fixed Schedule 5:25 p.m.
Debt True Up - Calculation of "Base Amount" 12/11/96
All references are to
Exhibit C to Distribution Agreement:
Debt and Cash Allocation Agreement $ thousands attachment
- ------------------------------------ ----------- ----------
<S> <C> <C> <C>
Item 1 paragraph(g) A-C-2 Initial Base Amount per merger agreement 2,650,000.0*
Additions to Base Amount
Item 1 paragraph (g) point (i) A A-C-2 A) GSR payments net of all GSR collections
from signing to closing A,B2
(1) Payments(*)
TransTexas 125,000.0* B2
Lenape (Coastal Litigation &
Bond Payment) 193,760.0* B2
Other 86,500.0 B2
(2) Collections (-) (94,720.0) B2
Item 1 paragraph (g) point (i) B A-C-2 B) Purchase price paid to acquire additional
interest in Oasis -- *
Item 1 paragraph (g) point (i) C A-C-2 C) Litigation payments net of all cash payments
received by Tenneco
(1) Payments (+) --
Schedule #4 to Exhibit C, Item 7 A-C-14 ICH (up to $19.0 million) --
Schedule #4 to Exhibit C, Item 8 A-C-14 (2) Collections (-) 620.2 A
Item 1 paragraph (g) point (i) D A-C-3 D) Expenditures for:
Schedule #4 to Exhibit C, Item 1 A-C-13 (1) Indonesia 23,508.9 C2
Schedule #4 to Exhibit C, Item 2 A-C-13 (2) Orange 36.6 D
Schedule #4 to Exhibit C, Item 3 A-C-13 (3) Australia Infrastructure Bonds 1,376.3 D2
Schedule #4 to Exhibit C, Item 12 E) Tenneco Bonus Portion of 1996 Bonus Amount
(if applicable) 1,116.2*
Side Letter F) Tenneco Portion of Proxy Printing Costs 1,753.9*
Item 1 paragraph (g) point (ii) A-C-3 Subtraction from Base Amount
Item 1 paragraph (g) point (ii) A A-C-3 A) New Preferred Shares value (300,000.0)*
B) Project Monetizations/Off balance sheet
financings
Schedule #4 to Exhibit C, Item 1 A-C-13 (1) Indonesia -- *
Schedule #4 to Exhibit C, Item 2 A-C-13 (2) Orange -- *
Schedule #4 to Exhibit C, Item 3 A-C-13 (3) Australia Infrastructure Bonds (14.317.0) E
Schedule #4 to Exhibit C, Item 4 A-C-13 C) Asset Sales
paragraph (a) A-C-13 (1) Microwaves (8,821.5)* F
Schedule #4 to Exhibit C, Item 5 (2) Surplus real estate
paragraph (a) A-C-14 Ingleside, Texas -- * F
paragraph (b) A-C-14 Westchase Development -- * F
paragraph (c) A-C-14 Post Oak Ranch (2,120.0)* F
Other (1,400.2)* F
Schedule #4 to Exhibit C, Item 6 A-C-14 (3) Gas Turbines -- *
Schedule #4 to Exhibit C, Item 11 A-C-14 (4) Tenneco Ventures *
(5) Other (3,958.2)* F
(6) Other - Sale of Ventures Properties (1,188.3)
Schedule #4 to Exhibit C, Item 9 A-C-14 D) Hedging transactions --
Schedule #4 to Exhibit C, Item 10 A-C-14 E) Rate refund obligation to customers (160,736.2)(i) G
Schedule #4 to Exhibit C, Item 12 A-C-14 F) Unpaid 1996 bonus amount (if applicable) (1,992.0)*
G) Agreed Closing Adjustments (7,500.0)*
------------
Total Base Amount $2,487,118.7
============
Tenneco Revolver Calculation
Total Base Amount $2,487,118.7
Less
Outstanding Debt, Transaction Expenses,
Taxes
Dividends and ASCC interest and expense 322,873.3
Accrued interest on the Revolver (487.8)
------------
Tenneco Revolver 2,163,757.6
============
Actual Energy Debt
All except for Revolver P&I 322,873.3
Revolver Accrued Interest 487.8
Revolver Principle 2,163,757.6
------------
Total Actual Energy Debt $2,487,118.7
============
</TABLE>
(i) The parties agree that the Rate refund obligation to customers includes
amounts to be paid to customers as a rate refund (including amounts related
to depreciation) plus interest through December 11, 1996.
<PAGE> 5
<TABLE>
<CAPTION>
Reference Page Tenneco/El Paso Merger
Debt True Up - Calculation of "Actual Energy Debt Amount"
All references are to
Exhibit C to Distribution Agreement: $ thousands attachment
Debt and Cash Allocation Agreement
- ------------------------------------ ----------- ----------
<S> <C> <C> <C>
Item (i) paragraph 1.(a) A-C-1 Outstanding Amount of Tenneco
Revolver & Interest 2,164,245.4
Item (ii) paragraph 1.(a) A-C-1 Consolidated Public Debt Value 261,536.5*
Item (iii) paragraph 1.(a) A-C-1 Outstanding Principle amount of
Tenneco & Energy Businesses, plus
interest fees and expenses. 51,061.0*
Item (iv) paragraph 1.(a) A-C-1 Unpaid Transaction Costs -
Item (v) & (vi) paragraph 1.(a) A-C-1 Restructuring Taxes 4,153.8
Item (vii) paragraph 1.(a) A-C-2 Oasis off balance sheet financing -
Item (viii) paragraph 1.(a) A-C-2 Dividends
Common Stock -
$4.50 Preferred Stock 3,617.0*
$7.40 Preferred Stock 724.0*
Item (ix) paragraph 1.(a) A-C-2 Dividends Accrued on NPS 1,627.0*
paragraph 1.(a) A-C-2 ASCC Expenses 154.0
Total Actual Energy Debt $2,487,118.7
============
Revolver & Interest $2,164,245.4
All Other $322,873.3
Tenneco Revolver Calculation
Total Base Amount $2,487,118.7
Less
Outstanding Debt, Transaction
Expenses, Taxes Dividends and
ASCC interest and expense 322,873.3
Tenneco Revolver and interest 2,164,245.4
------------
Actual Debt 2,487,118.7
------------
Tenneco Revolver 2,163,757.6
Tenneco Interest 487.8
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Reference Page Tenneco/El Paso Merger
Cash True Up -- Calculation of "Guaranteed Energy Cash Amount"
All references are to
Exhibit C to Distribution Agreement:
Debt and Cash Allocation Agreement $ thousands attachment
- ------------------------------------ ----------- ----------
<S> <C> <C> <C> <C>
Item 1 paragraph 5 point (i) A-C-5 Initial Base Amount per merger agreement 25,000.0*
---------
Item 1 paragraph 5 point (ii) A-C-5 Changes to the Base Amount
Factored Proceeds
A) Tenneco Allocation Percentage 0.8
multiplied by the lessor of
B) (i) $100 Million 100,000.0
B) (ii) $ The total of the factored proceeds 100,000.0
Sub Total from Factoring 61,904.8*
---------
Item 1 paragraph 5 point (iii) A-C-5 Receivables (the lessor of)
A) Section 5 amount owing to ASCC -
B) Total amount of Receivables Collected -
Sub Total from Receivables -
---------
Guaranteed Energy Cash Amount 88,904.8*
---------
Actual Energy Cash
Account Listing TE Accounts 20,337.8
Account Listing TMC Discontinued Operations Accounts 15,056.8
Merger Agreement B-39 Item 10.1(c) Tax Escrow Account 5,000.0
Required Cash at TGPL Account 45,510.2
---------
Total Actual Energy Cash 86,904.8
=========
</TABLE>
<PAGE> 7
TENNECO ENERGY
ACTUAL ENERGY EXPENDITURES AMOUNT CALCULATION
DECEMBER 11, 1996
<TABLE>
<S> <C> <C>
Capital bookings through November (A) $290,738,936 A
Less: Items accrued but not paid as of November 30, 1996
Accrued in IMPACS (1,511,277)B
Accrued by Disbursements Dept (3,421,403)C
Accrued by Reports Dept (4,415,732)D
Accrued by Ventures (2,463,541)E
Accrued by Brisbane (Queensland) (14,680,394)F (26,492,347)
-----------
Plus: December 1996 cash payments
Houston (through December 10) 7,278,699 G
Houston -- Dry Hole 330,000
Houston (December 11) 833,980 N
Brisbane (Queensland) 2,870,262 H 11,312,941
----------- ------------
Cash paid (1995 year-end accruals)
Accrued in IMPACS 9,698,503 M
Accrued by Int'l Acct -- EEC JV stock 12,000,000 I
Accrued by Brisbane Acct -- Queensland 15,851,929 J
Accrued by Disbursements -- Miscellaneous International 287,834 K
Accrued by Disbursements -- Transportation 6,027,039 K
Accrued by Disbursements -- Resources 257,235 K
Accrued by Ventures Acct 5,785,021 L
Accrued by Reports - Western Market Center 130,000
Accrued by Reports -- Altamont 30,000 50,067,561
----------- ------------
Less: Adjustment for Limitation to $20,000,000.00 on 1995
year-end accruals paid in 1996. (30,067,561)*
------------
ACTUAL ENERGY EXPENDITURES AMOUNT $295,559,530*
============
</TABLE>
(A) Excludes Ruhrgas $41.0 MM and EEC and Ark capital from June 19, 1996
through December 11, 1996
<PAGE> 1
EXHIBIT 2.4
AMENDMENT NO. 1 TO DISTRIBUTION AGREEMENT
THIS AMENDMENT NO. 1 TO DISTRIBUTION AGREEMENT (this "Amendment") is
made and entered into as of this 11th day of December, 1996 by and among TENNECO
INC., a Delaware corporation ("Tenneco"), NEW TENNECO INC., a Delaware
corporation ("Industrial Company"), and NEWPORT NEWS SHIPBUILDING INC.
(formerly known as Tenneco InterAmerica Inc.), a Delaware corporation
("Shipbuilding Company").
R E C I T A L S
A. Tenneco, Industrial Company and Shipbuilding Company previously
entered into a Distribution Agreement, dated as of November 1, 1996 (the
"Distribution Agreement"), pursuant to which, among other things, Tenneco will
separate and divide its existing business so that (i) its automotive, packaging
and business services businesses (the "Industrial Business") shall be owned
directly and indirectly by Industrial Company and (ii) the shipbuilding
business (the "Shipbuilding Business) shall be owned directly and indirectly
Shipbuilding Company.
B. Tenneco, Industrial Company and Shipbuilding Company desire to amend
the Distribution Agreement as specifically permitted thereunder.
NOW, THEREFORE, in consideration of the mutual promises and agreements
of the parties set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
A G R E E M E N T S
1. Terms. Unless otherwise defined herein, terms used herein shall have
the meaning ascribed thereto as set forth in the Distribution Agreement.
2. Amendments. Tenneco, Industrial Company and Shipbuilding Company
have determined pursuant to Section 2.01 of the Distribution Agreement that:
(a) it is necessary to amend, supplement, modify and, in certain respects,
eliminate certain of the Corporate Restructuring Transactions to properly
divide the existing businesses of Tenneco so that (i) the Industrial Business
shall be owned directly and indirectly by Industrial Company and (ii) the
Shipbuilding Business shall be owned directly and indirectly by the
Shipbuilding Company, and (b) that such amendments, modifications, supplements
and eliminations neither individually or in the aggregate, adversely affect the
Energy Business nor materially delay or prevent the consummation of the Merger.
Accordingly,
<PAGE> 2
pursuant to Section 2.01 and Section 8.08 of the Distribution Agreement, the
Distribution Agreement is hereby amended as follows:
a. Section 5.04(c) of the Distribution Agreement is hereby
amended by deleting the term "Shipbuilding Subsidiary" in the first line and
inserting the term "Shipbuilding Company" in lieu thereof.
b. Exhibit B to the Distribution Agreement is hereby deleted in
its entirety and the Exhibit B attached hereto is substituted in lieu thereof.
c. Exhibit E to the Distribution Agreement is hereby deleted in
its entirety and the Exhibit E attached hereto is substituted in lieu thereof.
d. Exhibit G to the Distribution Agreement is hereby deleted in
its entirety and the Exhibit G attached hereto is substituted in lieu thereof.
e. Exhibit J to the Distribution Agreement is hereby deleted in
its entirety and the Exhibit J attached hereto is substituted in lieu thereof.
3. Distribution Agreement in Full Force. Except as herein amended or
modified, the Distribution Agreement shall remain unchanged and in full force
and effect and is hereby ratified, approved and confirmed in all respects.
4. References. After the date hereof, all references in the
Distribution Agreement to "Agreement," "hereof" or similar terms shall refer to
the Distribution Agreement as hereby amended.
5. Successors and Assigns. This Amendment shall be binding upon and
inure to the benefit of Tenneco, Industrial Company and Shipbuilding Company
and their respective successors and assigns.
6. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws, and not the laws of conflict, of the State
of Delaware.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
TENNECO INC.
By: /s/ KARL A. STINT
-------------------------------
Name:
-----------------------
Title:
----------------------
NEW TENNECO INC.
By: /s/ ROBERT G. LANSING
-------------------------------
Name:
-----------------------
Title:
----------------------
NEWPORT NEWS SHIPSBUILDING INC.
By: /s/ STEPHEN B. CLARKSON
-------------------------------
Name: Stephen B. Clarkson
-----------------------
Title: Vice President
----------------------
<PAGE> 4
EXHIBIT B
TO THE
DISTRIBUTION AGREEMENT
<PAGE> 5
PROJECT LIZA
TRANSACTION STEPS
Set forth below are the transactions that, as applicable, the members of
each of the Energy Group, Industrial Group, and Shipbuilding Group will
consummate in connection with the Distributions and Merger. Capitalized terms
used but not otherwise defined herein have the meaning ascribed to them under
the Distribution Agreement.
A. REALIGNMENT OF INTERCOMPANY ACCOUNTS
Except as otherwise provided in Section B below, the following
transactions will be effected as of October 31, 1996 to realign the
intercompany accounts of the Groups. As a result of these transactions,
Tenneco will have one net intercompany account receivable or payable with New
Tenneco Inc. ("Industrial Company") and one net intercompany account receivable
or payable with Newport News Shipbuilding Inc. ("Shipbuilding Company"), and
all other intercompany accounts payable or receivable of members of each Group
(other than trade accounts) will be exclusively between members of that Group.
Following completion of these transactions, there will be no further transfers
of funds between members of the different Groups other than pursuant to
transactions occurring in ordinary course of business (trade accounts),
transfers from or to Tenneco and either Industrial Company or Shipbuilding
Company, and transfers required or otherwise permitted pursuant to these
Corporate Restructuring Transactions.
1. Realignment of Industrial Group Intercompany Accounts. Each member
of the Industrial Group having a net intercompany receivable from a member of
the Energy Group or the Shipbuilding Group (excluding trade accounts receivable)
will transfer such net intercompany receivable to Industrial Company in exchange
for an intercompany advance receivable from Industrial Company in an amount
equal to the amount of the net intercompany receivable transferred. Industrial
Company will assume the net intercompany payable of each member of the
Industrial Group having the net intercompany payable to a member of the Energy
Group or the Shipbuilding Group (excluding trade accounts payable) in exchange
for the issuance by each such Industrial Group member of an intercompany advance
payable to Industrial Company in an amount equal to the amount of the net
intercompany payable assumed. Industrial Company will consent to the assumption
of other net intercompany payables by Shipbuilding Company or Tenneco as
provided in this section A.
2. Realignment of Shipbuilding Group Intercompany Accounts.
Shipbuilding Company will cause each member of the Shipbuilding Group having a
net intercompany receivable from a member of the Industrial Group or the Energy
Group to transfer such net intercompany receivable to Shipbuilding Company in
exchange for an intercompany advance receivable from Shipbuilding Company in an
amount equal to the amount of the net intercompany receivable transferred,
Shipbuilding Company will assume the net intercompany payable to a member of
the Industrial Group or the Energy Group (excluding trade accounts payable) in
exchange for the issuance by each such Shipbuilding Group member of an
intercompany advance payable to Shipbuilding Company in an amount equal to the
amount of the net intercompany payable assumed. Shipbuilding Company will
<PAGE> 6
Project Liza Transaction Steps
Page 2
consent to the assumption of other net intercompany payables by Industrial
Company or Tenneco as provided in this section A.
3. Realignment of Energy Group Intercompany Accounts. Tenneco will
cause each member of the Energy Group having a net intercompany receivable from
a member of the Industrial Group or the Shipbuilding Group to transfer such net
intercompany receivable to Tenneco in exchange for an intercompany advance
receivable from Tenneco in an amount equal to the amount of the net
intercompany receivable transferred. Tenneco will assume the net intercompany
payable of each member of the Energy Group having a net intercompany payable to
a member of the Industrial Group or the Shipbuilding Group (excluding trade
accounts payable) in exchange for the issuance by each such Energy Group member
of an intercompany advance payable to Tenneco in an amount equal to the amount
of the net intercompany payable assumed. Tenneco will consent to the assumption
of other net intercompany payables by Industrial Company or Shipbuilding
Company as provided in this section A.
4. Realignment of Intercompany Accounts Between Industrial Company and
Shipbuilding Company. If after the completion of steps A(1) through A(3),
Industrial Company has a net intercompany receivable from Shipbuilding Company
(excluding trade accounts), Tenneco will assume Shipbuilding Company's net
payable to Industrial Company in exchange for the issuance by Shipbuilding
Company of an intercompany advance payable to Tenneco in an amount equal to the
amount of the net Intercompany payable assumed. If after the completion of
steps A(1) through A(3), Shipbuilding Company has a net intercompany receivable
from Industrial Company, Tenneco will assume Industrial Company's net payable
to Shipbuilding Company in exchange for the issuance by Industrial Company of
an intercompany advance payable to Tenneco having a face amount equal to the
face amount of the net intercompany payable assumed.
B. PRELIMINARY DEBT REALIGNMENT TRANSACTIONS
1. Capitalization or Liquidation of Subsidiaries. The following
transactions will be effected to increase the capitalization of various
subsidiaries and to liquidate other subsidiaries. Except as otherwise noted,
the transfers are effective as of 10/31/96. Transfers of funds will be
accomplished by daylight overdrafts.
a. Newport News Shipbuilding and Dry Dock Company ("Newport News") will
transfer to Newport News Industrial Corporations ("NNIC") as a contribution to
capital $1,700,000. NNIC will transfer the funds to Newport News as an
intercompany advance.
b. NNIC will transfer to Newport News Industrial Corporation of Ohio
("NNICO") as a contribution to capital $200,000. NNICO will transfer the funds
to NNIC as an intercompany advance.
c. TGP will transfer to TII as a contribution to capital the
intercompany account payable owed by Tenneco Automotive Trading Company
("TATC") to TGP as of August 31, 1996 ($____________).
<PAGE> 7
Project Liza Transaction Steps
Page 3
d. TII will transfer to TATC as a contribution to capital the
intercompany account payable received by TII in step B(1)(c).
e. TGP will transfer to Tenneco Brake Inc. as a contribution to
capital $15,000,000. Tenneco Brake Inc. will transfer the funds to TGP an
intercompany advance. The intercompany advance will be settled as provided in
Section A above.
f. TGP will transfer to Walker Electronic Silencing Inc. as a
contribution to capital $10,000,000. Walker Electronic Silencing Inc. will
transfer the funds to TGP as an intercompany advance. The intercompany advance
will be settled as provided in Section A above.
g. TGP will transfer to TII as contribution to capital the
intercompany account payable owed by Walker Europe Inc. to TGP as of October 31,
1996 ($_________). TII will transfer to Walker Europe Inc. as a contribution to
capital (1) the intercompany account payable received pursuant to the previous
sentence, and (2) $10,000,000. Walker Europe Inc. will transfer $10,000,000 to
TII as an intercompany advance. The intercompany will be settled as provided in
Section A above.
h. Effective as of October 30, 1996, Tenneco will transfer to
Tenneco Liquidation Company (f/k/a Tenneco Business Services Inc.) ("TBS") as a
contribution to capital $60,000,000. TBS will transfer the funds to Tenneco as
an intercompany advance. The intercompany advance will be settled as provided in
Section A above. Effective as of October 31, 1996, Tenneco will transfer to TBS
as a contribution to capital the intercompany account payable owed by TBS to
Tenneco as of August 31, 1996 ($______________).
i. Tenneco Corporation will transfer to Tenneco Independent
Power I Company as a contribution to capital $5,000,000. Tenneco Independent
Power I Company will transfer the funds to Tenneco Corporation as an
intercompany advance.
j. Tenneco Corporation will transfer to Tenneco Independent
Power II Company as a contribution to capital $1,000,000. Tenneco Independent
Power II Company will transfer the funds to Tenneco Corporation as an
intercompany advance.
k. Tenneco Corporation will transfer to Tenneco Minerals
Company - Nevada as a contribution to capital $5,000,000. Tenneco Minerals
Company - Nevada will transfer the funds to Tenneco Corporation as an
intercompany advance.
l. Tenneco Corporation will transfer to Tenneco Oil Company as
a contribution to capital $700,000,000. Tenneco Oil Company will transfer the
funds to Tenneco Corporation as an intercompany advance.
m. Tenneco Corporation will transfer to Tenneco Power
Generation Company as a contribution to capital $5,000,000. Tenneco Power
Generation Company will transfer the funds to Tenneco Corporation as an
intercompany advance.
<PAGE> 8
Project Liza Transaction Steps
Page 4
n. Tenneco Power Generation Company will transfer to Tenneco
Ethanol Company as a contribution to capital $10,000,000. Tenneco Ethanol
Company will transfer the funds to Tenneco Power Generation Company as an
intercompany advance.
o. The following subsidiaries will merge into their respective
parent corporations as indicated below.
<TABLE>
<CAPTION>
Subsidiary Parent
---------- ------
<S> <C>
Holmes Machinery Company The Pullman Company
Pullman RSC Company The Pullman Company
Pullman Aircraft Products Inc. Pullman Aerospace, Inc.
Pullman Aerospace Inc. The Pullman Company
Peabody Instruments, Inc. Peabody International Corporation
Peabody Noise Control Inc. Peabody International Corporation
Holmes Blowers Inc. Peabody International Corporation
Peabody Solid Waste Management Inc. - Peabody International Corporation
DeWald
Peabody ABC Corp. Peabody International Corporation
Peabody Pumps, Inc. Peabody International Corporation
Galco Inc. Peabody International Corporation
</TABLE>
2. Refinancing of TIHC Liquidity Facility and TIHC Loan to Tenneco.
Effective as of November 1, 1996, Tenneco International Holdings Corp.
(Delaware) ("TIHC") will restructure its credit facility with Tenneco Credit
Corporation ("TCC") and its loans to Tenneco as follows:
a. Tenneco will transfer to Industrial Company as an
intercompany advance an amount of funds equal to $25,000,000.
b. Industrial Company will transfer the funds received in step
B(2)(a) to Tenneco Automotive Inc. (f/k/a Monroe Auto Equipment Company; see
step C(13)) ("TAI") as an intercompany advance.
c. TAI will enter into a credit facility with TIHC on terms
identical to the terms of the credit facility currently existing between TIHC
and TCC. TAI will transfer the funds received in step B(2)(b) to TIHC as an
advance of funds under the terms of the TAI/TIHC credit facility.
d. Tenneco will transfer to TIHC an amount of funds equal to the
accrued balance through October 31, 1996 on TIHC's net intercompany loan to
Tenneco, and the loan shall be canceled.
e. From the funds received in steps B(2)(c) and B(2)(d), TIHC
will transfer to TCC an amount of funds equal to the accrued balance through
October 31, 1996 under TIHC's credit facility with TCC, and the credit facility
will be terminated.
f. TCC will transfer the funds received in step B(2)(e) to
Tenneco as an intercompany loan.
<PAGE> 9
Project Liza Transaction Steps
Page 5
g. TIHC will transfer any funds remaining after the transfer
described in step B(2)(e) to Industrial Company as an intercompany loan (on
terms substantively identical to the terms of the prior loan to Tenneco).
h. Industrial Company will transfer the funds received in step
B(2)(g) to Tenneco as an intercompany advance.
There will be no actual transfers of funds in step B(2); the intercompany
transfers will be accomplished though journal entries.
3. Purchase of Diamond Notes. Sara Lee Corporation currently holds a
note issued by Tenneco Packaging Inc. to Diamond International Inc. (the "TPI
DIAMOND NOTE") and two notes issued by Tenneco International Inc. ("TII") to
Diamond International Inc. (the "TII DIAMOND NOTE"). Tenneco Corporation's
distribution of the stock of Shipbuilding Company and Industrial Company in
step C(16) may violate certain provisions of a guarantee agreement executed by
Tenneco Corporation in connection with the issuance of the Diamond Notes. To
eliminate the possibility of a violation of the agreement, the Diamond Notes
will be purchased from Sara Lee on November 15, 1996 as follows:
a. Tenneco will transfer to Industrial Company as an
intercompany advance an amount of funds equal to the purchase price of the TPI
Diamond Note ($1,365,000).
b. Industrial Company will transfer the funds received in Step
B(3)(a) to Tenneco Packaging Inc. as an intercompany advance.
c. Tenneco will transfer to TII as an intercompany advance an
amount of funds equal to the fair market value of the TII Diamond Notes
($3,769,000 plus $673,000).
d. Tenneco Packaging Inc. and TII will transfer the funds
received in steps B(3)(b) and B(3)(c) to Sara Lee Corporation in exchange for
the TPI Diamond Note and the TII Diamond Note, respectively.
Step B(3) will be accomplished by a direct transfer of funds ($5,807,000) from
Tenneco to Sara Lee Corporation. The intercompany transfers will be
accomplished through journal entries.
4. TCC Sale of Case Receivables. Effective as of December 5, 1996, TCC
will sell all of its interest in the receivables relating to the business of
Case Corporation (the "CASE RECEIVABLES") to a newly formed wholly owned
Industrial Company subsidiary ("TENNECO RETAIL RECEIVABLES COMPANY") as
follows:
a. Tenneco will transfer to Industrial Company as an
intercompany advance an amount of funds equal to the fair market value of the
Case Receivables (approximately $160,000,000).
<PAGE> 10
Project Liza Transaction Steps
Page 6
b. Industrial Company will transfer the funds received in step
B(4)(a) to Tenneco Retail Receivables Company as an intercompany advance.
c. Tenneco Retail Receivables Company will transfer the funds
received in step B(4)(b) to TCC in exchange for the Case Receivables.
d. TCC will transfer the funds received in step B(4)(c) to
Tenneco as an intercompany loan.
e. Tenneco Retail Receivables Company will sell all or a
portion of the Case Receivables to a third party for cash.
f. Tenneco Retail Receivables Company will transfer the funds
received in step B(4)(e) to Industrial Company as a repayment of the
intercompany advance received from Industrial Company in step B(4)(b).
g. Industrial Company will transfer the funds received in step
B(4)(e) to Tenneco as a repayment of the intercompany advance received from
Tenneco in step B(4)(a). Tenneco will use the funds to repay short-term
borrowings under its credit facility or for other corporate purposes.
The funds to be received in step B(4)(e) will be transferred directly from the
third party's bank to Tenneco's credit facility administrative agent for credit
to Tenneco's account. No other funds transfers will required in step B(4).
5. TCC Transfer of Interest in Industrial Group Receivables. Effective
as of December 9, 1996, TCC will transfer all of its interest and obligations
associated with the receivables relating to the Industrial Business (the
"INDUSTRIAL RECEIVABLES"), including TCC's rights and obligations under
agreements with ASCC to the extent related to the Industrial Receivables, to a
newly formed wholly owned Industrial Company subsidiary ("TMC TEXAS INC.") as
follows:
a. Tenneco will transfer to Industrial Company as an
intercompany advance an amount of funds equal to the fair market value of the
Industrial Receivables ($_________).
b. Industrial Company will transfer the funds received in step
B(5)(a) to TMC Texas Inc. as an intercompany advance.
c. TMC Texas Inc. will transfer the funds received in step
B(5)(b) to TCC in exchange for the Industrial Receivables.
d. TCC will transfer the funds received in step B(5)(c) to
Tenneco as an intercompany loan.
6. Sale of Hvide Van Ommeren Interest. Intentionally omitted.
<PAGE> 11
Project Liza Transaction Steps
Page 7
7. Termination of Eastern Insurance Company Non-Energy Business
a. On June 21, 1996, Eastern Insurance Company Limited
("Eastern") paid a dividend of $20,118,711 out of its earned surplus to TGP. TGP
transferred the funds to Tenneco as an intercompany advance.
b. On September 23, 1996, Eastern transferred funds to Tenneco
Management Company in the amount of $34,200,289 representing the amount
described in Section 4.3(c)(i) of the Insurance Agreement attached as Exhibit H
to the Distribution Agreement (i.e., "all amounts which appear as reserves on
the books and records of the Eastern Insurance Provider as of the Termination
Time in respect of claims relating to any Industrial Covered Person which have
been reported prior to the Termination Time").
c. Effective as of [October 31, 1996], Eastern will transfer
funds to Industrial Company in the amount of $2,181,014 representing the amount
described in Section 4.3(c)(iii) of the Insurance Agreement attached as Exhibit
H to the Distribution Agreement (i.e., "50% of `incurred but not reported'
reserve appearing on the books and records of the Eastern Insurance Provider as
of the Termination Time under the excess liability programs of the Eastern
Policies with respect to Industrial and Energy").
8. Consents of Lessors and Creditors. As soon as practical, the
following consents will be obtained to permit the transactions contemplated by
the Corporate Restructuring Transactions:
a. Counce. The lenders under loan agreements with Counce
Finance Corporation (the "Counce Noteholders") must consent to the distribution
by Tenneco Corporation of substantially all of its assets as contemplated by
paragraph 16 of the Corporate Restructuring Transactions and to the transfer of
the Counce Limited Partnership partnership interests as contemplated by steps
C(6), C(9), and C(15A).
b. GECC Leases. The lenders, equity holder, and trustee under
the Tenneco Packaging Inc. mill leases must consent to Tenneco Packaging Inc.
ceasing to be an affiliate of Tenneco as contemplated by step D(1).
c. Tenneco International Holding Corp. MW Investors L.L.C., as
holder of the Variable Rate Voting Participating Preferred Stock of Tenneco
International Holding Corp., must consent to Tenneco International Holding Corp.
ceasing to be an affiliate of Tenneco as contemplated by step D(1).
9. Execution of Underwriting Agreement. On November 12, 1996, Tenneco
will enter into a firm commitment underwriting agreement with a group of
underwriters relating to the issuance by Tenneco to the underwriters of shares
of voting junior preferred stock of Industrial Company ("New Preferred Stock")
for $300,000,000 cash less underwriting discount.
10. NPS Issuance. On November 18, 1996, Tenneco will issue the New
Preferred Stock to the underwriters in exchange for cash of $300,000,000 less
underwriting discount. Tenneco will use the funds to pay down existing credit
facilities.
<PAGE> 12
Project Liza Transaction Steps
Page 8
11. Defeasance of a Portion of Tenneco's Consolidated Debt. On
December 6, 1996, Tenneco will defease a portion of the debt of TGP and TCC as
follows:
a. Tenneco will borrow $283,369,921.01 under Tenneco's existing
credit facilities to effect a defeasance of the following debt obligations:
---------------------------------------------------------------
Interest
Issuer Face Amount Coupon Maturity at Maturity
---------------------------------------------------------------
TGP $250,000,000 9.00% 01/15/97 $11,250,000
TCC $7,500,000 8.50% 01/30/97 $318,750
TCC $500,000 8.50% 03/17/97 $21,250
TCC $3,000,000 8.50% 03/24/97 $127,500
TCC $5,000,000 8.52% 03/28/97 $213,000
TCC $6,600,000 8.57% 03/18/97 $282,810
------------ -----------
Total $272,600,000 $12,213,310
============ ===========
b. Tenneco will transfer $23,237,635.59 to TCC from the funds
described in step B(11)(a) to defease the TCC debt identified in step B(11)(a).
The transfer will be treated as a payment by Tenneco against its intercompany
loan payable to TCC.
c. Tenneco will transfer $260,132,285.42 to TGP as an
intercompany advance from the funds described in step B(11)(a) to defease the
TGP debt identified in step B(11)(a).
d. TCC will transfer the funds received in step B(11)(b) to JP
Morgan, which will use such funds to purchase U.S. Treasury securities and will
transfer such securities to the indenture trustee in accordance with the terms
of the indenture relating to TCC's debt obligations identified in step B(11)(a)
to effect a legal defeasance of such obligations under the terms of the
indenture.
e. TGP will transfer the funds received in step B(11)(c) to JP
Morgan, which will use such funds to purchase U.S. Treasury securities and will
transfer such securities to the indenture trustee in accordance with the terms
of the indenture relating to TGP's debt obligations identified in step B(11)(a)
to effect a legal defeasance of such obligations under the terms of the
indenture.
f. The indenture trustee will transfer to Industrial Company
any proceeds from the defeasance portfolio (including investment of such
proceeds) in excess of the amounts necessary to pay the defeasance debt at
maturity.
12. Consent of $4.50 Preferred. Approval of the Transaction requires
the affirmative vote of holders of a majority of the outstanding shares of
Tenneco's $4.50 Preferred Stock and $7.40 Preferred Stock voting as a class. To
ensure that the holders of Tenneco's $4.50 Preferred Stock vote in favor of the
transaction, Tenneco will obtain an irrevocable proxy from the holders in
exchange for amending the Merger Agreement to fix the formula for determining
the number of shares of Acquiror Parent voting common stock to be paid to the
holders in the Merger.
13. Declaration of Accrued Dividends. Dividends on $4.50 Preferred
Stock otherwise due on March 12, 1997 will be declared on December 4, 1996,
payable to holders of record on December
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9, 1996, and payable on December 12, 1996. Dividends on $7.40 Preferred Stock
otherwise due on December 31, 1996 will be declared on October 8, 1996, payable
to holders of record on November 22, 1996, and payable on December 31, 1996.
C. IMPLEMENTATION OF CORPORATE RESTRUCTURING TRANSACTIONS
The following transactions will be effected following the receipt of
the IRS Ruling Letter and on or before the Distribution Date (December 11,
1996) pursuant to the requirement in Section 2.01 of the Distribution Agreement
that the parties and their affiliates "take such action or actions as is
necessary to cause, effect and consummate the Corporate Restructuring
Transactions." Transactions occurring on the same day shall be deemed to have
occurred in the order listed herein regardless of the order in which the
documentation is executed, filed, or accepted, and regardless of the order in
which the funds or other assets are transferred.
1. Effective as of October 31, 1996, TGP will transfer all of the
assets and associated liabilities of and relating to the Walker muffler shop
distribution center operation located in Carson, California (the "MSDC
BUSINESS") to Tenneco Corporation as a contribution to capital.
2. Effective as of October 31, 1996, Tenneco Corporation will transfer
the MSDC Business to Industrial Company as a contribution to capital. Any title
transfer documents required for steps C(1) and C(2) should reflect the transfer
of the assets directly from TGP to Industrial Company.
3. The following transactions will be effected to implement the
requirement that Tenneco Corporation satisfy the active business requirements
of I.R.C. Section 355(b):
a. Effective as of October 31, 1996, TGP will transfer all of
the stock of Midwestern Gas Transmission Company (Delaware) ("MIDWESTERN") to
Tenneco Corporation as a contribution to capital.
b. Effective as of October 31, 1996, Tenneco Energy Resources
Corporation (Delaware) ("TERC") will merge into Channel Industries Gas Company
(Delaware) ("CIGC"), a wholly owned subsidiary of TERC, with CIGC as the
surviving corporation. In the merger, all of the shares of TERC stock held by
Tenneco Corporation will be canceled, and Tenneco Corporation will become the
owner of all of the shares of CIGC stock formerly held by TERC. As a result of
the merger, CIGC will become a wholly owned direct subsidiary of Tenneco
Corporation, and all of TERC's assets other than the stock of CIGC will become
assets of CIGC.
c. Effective as of October 31, 1996, Tenneco Corporation will
transfer to New Midwestern Inc., a newly formed wholly owned subsidiary of
Tenneco Corporation, as a contribution to capital all of Tenneco Corporation's
Energy Business assets other than stock of subsidiaries, and all of its
liabilities other than liabilities for accrued taxes.
d. Effective as of October 31, 1996, Tenneco Corporation will
transfer to Midwestern as a contribution to capital all of the stock of the
following companies:
Entrade Engine Company (Kentucky)
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H.T. Gathering Company (Texas)(50%)(1)
Petro-Tex Chemical Corporation (Delaware)
(in dissolution)
SWL Security Corp. (Texas)
TGP Corporation (Delaware)
Tenneco Minerals Company -- California (Delaware)
Tenneco Minerals Company -- Nevada (Delaware)
Tenneco OCS Company, Inc. (Delaware)
Tenneco Oil Company (Delaware)
Tenneco Polymers, Inc. (Delaware)
Tennessee Overthrust Gas Company (Delaware)
New Midwestern Inc.
e. Effective as of October 31, 1996, Tenneco Corporation will
transfer to CIGC as a contribution to capital all of the stock owned by Tenneco
Corporation in the following companies:
Deepsea Ventures, Inc. (Delaware)
Tenneco Independent Power I Company (Delaware)
Tenneco Independent Power II Company (Delaware)
Tenneco Insurance Ventures (Delaware)
Tenneco Power Generation Company (Delaware)
Following step C(3), Tenneco Corporation will have no assets other than the
stock of the following companies:
Autopartes Walker, S.A. de C.V. (Mexico) (0.02%)
Channel Industries Gas Company (Delaware)
Midwestern Gas Transmission Company (Delaware)
Newport News Shipbuilding Inc. (Delaware)
New Tenneco Inc. (Delaware)
Tenneco Deutschland Holdinggesellschaft mbH
(Germany) (99.97%)
Walker Deutschland GmbH (Germany) (1%)
Tenneco International Holding Corp. (7.82% interest in
Common Stock)
4. Effective as of October 31, 1996, Tenneco will transfer to TGP as a
contribution to capital all of its assets other than cash, the interest rate
swap contracts entered into in August 1996 relating to the Consolidated Debt,
the note receivable from I.C.H. Corporation, the stock to be transferred in
step C(12), and the stock of TGP, and all of its liabilities other than the
Consolidated Debt issued by Tenneco, accrued taxes, unpaid dividends, and the
intercompany payables due to Industrial Company and Shipbuilding Company. The
assets to be transferred to TGP include stock of the following companies:
- -------------
(1) Tenneco Corporation owns 50% of the issued and outstanding Class A Voting
Stock and 20% of the Class B Nonvoting Stock, 29% of the total equity, and
Houston Pipe Line Company, an unaffiliated company, owns 50% of the issued and
outstanding Class A Voting Stock and 80% of the Class B Nonvoting Stock, 71% of
the total equity.
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Greater Houston Small Business Equity Fund, Inc. (Texas)
Kern County Land Company (Delaware)
MESBIC Financial Corporation of Houston (Texas)
Tenneco Credit Corporation (Delaware)
Tenneco MLP Inc. (Delaware)
5. Effective as of October 31, 1996. Newport News Industrial
Corporation (Virginia) will transfer all of its assets and trade accounts
payable to Shipbuilding Company in exchange for a Shipbuilding Company
$4,000,000 promissory note.
6. Subject to receipt of the consent of the Counce Noteholders referred
to in step B(8)(a), effective as of November 30, 1996 TCC will transfer all of
its interest as a limited partner in Counce Limited Partnership, a Texas
Limited Partnership ("Counce"), to Tenneco Corporation in exchange for Voting
Preferred Stock of Tenneco Corporation having a fair market value equal to the
aggregate appraised value of the partnership interest transferred by TCC.
7. Effective as of November 30, 1996, Tenneco Equipment Corporation
("TEC") will transfer (a) all of TEC's interest in the shares of the Common
Stock of TIHC, and (b) all of TEC's interest in the shares of $8.00 Junior
Preferred Stock of TIHC to Tenneco Corporation in exchange for Voting Preferred
Stock of Tenneco Corporation having a fair market value equal to the aggregate
appraised value of the stock transferred by TEC.
8. Effective as of November 30, 1996, TII will transfer all of its
ownership interest (100% unless otherwise indicated) in the following companies
to Tenneco Corporation in exchange for (a) a $50,000 promissory note issued by
Tenneco Corporation and (b) Voting Preferred Stock of Tenneco Corporation. The
consideration issued by Tenneco Corporation will have an aggregate fair market
value equal to the aggregate appraised value of the stock transferred by TII.
Autopartes Walker, S.A. de C.V. (Mexico) (0.02%)
Omni-Pac GmbH (Germany) (1%)
Omni-Pac S.A.R.L. (France) (97%)
Tenneco Automotive Trading Company
Tenneco International Holding Corp. (761.84% interest in Common
Stock and 50% interest in $8.00 Junior Preferred Stock)
Tenneco United Kingdom Holdings, Limited
Walker Europe, Inc.
Walker Norge A/S (Norway)
9. Subject to receipt of the consent of the Counce Noteholders referred
to in step B(8)(a), effective as of November 30, 1996 Shipbuilding Company
will transfer its interest as general partner in Counce Limited Partnership to
PCA Leasing Company as a contribution to capital.
10A. On or shortly before the Distribution Date, Shipbuilding Company
will issue $400,000,000 principal amount of high-yield notes, the proceeds of
which (after payment of issuance expenses) will be placed in an escrow amount
until the Distribution Date, at which time the funds
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will be transferred to Shipbuilding Company account number 910-2-780 609 at The
Chase Manhattan Bank.
10B. On the Distribution Date, Shipbuilding Company will borrow
$215,000,000 under its credit facility. The funds will be deposited in
Shipbuilding Company account number 910-2-780 609 at The Chase Manhattan Bank.
From the proceeds of the credit facility borrowing and the proceeds of the
high-yield notes released from the escrow described in step C(10A), Shipbuilding
Company will transfer $600,000,000 to NNS Delaware Management Company as a
contribution to capital. NNS Delaware Management Company will loan the funds to
Newport News Shipbuilding and Dry Dock Company. Newport News Shipbuilding and
Dry Dock Company will transfer the proceeds of the loan, plus Shipbuilding
Company's net intercompany receivable from Tenneco, to Tenneco Corporation as a
dividend. Tenneco Corporation will loan the funds received from Shipbuilding
Company to Tenneco. Tenneco will use all of the funds to retire existing TGP
debt as contemplated by the tender offers described in step C(16B), and to
retire existing Tenneco and TCC debt as contemplated by step C(20). To document
that the funds received by Tenneco were used to retire debt, the funds will be
transferred directly from Shipbuilding Company account number 910-2-780 609 at
The Chase Manhattan Bank to the account to be used by The Chase Manhattan Bank
as Depositary for the offers to purchase debt of TGP, TCC, and Tenneco as
contemplated by steps C(16B) and C(20)(account number 910-2-758 084).
11. On the Distribution Date following consummation of step C(10B),
Shipbuilding Company will transfer all of its stock in Tenneco Packaging Inc.
to Tenneco Corporation as a distribution with respect to stock (i.e., return
of contributed surplus), and will transfer all of its stock of PCA Leasing
Company as a dividend.
12. Effective as of October 31, 1996, Tenneco will transfer all of its
ownership interest (100% unless otherwise indicated) in the following companies
to TGP as a contribution to capital and in exchange and consideration for
additional shares of stock of TGP.
Autopartes Walker, S.A. de C.V.(Mexico)(0.02%)
Tenneco Windsor Box & Display Inc. (f/k/a DeLine Box & Display,
Inc.)
Tenneco Asia Inc.
Tenneco Brazil Ltda. (Brazil)
Tenneco Business Services Holdings Inc. (f/k/a Tenneco Business
Services, Inc.)
Tenneco Foam Products Company (f/k/a Amoco Foam Products
Company)
Tenneco Management Company (f/k/a 1275, Inc.)
13. Effective of October 31, 1996, Monroe Auto Equipment Company will
change its name to Tenneco Automotive Inc., and will create three divisions:
Monroe Auto Equipment Company division
Walker Manufacturing Company division
Tenneco Automotive Headquarters division
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Effective as of October 31, 1996 following the name change referred to in the
previous sentence. TGP will transfer all of the assets and related liabilities
of the Walker Manufacturing Company division of TGP (other than MSDC Business
transferred in step C(1) and (2)) to the Walker Manufacturing Company division
of Tenneco Automotive Inc., and will transfer all of the assets and liabilities
of the Tenneco Automotive Headquarters Division to the Tenneco Automotive
Headquarters division of Tenneco Automotive Inc., in each case as a
contribution to capital. For purposes of this transfer, TGP's Asheville, N.C.
plant shall not be treated as part of the Walker Manufacturing Company
division's assets nor as part of the Tenneco Automotive Headquarters Division's
assets. See Step 21 for the transfer of the Asheville, N.C. property.
14. Effective of October 31, 1996 following consummation of step C(12),
TGP will transfer all of its ownership interest (100% unless otherwise
indicated) in the following assets to Tenneco Corporation as a contribution to
capital and in exchange and consideration for additional shares of common stock
of Tenneco Corporation.
Autopartes Walker, S.A. de C.V. (Mexico)(99.94%)(2)
Tenneco Automotive Inc. (f/k/a Monroe Auto Equipment Company)
Monroe-Mexico S.A. de C.V. (Mexico)(0.01%)
Proveedors Walker S.A. de C.V. (Mexico)(99.99%)(3)
Tenneco Automotive Foreign Sales Corporation Ltd. (Jamaica)(1%)
Tenneco Brake, Inc.
Walker Electronic Silencing, Inc.
Walker Manufacturing Company
STOCK RECEIVED IN STEP(12) ABOVE
--------------------------------
Tenneco Windsor Box & Display Inc. (f/k/a DeLine Box & Display,
Inc.)
Tenneco Asia Inc.
Tenneco Brazil Ltda. (Brazil)
Tenneco Business Services Holdings Inc. (f/k/a/ Tenneco
Business Services Inc.)
Tenneco Foam Products Company (f/k/a Amoco Foam Products
Company)
Tenneco Management Company (f/k/a 1275, Inc.)
Tenneco Moorhead Acquisition, Inc.
Tenneco Packaging Hungary Holdings Inc.
Tenneco Romania Holdings Inc.
- ---------------
(2) Includes 0.02% interest acquired from Tenneco in step 12 above.
(3) TGP owns 49,999 shares, and Tenneco Automotive Inc. (f/k/a Monroe Auto
Equipment Company) owns 1 share.
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15A. Effective as of October 31, 1996 following the consummation of step
C(14), Tenneco Corporation will transfer all of its ownership interest (100%
unless otherwise indicated) in the following entities to Industrial Company as
a contribution to capital and in exchange and consideration for additional
shares of stock Industrial Company.
STOCK OWNED AT OCTOBER 30, 1996
-------------------------------
Tenneco Deutschland Holdinggesellschaft mbH (Germany)
Tenneco Inc. (Nevada)
Walker Deutschland GmbH (Germany)(1%)
STOCK AND ASSETS RECEIVED IN STEP (14)
---------------------------------------
Autopartes Walker, S.A. de C.V. (Mexico)(99.96%)(4)
Tenneco Automotive Inc. (f/k/a Monroe Auto Equipment Company)
Monroe-Mexico S.A. de C.V. (Mexico)(0.01%)
Proveedora Walker S.A. de C.V. (Mexico)(99.99%)
Tenneco Automotive Foreign Sales Corporation Ltd. (Jamaica)(1%)
Tenneco Brake, Inc.
Walker Electronic Silencing, Inc.
Walker Manufacturing Company
Tenneco Windsor Box & Display Inc. (f/k/a DeLine Box & Display
Inc.)
Tenneco Asia Inc.
Tenneco Brazil Ltda. (Brazil)
Tenneco Business Services Holdings, Inc. (f/k/a Tenneco Business
Services Inc.)
Tenneco Foam Products Company (f/k/a Amoco Foam Products
Company)
Tenneco Management Company (f/k/a 1275, Inc.)
Tenneco Moorehead Acquisition Inc.
Tenneco Packaging Hungary Holdings, Inc.
Tenneco Romania Holdings, Inc.
15B. Effective as of December 4, 1997 or December 6, 1996, TGP will
transfer to Tenneco Management Company as a contribution to capital the
following assets:
a. All trademarks, trade names, service marks, company or
operating unit names containing the word "Tenneco" or any variation of the name
"Tenneco", such as those names with a "Tenn" of "Ten" syllable and respective
applications or registrations therefor wherever used or registered, except
that Tenneco and other members of the Energy Group shall retain the right to
use the name "Tennessee" in their respective corporate names or otherwise in
respect of the Energy Business.
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(4) Includes: 0.02% interest owned by Tenneco Corporation at 12/31/95; and
99.94% accepted from TGP. Tenneco Automotive Inc. (f/d/a Monroe Auto
Equipment Company) continues to own 0.02% of the stock.
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b. All other intellectual property that does not solely and
directly relate to the Energy Business and/or the Shipbuilding Business,
including but not limited to patents, copyrights, trademarks, service marks,
tradenames, know-how, trade secrets, licenses and rights therein.
15C. Effective as of November 30, 1996 following the consummation of
steps C(6) through C(8), Tenneco Corporation will transfer all of its ownership
interest (100% unless otherwise indicated) in the following entities to
Industrial Company as a contribution to capital and in exchange and
consideration for additional shares of stock of Industrial Company. The
transfer of the Counce Limited Partnership interest is subject to receipt of
the consent of the Counce Noteholders referred to in step B(8)(a).
STOCK AND PARTNERSHIP INTEREST RECEIVED IN STEPS (6)-(8)
Counce Limited Partnership (95% limited partner interest)
Tenneco International Holding Corp. (100% interest in Common
Stock and 100% interest in $8.00 Junior Preferred Stock)
Autopartes Walker, S.A. de C.V. (Mexico)(0.02%)
Omni-Pac GmbH (Germany)(1%)
Omni-Pac S.A.R.L. (France)(97%)
Tenneco Automotive Trading Company
Tenneco United Kingdom Holdings Limited
Walker Europe, Inc.
Walker Norge A/S (Norway)
15D. Effective as of December 1, 1996, TGP will transfer to Tenneco
Corporation as a contribution to capital the assets listed on Schedule I.
Tenneco Corporation will transfer the assets to Industrial Company as a
contribution to capital. Industrial Company will transfer the assets to Tenneco
Management Company as a contribution to capital.(5)
15E. On the Distribution Date following the consummation of step C(11),
Tenneco Corporation will transfer the stock of the following entities to
Industrial Company as a contribution to capital:
STOCK RECEIVED IN STEP (11)
Tenneco Packaging Inc.
PCA Leasing Company
15F. On the Distribution Date following the consummation of steps C(1)
through C(15E), Tenneco Corporation will transfer all of its assets (excluding
the stock of Industrial Company, Shipbuilding Company, Midwestern, and CIGC,
but including the intercompany receivable from Tenneco received in step C(10B))
and all of its liabilities (excluding liabilities for accrued taxes) to
Midwestern as a contribution to capital. Midwestern will transfer such assets
and liabilities to New
- ---------------
(5) These transfers are being effected as of December 1, 1996 because the
transfer of the partnership interest in Waukegan Corporate Aviation Facilities
cannot become effective earlier than the first day of the month following the
month in which the transfer is approved by the partnership.
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Midwestern as a contribution to capital. Tenneco Corporation shall not acquire
any assets following the consummation of step C(15F) and Tenneco Corporation and
Midwestern will enter in to an agreement pursuant to which any assets
inadvertently acquired by Tenneco Corporation following the consummation of
step C(15F) will be deemed contributed to the capital of Midwestern immediately
upon acquisition without any further action by the parties.
16A. On the Distribution Date following the consummation of steps C(1)
through C(15), Tenneco Corporation will transfer all of the stock of
Shipbuilding Company and Industrial Company of TGP as a distribution with
respect to stock (i.e., return of contributed surplus).
16B. On the Distribution Date following the consummation of step C(16A)
and prior to the consummation of step C(17), Tenneco will purchase the debt of
TGP as follows:
a. Pursuant to a tender offer made on November 8, 1996, Tenneco
will purchase the debt of TGP validly tendered by the holders (and not
withdrawn) at or prior to 5:00 p.m. New York City Time on December 10, 1996
(the "Expiration Time").(6) Using the funds received by Tenneco in step C(10B)
(which are being are being held by the Chase Manhattan Bank as Depositary for
the offers to purchase TGP, TCC, and Tenneco debt), on the Distribution Date
Tenneco will purchase the tendered TGP debt, excluding interest to be paid by
TGP. Also on the Distribution Date, TGP will transfer to The Chase Manhattan
Bank as Depositary for the tender offers an amount of funds equal to the
interest to be paid by TGP pursuant to the terms of the tender offer. To
document TGP's payment of interest on the tendered debt, on the Distribution
Date Tenneco will make an actual transfer of funds into a TGP account (as an
intercompany advance), and TGP will transfer funds from that account to Chase's
Depositary account.
b. Tenneco will transfer the TGP debt acquired in step C(16)(a)
to TGP in exchange for cash equal to Tenneco's cost of acquiring the debt
(including fees and expenses paid by Tenneco in connection with the purchase of
the TGP debt, but excluding accrued interest paid by TGP), thereby
extinguishing the debt.
c. Tenneco will transfer the cash received in step C(16B)(b) to
TGP as an intercompany advance.
The transfers of cash described in steps C(16B)(b) and C(16B)(c) will be
accomplished using a daylight overdraft.
17. On the Distribution Date following the consummation of steps C(16A)
and C(16B), TGP will transfer all of the stock of Shipbuilding Company and
Industrial Company to Tenneco as a distribution with respect to stock (i.e.,
return of contributed surplus).
18. On the Distribution Date following the consummation of step C(17),
Industrial Company will transfer to Tenneco as a dividend the net intercompany
account payable owed by Tenneco to Industrial Company.
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(6) These Transaction Steps assume that the tender offer will not be extended
or earlier terminated.
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19. On the Distribution Date following the consummation of step C(17),
Industrial Company will participate in the Debt Realignment as follows:
a. Industrial Company will borrow $347,000,000 under a new
credit facility an amount equal to the amount necessary to fund, after payment
of credit facility expenses, a dividend to Tenneco (see step C(19)(d)) which,
when used by Tenneco to fund the retirement of debt pursuant to the Tenneco
debt tender offer, will cause the Actual Energy Debt Amount to be equal to the
Base Amount, as estimated on the Distribution Date.
b. Industrial Company's offer to exchange up to $1,950,000,000
face amount of Industrial Company debt for certain Tenneco debt will expire at
5:00 p.m. New York City time on December 10, 1996 (the "expiration time").(7)
Pursuant to the exchange offer, Industrial Company will accept for exchange
Tenneco debt validly tendered and not withdrawn as of the expiration time, and
will acquire such Tenneco debt by issuing new debt in exchange therefor on the
first NYSE trading day following the expiration time (the "issuance date,"
which is also the Distribution Date). On the Distribution Date, Industrial
Company will deliver the new debt certificates to The Chase Manhattan Bank as
exchange agent for the holders of Tenneco debt participating in the exchange.
The exchange agent will deliver the new debt certificates to such holders on
the third trading day following the expiration time (the "exchange date"). Also
on the Distribution Date, Industrial Company will transfer cash (from the funds
received in step C(19)(a)) to the exchange agent equal to the amount of
interest accrued on the exchanged Tenneco debt up to but excluding the issuance
date; provided that Tenneco, and not Industrial Company, will pay accrued
interest up to the issuance date on exchanged Tenneco debt for which the record
date for any interest payment is prior to the Distribution Date and for which
the payment date for such interest payment is after the issuance date. Interest
on the new debt will accrue from and including the issuance date ("straddle
interest"). To document Tenneco's payment of straddle interest on the exchange
debt as required by the exchange offer, Tenneco will transfer funds equal to
the required payment of straddle interest from a Tenneco Inc. account to the
account to be used by The Chase Manhattan Bank as exchange agent for the
payment of such interest pursuant to the exchange offer.
c. Tenneco will transfer to Industrial Company in exchange for
the Tenneco debt acquired by Industrial Company in step C(19)(b) an amount of
funds equal to the fair market value of the debt issued by Industrial Company
to acquire the Tenneco debt in step C(19)(b), plus the accrued interest to be
paid by Industrial Company on the Tenneco debt, plus any fees and expenses
incurred by Industrial Company in connection with the exchange.
d. Industrial Company will transfer to Tenneco as a dividend
the funds received in steps C(19)(a) and C(19)(c) remaining after payment of
accrued interest on the tendered Tenneco debt and expenses related to the
credit facility and debt exchange.
To document that the funds received in step C(19)(a) and transferred to Tenneco
in step C(19)(d) were used by Tenneco to retire debt, the funds will be
transferred directly from Morgan Guaranty
- ----------
(7) These Transaction Steps assume that the exchange offer will not be extended
or earlier terminated.
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Trust Company of New York as administrative agent for the lenders under the
Industrial Company credit facility of The Chase Manhattan Bank as Depositary
for the Tenneco debt tender offer (see step C(20)(b)). The funds to be received
by Industrial Company in step C(19)(c) and then transferred to Tenneco in step
C(19)(d) will be arranged under a daylight overdraft facility.
20. On the Distribution Date following the consummation of step C(17),
Tenneco will participate in the Debt Realignment as follows:
a. Tenneco will borrow $2,164,000,000 under a new credit
facility (the "Tenneco Credit Facility") an amount equal to the amount
necessary to cause the Actual Energy Debt Amount to be equal to the Base
Amount, as estimated on the Distribution Date, taking into account funds
utilized in the Debt Realignment.
b. Pursuant to a tender offer made on November 8, 1996, Tenneco
will purchase the debt of Tenneco and TCC validly tendered by the holders (and
not withdrawn) at or prior to 5:00 p.m. New York City Time on December 10, 1996
(the "Expiration Time").(3) From the funds received in step C(20)(a), on the
Distribution Date Tenneco will transfer to The Chase Manhattan Bank as
Depositary for the tender offers an amount of funds sufficient to fund the
purchases of the tendered Tenneco and TCC debt, taking into account the funds
deposited with Chase as Depositary as described in steps C(10B) and C(19)(d)
and the utilization of a portion of such funds as contemplated by step
C(16B)(a). Chase will use such funds to effect the purchases of the tendered
Tenneco and TCC debt on behalf of Tenneco.
c. Tenneco will transfer to TCC the debt of TCC acquired in
step C(20)(b) in exchange for cash equal to Tenneco's cost of acquiring the
TCC debt, including accrued interest plus any fees and expenses incurred by
Tenneco in connection with the acquisition of the TCC debt. Tenneco will use
the cash to repay its intercompany loan from TCC or to make an intercompany
advance to TCC. Step C(20)(c) will be accompanied using a daylight overdraft.
d. Tenneco will repay all of its outstanding bank debt and
commercial paper, pay transaction expenses, transfer funds to Shipbuilding
Company and TGP as necessary to fund the Guaranteed Shipbuilding Cash Amount
and the Guaranteed Energy Cash Amount, respectively (as defined in the Debt and
Cash Allocation Agreement), and fund cash expenditures of Tenneco and its
affiliates for the Distribution Date. To the extent the Shipbuilding Group cash
and cash equivalents on the Distribution Date (taking into account all of the
foregoing transactions) exceeds the Guaranteed Shipbuilding Cash Amount, the
excess shall be transferred by Shipbuilding Company to Tenneco as a dividend.
To the extent the Energy Group cash and cash equivalents on the Distribution
Date (taking into account all of the foregoing transactions, and including the
dividend described in the previous sentence) exceeds the Guaranteed Energy Cash
Amount, Tenneco shall transfer such excess to Industrial Company as a
contribution to capital.
e. Tenneco will transfer to TGP as a contribution to capital
all of its assets other than the stock of TGP and the note receivable from
I.C.H. Corporation, and all of its liabilities other than
- ------------------
(3) These Transaction Steps assume that the tender offer will not be extended or
earlier terminated.
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the Consolidated Debt issued by Tenneco (as defined in the Debt Realignment
Plan attached as Exhibit C to the Merger Agreement, including the untendered
portions of Tenneco public debt and the Tenneco Revolving Debt incurred under
the Tenneco Credit Facility), accrued taxes, and unpaid dividends.
Following step 20, Tenneco should have no assets other than the stock of TGP
and the note receivable from I.C.H. Corporation, and no liabilities other than
the Tenneco Credit Facility, the untendered portion of the Tenneco Consolidated
Debt, accrued taxes, and unpaid dividends. Tenneco shall not acquire any assets
following the consummation of step 20, and Tenneco and TGP will enter into an
agreement pursuant to which any assets inadvertently acquired by Tenneco
following the consummation of step 20 will be deemed contributed to the capital
of TGP immediately upon acquisition without any further action by the parties.
21. Effective as of November 30, 1996, TGP will transfer to Tenneco
Asheville Inc., a newly formed wholly owned subsidiary of TGP, as a
contribution to capital the assets and liabilities associated with the Walker
Manufacturing property located in Asheville, NC. TGP will then transfer the
stock of Tenneco Asheville Inc. to Tenneco Corporation as a contribution to
capital, and Tenneco Corporation will transfer the stock of Tenneco Asheville
Inc. to Industrial Company as a contribution to capital.
22. Effective as of November 1, 1996, Tenneco Liquidation Company
(formerly Tenneco Business Services Inc.) will transfer all of its assets and
liabilities to Tenneco Business Services Inc. (formerly Tenneco Technology
Services Inc.). Tenneco Liquidation Company will change its name to Tenneco
Business Services Holdings Inc.
23. On the Distribution Date immediately before the Distributions,
Industrial Company and Shipbuilding Company will issued a stock dividend to
Tenneco as provided in Section 2.02 of the Distribution Agreement.
D. DISTRIBUTIONS AND MERGER
1. On the Distribution Date following the consummation of steps C(1)
through C(23), Tenneco will distribute all of the stock of Industrial Company
and Shipbuilding Company to Tenneco shareholders as a distribution with respect
to stock (i.e., return of contributed surplus) pro rata on the basis of one
share of Industrial Company stock for one share of Tenneco common stock
outstanding and on the basis of one share of Shipbuilding Company stock for
five shares of Tenneco common stock outstanding. Cash will be paid in lieu of
issuing fractional shares of Shipbuilding Company stock. Each share of stock of
Industrial Company and Shipbuilding Company will have attached to it stock
purchase rights (the "Rights") which will entitle the holder to purchase
certain stock of Industrial Company or Shipbuilding Company, as the case may
be, upon the occurrence of certain triggering events.
2. Effective as of the Distribution Date, the account of the employees
of the Shipbuilding Business in the Tenneco Thrift Plan will be transferred to
a Shipbuilding Company qualified plan (the "Shipbuilding Company Thrift Plan")
as of the distribution date. The Shipbuilding Company Thrift Plan will include
an employee stock ownership plan ("ESOP"), and Shipbuilding Company
<PAGE> 24
Project Liza Transaction Steps
Page 20
stock received with respect to Tenneco stock on their accounts will held
subject to the terms of the ESOP.
3. Effective as of 8:00 a.m. EST on the day following the Distribution
Date, Industrial Company, Acquiror, Acquiror Sub A1, and Acquiror Parent will
consummate the merger of Acquiror Sub A1 into Tenneco (the "Merger").
E. POST-MERGER TRANSACTIONS
1. [Despite transfers of 401(k) accounts and communication of
opportunity to sell shares of non-employer stock.]
2. [Describe settlement of cash under Debt and Cash Allocation
Agreement. If there is a transfer of excess cash from Shipbuilding Company to
Industrial Company, the transfer should be treated as dividend by Shipbuilding
Company to Tenneco and a contribution by Tenneco to the capital of Industrial
Company immediately prior to step D(1). If there is a transfer of cash from
Industrial Company to Shipbuilding Company, the transfer should be treated as
dividend by Industrial Company to Tenneco and a contribution by Tenneco to the
capital of Shipbuilding Company immediately prior to step D(1). Any transfer of
cash from Tenneco to Industrial Company should be treated as a contribution by
Tenneco to the capital Industrial Company immediately prior to step D(1), and
any transfer of cash from Industrial Company to Tenneco should be treated as a
dividend by Industrial Company to Tenneco immediately prior to step D(1).]
3. Effective as of December 12, 1996, Tenneco will make arrangements
for the funding of the Energy Business cash requirements without flowing cash
through Tenneco and without creating any intercompany receivables held by
Tenneco. As soon as practical after the Effective Time, Tenneco will close all
of its bank accounts.
<PAGE> 25
Project Liza Transaction Steps
Page 21
Schedule 1
Pursuant to the Corporate Restructuring Transactions, the following assets
owned by TGP shall be transferred to Tenneco Management Company.
1. Aviation Assets.
a. All fixed wing corporate aircraft (except the Gulfstream
G-II, serial number 248, and Rolls Royce Spey Model 511-8 engines,
manufacturer's Serial Numbers 9816 and 9844), and spare parts for the aircraft
which as of the Effective time will not have a net book value in excess of $1
million.
b. Limited partner interest in the Waukegan Corporate Aviation
Facilities, an Illinois limited partnership (which owns the Waukegan, Illinois
airport hanger facility and common facilities), the furniture, fixtures, and
equipment owned by TGP located at the Waukegan aviation facilities, the stock
of Corporate Hangar Services, Inc., an Illinois corporation (which is the
corporate general partner of Waukegan Corporate Aviation Facility), and TGP's
sublease of the aviation facilities from Waukegan Corporate Aviation
Facilities.
c. Certain furniture, fixtures, and equipment located in the
Houston, Texas airport hangar facilities associated with the fixed-wing
aircraft described in clause (a), which at the Effective Time will not have a
net book value in excess of $1 million.
2. Furniture, Fixtures, and Equipment. Furniture, fixtures, and
equipment (including furnishings and computer equipment) which as of the
Effective Time will not have a net book value in excess of $2 million located
in:
a. Greenwich, CT Management Center.
b. Washington, D.C. office.
c. Houston, Texas office.
3. Albright & Wilson Note. The long-term note receivable from Albright
& Wilson Americas Inc. in the amount of $6,936,384 as of October 31, 1996.
<PAGE> 26
Exhibit E
to the
Distribution Agreement
<PAGE> 27
ENERGY SUBSIDIARIES
<TABLE>
<S> <C>
Subsidiaries of Tenneco Inc. (Delaware)
Tennessee Gas Pipeline Company (Delaware)............................. 100%
Altamont Service Corporation (Delaware)............................ 100
Altamont Gas Transmission Canada Limited (Canada)............... 100
(Altamont Service Corporation is the registered holder of all
of the issued and outstanding shares of Altamont Gas
Transmission Canada Limited, as Trustee for Altamont Gas
Transmission Company, a Joint Venture)
Border Gas Inc. (Delaware) (a close corp.)......................... 37.5
(Tennessee Gas Pipeline Company owns 100% of the Class A Common
Stock, 37.5% of the total equity, and 37.5% of the total voting
stock; unaffiliated companies (Texas Eastern Transmission
Corporation, El Paso Natural Gas Company, Transcontinental Gas
Pipe Line Corporation, Southern Natural Gas Company, and
Florida Gas Transmission Company) own the remaining stock and
equity.
Eastern Insurance Company Limited (Bermuda)........................ 100
East Tennessee Natural Gas Company (Tennessee)..................... 100
Tenneco East Natural Gas L.P. (Delaware Limited Partnership).... 1
(East Tennessee Natural Gas Company, as General Partner,
owns 1%; and Tenneco East Corporation, as Limited Partner,
owns 99%)
Energy TRACS, Inc. (Delaware)...................................... 100
Greater Houston Small Business Equity Funds, Inc. (Texas).......... ??
Kern County Land Company (Delaware)................................ 100
Tenneco Equipment Corporation (Delaware)........................ 100
Marlin Drilling Co., Inc. (Delaware)
Bluefin Supply Company (Delaware)......................... 100
Marlin do Brasil Perfuacees Maritimas Ltda. (Brazil)...... 0.16
(in dissolution)
(Bluefin Supply Company owns 0.16%; and Marling Drilling
Co., Inc. owns 99.84%)
Marlin do Brasil Perfuacees Maritimas Ltda. (Brazil)...... 99.84
(in dissolution)
(Marlin Drilling Co., Inc. owns 99.84%; and Bluefin
Supply Company owns 0.16%)
Tenneco Equipment Holding I Company (Delaware)............... 100
Tenneco Equipment Holding II Company (Delaware).............. 100
Tenneco Equipment Holding III Company (Delaware)............. 100
Tenneco Equipment Holding V Company (North Dakota)........ 100
Tenneco Equipment Holding IV Company (Wisconsin)............. 100
Tenneco Equipment Holding VI Company (Illinois).............. 100
Tenneco West, Inc. (Delaware)................................... 100
Kern County Land Company, Inc. (California).................. 100
Kern River Corporation (Delaware).................................. 0.01
Land Ventures, Inc. (Delaware)..................................... 100
MESBIC Financial Corporation of Houston (Texas).................... ??
Midwestern Gas Marketing Company (Delaware)........................ 100
Mont Belvieu Land Company (Delaware)............................... 100
</TABLE>
1
<PAGE> 28
ENERGY SUBSIDIARIES
<TABLE>
<S> <C>
Subsidiaries of Tenneco Inc.
Subsidiaries of Tennessee Gas Pipeline Company
New Tenn Company (Delaware)...................................... 100
(New Tenn Company and New Tennessee Gas Pipeline are in the
process of being merged into Tennessee Gas Pipeline Company.)
New Tennessee Gas Pipeline Company (Delaware).................... 100
(New Tenn Company and New Tennessee Gas Pipeline are in the
process of being merged into Tennessee Gas Pipeline Company.)
S.K. Petroleum Company (Delaware)................................ 100
Sandbar Petroleum Company (Delaware)............................. 100
Tennchase Inc. (Texas)........................................... 100
Tenneco Alaska, Inc. (Alaska).................................... 100
Tenneco-Altamont Corporation (Delaware).......................... 100
Altamont Gas Transmission Company (Delaware Joint Venture).... 53,34
(Tenneco-Altamont Corporation owns 53-1/8%; Amoco Altamont
Company, an unaffiliated company, owns 33-1/8%; and Entech
Altamont, Inc., an unaffiliated company, owns 13-1/8%.)
Tenneco Argentina Corporation (Delaware)......................... 100
Tenneco Baja California Corporation (Delaware)................... 100
Tenneco Communications Corporation (Delaware).................... 100
Tenneco Corporation (Delaware)................................... 100
(Tennessee Gas Pipeline Company owns 100% of the Common
Stock; Tenneco Credit Corporation owns ___% of the Second
Preferred Stock; Tenneco Equipment Corporation owns ___% of
the Second Preferred Stock; and Tenneco International Inc.
owns ___% of the Second Preferred Stock.)
Channel Industries Gas Company (Delaware)...................... 100
Tenneco Energy Marketing Company (Kentucky)................. 100
Creole Gas Pipeline Corporation (Louisiana).............. 100
Entrade Pipeline Company (Kentucky)...................... 100
Channel Gas Marketing Company (Delaware).................... 100
Oasis Pipe Line Company (Delaware)....................... 30
(Channel Gas Marketing Company owns 100% of the issued
and outstanding Series B Preference Stock and 30% of
the Common Stock, 30% of total equity; Dow Chemical
Company, an unaffiliated company owns 100% of the
issued and outstanding Series A Preference Stock and
70% of the Common Stock, 70% of total equity.)
Tenneco Gas Processing Company (Delaware)................... 100
Tenneco Independent Power I Company (Delaware).............. 100
Tenneco Independent Power II Company (Delaware)............. 100
Tenneco Insurance Ventures (Delaware)....................... 100
Tenneco Offshore Gathering Company (Delaware)............... 100
Tenneco Gas Marketing Company (Delaware).................... 100
</TABLE>
2
<PAGE> 29
ENERGY SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C>
Subsidiaries of Tenneco Inc. (Delaware)
Tennessee Gas Pipeline Company (Delaware) .............................. 100%
Altamont Service Corporation (Delaware) ............................. 100
Altamont Gas Transmission Canada Limited (Canada) ................ 100
(Altamont Service Corporation is the registered holder of all
the issued and outstanding shares of Altamont Gas Transmission
Canada Limited, as Trustee for Altamont Gas Transmission
Company, a Joint Venture)
Border Gas Inc. (Delaware) (a close corp.) ......................... 37.5
(Tennessee Gas Pipeline Company owns 100% of the Class A Common
Stock, 37.5% of the total equity, and 37.5% of the total voting
stock; unaffiliated companies (Texas Eastern Transmission
Corporation, El Paso Natural Gas Company, Transcontinental Gas
Pipe Line Corporation, Southern Natural Gas Company, and Florida
Gas Transmission Company) own the remaining stock and equity.
Eastern Insurance Company Limited (Bermuda) ......................... 100
East Tennessee Natural Gas Company (Tennessee) ...................... 100
Tenneco East Natural Gas L.P. (Delaware Limited Partnership) ..... 1
(East Tennessee Natural Gas Company, as General Partner, owns
1%; and Tenneco East Corporation, as Limited Partner, owns
99%.)
Energy TRACS, Inc. (Delaware) ....................................... 100
Greater Houston Small Business Equity Fund, Inc. (Texas) ............ ??
Kern County Land Company (Delaware) ................................. 100
Tenneco Equipment Corporation (Delaware) ......................... 100
Marlin Drilling Co., Inc. (Delaware)
Bluefin Supply Company (Delaware) .......................... 100
Marlin do Brasil Perfuacees Martimas Ltda. (Brazil) ....... 0.16
(in dissolution)
(Bluefin Supply Company owns 0.16%; and Marlin Drilling
Co., Inc. owns 99.84%)
Marlin do Brasil Perfuacees Martimas Ltda. (Brazil) ...... 99.84
(in dissolution)
(Marlin Drilling Co., Inc. owns 99.84%; and Bluefin
Supply Company owns 0.16%)
Tenneco Equipment Holding I Company (Delaware) ................ 100
Tenneco Equipment Holding II Company (Delaware) ............... 100
Tenneco Equipment Holding III Company (Delaware) .............. 100
Tenneco Equipment Holding V Company (North Dakota) ......... 100
Tenneco Equipment Holding IV Company (Wisconsin) .............. 100
Tenneco Equipment Holding VI Company (Illinois) ............... 100
Tenneco West, Inc. (Delaware) .................................... 100
Kern County Land Company, Inc. (California) ................... 100
Kern River Corporation (Delaware) .................................. 0.01
Land Ventures, Inc. (Delaware) ...................................... 100
MESBIC Financial Corporation of Houston (Texas) ..................... ??
Midwestern Gas Marketing Company (Delaware) ......................... 100
Mont Belvieu Land Company (Delaware) ................................ 100
</TABLE>
1
<PAGE> 30
ENERGY SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C>
Subsidiaries of Tenneco Inc.
Subsidiaries of Tennessee Gas Pipeline Company
New Tenn Company (Delaware) ......................................... 100
(New Tenn Company and New Tennessee Gas Pipeline are in the
process of being merged into Tennessee Gas Pipeline Company.)
New Tennessee Gas Pipeline Company (Delaware) ....................... 100
(New Tenn Company and New Tennessee Gas Pipeline are in the
process of being merged into Tennessee Gas Pipeline Company.)
S.K. Petroleum Company (Delaware) ................................... 100
Sandbar Petroleum Company (Delaware) ................................ 100
Tennchase Inc. (Texas) .............................................. 100
Tenneco Alaska, Inc. (Alaska) ....................................... 100
Tenneco-Altamont Corporation (Delaware) ............................. 100
Altamont Gas Transmission Company (Delaware Joint Venture) ..... 53.34
(Tenneco-Altamont Corporation owns 53 1/3%; Amoco Altamont
Company, and unaffiliated company, owns 33 1/3%; and Entech
Altamont, Inc. and unaffiliated company, owns 13 1/3%)
Tenneco Argentina Corporation (Delaware) ............................ 100
Tenneco Baja California Corporation (Delaware) ...................... 100
Tenneco Communications Corporation (Delaware) ....................... 100
Tenneco Corporation (Delaware) ...................................... 100
(Tennessee Gas Pipeline Company owns 100% of the Common
Stock; Tenneco Credit Corporation owns ___% of the Second
Preferred Stock; Tenneco Equipment Corporation owns ___% of
Second Preferred Stock; and Tenneco International Inc. owns
___% of the Second Preferred Stock.)
Channel Industries Gas Company (Delaware) ........................ 100
Tenneco Energy Marketing Company (Kentucky) ................... 100
Creole Gas Pipeline Corporation (Louisiana) ................ 100
Entrade Pipeline Company (Kentucky) ........................ 100
Channel Gas Marketing Company (Delaware) ...................... 100
Oasis Pipe Line Company (Delaware) ......................... 30
(Channel Gas Marketing Company owns 100% of the issued
and outstanding Series B Preference Stock and 30% of
the Common Stock, 30% of total equity; Dow Chemical
Company, an unaffiliated company owns 100% of the
issued and outstanding Series A Preference Stock and
70% of the Common Stock, 70% of total equity.)
Tenneco Gas Processing Company (Delaware) ..................... 100
Tenneco Independent Power I Company (Delaware) ................ 100
Tenneco Independent Power II Company (Delaware) ............... 100
Tenneco Insurance Ventures (Delaware) ......................... 100
Tenneco Offshore Gathering Company (Delaware) ................. 100
Tennessee Gas Marketing Company (Delaware) .................... 100
</TABLE>
2
<PAGE> 31
ENERGY SUBSIDIARIES
<TABLE>
<S> <C>
Subsidiaries of Tenneco Inc.
Subsidiaries of Tennessee Gas Pipeline Company
Subsidiaries of Tenneco Corporation
Subsidiaries of Channel Industries Gas Company
Tenneco Power Generation Company (Delaware)....................... 100
Orange Acquisition, Inc. (Delaware)............................. 100
Orange Cogeneration Limited Partnership (Delaware Limited
Partnership).................................................. 49.5
(Orange Acquisition Inc. owns 49.5% as a Limited Partner; CSW
Orange, Inc., an unaffiliated company, owns _____% as a
Limited Partner, and Orange Cogeneration GP, Inc. owns _____%
as General Partner.)
Orange Cogeneration GP II, Inc. (Delaware).................... 50
(Tenneco Power Generation Company owns 50%; and CSW
Development-I, Inc., an unaffiliated company, owns 50%.)
(Orange Cogeneration G.P., Inc. (Delaware)................... 100
Polk Power GP II, Inc. (Delaware).............................. 50
(Tenneco Power Generation Company owns 50% and CSW
Development-I, Inc., an unaffiliated company, owns 50%.)
Polk Power GP, Inc........................................... 100
Tenneco Ethanol Company (Delaware)............................. 100
Tenneco Ethanol Services Company (Delaware).................... 100
West Campus Cogeneration Company (Delaware).................... 100
Midwestern Gas Transmission Company (Delaware)................... 100
Deepsea Ventures, Inc. (Delaware).............................. ??
Entrade Engine Company (Kentucky).............................. 100
H.T. Gathering Company (Texas)................................. 50
(Midwestern Gas Transmission Company owns 50% of the issued
and outstanding Class A Voting Stock and 20% of the Class B
Nonvoting Stock, 29% of the total equity; and Houston Pipe
Line Company, an unaffiliated company, owns 50% of the issued
and outstanding Class A Voting Stock and 80% of the Class B
Nonvoting Stock, 71% of the total equity.)
New Midwestern Inc. (Delaware)................................. 100
Petro-Tex Chemical Corporation (Delaware) (in dissolution)..... 100
(Certificate of Dissolution was filed in Delaware on January
18, 1995, Final dissolution date will be January 18, 1998,
subject to settlement of any other outstanding business.)
SWL Security Corp. (Texas)..................................... 100
Tenneco Midwest Natural Gas L.P. (Delaware Limited
Partnership)................................................. 1
(Midwestern Gas Transmission Company, as General Partner,
owns 1%; and Tenneco Midwest Corporation, as Limited Partner
owns 99%.)
Tenneco Minerals Company - California (Delaware)............... 100
Tenneco Minerals Company - Nevada (Delaware)................... 100
Tenneco OCS Company, Inc. (Delaware)........................... 100
Tenneco Oil Company (Delaware)................................. 100
</TABLE>
3
<PAGE> 32
ENERGY SUBSIDIARIES
<TABLE>
<S> <C>
Subsidiaries of Tenneco Inc.
Subsidiaries of Tennessee Gas Pipeline Company
Subsidiaries of Tenneco Corporation
Subsidiaries of Midwestern Gas Transmission Company
Tenneco Polymers, Inc. (Delaware)............................ 100
Tenneco Eastern Realty, Inc. (New Jersey).................... 100
Tennessee Overthrust Gas Company (Delaware).................. 100
Overthrust Pipeline Company (Delaware General Partner).... 18
(Tennessee Overthrust Gas Company owns an 18% general
partnership interest; unaffiliated parties own 82%
partnership interest)
TGP Corporation (Delaware)................................... 100
Tenneco Credit Corporation (Delaware).............................. 100
TenFac Corporation (Delaware)................................... 100
Tenneco Deepwater Gathering Company (Delaware)..................... 100
Tenneco Delta XII Gas Co., Inc. (Delaware)......................... 100
Tenneco East Corporation (Delaware)................................ 100
Tenneco East Ntural Gas L.P. (Delaware Limited Partnership)..... 99
(Tenneco East Corporation, as Limited Partner, owns 99%; and
East Tennessee Natural Gas Company, as General Partner,
owns 1%)
Tenneco Energy Europe Inc. (Delaware).............................. 100
Tenneco Energy Hungary Inc. (Delaware).......................... 99
[Tenneco Energy Hungary B.V. (Netherlands)................... ??]
Tenneco Energy Ltd. (Canada)....................................... 100
Tenneco Energy Services Company (Delaware)......................... 100
GreyStar Corporation (Texas).................................... 50
(Tenneco Energy Services Company owns 50%, and unaffiliated
parties own 50%. Tenneco Energy Services Company owns
1,135,294 shares of Series B Preferred Stock, $0.01 par value
per share.)
Tenneco Energy AIRCO Inc. (Delaware)............................ 100
Tenneco Energy OGS Inc. (Delaware).............................. 100
Tenneco Energy TEPSCO Inc. (Delaware)........................... 100
Tenneco Energy Inc. (Delaware)..................................... 100
Tenneco EIS Company (Delaware).................................. 100
Tenneco EIS Canada Ltd. (Alberta)............................ 100
Tenneco Gas Transportation Company (Delaware)................... 100
Tenneco Gas Canada, Ltd. (Ontario)................................. 100
Tenneco Gas International Inc. (Delaware).......................... 100
Tenneco Energy China Inc. (Delaware)............................ 100
Tenneco Gas Brazil Corporation (Delaware)....................... 100
Tenneco Gas International Servicos do Brasil Ltda (Brazil)... 100
Tenneco Gas Chile Corporation (Delaware)........................ 100
Tenneco Energy International (East Asia/Pacific) Inc.
(Delaware)................................................... 100
Tenneco Gas Services (Chile) Corporation (Delaware)............. 100
Tenneco Gas Transportes S.A. (Chile)......................... 100
Tenneco Gas Latin America Inc. (Delaware)....................... 100
</TABLE>
4
<PAGE> 33
ENERGY SUBSIDIARIES
<TABLE>
<S> <C>
Subsidiaries of Tenneco Inc.
Subsidiaries of Tennessee Gas Pipeline Company
Tenneco Gas Louisiana Inc. (Delaware) ................................ 100
Martin Exploration Company (Delaware) ............................. 100
Tenneco Gas Production Corporation (Delaware) ........................ 100
Tenneco Gas Properties Inc. (Delaware) ............................... 100
Tenneco Gas Services, Inc. (Delaware) ................................ 100
Tenneco Gas Supply Corporation (Delaware) ............................ 100
Tenneco Gas Australia Inc. (Delaware) ................................ 100
Tenneco Holdings Pty. Ltd. (Australia) ............................ 100
Sulawesi Energy Pty Ltd. (Australia) ........................... 50
(Upon the acquisition of the Energy Equity subsidiaries
contemplated for the South Sulawesi Project, Tenneco
Holdings Pty. Ltd. will own 50%, and an unaffiliated
company will own 50%.)
PT Energi Sengkang (Indonesia)............................... 95
(Upon the acquisition of the Energy Equity subsidiaries
contemplated for the South Sulawesi Project, Sulawesi
Energy Pty. Ltd. will own 95%, and an unaffiliated
company will own 5%.)
Tenneco Energy Australia Pty. Limited (Australia) .............. 100
Tenneco Energy Queensland Pty. Limited (Australia) .......... 100
Tenneco Energy South Australia Pty. Limited (Australia) ..... 100
Tenneco Energy Operations and Maintenance Pty. Ltd. ............ 100
Energy Management Technical Systems Pty. Ltd. (Australia) ... 50
(Upon the acquisition of the Energy Equity subsidiaries
contemplated for the South Sulawesi Project, Tenneco
Energy Operations and Maintenance Pty. Ltd. will own
50%, and an unaffiliated company will own 50%.)
Tenneco Sulawesi Gas Pty. Ltd. (Australia) ..................... 100
Energy Equity (Sengkang) Pty. Ltd. (Australia) .............. 50
(Upon the acquisition of the Energy Equity subsidiaries
contemplated for the South Sulawesi Project, Tenneco
Sulawesi Gas Pty. Ltd. will own 50%, and an unaffiliated
company will own 50%.)
Galtee Limited (Cayman Islands) ................................... 100
Tenneco International Inc. (Delaware) ................................ 100
Tenneco Nederland B.V. (Netherlands) .............................. 100
Tenneco Offshore Netherlands Company (Delaware) ................... 100
Tenneco Liquids Corporation (Delaware) ............................... 100
Tenneco Marketing Services Company (Delaware) ........................ 100
Tenneco MLP Inc. (Delaware) .......................................... 100
Polk Power Partners, L.P. (Delaware Limited Partnership) ....... 100
(Tenneco MLP Inc. owns __% as a Limited Partner, CSW
Mulberry, Inc., an unaffiliated company, owns __% as a
Limited Partner; GPSF-A Inc., an Unaffiliated company
owns __% as Preferred Limited Partner; and Polk Power
GP, Inc. owns __% as the General Partner.)
Tenneco MTBE, Inc. (Delaware) ........................................ 100
</TABLE>
5
<PAGE> 34
ENERGY SUBSIDIARIES
<TABLE>
<S> <C>
Subsidiaries of Tenneco Inc.
Subsidiaries of Tennessee Gas Pipeline Company
Tenneco Midwest Corporation (Delaware)............................. 100
Tenneco Midwest Natural Gas L.P. (Delaware Limited
Partnership)................................................. 99
(Tenneco Midwest Corporation, as Limited Partner, owns 99%;
and Midwestern Gas Transmission Company, as General Partner,
owns 1%.)
Tenneco Pittsfield Corporation (Delaware).......................... 100
Tenneco Portland Corporation (Delaware)............................ 100
Tenneco Realty, Inc. (Delaware).................................... 100
Tenneco SNG Inc. (Delaware)........................................ 100
Tenneco Texas Acquisition Inc. (Delaware).......................... 100
Tenneco Trinidad LNG, Inc. (Delaware).............................. 100
Tenneco Ventures Bolivia Corporation (Delaware).................... 100
Tenneco Ventures Corporation (Delaware)............................ 100
Tenneco Ventures Poland Corporation (Delaware)..................... 100
Tenneco Western Market Center Corporation (Delaware)............... 100
The Western Market Center Joint Venture (Joint Venture)......... 50
(Tenneco Western Market Center Corporation owns 50%; Entech
Gas Ventures, Inc., an unaffiliated company, owns 15%;
Questar WMC Corporation, an unaffiliated company, owns 25%;
and Fuels WMC Corporation, an unaffiliated company,
owns 10%.)
Tenneco Western Market Center Service Corporation (Delaware)....... 100
TennEcon Services, Inc. (Delaware)................................. 100
Tenneco Energy Technology Consulting Services Inc. (Delaware)... 100
Tennessee Gas Transmission Company (Delaware)...................... 100
Tennessee Storage Company (Delaware)............................... 100
Tennessee Trailblazer Gas Company (Delaware)....................... 100
Ten Ten Parking Garage Inc. (Delaware)............................. 100
The Fontanelle Corporation (Louisiana)............................. 100
The F and E Oyster Partnership (Louisiana Partnership).......... 64
(The Fontanelle Corporation owns 64% as General Partner; and
Expedite Oyster, Inc., an unaffiliated company, owns 36% as
General Partner.)
The LaChute Corporation (Louisiana)................................ 100
</TABLE>
6
<PAGE> 35
ENERGY SUBSIDIARIES
<TABLE>
<S> <C>
Subsidiaries of Tenneco Inc.
Subsidiaries of Tennessee Gas Pipeline Company
Tenneco Midwest Corporation (Delaware)................................ 100
Tenneco Midwest Natural Gas L.P. (Delaware Limited Partnership).... 99
(Tenneco Midwest Corporation, as Limited Partner, owns 99%; and
Midwestern Gas Transmission Company, as General Partner, owns
1%).
Tenneco Pittsfield Corporation (Delaware)............................. 100
Tenneco Portland Corporation (Delaware)............................... 100
Tenneco Realty, Inc. (Delaware)....................................... 100
Tenneco SNG Inc. (Delaware)........................................... 100
Tenneco Texas Acquisition, Inc. (Delaware)............................ 100
Tenneco Trinidad LNG, Inc. (Delaware)................................. 100
Tenneco Ventures Bolivia Corporation (Delaware)....................... 100
Tenneco Ventures Corporation (Delaware)............................... 100
Tenneco Ventures Poland Corporation (Delaware)........................ 100
Tenneco Western Market Center Corporation (Delaware).................. 100
The Western Market Center Joint Venture (Joint Venture)............ 50
(Tenneco Western Market Center Corporation owns 50%; Entech Gas
Ventures, Inc., an unaffiliated company, owns 15%; Questar WMC
Corporation, an unaffiliated company, owns 25%; and Fuels WMC
Corporation, an unaffiliated company, owns 10%.)
Tenneco Western Market Center Service Corporation (Delaware).......... 100
TennEcon Services, Inc. (Delaware) ................................... 100
Tenneco Energy Technology Consulting Services Inc. (Delaware)...... 100
Tennessee Gas Transmission Company (Delaware)......................... 100
Tennessee Storage Company (Delaware).................................. 100
Tennessee Trailblazer Gas Company (Delaware).......................... 100
Ten Ten Parking Garage Inc. (Delaware)................................ 100
The Fontanelle Corporation (Louisiana). .............................. 100
The F and E Oyster Partnership (Louisiana Partnership)............. 64
(The Fontanelle Corporation owns 64% as General Partner; and
Expedite Oyster, Inc., an unaffiliated company, owns, 36% as
General Partner.)
The LaChute Corporation (Louisiana)................................... 100
</TABLE>
6
<PAGE> 36
EXHIBIT G
TO THE
DISTRIBUTION AGREEMENT
<PAGE> 37
INDUSTRIAL SUBSIDIARIES
<TABLE>
<S> <C>
Subsidiaries of Industrial Company
Subsidiaries of Tenneco Automotive Inc.
Tenneco Automotive Italia S.r.l. (Italy)............................ 15
(Tenneco Automotive Inc. owns 85%; and Monroe Auto
Equipment France, S.A. owns 15%)
Monroe Auto Pecas S.A. (Brazil)................................... 2.82
(Tenneco Automotive Inc. owns 2.82%; Monroe do Brazil Industria
e Comercio Ltda. Owns 82.71%; and Monteiro Aranha S/A, an
unaffiliated company, owns 14.47%)
Monroe-Mexico S.A. de C.V. (Mexico).............................. 99.99
(Tenneco Automotive Inc. owns 99.99%; and Industrial Company
owns 0.01%)
Precision Modular Assembly Corp. (Delaware)........................ 100
Rancho Industries Europe B.V. (Netherlands)........................ 100
Tenneco Automotive Foreign Sales Corporation Limited (Jamaica)..... 99
(Tenneco Automotive Inc. owns 99%; and Industrial Company owns
1%)
Tenneco Automotive International Sales Corporation
(DE-In Dissolution)............................................. 100
Tenneco Automotive Italia S.r.l. (Italy)........................... 85
(Tenneco Automotive Inc. owns 85%; and Monroe Auto Equipement
France, S.A. owns 15%)
Tenneco Automotive Japan Ltd. (Japan).............................. 100
The Pullman Company (Delaware)..................................... 100
Axios Produtos de Elastomeros Limitada (Brazil)................. 99
(99% The Pullman Company; 1% Peabody International
Corporation)
Clevite Industries Inc. (Delaware).............................. 100
Peabody International Corporation (Delaware).................... 100
Axios Produtos de Elastomeros Limitada (Brazil).............. 1
(99% The Pullman Company; 1% Peabody International
Corporation)
Barasset Corporation (Ohio).................................. 100
Peabody Galion Corporation (Delaware)........................ 100
Peabody Gordon-Piatt, Inc. (Delaware)........................ 100
Peabody N.E., Inc. (Delaware)................................ 100
Peabody World Trade Corporation (Delaware)................... 100
Pullmex, S.A. de C.V. (Mexico)........................... 0.1
(99.9% The Pullman Company; 0.1% Peabody World Trade
Corporation)
Peabody-Myers Corporation (Illinois)......................... 100
Pullman Canada Ltd. (Canada)................................. 61
(61% Peabody International Corporation; 39% The Pullman
Company)
Pullman Canada Ltd. (Canada).................................... 39
(61% Peabody International Corporation; 39% The Pullman
Company)
Pullman Standard, Inc. (Delaware)............................... 100
</TABLE>
2
<PAGE> 38
INDUSTRIAL SUBSIDIARIES
<TABLE>
<S> <C>
Subsidiaries of Industrial Company
Pullmex, S.A. de C.V. (Mexico).................................. 99.9
(99.9% The Pullman Company; 0.1% Peabody World Trade
Corporation)
Tenneco Automotive Trading Company (Delaware)......................... 100
Tenneco Brake, Inc. (Delaware)..................................... 100
Tenneco Brazil Ltda. (Brazil)......................................... 100
Monroe do Brazil Industria e Comercio Ltda. (Brazil)............... 100
Monroe Auto Pecas S.A. (Brazil)................................. 82.71
(Monroe do Brazil Industria e Comercio Ltda. Owns 82.71%;
(Tenneco Automotive Inc. owns 2.82%; and Monteiro Aranha
S/A, an unaffiliated company owns 14.47%)
Tenneco Business Services Holdings Inc. (f/k/a Tenneco Business
Services Inc.)..................................................... 100
(Tenneco Business Services Inc. (f/k/a Tenneco Technology
Services Inc.).................................................. 100
Tenneco Deutschland Holdinggesellschaft mbH (Germany)................. 99.97
(Industrial Company owns 99.97%; and Atlas Bermoegensverwaltung, an
unaffiliated company, owns 0.03%)
GILLET Unternehmesverwaltungs (Germany)............................ 100
Heinrich Gillet GmbH & Co. KG (Germany)......................... 0.1
(GILLET Unternehmesverwaltungs GmbH owns 0.1%; and Tenneco
Deutschland Holdinggesellschaft mbH owns 99.9%)
Heinrich Gillet GmbH & Co. KG (Germany)............................ 99.9
(Tenneco Deutschland Holdinggesellschaft mbH owns 99.9%; and
GILLET Unternchmesverwaltungs GmbH owns 0.1%)
Gillet-Abgassysteme Zwickau Gmbh (Germany)...................... 100
Mastra-Gillet Industria e Comercio Ltda. (Brazil)............... 50
(Heinrich Gillet GmbH & Co. KG owns 50%; and Mastra Industria
e Comercio Ltda., an unaffiliated company, owns 50%)
Omni-Pac Ekco GmbH Verpackungsmittel (Germany)..................... 100
Omni-Pac Poland Sp. z o.o. (Poland)............................. 100
PCA Embalajes Espana, S.L. (Spain).............................. 1
(Omni-Pac Ekco GmbH Verpackungsmittel owns 1%; and PCA
Verpackungsmittel GmbH owns 99%)
Omni-Pac GmbH (Germany)............................................ 99
(Tenneco Deutschland Holdinggesellschaft mbH owns 99%; and
Industrial Company owns 1%)
Omni-Pac Ap5 (Denmark).......................................... 100
Omni-Pac A.B. (Sweden).......................................... 100
Omni-Pac S.A.R.L. (France)...................................... 3
(Omni-Pac GmbH owns 3%; and Industrial Company owns 97%)
Walker Deutschland GmbH (Germany).................................. 99
(Tenneco Deutschland Holdinggesellschaft mbH owns 99%; and
Industrial Company owns 1%)
Walker Gillet (Enrope) GmbH (Germany).............................. 100
Tenneco Foam Products Company......................................... 100
Tenneco Inc. (Nevada)................................................. 100
</TABLE>
3
<PAGE> 39
INDUSTRIAL SUBSIDIARIES
<TABLE>
<S> <C>
Subsidiaries of Industrial Company
Tenneco International Holding Corp. (Delaware)........................ 100
Monroe Australia Pty. Limited (Australia).......................... 100
Monroe Springs (Australia) Pty. Ltd. Australia)................. 100
Monroe Superannuation Pty. Ltd. (Australia)..................... 100
Walker Australia Pty. Limited (Australia)....................... 100
S.A. Monroe Europe N.V. (Belgium).................................. 100
Borusan Amortisor Imalat Ve Ticaret A.S. (Turkey)............... 16.67
(S.A. Monroe Europe N.V. owns 16.67%; Borusan Holding AS, an
unaffiliated company, owns 83.03%; and various unaffiliated
individual stockholders own 0.3%)
Monroe Europe Coordination Center N.V. (Belgium)................ 99.9
(S.A. Monroe Europe N.V. owns 99.9%; and Monroe Auto
Equipment France, S.A. owns 0.1%)
Monroe Europe (UK) Limited (United Kingdom)..................... 18
(S.A. Monroe Europe N.V. owns 18%; and Tenneco United
Kingdom Holdings Limited owns 82%)
Monroe Packaging N.V. (Belgium)................................. 99.9
(S.A. Monroe Europe N.V. owns 99.9%; and Monroe Auto
Equipment France, S.A. owns 0.1%)
Tenneco Canada Inc. (Ontario)...................................... 51.28
(Tenneco International Holding Corp. Owns 100% of the issued and
outstanding Common Stock, 51.28% of total equity; and Tenneco
United Kingdom Holdings Limited owns 100% of the Class A Stock,
48.72% of total equity)
98174 Ontario Limited (Ontario)................................. 100
Tenneco Canada Wholesale Finance Company (Alberta).............. 100
Tenneco Credit Canada Corporation (Alberta)..................... 100
Tenneco Espana Holdings, Inc. (Delaware)........................... 100
Louis Minuzzi F. Hijos S.A.I.C. (Argentina)..................... 100??
Monroe Springs (New Zealand) Pty. Ltd. (New Zealand)............ 100
Monroe Spain, S.A. (f/k/a Tenneco Espana, S.A.) (Spain)...... 100
Gillet Iberica, S.A. (Spain)................................. 100
Manufacturas Fonos, S.L. (Spain)............................. 100
Omni-Pac Embalajes S.A. (Spain).............................. 100
Reknowned Automotive Products Manufacturers Ltd. (India)........ 51
Thibault Investments Limited (Mauritius)........................ 100
Hydraulics Limited (India)................................... 51
(Thibault Investments Limited owns 51% and Bangalore Union
Services Limited, an unaffiliated company, owns 49%)
Tenneco Holdings Danmark A/S (Denmark)............................. 100
Gillet Exhaust Technologie (Proprietary) Limited
(South Africa).................................................. 100
Gillet Lazne Belohrad, S.T.O. (Republic of Czechoslovakia)....... 100
Hemrich Gillet Portuguesa - Sistemas de Escape, Lda.
(Portugal)...................................................... 100
Walker Danmark A/S (Denmark).................................... 100
</TABLE>
4
<PAGE> 40
INDUSTRIAL SUBSIDIARIES
<TABLE>
<S> <C>
Subsidiaries of Industrial Company
Subsidiaries of Tenneco International Holding Corp. (Delaware)
Subsidiaries of Tenneco Holdings Danmark A/S (Denmark)
Walker Inapal Escapes, S.A. (Portugal)............................ 90
(Tenneco Holdings Danmark A/S owns 90%; Inapal, Industria
Nacional de Acessorios Para Automoveis, SA, an unaffiliated
company, owns 9.99%; and Walker Danmark A/S owns 0.01%
Walker France S.A. (France)....................................... 100
Constructions Metallurgiques de Wissembourg - Wimetal
(France)....................................................... 100
Societe Europeenne des Ensembles-Montes (France)............ 100
Gillet Tubes Technologies G.T.T. (France)...................... 100
Walker Sverige A.B. (Sweden)...................................... 100
Tenneco Management Company (Delaware)................................ 100
Tenneco Moorhead Acquisition Inc. (Delaware)......................... 100
Tenneco Packaging Hungary Holdings Inc. (Delaware)................... 100
Tenneco Packaging Inc. (Delaware).................................... 100
A&E Plastics, Inc. (Delaware)..................................... 100
Alupak A.G. (Switzerland)......................................... 100
American Cellulose Corporation (Delaware)......................... 100
(Tenneco Packaging Inc. owns 50%; and Larry E. Homan, an
unaffiliated individual, owns 50%)
The Corinth and Counce Railroad Company (Mississippi)............. 100
Marinette Tomahawk & Western Railroad Company (Wisconsin)...... 100
Valdosta Southern Railroad Company (Florida)................... 100
Dahlonega Packaging Corporation (Delaware)........................ 100
Dixie Container Corporation (Virginia)............................ 100
Dixie Convoy Corporation (North Carolina)......................... 100
Dongguan PCA Packaging Co., Ltd. (Peoples Republic of China)...... 50
(Tenneco Packaging Inc. owns 50%; and Dongguan Dong Ya Color
Printing and Packaging Factory, an unaffiliated company,
owns 50%)
EKCO Products, Inc. (Illinois).................................... 100
E-Z Por Corporation (Delaware).................................... 100
Hexacomb Corporation (Illinois)................................... 100
Hexacomb International Sales Corporation (U.S. Virgin
Islands)....................................................... 100
Packaging Corporation of America (Nevada)......................... 100
PCA Box Company (Delaware)........................................ 100
PCA-Budafok (Kartongyar) Kft. (Hungary)........................... 100
PCA Hydro, Inc. (Delaware)........................................ 100
PCA Romania Srl (Romania)......................................... 50
(Tenneco Packaging Inc. owns 50%; and Kraftcorr Inc., an
unaffiliated company owns 50%)
PCA Tomahawk Corporation (Delaware)............................... 100
PCA Valdosta Corporation (Delaware)............................... 100
</TABLE>
5
<PAGE> 41
INDUSTRIAL SUBSIDIARIES
<TABLE>
<S> <C>
Subsidiaries of Industrial Company
Subsidiaries of Tenneco Packaging Inc.
PCA Verpackungsmittel GmbH (Germany)............................... 100
PCA Embalajes Espana S.L. (Spain)............................... 99
(PCA Verpackungsmittel GmbH owns 99%; and Omni-Pac Ekco
GmbH Verpackungsmittel owns 1%)
PCA West Inc. (Delaware)........................................... 100
Coast-Packaging Company (California General Partnership)........ 50
(PCA West Inc. owns 50%, as General Partner; and J.G. Haddy
Sales Company, an unaffiliated company, owns 50%, as
General Partner)
Pressware International, Inc. (Delaware)........................... 100
Revere Foil Containers, Inc. (Delaware)............................ 100
Tenneco Packaging-Romania S.R.L. (Romania)......................... 100
Tenneco Plastics Company (Delaware)................................ 100
798795 Ontario Limited (Ontario)................................... 100
PCA Canada Inc. (Ontario)....................................... 100
Tenneco Retail Receivables Company (Delaware)......................... 100
Tenneco Romania Holdings Inc. (Delaware).............................. 100
Tenneco United Kingdom Holdings Limited (Delaware).................... 100
Monroe Europe (UK) Limited (United Kingdom)........................ 82
(Tenneco United Holdings Limited owns 82%; and S.A. Monroe
Europe N.V. owns 18%)
Omni-Pac U.K. Limited (United Kingdom)............................. 100
Packaging Corporation of America (UK) Limited (Scotland)........... 100
Alpha Products (Bristol Limited (United Kingdom)................ 100
Calendered Plastics Limited (United Kingdom).................... 100
Delyn Packaging Limited (United Kingdom)........................ 100
Penlea Plastics Limited (United Kingdom)........................ 100
Polbeth Packaging Limited (Scotland)............................ 100
Brucefield Plastics Limited (Scotland)....................... 100
Polbeth Packaging (Corby) Limited (Scotland)................. 100
Tenneco Canada Inc. (Ontario)...................................... 48.72
(Tenneco United Kingdom Holdings Limited owns 100% of the Class
A Stock, 48.72% of total equity; and Tenneco International
Holding Corporation owns 100% of the issued and outstanding
common stock, 51.28% of total equity)
Tenneco Europe Limited (Delaware).................................. 100
Tenneco Asia Limited (United Kingdom)........................... 100
Tenneco International Finance Limited (United Kingdom)............. 100
Tenneco International Finance B.V. (Netherlands)................ 100
Tenneco Management (Europe) Limited (United Kingdom)............... 100
Tenneco Packaging (UK) Limited (United Kingdom).................... 100
Tenneco West Limited (United Kingdom).............................. 100
Thompson and Stammers Dunmow (Number 6) Limited (United Kingdom)... 100
Thompson and Stammers Dunmow (Number 7) Limited (United Kingdom)... 100
</TABLE>
6
<PAGE> 42
SHIPBUILDING SUBSIDIARIES
Subsidiaries of Newport News Shipbuilding Inc. (Delaware) (formerly known as
Tenneco InterAmerica Inc.)
Newport News Shipbuilding and Dry Dock Company (Virginia)................100%
Ashville Industries Inc. (North Carolina)..............................100
Greenville Industries Inc. (Virginia)..................................100
Newport News GlobalCorporation (U.S. Virgin Islands)...................100
Newport News Industrial Corporation (Virginia).........................100
Newport News Industrial Corporation of Ohio (Ohio)...................100
Newport News Reactor Services, Inc. (Virginia).........................100
Tenneco Tanker Holding Corporation (Delaware)..........................100
The James River Oyster Corporation (Virginia)..........................100
NNS Delaware Management Company (Delaware)...............................100
<PAGE> 1
EXHIBIT 4.1
TENNECO INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF JUNIOR PREFERRED STOCK
BY RESOLUTION OF THE BOARD OF DIRECTORS
PROVIDING FOR AN ISSUE OF 6,000,000
SHARES OF JUNIOR PREFERRED STOCK DESIGNATED
"8 1/4% CUMULATIVE JUNIOR PREFERRED STOCK, SERIES A"
---------------------
I, Karl A. Stewart, Vice President and Secretary of Tenneco Inc.
(hereinafter referred to as the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 151 thereof, DO HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said Corporation, as amended, the Board of
Directors is authorized to issue Junior Preferred Stock, without par value, of
the Corporation ("Junior Preferred Stock") in one or more series, and the Board
of Directors (i) has authorized the issuance of the series of Junior Preferred
Stock hereinafter provided for, and (ii) has authorized a special committee of
the Board of Directors (the "Junior Preferred Stock Issuance Committee") to
adopt the resolution set forth below creating a series of 6,000,000 shares of
Junior Preferred Stock, without par value, designated as 8 1/4% Cumulative
Junior Preferred Stock, Series A.
That the Junior Preferred Stock Issuance Committee has adopted the
following resolution:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Certificate of Incorporation of the
Corporation, as amended (as such may be further amended from time to
time, the "Certificate of Incorporation") and the authority vested by
such Board in a Junior Preferred Stock Issuance Committee, all of the
members of which are members of such Board, a series of Junior Preferred
Stock, without par value, of the Corporation (the "Junior Preferred
Stock") be, and hereby is, created to be designated "8 1/4% Cumulative
Junior Preferred Stock, Series A" (hereinafter referred to as the
"Series A Preferred Stock"), consisting of 6,000,000 shares, and the
designations, powers, preferences and relative and other special rights
and the qualifications, limitations and restrictions of the Series A
Preferred Stock are hereby fixed and stated to be as follows (all terms
used herein which are defined in the Certificate of Incorporation shall
be deemed to have the meanings provided therein):
Section 1. Dividends. (a) The dividend rate on the Series A
Preferred Stock shall be 8 1/4% of $50 per share of Series A Preferred
Stock per annum (2.0625% per quarter annum). Dividends (including
Additional DRD Dividends (as defined in Section 2)) on shares of the
Series A Preferred Stock shall accrue, whether or not declared, on a
daily basis from the date of issuance of such shares. Accrued but unpaid
dividends shall not bear interest.
(b) Dividends on the Series A Preferred Stock shall be payable,
when, as and if declared by the Board of Directors of the Corporation
out of assets legally available therefor, quarter yearly on the last
days of March, June, September and December in each year (each, a
"Dividend Payment Date"), with the first dividend payment date being the
next Dividend Payment Date following the date of issuance. Dividends on
each Dividend Payment Date will be payable to holders of record of the
Series A Preferred Stock as they appear on the stock books of the
Corporation on a record date, not more than 60 days preceding such
Dividend Payment Date, fixed for such purpose by the Board of Directors
in advance of such Dividend Payment Date. Dividends payable on the
Series A Preferred Stock for any period shorter than a quarter-yearly
dividend period shall be computed on the basis of a 360-day year of
twelve 30-day months. The Series A Preferred Stock shall rank on a
parity with each other series of Junior Preferred Stock as to the
payment of dividends, except to the extent otherwise provided in Section
7 hereof or in the resolution or resolutions providing for the issuance
of such other series.
(c) If (x) the Stock Issuance (as defined in the Amended and
Restated Agreement and Plan of Merger, dated as of June 19, 1996, as
such may be amended or supplemented from time to time (the "Merger
Agreement") among the Corporation, El Paso Natural Gas Company, a
Delaware corporation ("El Paso"),
<PAGE> 2
and El Paso Merger Company, a Delaware corporation) is not approved by the
stockholders of El Paso at a special meeting of El Paso stockholders
(including any adjournments or postponements thereof, the "El Paso Special
Meeting") called to approve such issuance, (y) the Merger (as defined in the
Merger Agreement) is effected, and (z) on or before the 90th day after the date
of the El Paso Special Meeting, either Standard & Poor's Corp. ("S&P") or
Moody's Investors Service, Inc. ("Moody's") downgrades the rating previously
given by it to the Series A Preferred Stock, the annual dividend rate set
forth in (a) above will be automatically subjected to a one-time upward
adjustment to the rate set forth in the table below opposite the applicable
ratings which are given to the Series A Preferred Stock by each of Moody's and
S&P as of the 90th day after the El Paso Special Meeting, effective as of the
date of original issuance of the Series A Preferred Stock.
Annual
Dividend
Revised Ratings (Moody's xxxx) Rate
------------------------------ --------
Ba1/BB+........................................... 9.000%
Ba2/BB+ or Ba1/BB................................. 9.125%
Ba2/BB............................................ 9.250%
Ba3/BB or BA2/BB-................................. 9.500%
Ba3/BB-........................................... 10.000%
If any such adjustment to the annual dividend rate occurs after a
Dividend Payment Date as to which the Corporation previously paid dividends on
the Series A Preferred Stock, additional dividends will be payable, out of funds
legally available therefor, on each share of Series A Preferred Stock on the
next succeeding Dividend Payment Date (or if such adjustment occurs after the
dividend payable on the next succeeding Dividend Payment Date has been
declared, on the second succeeding Dividend Payment Date following the date of
such adjustment) to the holder of record of such share of Series A Preferred
Stock as of the record date established for such succeeding Dividend Payment
Date (or second succeeding Dividend Payment Date, as the case may be) in an
amount equal to the excess of (x) the aggregate amount of dividends that would
have been payable on such share on all Dividend Payment Dates as so which the
Corporation previously paid dividends on the Series A Preferred Stock if
dividends had accrued from the date of issuance of the Series A Preferred Stock
at the adjusted annual dividend rate, over (y) the aggregate amount of
dividends actually paid with respect to such share of Series A Preferred Stock.
If the annual dividend rate is adjusted as provided above, the Corporation
will cause notice of such adjustment to be sent to the holders of record of
the Series A Preferred Stock as they appear in the stock register of the
Corporation.
Section 2. Changes in the Dividends Received Percentage. (a)
Notwithstanding Section 1 hereof, if one or more amendments to the Internal
Revenue Code of 1986, as amended (the "Code"), are enacted that reduce the
percentage of the dividends received deductions as specified in Section
243(a)(1) of the Code or any successor provision (the "Dividends Received
Percentage") to below 70%, the amount of each dividend payable per share of the
Series A Preferred Stock for dividend payments made on or after the effective
date of such change (or the second succeeding dividend payment after such
effective date, as hereinafter described) will be adjusted by multiplying the
amount of the dividend payable pursuant to Section 1 (before adjustment
pursuant to the Section 2) by a factor, which will be the number determined in
accordance with the following formula (the "DRD Formula"), and rounding the
result to the nearest cent:
1 - (.35(1 - .70))
--------------------------
1 - (.35(1 - DRP))
For the purposes of the DRD Formula "DRP", means the Dividends Received
Percentage applicable to the dividend in question. No amendment to the Code,
other than a change in the percentage of the dividends received deduction set
forth in Section 243(a)(1) of the Code or any successor provision, will give
rise to an adjustment. Notwithstanding the foregoing provisions of this Section
2, in the event that, with respect to any such amendment, the Corporation
receives either an unqualified opinion of nationally
2
<PAGE> 3
recognized independent tax counsel selected by the Corporation or a private
letter ruling or similar form of authorization from the Internal Revenue
Service to the effect that such an amendment would not apply to dividends
payable on the Series A Preferred Stock, then any such amendment will not
result in the adjustment provided for pursuant to the DRD Formula. The opinion
referenced in the previous sentence must be based upon a specific exception in
the legislation amending the DRP or upon a published pronouncement of the
Internal Revenue Service addressing such legislation. The Corporation's
calculation of the dividends payable, as so adjusted and as certified accurate
as to calculation and reasonable as to method by the independent public
accountants then regularly engaged by the Corporation, will be final and not
subject to review absent manifest error.
(b) If any amendment to the Code which reduces the Dividends Received
Percentage to below 70% is enacted after a dividend payable on a Dividend
Payment Date has been declared but prior to the applicable Dividend Payment
Date, the amount of dividend payable on such Dividend Payment Date will not be
increased. Instead, an amount, equal to the excess of (x) the product of the
dividends paid by the Corporation on such Dividend Payment Date and the factor
derived from the DRD Formula (where the DRP used in the DRD Formula would be
equal to the reduced Dividends Received Percentage for such dividends), over
(y) the dividends paid by the Corporation on such Dividend Payment Date, will
be payable, out of funds legally available therefor, to holders of record as of
the record date established for the next succeeding Dividend Payment Date in
addition to any other amounts payable on such date. Notwithstanding the
foregoing, no such additional dividend will be payable pursuant to this Section
2 if such amendment to the Code would not result in an adjustment to the DRD
Formula due to the Corporation having received either an opinion of counsel or
tax ruling referred to in paragraph (a) of this Section 2.
(c) If, prior to March 31, 1997, an amendment to the Code is enacted
that reduces the Dividends Received Percentage to below 70% and such reduction
retroactively applies to a Dividend Payment Date as to which the Corporation
previously paid dividends on the Series A Preferred Stock (each an "Affected
Dividend Payment Date"), additional dividends (the "Additional DRD Dividends")
will be payable out of funds legally available therefor on the next succeeding
Dividend Payment Date (or if such amendment is enacted after the dividend
payable on such Dividend Payment Date has been declared, on the second
succeeding Dividend Payment Date following the date of enactment) to holders of
record as of the record date established for such succeeding Dividend Payment
Date (or second succeeding Dividend Payment Date, as the case may be) in an
amount equal to the excess of (x) the product of the dividends paid by the
Corporation on each Affected Dividend Payment Date and the factor derived from
the DRD Formula (where the DRP used in the DRD Formula would be equal to the
reduced Dividends Received Percentage applied to each Affected Dividend Payment
Date), over (y) the dividends paid by the Corporation on all Affected Dividend
Payment Dates.
(d) Additional DRD Dividends will not be payable in respect of the
enactment of any amendment to the Code on or after March 31, 1997 which
retroactively reduces the Dividends Received Percentage to below 70%, or if
enacted prior to March 31, 1997, which would not result in an adjustment due to
the Corporation having received either as opinion of counsel or tax ruling
referred to in paragraph (a) of this Section 2. The Corporation shall only be
required to make one payment of Additional DRD Dividends.
(e) In the event that the amount of dividends payable per share of the
Series A Preferred Stock are adjusted pursuant to the DRD Formula and/or
Additional DRD Dividends are to be paid, the Corporation shall cause ???? of
each such adjustment and, if applicable, any Additional DRD Dividends to be
sent to the holders of record of the Series A Preferred Stock as they appear in
the stock register of the Corporation.
Section 3. Optional Redemption. (a) At any time or from time to time,
on or after December 31, 2001, the Series A Preferred Stock may be redeemed at
the option of the Corporation, in whole or in part, out of funds legally
available therefor, at a redemption price equal to $50.00 per share plus an
amount equal to accrued and unpaid dividends (whether or not declared) to but
excluding the date fixed for redemption including any changes in dividends
payable due to changes in the annual dividend rate or Dividends Received
Percentage, and Additional DRD Dividends, if any. In addition to any
restrictions or limitations
3
<PAGE> 4
contained in the Certificate of Incorporation, if any. If full cumulative
dividends on the Series A Preferred Stock for all past dividend periods have
not been paid or declared and set apart for payment, the Series A Preferred
Stock may be redeemed only in full (but not in part) by the Corporation
pursuant to this paragraph (a) and the Corporation shall not purchase or
acquire any shares of Series A Preferred Stock other than pursuant to Section
4 hereof or pursuant to a purchase or exchange offer made on the same terms to
all holders of the Series A Preferred Stock. If fewer than all the outstanding
shares of Series A Preferred Stock are to be redeemed, the Corporation will
select those to be redeemed pro rata, by lot or by a substantially equivalent
method.
(b) If the Dividends Received Percentage is equal to or less than 40%
and, as a result, the amount of dividends on the Series A Preferred Stock
payable on any Dividend Payment Date will be or is adjusted upwards as provided
in Section 2, the Corporation, at its option, may redeem all, but not less than
all, of the outstanding shares of the Series A Preferred Stock, out of funds
legally available therefor, provided that within 60 days of the date on which
an amendment to the Code is enacted which reduces the Dividends Received
Percentage to 40% or less, the Corporation gives notice of redemption as
provided in paragraph (d) of this Section 3 to all holders of record of the
Series A Preferred Stock. A redemption of the Series A Preferred Stock in
accordance with this paragraph (b) shall be at the applicable redemption price
set forth in the following table, in each case plus an amount equal to accrued
and unpaid dividends (whether or not declared) thereon to but excluding the
date fixed for redemption, including any changes in dividends payable due to
changes in the annual dividend rate or Dividends Received Percentage, and
Additional DRD Dividends, if any:
Redemption
Price Per
Redemption Period Share
----------------- ----------
November 18, 1996 to December 30, 1997.................... $52.50
December 31, 1997 to December 30, 1998.................... 52.00
December 31, 1998 to December 30, 1999.................... 51.50
December 31, 1999 to December 30, 2000.................... 51.00
December 31, 2000 to December 30, 2001.................... 50.50
December 31, 2001 and thereafter.......................... 50.00
(c) If at any time fewer than 600,000 shares of Series A Preferred
Stock remain outstanding, the Corporation, at its option, may redeem all, but
not less than all, of the outstanding Series A Preferred Stock. A redemption of
the Series A Preferred Stock in accordance with this paragraph (c) shall be at
the applicable redemption price set forth in the following table, in each case
plus an amount equal to the accrued but unpaid dividends (whether or not
declared) thereon to but excluding the date fixed for redemption, including any
changes in dividends payable due to changes in the annual dividend rate or the
Dividends Received Percentage, and Additional DRD Dividends, if any:
Redemption
Price Per
Redemption Period Share
----------------- ----------
November 18, 1996 to December 30, 1997.................... $52.50
December 31, 1997 to December 30, 1998.................... 52.00
December 31, 1998 to December 30, 1999.................... 51.50
December 31, 1999 to December 30, 2000.................... 51.00
December 31, 2000 to December 30, 2001.................... 50.50
December 31, 2001 and thereafter.......................... 50.00
(d) Notice of redemption pursuant to paragraph (a), (b) or (c) of this
Section 3 will be given by mail, (i) not less than 30 days prior to the date
fixed for redemption thereon in the case of paragraph (a) and (ii) not less
than 30 nor more than 60 days prior to the date fixed for redemption thereof,
in the case of paragraphs (b) and (c), in each case to reach record holder of
the shares of Series A Preferred Stock to be redeemed at the address of such
holder in the stock register of the Corporation. If a notice of redemption has
been given, from and after the specified redemption date (unless the
Corporation defaults in making
4
<PAGE> 5
payment of the redemption price), dividends on the Series A Preferred Stock so
called for redemption will cease to accrue, such shares will no longer be deemed
to be outstanding, and all rights of the holders thereof as stockholders of the
Corporation (except the right to receive the redemption price) will cease.
Subject to applicable eschew and similar abandoned property laws, any moneys set
aside by the Corporation for such redemption and unclaimed at the end of six
months from the redemption date shall revert to the general funds of the
Corporation, after which reversion the holders of such shares so called for
redemption shall look only to the general funds of the Corporation for the
payment of the amounts payable upon such redemption. Any interest accrued on
funds so deposited shall be paid to the Corporation from time to time.
Section 4. Mandatory Redemption. Subject to the rights of the holders
of any class or series of stock ranking prior to the Series A Preferred Stock,
upon the occurrence of a Mandatory Redemption Event, the Corporation shall
redeem out of funds legally available therefor all of the outstanding shares of
Series A Preferred Stock on a date (the "Mandatory Redemption Date") not more
than 60 days after the time of such Mandatory Redemption Event at a redemption
price of $50.50 per share plus an amount equal to accrued and unpaid dividends
(whether or not declared) thereon to but excluding the Mandatory Redemption
Date, including any changes in dividends payable due to changes in the annual
dividend rate or Dividends Received Percentage, and Additional DRD Dividends, if
any.
A "Mandatory Redemption Event" shall mean the earliest to occur of the
following events:
(i) the Transaction (as deferred below) shall have been voted upon by
the stockholders of the Corporation and shall not have been approved at
the special meeting of Tenneco stockholders presently scheduled to be
held on December 10, 1996 for the purpose of considering and voting upon
the Transaction (such meeting having been finally adjourned; (ii) the
Transaction shall not have been approved by the requisite vote of the
stockholders of the Corporation entitled to vote thereon on or prior to
March 31, 1997; or (iii) the Corporation shall not have accepted on or
prior to March 31, 1997 any indebtedness of the Corporation and its
subsidiaries tendered to it pursuant to the cash under offers made by it
pursuant to the Transaction.
"Transaction" means the recognition of the Corporation pursuant to
which (i) the Corporation and its subsidiaries will, pursuant to a Distribution
Agreement dated as of November 1, 1996 (as such may be amended, supplemented or
modified from time to time) among the Corporation, New Tenneco Inc., a newly
formed wholly-owned subsidiary of the Corporation ("New Tenneco"), and Newport
News Shipbuilding Inc. a wholly-owned subsidiary of the Corporations ("Newport
News"), undertake various intercompany transfers and distributions designed to
restructure, divide and separate their various businesses and assets so that
all of the assets, liabilities and operations of (A) their automotive parts,
packaging and administrative services businesses ("Industrial Business") are
owned and operated by New Tenneco and (B) their shipbuilding business
("Shipbuilding Business") are owned and operated by Newport News; (ii) the
Corporation will then distribute pro rata to holders of the common stock of
the Corporation all of the outstanding common stock of New Tenneco and Newport
News; and (iii) thereafter a subsidiary of El Paso will merge with and into the
Corporation, which will then consist of the remaining existing and discontinued
operations of the Corporation and its subsidiaries other than those relating to
the Industrial Business or the Shipbuilding Business, including the
transmission and marketing of natural gas, pursuant to the Merger Agreement.
Notice of redemption pursuant to this Section 4 will be given by mail,
not less than 30 nor more than 60 days prior to the Mandatory Redemption Date
to each record holder of shares of Series A Preferred Stock at the address of
such holder in the stock register of the Corporation. If a notice of redemption
has been given, from and after the Mandatory Redemption Date (unless the
Corporation defaults in making payment of the redemption price), dividends on
the Series A Preferred Stock will cease to accrue, such shares will no longer
be deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Corporation (except the rights to receive the redemption
price) will cease. Subject to applicable escheat and similar abandoned
property laws, any moneys set aside by the Corporation for such redemption and
unclaimed at the end of six months from the Mandatory Redemption Date shall
revert to the general funds
5
<PAGE> 6
of the Corporation, after which reversion the holders of such shares so called
for redemption shall look only to the general funds of the Corporation for the
payment of the accounts payable upon such redemption. Any interest accrued on
funds so deposited shall be paid to the Corporation from time to time.
Section 5. Voting. The Series A Preferred Stock shall not have any voting
rights except as required by law or the Certificate of Incorporation or as
hereinafter set forth:
(a) Each share of Series A Preferred Stock shall entitle the holder
thereof to vote voter can alternate submitted to a vote of the holders of
Series A Preferred Stock.
(b) The holders of Series A Preferred Stock, voting as a separate series
from all other series of junior Preferred Stock and classes of capital stock,
shall be entitled, at each annual meeting of stockholders of the Corporation, to
elect a number of directors of the Corporation equivalent to the smallest
number representing at least six-ninth of the number of members of the Board
of Directors as if there were no vacancies or unfilled newly created
directorships on such Board, without giving effect to any directorships created
or directors elected pursuant to paragraph (c) below. Any director so elected
shall hold office until the next annual meeting and until his or her successor
shall be elected and qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. So long as any series of
Series A Preferred Stock are outstanding, the number of members of the Board of
Directors of the Corporation (as if there were no vacancies or unfilled newly
created directorships on such Board, without giving effect to any directorships
created or directors elected pursuant to paragraph (c) below) shall be set at an
integral multiple of six.
A director elected pursuant to the terms of this paragraph (b) may be
removed without cause only by the holders of a majority in voting power of the
outstanding Series A Preferred Stock.
At such time as all shares of the Series A Preferred Stock shall cease to
be outstanding, the term of office of any director elected pursuant to this
paragraph (b), or his or her successor, shall automatically terminate.
(c) Whenever, at any time or times, dividends payable on the Series A
Preferred Stock shall be in arrears for dividend periods, whether or not
consecutive, continuing in the aggregate a number of days equivalent to six
calendar quarters, the holders of outstanding Series A Preferred Stock shall
have the exclusive right, in addition to their rights under (b) above, voting as
a separate series from all other series of Junior Preferred Stock and classes
of capital stock of the Corporation, at each meeting of the stockholders held
for the purpose of electing directors, to elect two directors of the
Corporation, until such time as all dividends accumulated on the Series A
Preferred Stock and in arrears shall have been paid in full or declared and set
apart for payment, at which time the right of the holders of the Series A
Preferred Stock to vote pursuant to the provisions of this paragraph (c) shall
terminate, subject to revesting in the event of each and every subsequent
default of the character and for the time above mentioned.
At any time when voting rights shall, pursuant to the provisions of this
paragraph (c), be vested in the Series A Preferred Stock, the number of
directors of the Corporation shall be automatically increased, to the extent
necessary, so that two directors may be elected by the holders of the Series A
Preferred Stock and a proper officer of the Corporation shall, upon the written
request of the holders of record of at least ten percent in aggregate
liquidation value of the Series A Preferred Stock then outstanding, addressed
to the Secretary of the Corporation, call a special meeting of holders of the
Series A Preferred Stock. Such meeting shall be held at the earliest practicable
date but in no event shall a special meeting be held if the annual meeting of
stockholders of the Corporation is to be held within 90 days of the receipt by
the Secretary of the Corporation of such request, if such meeting shall not be
called by the proper officer of the Corporation as required within 20 days after
personal service of the said written request upon the Secretary of the
Corporation, or within 30 days after mailing the same within the United States
of America by certified or registered mail, return receipt requested.
6
<PAGE> 7
addressed to the Secretary of the Corporation at its principal office (such
mailing to be evidenced by the registry receipt issued by the postal
authorities), then the holders of record of at least ten percent of the
aggregate liquidation value of the Series A Preferred Stock then outstanding may
designate in writing one of their number to call such meeting, and such meeting
may be called by such person designated upon the notice required for annual
meetings of stockholders but in no event shall a special meeting be held if the
annual meeting of stockholders of the Corporation is to be held within 90 days
of the receipt by the Secretary of the Corporation of such request. Any holder
of the Series A Preferred Stock so designated shall have access to the stock
books of the Corporation for the purpose of causing a meeting of stockholders to
be called pursuant to these provisions.
Upon any termination of the right of the holders of the Series A
Preferred Stock to vote for directors as a class as described in this paragraph
(c), the term of office of the directors so elected as described in this
paragraph (c) shall automatically terminate and the number of directors shall
be reduced accordingly.
(d) At any meeting so called pursuant to paragraph (c) above, and at
any other meeting of stockholders held for the purpose of electing directors at
which the holders of the Series A Preferred Stock shall have the right to elect
directors as provided in paragraph (b) or paragraph (c) above, the presence in
person or by proxy of a majority in voting power of the outstanding shares of
the Series A Preferred Stock, shall be required to constitute a quorum thereof
for the election of any director by the holders of the Series A Preferred
Stock.
At any such meeting or adjournment thereof, (x) the absence of the
required quorum of the Series A Preferred Stock shall not prevent the election
of directors other than those to be elected by the Series A Preferred Stock and
the absence of a quorum for the election of such other directors shall not
prevent the election of the directors to be elected by the Series A Preferred
Stock, and (y) in the absence of either or both such quorums, a majority in
voting power of the holders present in person or by proxy of the stock or
stocks which lack a quorum shall have power to adjourn the meeting, subject to
applicable law, for the election of directors which they are entitled to elect
from time to time without notice other than announcement at the meeting until a
quorum shall be present.
(e) If by reason of any resignation, retirement, disqualification,
death or removal there are not in office all such directors that the holders of
the Series A Preferred Stock are entitled to elect pursuant to paragraph (c),
then any such vacancy shall be filled only by the remaining director or
directors elected by such holders or, only in the event there is no such
remaining director, by the holders of the Series A Preferred Stock entitled to
vote thereon. If by reason of any resignation, retirement, disqualification,
death or removal there are not in office all such directors then the holders of
the Series A Preferred Stock are entitled to elect pursuant to paragraph (b),
then any such vacancy shall be filled only by a majority of the remaining
directors elected by such holders or, in the event there are no such remaining
directors by the majority vote of the remaining directors then constituting the
Board of Directors.
Promptly after the right of the holders of the Series A Preferred Stock
to fill any vacancy as set forth in the first sentence of the immediately
preceding paragraph arises, the Board of Directors may cause a special meeting
of the holders of Series A Preferred Stock entitled to vote thereon, to be held
for the purpose of filling such vacancy and such vacancy shall be filled at any
such special meeting. Such meeting shall be held at the earliest possible date,
but in no event shall a special meeting be held if the annual meeting of
stockholders of the Corporation is to be held within 90 days of the occurrence
of such vacancy.
Notwithstanding the immediately preceding paragraph, at any time after
the right of the holders of the Series A Preferred Stock to fill any vacancy as
set forth above in the first sentence of the first paragraph of this paragraph
(a) arises, a proper officer of the Corporation shall, upon the written request
of the holders of record of at least ten percent in aggregate liquidation value
of the Series A Preferred Stock then outstanding, addressed to the Secretary of
the Corporation, call a special meeting of holders
<PAGE> 8
of the Series A Preferred Stock. Such meeting shall be held at the earliest
practicable date but in no event shall a special meeting be held if the annual
meeting of stockholders of the Corporation is to be held within 90 days of the
occurrence of such vacancy. If such meeting shall not be called by the proper
officer of the Corporation as required within 20 days after personal service of
the said written request upon the Secretary of the Corporation, or within 20
days after mailing the same within the United States of America by registered
mail addressed to the Secretary of the Corporation at its principal office
(such mailing to be evidenced by the registry receipt issued by the postal
authorities), then the holders of record of at least ten percent of the
aggregate liquidation value of the Series A Preferred Stock then outstanding
may designate in writing one of their number to call such meeting, and such
meeting may be called by such person designated upon the notice required for
annual meetings of stockholders and shall be held at the place at which the
last preceding actual meeting of the stockholders of the Corporation was held.
Any holder of the Series A Preferred Stock so designated shall have access to
the stock books of the Corporation for the purpose of causing a meeting of
stockholders to be called pursuant to these provisions.
(f) In addition to any other vote or consent of stockholders required
by law or the Certificate of Incorporation, if any, so long as any shares of
Series A Preferred Stock are outstanding, the Corporation shall not, without
the consent of the holders of at least a majority in voting power of the
outstanding shares of Series A Preferred Stock, given in person or by proxy,
either in writing or by vote or an annual meeting or a special meeting called
for that purpose:
(A) issue any additional shares of Series A Preferred Stock
(other than the 6,000,000 shares of Series A Preferred Stock authorized
hereby), or issue any shares of any class or series of stock ranking
prior to or on parity with the Series A Preferred Stock as to the
payment of dividends or as to the distribution of assets on liquidation,
dissolution or winding up;
(B) issue any obligation or security convertible into shares of
stock ranking prior to or on parity with the Series A Preferred Stock as
to the payment of dividends or as to the distribution of assets on
liquidation, dissolution or winding up; or
(C) amend the Certificate of Incorporation or the Certificate
of Designation if the amendment would alter or change the powers,
preferences or special rights of the shares of Series A Preferred Stock
so as to affect such shares adversely.
Section 6. Restrictions on Dividends and Stock Repurchases. Subject to
any additional restrictions or limitations contained in the Certificate of
Incorporation, if any, so long as any shares of Series A Preferred Stock remain
outstanding, unless full cumulative dividends on the outstanding shares of
Series A Preferred Stock for all plus dividend periods have been paid, or
declared and set apart for payment, and the Corporation shall not be in default
with respect to its obligations under Section 4 hereof, dividends may not be
paid or declared and other distributions may not be made upon any class or
series of stock of the Corporation ranking junior to or on a parity with the
Series A Preferred Stock as to dividends or rights upon dissolution, liquidation
or winding up of the Corporation nor may any such class or series of stock of
the Corporation be purchased, retired or otherwise acquired by the Corporation,
in either case without the consent, given in person or by proxy, either in
writing or by vote at any annual meeting or at a special meeting called for that
purpose, of the holders of at least a majority in voting power of the
outstanding shares of Series A Preferred Stock present in person or by proxy at
such meeting, provided that a quorum, consisting of at least a majority in
voting power of the then outstanding shares of Series A Preferred Stock is
present; provided, however, that, notwithstanding the foregoing provisions of
this Section 6 (but subject to any restrictions or limitations to the contrary
contained in the Certificate of Incorporation), the Corporation may at any time
redeem, purchase or acquire, out of funds legally available therefor, shares of
stock ranking junior to or on a parity with the Series A Preferred Stock as to
dividends and rights upon liquidation, dissolution and winding up of the
Corporation in exchange for, or out of net cash proceeds from a substantially
concurrent sale of other shares of any stock of the Corporation ranking junior
to the Series A Preferred Stock as to dividends and rights upon liquidation,
dissolution and winding up.
8
<PAGE> 9
Section 7, Ranking, (a) Any class or series of stock of the Corporation
shall be deemed to rank:
(i) prior to the Series A Preferred Stock as to the payment of
dividends or as to distributions of assets upon liquidation, dissolution
or winding up, as the case may be, if the holders of such class or
series shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case
may be, in preference or priority to the holders of Series A Preferred
Stock;
(ii) on a parity with the Series A Preferred Stock as the
payment of dividends, whether or not the dividend rates or dividend
payment dates thereof be different from those of the Series A Preferred
Stock. If the holders of such class or series of stock and the holders
of the Series A Preferred Stock shall be entitled to the receipt of
dividends in proportion to their respective amounts of accrued and
unpaid dividends per share, without preference or priority are over the
other, and on a parity with the Series A Preferred Stock as to the
distribution of assets upon liquidation, dissolution or winding up,
whether or not the liquidation prices per share thereof be different
from those of the Series A Preferred Stock, if the holders of such class
or series of stock and the holders of the Series A Preferred Stock shall
be entitled to the receipt of amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective liquidation
preferences, without preference or priority one over the other, and
(iii) junior to the Series A Preferred Stock as to the payment
of dividends or as to the distribution of assets upon liquidation,
dissolution or winding up, as the case may be, if the holders of Series
A Preferred Stock shall be entitled to receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as
the case may be, in preference or priority to the holders of shares of
such class or series.
(b) Except for the Common Stock, par value $5.00 per share, of the
Corporation (as such may be constituted from time to time, the "Common Stock")
and the Series A Participating Junior Preferred Stock, without par value, of
the Corporation (the "Participating Junior Preferred Stock"), each other class
and series of stock of the Corporation existing on the date of the adoption of
this Certificate shall be deemed to rank prior to the Series A Preferred Stock
both as to the payment of dividends and as to the distribution of assets upon
liquidation, dissolution or winding up. The Common Stock and the Participating
Junior Preferred Stock shall be deemed to rank junior to the Series A Preferred
Stock both as to the payment of dividends and as to the distribution of assets
upon liquidation, dissolution or winding up.
Section 8. Liquidation Rights. (a) The amount that the holders of
Series A Preferred Stock shall be entitled to receive in the event of any
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary (collectively, a "Liquidation"), shall be
$50.00 per share, plus an amount equal to all accrued and unpaid dividends to
the date of Liquidation including any changes in dividends payable due to
changes in the annual dividend rate or Dividends Received Percentage, and
Additional ORD Dividends, if any, and no more. After such amount is paid in
full, no further distributions or payments shall be made in respect of shares
of Series A Preferred Stock, such shares of Series A Preferred Stock shall no
longer be deemed to be outstanding or be entitled to any powers, preferences,
rights or privileges, including voting rights, and such shares of Series A
Preferred Stock shall be surrendered for cancellation to the Corporation.
(b) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, then, before any distribution or payment shall be
made to the holders of any class or series of stock of the Corporation ranking
junior to the Series A Preferred Stock, the holders of the Series A Preferred
Stock (subject to the rights of the holders of any stock ranking prior to the
Series A Preferred Stock as to rights on liquidation, dissolution and winding
up) shall be entitled to be paid in full the amounts set forth in paragraph (a)
of this Section 8. After such payment shall have been made in full to the
holders of the Series A Preferred Stock, the remaining assets and funds of the
Corporation shall be distributed among the holders of the stock of the
Corporation ranking junior in respect thereof to the Series A Preferred Stock
according to their respective rights, in the event that the assets of the
Corporation available for distribution to holders
9
<PAGE> 10
of Series A Preferred Stock shall not be sufficient to make the payment
herein required to be made in full and to pay in full the liquidation
preference on all other shares of stock of the Corporation ranking on a
parity with the Series A Preferred Stock as to amounts distributable
upon dissolution, liquidation or winding up of the Corporation, such
assets shall be distributed to the holders of the respective shares of
Series A Preferred Stock and any such other parity stock pro rata in
proportion to the full accounts payable upon the shares of Series A
Preferred Stock and any such other parity stock if all amounts payable
thereon were paid in full.
Section 9. Maturity. Unless otherwise redeemed as provided
herein, the term of the Series A Preferred Stock shall be perpetual.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be
signed by Karl A. Stewart, as Vice President and Secretary, this 18th day of
November, 1996.
TENNECO INC.
By: /s/ Karl A. Stewart
----------------------------------
Name: Karl A. Stewart
Title: Vice President and Secretary
10
<PAGE> 1
EXHIBIT 99
Lenders
- -------
1. The Chase Manhattan Bank
2. ABN AMRO Bank, N.V. - Houston Agency
3. Australia and New Zealand Banking Group Limited
4. Bank of America Illinois
5. Bank of Montreal
6. The Bank of New York
7. The Bank of Nova Scotia, Atlanta Agency
8. The Bank of Tokyo-Mitsubisi, Ltd.
9. Banque Nationale de Paris, Houston Agency
10. Barclays Bank PLC
11. Bayerische Vereinsbank AG, Los Angeles Agency
12. Caisse Nationale de Credit Agricole
13. CIBC Inc.
14. Citibank, N.A.
15. Commerzbank Aktiengesellschaft, Atlanta Agency,
16. Credit Lyonais New York Branch
17. Credit Suisse
18. The Dia-Ichi Kangyto Bank, Ltd.
19. Deutshce Bank AG New York and/or
Cayman Islands Branches
20. Dresdner Bank AG, New York Branch
21. First National Bank of Boston
22. The First National Bank of Chicago
<PAGE> 2
23. The Fuji Bank, Limited-Houston Agency
24. The Industrial Bank of Japan Trust Company
25. Kredietbank N.V., Grand Cayman Branch
26. The Long-term Credit Bank of Japan, Ltd.
27. Mellon Bank, N.A.
28. Morgan Guaranty Trust Company of New York
29. National Westminster Bank Plc
30. NationsBank of Texas, N.A.
31. Norinchukin Bank, New York Branch
32. PNC Bank, National Association
33. Royal Bank of Canada
34. The Sakura Bank, Limited - New York Branch
35. The Sanwa Bank Limited, Dallas Agency
36. Societe Generale
37. The Sumitomo Bank, Limited, Houston Agency
38. The Tokai Bank, Limited, New York Branch
39. Toronto Dominion (Texas), Inc.
40. Union Bank of Switzerland, Houston Agency
41. The Yasuda Trust & Banking Co., Ltd.
-2-
<PAGE> 1
EXHIBIT 99.2
FOR IMMEDIATE RELEASE
EL PASO ENERGY CORPORATION; KCS SETTLEMENT
IS FAIR AND POSITIVE FOR ALL PARTIES
HOUSTON, TEXAS, DECEMBER 23, 1996 -- El Paso Energy Corporation (NYSE:EPG)
announced today that it has reached a settlement that resolves its gas purchase
contract disputes with KCS Energy.
Under the terms of the settlement, El Paso agreed to dismiss its
lawsuits claiming that KCS illegally boosted the Btu content of the natural gas
it delivers to meet contract specifications and that KCS increased natural gas
deliveries from the properties in bad faith. This action terminates KCS'
further challenge to a jury's verdict entered recently in Tennessee Gas
Pipeline's favor in the Btu injection case.
As a consideration for these dismissals, KCS agreed to the early
termination of the natural gas purchase contract that was set to expire in
1989, ending the company's contractual obligation to pay more than $50 million
of premium prices for future natural gas purchases. The settlement also lowers
the total gas supply realignment costs to be paid by customers of Tennessee Gas
Pipeline.
The company is very pleased that this settlement resolves major
litigation facing the company and allows it to move forward with plans to build
on the momentum created by its acquisition of Tenneco Energy.
El Paso Energy Corporation provides total energy solutions worldwide
through four business units: El Paso Natural Gas Company, Tennessee Gas
Pipeline Company, El Paso Energy Resources Company and El Paso Energy
International Company. With offices across the country, the company has
operations in interstate natural gas transmission, gas gathering and
processing, energy marketing, and international energy development.
###
Media relations contact: Christine LeLaurin (713) 757-3325
