<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9864
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TENNECO INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0233548
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
1275 KING STREET, GREENWICH, CONNECTICUT 06831
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 863-1000
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock, par value $5 per share: 173,964,703 shares as of April 30,
1996.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I--Financial Information
Tenneco Inc. and Consolidated Subsidiaries--
Statements of Income.................................................. 2
Statements of Cash Flows.............................................. 3
Balance Sheets........................................................ 4
Statements of Changes in Shareowners' Equity.......................... 5
Statements of Changes in Preferred Stock With Mandatory Redemption
Provisions........................................................... 6
Notes to Financial Statements......................................... 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 11
Part II--Other Information
Item 1. Legal Proceedings............................................... 17
Item 2. Changes in Securities........................................... *
Item 3. Defaults Upon Senior Securities................................. *
Item 4. Submission of Matters to a Vote of Security Holders............. *
Item 5. Other Information............................................... 19
Item 6. Exhibits and Reports on Form 8-K................................ 19
</TABLE>
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* No response to this item is included herein for the reason that it is
inapplicable or the answer to such item is negative.
1
<PAGE>
PART I
FINANCIAL INFORMATION
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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(MILLIONS EXCEPT SHARE AMOUNTS) 1996 1995
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<S> <C> <C>
Revenues:
Net sales and operating revenues--
Automotive........................................ $ 683 $ 602
Energy............................................ 744 505
Packaging......................................... 859 636
Shipbuilding...................................... 438 421
Other............................................. 1 (1)
----------- -----------
2,725 2,163
Other income--
Interest income................................... 20 27
Equity in net income of affiliated companies...... 10 17
Gain on sale of businesses and assets, net........ 40 14
Other income, net................................. 6 7
----------- -----------
2,801 2,228
----------- -----------
Costs and Expenses:
Cost of sales (exclusive of depreciation shown
below)............................................. 1,485 1,249
Cost of gas sold.................................... 434 272
Operating expenses.................................. 143 103
Selling, general and administrative................. 262 187
Finance charges--Tenneco Finance.................... 18 23
Depreciation, depletion and amortization............ 140 103
----------- -----------
2,482 1,937
----------- -----------
Income Before Interest Expense, Income Taxes and
Minority Interest.................................... 319 291
Interest Expense (net of interest capitalized)........ 89 75
----------- -----------
Income Before Income Taxes and Minority Interest...... 230 216
Income Tax Expense.................................... 69 83
----------- -----------
Income Before Minority Interest....................... 161 133
Minority Interest..................................... 5 5
----------- -----------
Income From Continuing Operations..................... 156 128
Income From Discontinued Operations, Net of Income
Tax.................................................. 339 25
----------- -----------
Net Income............................................ 495 153
Preferred Stock Dividends............................. 3 3
----------- -----------
Net Income to Common Stock............................ $ 492 $ 150
=========== ===========
Average Number of Shares of Common Stock Outstanding.. 170,440,074 177,792,872
=========== ===========
Earnings Per Average Share of Common Stock:
Continuing operations .............................. $ .90 $ .71
Discontinued operations............................. 1.99 .13
----------- -----------
$ 2.89 $ .84
=========== ===========
Cash Dividends Per Share of Common Stock.............. $ .45 $ .40
=========== ===========
</TABLE>
(The accompanying notes to financial statements are an integral part of these
statements of income.)
2
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
- -------------------------------------------------------------------------------
(MILLIONS) 1996 1995
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<S> <C> <C>
Cash Flows from Operating Activities:
Income from continuing operations............................. $ 156 $ 128
Adjustments to reconcile income from continuing operations to
cash provided (used) by continuing operations--
Depreciation, depletion and amortization..................... 140 103
Equity in net (income) loss of affiliated companies, net of
dividends................................................... (6) (16)
Deferred income taxes........................................ (34) 7
Gain on sale of businesses and assets, net................... (40) (14)
Changes in components of working capital--
(Increase) decrease in receivables.......................... (557) 5
(Increase) decrease in inventories.......................... (68) (156)
(Increase) decrease in prepayments and other current
assets..................................................... (6) 4
Increase (decrease) in payables............................. (61) (75)
Increase (decrease) in taxes accrued........................ (325) 16
Increase (decrease) in interest accrued..................... 10 (14)
Increase (decrease) in natural gas pipeline revenue
reservation................................................ 17 (177)
Increase (decrease) in other current liabilities............ (78) (29)
(Increase) decrease in long-term notes and receivables....... 70 114
Take-or-pay (refunds to customers) recoupments, net.......... 1 14
Other........................................................ (8) 15
------ ------
Cash provided (used) by continuing operations............... (789) (75)
Cash provided (used) by discontinued operations............. 1 62
------ ------
Net Cash Provided (Used) by Operating Activities............... (788) (13)
------ ------
Cash Flows from Investing Activities:
Net proceeds (expenditures) related to the sale of
discontinued operations....................................... 780 701
Net proceeds from sale of businesses and assets............... 246 33
Expenditures for plant, property and equipment--
Continuing operations........................................ (193) (118)
Discontinued operations...................................... -- (4)
Acquisitions of businesses.................................... (14) (3)
Investments and other......................................... (14) 7
------ ------
Net Cash Provided (Used) by Investing Activities............... 805 616
------ ------
Cash Flows from Financing Activities:
Issuance of common, treasury and SECT shares.................. 18 20
Purchase of common stock...................................... (61) (300)
Redemption of preferred stock................................. (20) (20)
Retirement of long-term debt.................................. (2) (49)
Net increase (decrease) in short-term debt excluding current
maturities on long-term debt.................................. 13 (19)
Dividends (common and preferred).............................. (81) (76)
------ ------
Net Cash Provided (Used) by Financing Activities............... (133) (444)
------ ------
Effect of Foreign Exchange Rate Changes on Cash and Temporary
Cash Investments............................................... (1) 5
------ ------
Increase (Decrease) in Cash and Temporary Cash Investments..... (117) 164
Cash and Temporary Cash Investments, January 1................. 354 405
------ ------
Cash and Temporary Cash Investments, March 31 (Note)........... $ 237 $ 569
====== ======
Cash Paid During the Period for:
Interest...................................................... $ 96 $ 119
Income taxes (net of refunds)................................. $ 425 $ 56
</TABLE>
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NOTE: Cash and temporary cash investments include highly liquid investments
with a maturity of three months or less at date of purchase.
(The accompanying notes to financial statements are an integral part of these
statements of cash flows.)
3
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
(MILLIONS) 1996 1995 1995
- -------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and temporary cash investments.......... $ 237 $ 354 $ 569
Receivables--
Customer notes and accounts (net).......... 1,509 921 1,293
Affiliated companies....................... 54 112 62
Gas transportation and exchange............ 115 64 221
Income taxes............................... 17 172 93
Other...................................... 326 514 252
Inventories--
Finished goods............................. 435 396 268
Work in process............................ 101 102 90
Long-term contracts in progress, less pro-
gress billings............................ 299 264 207
Raw materials.............................. 256 253 226
Materials and supplies..................... 161 166 142
Deferred income taxes........................ 5 -- 39
Prepayments and other........................ 296 264 269
------- ------- -------
3,811 3,582 3,731
------- ------- -------
Investments and Other Assets:
Investment in affiliated companies........... 282 620 937
Long-term receivables--
Notes and other (net)...................... 337 435 702
Affiliated companies....................... -- -- 271
Investment in subsidiaries in excess of fair
value of net assets at date of acquisition,
less amortization........................... 600 642 311
Deferred income taxes........................ 61 52 55
Other........................................ 1,825 1,801 1,362
------- ------- -------
3,105 3,550 3,638
------- ------- -------
Plant, Property and Equipment, at cost........ 12,144 11,962 10,309
Less--Reserves for depreciation, depletion
and amortization............................ 5,748 5,643 5,458
------- ------- -------
6,396 6,319 4,851
------- ------- -------
$13,312 $13,451 $12,220
======= ======= =======
<CAPTION>
LIABILITIES AND SHAREOWNERS' EQUITY
<S> <C> <C> <C>
Current Liabilities:
Short-term debt (including current
maturities on long-term debt)............... $ 1,195 $ 908 $ 484
Payables--
Trade...................................... 1,010 1,102 782
Affiliated companies....................... 2 2 39
Gas transportation and exchange............ 77 28 160
Taxes accrued................................ 158 572 102
Deferred income taxes........................ -- 13 --
Interest accrued............................. 135 103 146
Natural gas pipeline revenue reservation..... 45 27 5
Other........................................ 851 1,081 1,050
------- ------- -------
3,473 3,836 2,768
------- ------- -------
Long-term Debt................................ 3,482 3,751 3,559
------- ------- -------
Deferred Income Taxes......................... 897 962 1,309
------- ------- -------
Postretirement Benefits....................... 623 616 608
------- ------- -------
Deferred Credits and Other Liabilities........ 874 688 602
------- ------- -------
Commitments and Contingencies
Minority Interest............................. 320 320 314
------- ------- -------
Preferred Stock with Mandatory Redemption
Provisions................................... 111 130 128
------- ------- -------
Shareowners' Equity:
Common stock................................. 957 957 957
Stock Employee Compensation Trust (common
stock held in trust)........................ (205) (215) (295)
Premium on common stock and other capital
surplus..................................... 3,618 3,602 3,584
Cumulative translation adjustments........... 18 26 (39)
Retained earnings (accumulated deficit)...... (55) (469) (829)
------- ------- -------
4,333 3,901 3,378
Less--Shares held as treasury stock, at
cost........................................ 801 753 446
------- ------- -------
3,532 3,148 2,932
------- ------- -------
$13,312 $13,451 $12,220
======= ======= =======
</TABLE>
(The accompanying notes to financial statements are an integral part of these
balance sheets.)
4
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
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(MILLIONS EXCEPT SHARE AMOUNTS) 1996 1995
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SHARES AMOUNT SHARES AMOUNT
----------- ------ ----------- ------
<S> <C> <C> <C> <C>
Common Stock:
Balance January 1......................... 191,351,615 $ 957 191,335,193 $ 957
Issued pursuant to benefit plans........ 3,317 -- 1,476 --
Other................................... -- -- 1,536 --
----------- ------ ----------- ------
Balance March 31.......................... 191,354,932 957 191,338,205 957
=========== ------ =========== ------
Stock Employee Compensation Trust (SECT):
Balance January 1......................... (215) (298)
Shares issued........................... 34 31
Adjustment to market value.............. (24) (28)
------ ------
Balance March 31.......................... (205) (295)
------ ------
Premium on Common Stock and Other Capital
Surplus:
Balance January 1......................... 3,602 3,553
Dividends on shares held by SECT........ 2 3
Adjustment of SECT to market value...... 24 28
Other................................... (10) --
------ ------
Balance March 31.......................... 3,618 3,584
------ ------
Cumulative Translation Adjustments:
Balance January 1......................... 26 (237)
Translation of foreign currency
statements............................. (12) 68
Sale of investment in foreign
subsidiaries........................... -- 139
Hedges of net investment in foreign
subsidiaries (net of income taxes)..... 4 (9)
------ ------
Balance March 31.......................... 18 (39)
------ ------
Retained Earnings (Accumulated Deficit):
Balance January 1......................... (469) (905)
Net income.............................. 495 153
Dividends--
Preferred stock....................... (2) (2)
Common stock.......................... (78) (74)
Accretion of excess of redemption value
of preferred stock over fair value at
date of issue.......................... (1) (1)
------ ------
Balance March 31.......................... (55) (829)
------ ------
Less--Common Stock Held as Treasury Stock,
at Cost:
Balance January 1......................... 16,422,619 753 3,617,510 170
Shares acquired......................... 996,500 51 6,252,519 276
Shares issued pursuant to benefit and
dividend reinvestment plans............ (60,674) (3) (11,686) --
----------- ------ ----------- ------
Balance March 31.......................... 17,358,445 801 9,858,343 446
=========== ------ =========== ------
Total............................... $3,532 $2,932
====== ======
</TABLE>
(The accompanying notes to financial statements are an integral part of these
statements of changes in shareowners' equity.)
5
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENTS OF CHANGES IN PREFERRED STOCK
WITH MANDATORY REDEMPTION PROVISIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
- -------------------------------------------------------------------------------
(MILLIONS EXCEPT SHARE AMOUNTS) 1996 1995
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SHARES AMOUNT SHARES AMOUNT
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Preferred Stock:
Balance January 1........................ 1,390,993 $130 1,586,764 $147
Shares redeemed........................ (195,751) (20) (195,761) (20)
Accretion of excess of redemption value
over fair value at date of issue...... -- 1 -- 1
--------- ---- --------- ----
Balance March 31......................... 1,195,242 $111 1,391,003 $128
========= ==== ========= ====
</TABLE>
(The accompanying notes to financial statements are an integral part of these
statements of changes in preferred stock with mandatory redemption provisions.)
6
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) In the opinion of Tenneco Inc. (hereinafter referred to as the
"Company"), the accompanying unaudited financial statements of Tenneco Inc.
and consolidated subsidiaries (hereinafter referred to as "Tenneco") contain
all adjustments necessary to present fairly the financial position as of March
31, 1996, and the results of operations; changes in shareowners' equity;
changes in preferred stock with mandatory redemption provisions; and cash
flows for the periods indicated. The financial statements of Tenneco include
all majority-owned subsidiaries including wholly-owned finance subsidiaries.
Investments in 20% to 50% owned companies where Tenneco has the ability to
exert significant influence over operating and financial policies are carried
at cost plus equity in undistributed earnings since date of acquisition and
cumulative translation adjustments.
Prior year's financial statements have been reclassified where appropriate
to conform to 1996 presentations. Also, prior year's financial statements have
been restated where appropriate to reflect the farm and construction equipment
segment as discontinued operations. See note 5 for additional information.
(2) Pursuant to Order 636 issued by the Federal Energy Regulatory Commission
("FERC") on April 8, 1992, Tennessee Gas Pipeline Company ("Tennessee")
implemented revisions to its tariff, effective on September 1, 1993, which
restructured its transportation, storage and sales services to convert
Tennessee from primarily a merchant to primarily a transporter of gas. As a
result of this restructuring, Tennessee's gas sales declined while certain
obligations to producers under long-term gas supply contracts continued,
causing Tennessee to incur significant restructuring transition costs.
Pursuant to the provisions of Order 636 allowing for the recovery of
transition costs related to the restructuring, Tennessee has made filings to
recover gas supply realignment ("GSR") costs resulting from remaining gas
purchase obligations, costs related to its Bastian Bay facilities, the
remaining unrecovered balance of purchased gas ("PGA") costs and the
"stranded" cost of Tennessee's continuing contractual obligation to pay for
capacity on other pipeline systems ("TBO costs").
Tennessee's filings to recover costs related to its Bastian Bay facilities
have been rejected by the FERC based on the continued use of the gas
production from the field; however, the FERC recognized the ability of
Tennessee to file for the recovery of losses upon disposition of these assets.
Tennessee has filed for appellate review of the FERC actions and is confident
that the Bastian Bay costs will ultimately be recovered as transition costs
under Order 636; the FERC has not contested the ultimate recoverability of
these costs.
The filings implementing Tennessee's recovery mechanisms for the following
transition costs were accepted by the FERC effective September 1, 1993;
recovery was made subject to refund pending FERC review and approval for
eligibility and prudence: 1) direct-billing of unrecovered PGA costs to its
former sales customers over a twelve-month period; 2) recovery of TBO costs,
which Tennessee is obligated to pay under existing contracts, through a
surcharge from firm transportation customers, adjusted annually; and 3) GSR
cost recovery of 90% of such costs over a period of up to 36 months from firm
transportation customers and recovery of 10% of such costs from interruptible
transportation customers over a period of up to 60 months.
Following negotiations with its customers, Tennessee filed in July 1994 with
the FERC a Stipulation and Agreement (the "PGA Stipulation"), which provides
for the recovery of PGA costs of approximately $100 million and the recovery
of costs associated with the transfer of storage gas inventory to new storage
customers in Tennessee's restructuring proceeding. The PGA Stipulation
eliminates all challenges to the PGA costs, but establishes a cap on the
charges that may be imposed upon former sales customers. On November 15, 1994,
the FERC issued an order approving the PGA Stipulation and resolving all
outstanding issues. On April 5, 1995, the FERC issued its order on rehearing
affirming its initial approval of the PGA Stipulation. Tennessee implemented
the terms of the PGA Stipulation and made refunds in May 1995. The refunds had
no material effect on Tenneco's reported net income. The orders approving the
PGA Stipulation have been appealed to the D.C. Circuit Court of Appeals by
certain customers. Tennessee believes the FERC orders approving the PGA
Stipulation will be upheld on appeal.
7
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Tennessee is recovering through a surcharge, subject to refund, TBO costs
formerly incurred to perform its sales function. The FERC subsequently issued
an order requiring Tennessee to refund certain costs from this surcharge and
refunds were made in May 1996. The refunds had no material effect on Tenneco's
reported net income. Tennessee is appealing this decision and believes such
appeal will likely be successful.
With regard to Tennessee's GSR costs, Tennessee, along with three other
pipelines, executed four separate settlement agreements with Dakota
Gasification Company and the U.S. Department of Energy and initiated four
separate proceedings at the FERC seeking approval to implement the settlement
agreements. The settlement resolved litigation concerning purchases made by
Tennessee of synthetic gas produced from the Great Plains Coal Gasification
plant ("Great Plains"). The FERC previously ruled that the costs related to
the Great Plains project are eligible for recovery through GSR and other
special recovery mechanisms and that the costs are eligible for recovery for
the duration of the term of the original gas purchase agreements. On October
18, 1994, the FERC consolidated the four proceedings and set them for hearing
before an administrative law judge ("ALJ"). The hearing, which concluded in
July 1995, was limited to the issue of whether the settlement agreements are
prudent. The ALJ concluded, in his initial decision issued in December 1995,
that the settlement was imprudent. Tennessee has filed exceptions to this
initial decision and believes that this decision will not impair Tennessee's
recovery of the costs resulting from this contract. The FERC has committed to
issuing a final order by December 31, 1996.
Also related to Tennessee's GSR costs, on October 14, 1993, Tennessee was
sued in the State District Court of Ector County, Texas, by ICA Energy, Inc.
("ICA") and TransTexas Gas Corporation ("TransTexas"). In that suit, ICA and
TransTexas contended that Tennessee had an obligation to purchase gas
production which TransTexas thereafter attempted to add unilaterally to the
reserves originally dedicated to a 1979 gas contract. An amendment to the
pleading seeks $1.5 billion from Tennessee for alleged damages caused by
Tennessee's refusal to purchase gas produced from the TransTexas leases
covering the new production and lands. Neither ICA nor TransTexas were
original parties to that contract. However, they contend that any stranger
acquiring a fractional interest in the original committed reserves thereby
obtains a right to add to the contract unlimited volumes of gas production
from locations in South Texas. Tennessee filed a motion for partial summary
judgment, asserting that the Texas statutes of frauds precluded the plaintiffs
from adding new production or acreage to the contract. On May 4, 1995, the
trial court granted Tennessee's motion for partial summary judgment; the
plaintiffs have filed a notice of appeal and oral arguments were conducted on
March 28, 1996. ICA and TransTexas filed a motion for partial summary judgment
on a separate issue involving the term "committed reserves" and whether
Tennessee has a contractual obligation to purchase gas produced from a lease
not described in the gas contract. On November 8, 1995, the trial court
granted ICA's and TransTexas' motion in part. That order, which would be
finalized upon conclusion of the trial, also held that ICA's and TransTexas'
rights are subject to certain limitations of the Texas Business and Commerce
Code. In addition to these defenses, which are to be resolved at trial,
Tennessee has other defenses which it has asserted and intends to pursue.
Tennessee filed a Motion to Clarify the November 8, 1995 order together with a
new motion for partial summary judgment concerning the committed reserve
issue. On February 22, 1996, the trial court clarified its November 8, 1995
order, but denied Tennessee's new motion for partial summary judgment. The
November 8, 1995 and February 22, 1996 rulings do not affect the trial court's
previous May 4, 1995 order granting summary judgment to Tennessee.
Tennessee has been engaged in other settlement and contract reformation
discussions with other holders of certain gas purchase contracts who have sued
Tennessee. On August 1, 1995, the Texas Supreme Court affirmed a ruling of the
Court of Appeals favorable to Tennessee in one of these matters and indicated
that it would remand the case to the trial court. On April 18, 1996, however,
the Texas Supreme Court withdrew its initial opinion and issued an opinion
reversing the Court of Appeals opinion on the matter which was favorable to
Tennessee. Tennessee will file a motion for rehearing with the Texas Supreme
Court in June 1996. The Supreme Court's ruling explicitly preserves
Tennessee's defenses based on bad faith conduct of the producers. In addition,
nothing in the Supreme Court's decision affects Tennessee's ability to seek
recovery of its above-market costs of
8
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
purchasing gas under the contract from its customers as gas supply
restructuring costs in proceedings currently pending before the Federal Energy
Regulatory Commission. In addition, Tennessee has initiated two lawsuits
against the holders of this gas purchase contract, seeking damages related to
their conduct in connection with that contract. Tennessee has accrued amounts
which it believes are appropriate to cover the resolution of the litigation
associated with its contract reformation efforts.
As of March 31, 1996, Tennessee has deferred GSR costs yet to be recovered
from its customers of approximately $455 million, net of $342 million
previously recovered from its customers, subject to refund. Phase I of the
proceeding before a FERC ALJ on the eligibility of the costs to be recovered
has been completed. The ALJ's decision of this Phase is expected in October
1996. Phase II of the proceeding on the prudency of the costs to be recovered
has not yet been scheduled, but will likely occur sometime after the ALJ's
decision in Phase I is issued. The FERC has generally encouraged pipelines to
settle such issues through negotiations with customers. Although Order 636
provides for complete recovery by pipelines of eligible and prudently incurred
transition costs, certain customers have challenged the prudence and
eligibility of Tennessee's GSR costs and Tennessee has engaged in settlement
discussions with its customers concerning the amount of such costs in response
to the FERC and customer statements acknowledging the desirability of such
settlements.
Given the uncertainty over the results of ongoing discussions between
Tennessee and its customers related to the recovery of GSR costs and the
uncertainty related to predicting the outcome of its gas purchase contract
reformation efforts and the associated litigation, Tenneco is unable to
predict the timing or the ultimate impact that the resolution of these issues
will have on its consolidated financial position or results of operations.
On December 30, 1994, Tennessee filed for a general rate increase (the "1995
Rate Case"). On January 25, 1995, the FERC accepted the filing, suspended its
effectiveness for the maximum period of five months pursuant to normal
regulatory process, and set the matter for hearing. On July 1, 1995, Tennessee
began collecting rates, subject to refund, reflecting an $87 million increase
in Tennessee's annual revenue requirement. A Stipulation and Agreement was
filed with an ALJ in this proceeding on April 5, 1996. This Stipulation
proposed to resolve the rates subject to the 1995 Rate Case, including
structural rate design and increased revenue requirements, and Tennessee is
reserving revenues it believes adequate to cover any refunds that may be
required upon final settlement of this proceeding.
(3) Reference is made to Note 2 for information concerning gas supply
litigation. Tenneco Inc. and its subsidiaries are parties to numerous other
legal proceedings arising from their operations. Tenneco Inc. believes that
the outcome of these other proceedings, individually and in the aggregate,
will have no material effect on the financial position or results of
operations of Tenneco Inc. and its consolidated subsidiaries.
(4) Since 1988, Tennessee has been engaged in an internal project to
identify and deal with the presence of polychlorinated biphenyls ("PCBs") and
other substances of concern, including substances on the U.S. Environmental
Protection Agency ("EPA") List of Hazardous Substances ("HS List") at
compressor stations and other facilities operated by both its interstate and
intrastate natural gas pipeline systems. While conducting this project,
Tennessee has been in frequent contact with federal and state regulatory
agencies, both through informal negotiation and formal entry of consent
orders, in order to assure that its efforts meet regulatory requirements.
Tenneco has established a reserve for Tennessee's environmental expenses,
which includes: 1) expected remediation expense and associated onsite, offsite
and groundwater technical studies, 2) legal fees and 3) settlement of third
party and governmental litigation, including civil penalties. Through March
31, 1996, Tenneco has charged approximately $152 million against the
environmental reserve, excluding recoveries related to Tennessee's
environmental settlement as discussed below. Of the remaining reserve, $46
million has been recorded on the balance sheet under "Payables-trade" and $114
million under "Deferred credits and other liabilities."
9
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Due to the current uncertainty regarding the further activity necessary for
Tennessee to address the presence of the PCBs, the substances on the HS List
and other substances of concern on its sites, including the requirements for
additional site characterization, the actual amount of such substances at the
sites, and the final, site-specific cleanup decisions to be made with respect
to cleanup levels and remediation technologies, Tennessee cannot at this time
accurately project what additional costs, if any, may arise from future
characterization and remediation activities. While there are still many
uncertainties relating to the ultimate costs which may be incurred, based upon
Tennessee's evaluation and experience to date, Tenneco continues to believe
that the recorded estimate for the reserve is adequate.
Following negotiations with its customers, Tennessee in May 1995 filed with
the FERC a separate Stipulation and Agreement (the "Environmental
Stipulation") that addresses the recovery of environmental costs currently
being recovered in its rates and also establishes a mechanism for recovering a
substantial portion of the environmental costs that will be expended in the
future. In November 1995, the FERC issued an order approving the Environmental
Stipulation. Although one shipper filed for rehearing, the FERC denied
rehearing of its order on February 20, 1996. This shipper filed a Petition for
Review on April 22, 1996 in the D.C. Circuit Court of Appeals; Tennessee
believes the FERC Order approving the Environmental Stipulation will be upheld
on appeal. The effects of the Environmental Stipulation, which was effective
as of July 1, 1995, have been recorded with no material effect on Tenneco's
financial position or results of operations. As of March 31, 1996, the balance
of the regulatory asset is $68 million.
Tenneco has completed settlements with and has received payments from the
majority of its liability insurance policy carriers for remediation costs and
related claims. Tenneco believes that the likelihood of recovery of a portion
of its remediation costs and claims against the remaining carriers in its
pending litigation is reasonably possible. In addition, Tennessee has settled
its pending litigation against and received payment from the manufacturer of
the PCB-containing lubricant. These recoveries have been considered in
Tennessee's recording of its environmental settlement with its customers.
Tenneco has identified other sites in its various operating divisions where
environmental remediation expense may be required should there be a change in
ownership, operations or applicable regulations. These possibilities cannot be
predicted or quantified at this time and accordingly, no provision has been
recorded. However, provisions have been made for all instances where it has
been determined that the incurrence of any material remedial expense is
reasonably possible. Tenneco believes that the provisions recorded for
environmental exposures are adequate based on current estimates.
(5) In March 1996, Tenneco sold its remaining ownership of 15.2 million
shares of common stock of Case Corporation in a public offering at $53.75 per
share. Net proceeds of approximately $788 million were received, resulting in
a gain of $340 million, net of $83 million in income tax expense. As a result
of this sale, the financial statements have been restated to reflect the
operating results and the gains on the sale of the farm and construction
equipment segment as "discontinued operations" for all periods presented.
(6) In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 which establishes new accounting
standards for the impairment of long-lived assets and for long-lived assets to
be disposed of. Tenneco adopted the new standard in the first quarter of 1996
with no material effect on Tenneco's consolidated financial position or
results of operations.
(7) On March 21, 1996, the Company announced that it intends to spin off
Newport News Shipbuilding and Dry Dock Company to its shareholders in a tax-
free transaction, and is developing strategic options to separate Tenneco
Energy from its packaging and automotive parts divisions and to maximize
shareowner value through a tax-free spinoff, a sale, strategic alliance or
other action. The development of these options related to Tenneco Energy is
expected to be completed during the second quarter of 1996. The spinoff of
Newport News Shipbuilding and Dry Dock Company is targeted to be completed
late in 1996, but remains subject to a number of conditions including the
receipt of a favorable ruling from the Internal Revenue Service on the tax-
free nature of the proposed transaction and authorization by Tenneco's board
of directors.
(The above notes are an integral part of the foregoing financial statements.)
10
<PAGE>
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1996 STRATEGIC ACTIONS
On March 21, 1996, Tenneco announced that the board of directors approved
steps to focus Tenneco on its packaging and automotive parts businesses
including:
.A tax-free spinoff of Newport News Shipbuilding to Tenneco's shareowners,
and
.The development of strategic options to separate Tenneco Energy from the
packaging and automotive parts divisions through a tax-free spinoff, a
sale, strategic alliance or other action. The development of these options
is expected to be completed during the second quarter of 1996.
Following a spinoff of Newport News Shipbuilding and should a separation of
Tenneco Energy be effected, Tenneco would then consist of two industrial
manufacturing businesses, Tenneco Packaging and Tenneco Automotive, both of
which reported record earnings and revenues in 1995, and Tenneco Business
Services, the company's administrative services unit.
The spinoff of Newport News Shipbuilding from Tenneco is targeted to be
completed late in 1996, but remains subject to a number of conditions
including the receipt of a favorable ruling from the Internal Revenue Service
on the tax-free nature of the proposed transaction and authorization by
Tenneco's board of directors.
In the first quarter of 1996, Tenneco continued its strategy to redeploy
capital to faster-growing, more profitable and less cyclical business
opportunities. One of the largest sales in this asset redeployment program was
completed in March with the sale of Tenneco's remaining 21 percent ownership
of Case Corporation. The sale resulted in an after-tax gain of $340 million
and generated net proceeds of approximately $788 million.
Also during the first quarter of 1996, Tenneco repurchased $42 million of
common stock under its repurchase program. This program is designed to offset
the growth in common shares resulting from shares issued pursuant to employee
benefit plans. Since December 1994, Tenneco repurchased a total of 15.1
million common shares at a cost of $688 million.
THREE MONTHS RESULTS
Tenneco's income from continuing operations for the first quarter of 1996 of
$156 million improved by 22 percent compared with $128 million in the first
quarter of 1995. Tenneco Energy and Tenneco Automotive, in addition to the
deferred gain on the sale of an investment, contributed to this improvement in
income. Partially offsetting these improvements was lower operating income at
Tenneco Packaging and Newport News Shipbuilding, all of which are discussed
below.
Earnings per share from continuing operations improved by 27 percent to $.90
per average common share in the 1996 first quarter from $.71 in the prior year
first quarter. Net income to common stock in the first quarter of 1996 was
$492 million or $2.89 per share compared with net income to common stock of
$150 million or $.84 per share in the 1995 first quarter. The first quarter
1996 net income to common stock included income from discontinued operations
of $339 million, or $1.99 per average common share. The 1995 first quarter net
income to common stock included income from discontinued operations of $25
million, or 13 cents per average common share. Average common shares
outstanding during the 1996 first quarter were 170 million, a four percent
decrease from the 1995 first quarter primarily resulting from Tenneco's share
repurchase programs.
11
<PAGE>
NET SALES AND OPERATING REVENUES
<TABLE>
<CAPTION>
FIRST QUARTER
-------------
1996 1995
------ ------
(MILLIONS)
<S> <C> <C>
Automotive................................................. $ 683 $ 602
Energy..................................................... 744 505
Packaging.................................................. 859 636
Shipbuilding............................................... 438 421
Other...................................................... 1 (1)
------ ------
$2,725 $2,163
====== ======
</TABLE>
Tenneco's first quarter 1996 revenues increased $562 million or 26 percent,
and have benefited from strong market conditions in the gas industry along
with revenues from acquisitions made in late 1994 and 1995. The results of
each business are discussed in detail below.
INCOME BEFORE INTEREST EXPENSE, INCOME TAXES AND MINORITY INTEREST (OPERATING
INCOME)
<TABLE>
<CAPTION>
FIRST QUARTER
-------------
1996 1995
------ ------
(MILLIONS)
<S> <C> <C>
Automotive................................................. $ 59 $ 56
Energy..................................................... 98 80
Packaging.................................................. 106 116
Shipbuilding............................................... 41 44
Other...................................................... 15 (5)
------ ------
$ 319 $ 291
====== ======
</TABLE>
Tenneco's operating income for the first quarter of 1996 increased by $28
million compared with the 1995 period. Tenneco Energy benefited from favorable
market conditions in the gas industry and Tenneco Automotive benefited from
improved market conditions in the exhaust aftermarket. Also, Tenneco
recognized a deferred gain on the sale of an investment in the 1996 first
quarter that was in excess of amounts recorded in the 1995 period. These
increases were offset by lower operating income at Tenneco Packaging due to
lower paperboard prices and at Newport News Shipbuilding due in part to the
settlement of a dispute on a cruise ship repair contract and higher material
costs related to commercial product tankers. The results of each business are
discussed in detail below.
TENNECO AUTOMOTIVE
<TABLE>
<CAPTION>
FIRST QUARTER
-------------
1996 1995
------ ------
(MILLIONS)
<S> <C> <C>
Revenues.................................................... $ 683 $ 602
Operating income............................................ 59 56
</TABLE>
Revenues from Tenneco Automotive's original equipment business increased
during the first quarter of 1996 by $55 million to $345 million. North
American and European original equipment volumes were up significantly in the
first quarter of 1996 driven by a record number of new product launches and an
excellent market mix. Over 60 percent of Tenneco Automotive's original
equipment sales are for use on light trucks, minivans and sport utility
vehicles.
Operating income in the original equipment business for the first quarter of
1996 decreased $3 million to $13 million compared with last year's first
quarter. The operating income change in 1996 is due primarily to a
12
<PAGE>
high level of costs related to a new process, hydroforming. Hydroforming is a
liquid, high-pressure process for bending and shaping metal parts not
available with traditional manufacturing technology. Reductions in shipments
related to the labor strike at General Motors also reduced operating income.
Revenues from aftermarket sales increased $26 million to $338 million
compared with the 1995 first quarter. North American aftermarket revenues rose
9 percent over last year, driven by a significant number of major new
customers and strong marketing programs.
Operating income in the aftermarket business was $46 million for the 1996
first quarter compared with $40 million for the prior year quarter. The
positive impact of higher sales volumes in North America and Europe, and
continued strong marketing programs contributed to the increase in operating
income.
TENNECO ENERGY
<TABLE>
<CAPTION>
FIRST
QUARTER
-----------
1996 1995
----- -----
(MILLIONS)
<S> <C> <C>
Revenues...................................................... $ 744 $ 505
Operating income.............................................. 98 80
</TABLE>
Tenneco Energy achieved first quarter 1996 operating income of $98 million,
a 23 percent increase from the $80 million posted in the 1995 first quarter.
In addition, revenues rose 47 percent, to $744 million from $505 million.
Revenues from the non-regulated business increased 75 percent to $518
million, the result of higher gas prices and a 17 percent increase in gas
volumes. Regulated revenues increased to $226 million, or eight percent, due
to a new pipeline rate structure and a 12 percent increase in volumes.
Operating income from the non-regulated business increased to $18 million in
the 1996 first quarter from $6 million which included Venture's natural gas
producing properties, the South Australia pipeline, and marketing and
intrastate activities. The Ventures group increased production 70 percent from
the year-ago level and contributed $5 million in operating income.
Operating income from regulated pipelines in the U.S. rose $6 million to $80
million. The increase was achieved despite the sale last December of Energy's
50 percent interest in the Kern River pipeline, which contributed $8 million
to operating income in the year-ago quarter. The benefits derived from the
Tennessee Gas Pipeline Company ("Tennessee") rate case implementation
contributed to the improvement.
On April 18, 1996, the Texas Supreme Court issued a decision adverse to
Tennessee in a proceeding involving a gas supply contract containing a "take-
or-pay" provision and above-market pricing terms. The decision reversed an
earlier opinion of the Texas Supreme Court which held that the contract in
question was an "output" contract under the Texas Business and Commerce Code
and therefore subject to the requirement that any increase in production under
the contract must be made in good faith and in reasonable proportion to
historical levels. Tennessee intends to ask the court to again rehear the
issue. The Supreme Court's ruling explicitly preserves Tennessee's defenses
based on bad faith conduct of the producers. In addition, nothing in the
Supreme Court's decision affects Tennessee's ability to seek recovery of its
above-market costs of purchasing gas under the contract from its customers as
gas supply restructuring costs in proceedings currently pending before the
Federal Energy Regulatory Commission. Reference is made to Note 2 in the
"Notes to Financial Statements" for additional information concerning these
gas purchase agreements.
13
<PAGE>
TENNECO PACKAGING
<TABLE>
<CAPTION>
FIRST
QUARTER
-----------
1996 1995
----- -----
(MILLIONS)
<S> <C> <C>
Revenues...................................................... $ 859 $ 636
Operating income.............................................. 106 116
</TABLE>
Tenneco Packaging had a strong quarter despite an average decline of 10
percent in linerboard prices from the year-ago quarter. The results were
driven by strong performance from its plastics business. The recently acquired
plastics business contributed $31 million in operating income on revenues of
$230 million in the 1996 first quarter. In the first quarter of 1995, when not
part of Tenneco, this recently acquired plastics business earned $15 million
from operations.
In Tenneco Packaging's paperboard business, revenues were down $14 million
to $461 million compared with the 1995 first quarter. Operating income in the
paperboard business declined $30 million to $63 million compared with the 1995
first quarter, excluding the 1995 first quarter $14 million pre-tax gain on
the sale of a North Carolina mill. Earnings and sales were reduced by lower
volumes and price realizations in both linerboard and corrugated medium.
Revenues in Tenneco Packaging's specialty packaging business increased $237
million to $398 million compared with the 1995 first quarter, primarily as a
result of the recently acquired plastics business.
The specialty packaging business earned $43 million in operating income for
the 1996 first quarter, a $34 million increase compared with the 1995 first
quarter results. The strong results of the recently acquired plastics business
generated $31 million of this improvement. The plastics and molded fiber
businesses continued to improve but these results were partially offset by
weaker aluminum operations.
A $30 million restructuring program to reduce costs in aluminum and molded
fiber operations was announced and accounted for in the fourth quarter of
1995. These actions should result in improved performance in the second half
of this year.
NEWPORT NEWS SHIPBUILDING
<TABLE>
<CAPTION>
FIRST
QUARTER
-----------
1996 1995
----- -----
(MILLIONS)
<S> <C> <C>
Revenues...................................................... $ 438 $ 421
Operating income.............................................. 41 44
</TABLE>
Shipbuilding revenues for the 1996 first quarter increased slightly compared
with the 1995 period due to greater levels of activity on the surface ship
overhaul program, partially offset by lower submarine program revenues.
Construction activity on the Los Angeles-class submarines declined in the 1996
first quarter as this program nears completion.
Operating income for Shipbuilding decreased for the 1996 first quarter due
in part to the settlement of a dispute on a cruise ship repair contract and
higher material costs related to commercial product tankers.
The shipyard's backlog was $4.4 billion at March 31, 1996 substantially all
of which is U.S. Navy-related. This compared with $5.3 billion at March 31,
1995.
The backlog at the end of the 1996 first quarter included one Los Angeles-
class submarine, two Nimitz-class aircraft carriers (Harry S. Truman and
Ronald Reagan), the two-ship Sealift conversion contract, surface ship
overhaul contracts and contracts to construct nine "Double Eagle" product
tankers. In addition, Newport News
14
<PAGE>
has ongoing engineering contracts as the lead design yard for the Los Angeles-
class and Seawolf-class submarines. Subject to new orders, this backlog will
decline as the remaining submarine is delivered in 1996 and the aircraft
carriers are delivered in 1998 and 2002.
OTHER
Tenneco's other operations reported operating income of $15 million during
the first quarter of 1996 compared with an operating loss of $5 million in the
1995 first quarter. This increase in operating income was due to the
recognition of a $32 million deferred gain on the sale of Tenneco's investment
in Cummins Engine Company stock partially offset by lower interest income
along with higher corporate administrative and general expenses.
INTEREST EXPENSE (NET OF INTEREST CAPITALIZED)
Interest expense increased from $75 million in the 1995 first quarter to $89
million in the 1996 first quarter. The increase was primarily attributable to
higher debt levels that resulted from the Tenneco Plastics acquisition in
November 1995. Interest capitalized increased from $1 million in the 1995
first quarter to $6 million in the 1996 first quarter due to an increase of
major projects under construction.
INCOME TAXES
Income tax expense for the first quarter of 1996 was $69 million compared
with $83 million for the 1995 first quarter.
DISCONTINUED OPERATIONS
Income from discontinued operations in the first quarter of 1996 of $339
million (net of income tax expense of $83 million) was attributable to the
farm and construction equipment segment.
In March 1996, Tenneco sold its remaining investment in the common stock of
Case Corporation, resulting in net proceeds of approximately $788 million. The
gain on the sale, which was recorded in the 1996 first quarter as
"discontinued operations", was $340 million, net of income tax expense of $83
million.
Loss from the farm and construction equipment operations in the 1996 first
quarter was $1 million. Income from discontinued operations in the 1995 first
quarter of $25 million was also attributable to the farm and construction
equipment operations.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
<TABLE>
<CAPTION>
FIRST
QUARTER
-----------
CASH PROVIDED (USED) BY: 1996 1995
------------------------ ----- ----
(MILLIONS)
<S> <C> <C>
Operating activities....................................... $(788) $(13)
Investing activities....................................... 805 616
Financing activities....................................... (133) (444)
</TABLE>
Tenneco's operating results, combined with proceeds from sales of assets and
businesses, including discontinued operations, and short-term borrowings, have
provided funds for acquisitions and capital investments in existing businesses
and to repurchase its common stock. Operating cash flow for the first quarter
of 1996 declined as customer receivables increased $557 million primarily due
to lower sales of customer receivables compared with cash generated in the
1995 first quarter of $5 million. This decrease was due primarily to trade
receivables sold to Asset Securitization Cooperative Corporation, which were
$470 million lower in the first
15
<PAGE>
quarter of 1996 compared with the 1995 first quarter. Operating cash flow in
the first quarter of 1996 also declined as a result of higher tax payments
compared with the 1995 first quarter due to the final settlement of years 1987
through 1989 federal tax liabilities. The sale of discontinued operations and
sales of businesses and assets, primarily the 15.2 million shares of Case
common stock and Tenneco's 50 percent interest in Kern River Gas Transmission
Company, generated an additional $1,026 million of cash during the 1996 first
quarter.
Tenneco invested $193 million in capital expenditures in its existing
businesses during the 1996 first quarter. Capital expenditures during the 1996
first quarter included $42 million for Automotive, $44 million for Energy, $64
million for Packaging, $13 million for Shipbuilding and $30 million related to
Tenneco's other operations. Capital expenditures were higher at Automotive,
Packaging and Energy during the 1996 first quarter while Shipbuilding capital
expenditures were approximately the same as the prior year quarter.
During the 1995 first quarter, Tenneco's cash sources included $734 million
in proceeds from the sale of discontinued operations and sales of businesses
and assets (primarily the Albright & Wilson chemicals operations for $700
million). Capital expenditures were $118 million for continuing operations.
CAPITALIZATION
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
1996 1995 1995
--------- ------------ ---------
(MILLIONS)
<S> <C> <C> <C>
Short-term debt and
current maturities..... $1,195 $ 908 $ 484
Long-term debt.......... 3,482 3,751 3,559
Minority interest....... 320 320 314
Preferred stock......... 111 130 128
Common shareowners'
equity................. 3,532 3,148 2,932
------- ------ ------
Total capitalization.... $8,640 $8,257 $7,417
======= ====== ======
</TABLE>
The primary reason for the net increase in debt outstanding at March 31,
1996 compared with March 31, 1995 is the debt issued for the acquisition of
the plastics business from Mobil. Tenneco initially funded this acquisition
primarily with short-term debt. In December 1995, Tenneco issued $600 million
of long-term debt to refinance part of the purchase price.
Tenneco's ratio of debt to total capitalization at March 31, 1996 was 54.1
percent compared with 56.4 percent at December 31, 1995. Including the market
value of the SECT shares, the ratio of total debt to total capitalization at
March 31, 1996 was 52.9 percent compared with 55.0 percent at December 31,
1995.
16
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
(1) Environmental Proceedings.
Tennessee is a party in proceedings involving federal and state authorities
regarding the past use by Tennessee of a lubricant containing polychlorinated
biphenyls ("PCBs") in its starting air systems. Tennessee has executed a
consent order with the EPA governing the remediation of certain of its
compressor stations and is working with the Pennsylvania and New York
environmental agencies to specify the remediation requirements at the
Pennsylvania and New York stations. Remediation activities in Pennsylvania are
essentially complete; in addition, pursuant to the Consent Order dated August
1, 1995, between the Company and the Pennsylvania Department of Environmental
Protection, the Company funded an environmentally beneficial project for
$450,000 in April 1996. Tenneco believes that the ultimate resolution of this
matter will not have a material adverse effect on the financial position or
results of operations of Tenneco Inc. and its consolidated subsidiaries.
In Commonwealth of Kentucky, Natural Resources and Environmental Protection
Cabinet v. Tennessee Gas Pipeline Company (Franklin County Circuit Court,
Docket No. 88-C1-1531, November 16, 1988), the Kentucky environmental agency
alleged that Tennessee discharged pollutants into the waters of the state
without a permit, and disposed of PCBs without a permit. The agency sought an
injunction against future discharges, sought an order to remediate or remove
PCBs and sought a civil penalty. Tennessee has entered into agreed orders with
the agency to resolve many of the issues raised in the original allegations,
has received water discharge permits for its Kentucky stations from the agency
and continues to work to resolve the remaining issues. Counsel for Tenneco are
unable to express an opinion as to its ultimate outcome. Tenneco believes that
the resolution of this issue will not have a material adverse effect on its
consolidated financial position or results of operations.
A subsidiary of Tennessee owns a 13.2% general partnership interest in
Iroquois Gas Transmission System, L.P. ("Iroquois"), which owns an interstate
natural gas pipeline from the Canadian border through the states of New York
and Connecticut to Long Island. The operator of the pipeline is Iroquois
Pipeline Operating Company (the "Operator"), which, as of May 1996, is a
subsidiary of TransCanada Pipelines, Ltd., an affiliate of TransCanada
Iroquois, Ltd., which is also a partner in Iroquois. Tennessee has a contract
to provide gas dispatching as well as post-construction field operation and
maintenance services for the Operator of Iroquois, but Tennessee is not the
Operator and is not an affiliate of the Operator.
Iroquois has been informed of investigations and allegations regarding
alleged environmental violations which occurred during the construction of the
pipeline. Communications have been received from U.S. Attorneys' Offices, the
Enforcement Staff of the FERC's Office of the General Counsel, the Army Corps
of Engineers, the Public Service Commission of the State of New York, the EPA
and the Federal Bureau of Investigation. Iroquois is in the process of
negotiating a settlement with the Government regarding certain environmental
and safety allegations asserted by the Government. Tenneco anticipates that a
global settlement will be reached in the second quarter of 1996 that will
resolve all criminal, civil and administrative enforcement actions
contemplated by federal and state authorities respecting the pending
investigations.
As a general partner, Tennessee's subsidiary may be jointly and severally
liable with the other partners for the liabilities of Iroquois. The foregoing
proceedings and investigations have not affected pipeline operations. Based
upon information available to Tennessee, Tennessee believes that neither it
nor any of its subsidiaries is a target of the criminal investigation
described above. Further, while a global resolution of these inquiries could
have a material adverse effect on the financial condition of Iroquois, Tenneco
believes that the ultimate resolution of these matters will not have a
material adverse effect on the financial position or results of operations of
Tenneco Inc. and its consolidated subsidiaries.
On August 2, 1993, the Department of Justice filed suit against Tenneco
Packaging Inc. ("Tenneco Packaging") in the Federal District Court for the
Northern District of Indiana, alleging that wastewater from
17
<PAGE>
Tenneco Packaging's molded fiber products plant in Griffith, Indiana,
interfered with or damaged the Town of Griffith's municipal sewage pumping
station on two occasions in 1991 and 1993, resulting in discharges by the Town
of Griffith of untreated wastewater into a river. Tenneco Packaging and the
Department of Justice have agreed in principle to settle the suit. A consent
decree is being negotiated by Tenneco Packaging and the Department of Justice.
Tenneco believes that the resolution of this matter will not have a material
adverse effect on the financial position or results of operations of Tenneco
Inc. and its consolidated subsidiaries.
(2) Potential Superfund Liability.
At March 31, 1996, Tenneco has been designated as a potentially responsible
party in 57 "Superfund" sites. With respect to its pro rata share of the
remediation costs of certain sites, Tenneco is fully indemnified by third
parties. With respect to certain other sites, Tenneco has sought to resolve
its liability through payments to the other potentially responsible parties.
For the remaining sites, Tenneco has estimated its share of the remediation
costs to be between $10 million and $65 million or 0.4% to 2.4% of the total
remediation costs for those sites and has provided reserves that it believes
are adequate for such costs. Because the clean-up costs are estimates and are
subject to revision as more information becomes available about the extent of
remediation required, Tenneco's estimate of its share of remediation costs
could change. Moreover, liability under the Comprehensive Environmental
Response, Compensation and Liability Act is joint and several, meaning that
Tenneco could be required to pay in excess of its pro rata share of
remediation costs. Tenneco's understanding of the financial strength of other
potentially responsible parties has been considered, where appropriate, in
Tenneco's determination of its estimated liability. Tenneco believes that the
costs associated with its current status as a potentially responsible party in
the Superfund sites described above will not be material to its consolidated
financial position or results of operations.
(3) Other Proceedings.
On October 14, 1993, Tennessee was sued in the State District Court of Ector
County, Texas, by ICA Energy, Inc. ("ICA") and TransTexas Gas Corporation
("TransTexas"). In that suit, ICA and TransTexas contended that Tennessee had
an obligation to purchase gas production which TransTexas thereafter attempted
to add unilaterally to the reserves originally dedicated to a 1979 gas
contract. An amendment to the pleading seeks $1.5 billion from Tennessee for
alleged damages caused by Tennessee's refusal to purchase gas produced from
the TransTexas leases covering the new production and lands. Neither ICA nor
TransTexas were original parties to that contract. However, they contend that
any stranger acquiring a fractional interest in the original committed
reserves thereby obtains a right to add to the contract unlimited volumes of
gas production from locations in South Texas. Tennessee filed a motion for
partial summary judgment, asserting that the Texas statutes of frauds
precluded the plaintiffs from adding new production or acreage to the
contract. On May 4, 1995, the trial court granted Tennessee's motion for
partial summary judgment; the plaintiffs have filed a notice of appeal and
oral arguments were conducted on March 28, 1996. ICA and TransTexas filed a
motion for partial summary judgment on a separate issue involving the term
"committed reserves" and whether Tennessee has a contractual obligation to
purchase gas produced from a lease not described in the gas contract. On
November 8, 1995, the trial court granted ICA's and TransTexas' motion in
part. That order, which would be finalized upon conclusion of the trial, also
held that ICA's and TransTexas' rights are subject to certain limitations of
the Texas Business and Commerce Code. In addition to these defenses, which are
to be resolved at trial, Tennessee has other defenses which it has asserted
and intends to pursue. Tennessee filed a Motion to Clarify the November 8,
1995 order together with a new motion for partial summary judgment concerning
the committed reserve issue. On February 22, 1996, the trial court clarified
its November 8, 1995 order, but denied Tennessee's new motion for partial
summary judgment. The November 8, 1995 and February 22, 1996 rulings do not
affect the trial court's previous May 4, 1995 order granting partial summary
judgment to Tennessee.
Tennessee has been engaged in other settlement and contract reformation
discussions with other holders of certain gas purchase contracts who have sued
Tennessee. On August 1, 1995, the Texas Supreme Court affirmed a ruling of the
Court of Appeals favorable to Tennessee in one of these matters and indicated
that it would remand the case to the trial court. On April 18, 1996, however,
the Texas Supreme Court withdrew its initial opinion and issued an opinion
reversing the Court of Appeals opinion on the matter which was favorable to
18
<PAGE>
Tennessee. Tennessee will file a motion for rehearing with the Texas Supreme
Court in June 1996. In addition, Tennessee has initiated two lawsuits against
the holders of this gas purchase contract, seeking damages related to their
conduct in connection with that contract. Tenneco is unable to predict the
ultimate outcome of the litigation associated with its contract reformation
efforts or the impact which it may have upon its consolidated financial
position or results of operations, however, Tennessee has accrued amounts
which it believes are appropriate to cover the resolution of these matters.
Tenneco Inc. and its subsidiaries are parties to numerous other legal
proceedings arising from their operations. Tenneco Inc. believes that the
outcome of these other proceedings, individually and in the aggregate, will
have no material effect on Tenneco's consolidated financial position or
results of operations.
ITEM 5. OTHER INFORMATION.
Recent Developments.
On March 21, 1996, the Company announced that it intends to spin off Newport
News Shipbuilding and Dry Dock Company to its shareholders in a tax-free
transaction, and is developing strategic options to separate Tenneco Energy
from its packaging and automotive parts divisions and to maximize shareowner
value through a tax-free spinoff, a sale, strategic alliance or other action.
The development of these options related to Tenneco Energy is expected to be
completed during the second quarter of 1996. The spinoff of Newport News
Shipbuilding and Dry Dock Company is expected to be completed late in 1996,
subject to receipt of a favorable ruling from the Internal Revenue Service on
the tax-free nature of the proposed transaction.
On April 18, 1996, the Texas Supreme Court issued a decision adverse to
Tennessee in a proceeding involving a gas supply contract containing a "take-
or-pay" provision and above-market pricing terms. The decision reversed an
earlier opinion of the Texas Supreme Court which held that the contract in
question was an "output" contract under the Texas Business and Commerce Code
and therefore subject to the requirement that any increase in production under
the contract must be made in good faith and in reasonable proportion to
historical levels. Tennessee intends to ask the court to again rehear the
issue. The Supreme Court's ruling explicitly preserves Tennessee's defenses
based on bad faith conduct of the producers. In addition, nothing in the
Supreme Court's decision affects Tennessee's ability to seek recovery of its
above-market costs of purchasing gas under the contract from its customers as
gas supply restructuring costs in proceedings currently pending before the
Federal Energy Regulatory Commission.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(1) Exhibits.
3--Certificate of Incorporation as amended and supplemented as of
February 27, 1996.
11--Computation of Earnings Per Share of Common Stock.
12--Computation of Ratio of Earnings to Fixed Charges.
27.1--Financial Data Schedule.
27.2--Financial Data Schedule for December 31, 1995 (Restated).
27.3--Financial Data Schedule for September 30, 1995 (Restated).
27.4--Financial Data Schedule for June 30, 1995 (Restated).
27.5--Financial Data Schedule for March 31, 1995 (Restated).
27.6--Financial Data Schedule for December 31, 1994 (Restated).
27.7--Financial Data Schedule for September 30, 1994 (Restated).
(2) Reports on Form 8-K. Tenneco Inc. filed two Current Reports on Form 8-K
during the quarter ended March 31, 1996: on February 2, 1996 with respect to a
(i) letter to shareowners dated February 2, 1996 from Dana G. Mead, Chairman
and Chief Executive Officer, regarding Tenneco's businesses, and (ii) press
release issued January 30, 1996 regarding, among other things, earnings of
Tenneco Inc. for the year ended December 31, 1995; and on March 21, 1996 with
respect to a (i) letter to shareowners dated March 21, 1996 from Dana G. Mead,
Chairman and Chief Executive Officer, regarding Tenneco's businesses, and (ii)
press release issued March 21, 1996 regarding, among other things, a spinoff
of Newport News Shipbuilding and Dry Dock Company and other strategic options.
19
<PAGE>
SIGNATURE
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.
TENNECO INC.
Robert T. Blakely
By __________________________________
Robert T. Blakely
Senior Vice President and
Chief Financial Officer
Date: May 15, 1996
20
<PAGE>
EXHIBIT 11
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
(UNAUDITED)
<TABLE>
<CAPTION>
(MILLIONS EXCEPT SHARE
AMOUNTS)
THREE MONTHS ENDED MARCH 31,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
COMPUTATION FOR STATEMENTS OF INCOME
Primary Earnings Per Share (average shares
outstanding):
Income from continuing operations.......... $ 156 $ 128
Income from discontinued operations, net of
income tax................................ 339 25
------------ ------------
Net income................................. 495 153
Preferred stock dividends.................. 3 3
------------ ------------
Net income to common stock................. $ 492 $ 150
============ ============
Average shares of common stock
outstanding(a)............................ 170,440,074 177,792,872
============ ============
Earnings per average share of common stock:
Continuing operations.................... $ .90 $ .71
Discontinued operations.................. 1.99 .13
------------ ------------
$ 2.89 $ .84
============ ============
ADDITIONAL COMPUTATIONS(B)
Net income to common stock, per above....... $ 492 $ 150
============ ============
Primary Earnings Per Share (including common
stock equivalents):
Average shares of common stock
outstanding(a)............................ 170,440,074 177,792,872
Incremental common shares applicable to
common stock options based on the common
stock daily average market price during
the period................................ 535,013 49,907
Incremental common shares applicable to
performance units based upon the
attainment of specified goals............. 88,125 27,625
------------ ------------
Average common shares, as adjusted......... 171,063,212 177,870,404
============ ============
Earnings per average share of common stock
(including common stock equivalents):
Continuing operations.................... $ .90 $ .71
Discontinued operations.................. 1.98 .13
------------ ------------
$ 2.88 $ .84
============ ============
Fully Diluted Earnings Per Share:
Average shares of common stock
outstanding(a)............................ 170,440,074 177,792,872
Incremental common shares applicable to
common stock options based on the more
dilutive of the common stock ending or
average market price during the period.... 774,770 64,438
Average common shares issuable assuming
conversion of Tenneco Inc. 10% loan stock. -- 39,329
Incremental common shares applicable to
performance units based upon the
attainment of specified goals............. 88,125 27,625
------------ ------------
Average common shares assuming full
dilution.................................. 171,302,969 177,924,264
============ ============
Fully diluted earnings per average share,
assuming conversion of all applicable
securities:
Continuing operations.................... $ .89 $ .71
Discontinued operations.................. 1.98 .13
------------ ------------
$ 2.87 $ .84
============ ============
</TABLE>
- --------
NOTES:(a) In 1992, 12,000,000 shares of common stock were issued to the Stock
Employee Compensation Trust ("SECT"). Shares of common stock issued
to a related trust are not considered to be outstanding in the
computation of average shares of common stock until the shares are
utilized to fund the obligations for which the trust was
established. For the periods ended March 31, 1996 and 1995, the SECT
utilized 717,256 and 737,799 shares, respectively.
(b) These calculations are submitted in accordance with Securities and
Exchange Commission requirements although not required by Accounting
Principles Board Opinion No. 15 because they result in dilution of
less than 3%.
<PAGE>
EXHIBIT 12
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMBINED WITH 50% OWNED UNCONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31,
----------
1996 1995
---- ----
<S> <C> <C>
Income from continuing operations.................................. $156 $128
Add:
Interest......................................................... 108 107
Portion of rentals representative of interest factor............. 15 14
Preferred stock dividend requirements of majority-owned
subsidiaries.................................................... 5 6
Income tax expense and other taxes on income..................... 69 83
Amortization of interest capitalized applicable to nonutility
companies....................................................... 1 1
Undistributed earnings of affiliated companies in which less than
a 50% voting interest is owned.................................. (4) (2)
---- ----
Earnings as defined............................................ $350 $337
==== ====
Interest........................................................... $108 $107
Interest capitalized............................................... 6 1
Portion of rentals representative of interest factor............... 15 14
Preferred stock dividend requirements of majority-owned
subsidiaries on a pretax basis.................................... 7 10
---- ----
Fixed charges as defined....................................... $136 $132
==== ====
Ratio of earnings to fixed charges................................. 2.57 2.55
==== ====
</TABLE>
<PAGE>
[LOGO OF TENNECO INC. APPEARS HERE]
<PAGE>
Exhibit 3
[CONFORMED COPY]
CERTIFICATE OF INCORPORATION
OF
TENNECO HOLDINGS, INC.
* * * * *
FIRST: The name of the corporation is Tenneco Holdings, Inc.
SECOND: The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
corporation shall be authorized to issue is 415,000,000 shares, divided into
15,000,000 shares of Preferred Stock, without par value (herein called
"Preferred Stock"), 50,000,000 shares of Junior Preferred Stock, without par
value ( herein called "Junior Preferred Stock"), and 350,000,000 shares of
Common Stock, of the par value of $5 per share (herein called "Common Stock").
The following is a statement of the designations and the powers, preferences
and rights, and the qualifications, limitations or restrictions thereof, of the
classes of stock of the corporation.
I.
l. The Preferred Stock may be issued in one or more series. The designations,
preferences and relative, participating, optional, or other special rights, and
the qualifications, limitations or restrictions thereof, of the Preferred Stock
of each series shall be such as are stated and expressed herein and, to the
extent not stated and expressed herein, shall be such as may be fixed by the
Board of Directors (authority so to do being hereby expressly granted) and
stated and expressed in a resolution or resolutions adopted by the Board of
Directors providing for the issue of Preferred Stock of such series. Such
resolution or resolutions shall (a) specify the series to which such Preferred
Stock shall belong, (b) fix the dividend rate therefor, (c) fix the amount
which the holders of the Preferred Stock of such series shall be entitled to be
paid in the event of a voluntary or involuntary liquidation, dissolution or
winding up of the corporation, provided that such amount in the event of an
involuntary liquidation shall not exceed $100 per share, (d) state whether or
not the Preferred Stock of such series shall be redeemable and at what times and
under what conditions and the amount or amounts payable thereon in the event of
redemption; and may, in a manner not inconsistent with the provisions of this
Article FOURTH, (i) limit the number of shares of such series which may be
issued, (ii) provide for a sinking fund for the purchase or redemption, or a
purchase fund for the purchase, of shares of such series and the terms and
provisions governing the operation of any such fund and the status as to
reissuance of shares of Preferred Stock purchased or otherwise reacquired or
redeemed or retired through the operation thereof, and that so long as the
corporation is in default as to such sinking or purchase fund the corporation
shall not (with such exceptions, if any, as may be provided) pay any dividends
upon or purchase or redeem shares of capital stock ranking junior to the
Preferred Stock with respect to dividends or distributions of assets upon
liquidation (referred to in this Part I of Article FOURTH as "stock ranking
junior to the Preferred Stock"), (iii) grant voting rights to the holders of
shares of such series in addition to and not inconsistent with those granted by
this Part I of Article FOURTH to the holders of Preferred Stock, and in the
absence of such grant the holders of such series of Preferred Stock shall have
no such additional voting rights, (iv) impose conditions or restrictions upon
the creation of indebtedness of the corporation or upon the issue of
<PAGE>
additional Preferred Stock or other capital stock ranking on a parity therewith
or prior thereto with respect to dividends or distribution of assets upon
liquidation, (v) impose conditions or restrictions upon the payment of dividends
upon, or the making of other distributions to, or the acquisition of, stock
ranking junior to the Preferred Stock, (vi) grant to the holders of the
Preferred Stock of such series the right to convert such stock into shares of
stock ranking junior to the Preferred Stock, and (vii) grant such other special
rights to the holders of shares of such series as the Board of Directors may
determine and as shall not be inconsistent with the provisions of this Article
FOURTH. The term "fixed for such series" and similar terms as used in this Part
I of Article FOURTH shall mean stated and expressed in this Part I of Article
FOURTH or in a resolution or resolutions adopted by the Board of Directors
providing for the issue of Preferred Stock of the series referred to therein.
2. The holders of the Preferred Stock shall be entitled to receive, when and
as declared by the Board of Directors, out of any funds legally available
therefor, cumulative preferential dividends in cash, at the rate per annum fixed
for such series, and no more, payable quarter-yearly on the last days of March,
June, September and December in each year to the stockholders of record on a
date, not exceeding fifty days preceding each such dividend payment date, fixed
for the purpose by the Board of Directors in advance of payment of each
particular dividend. Dividends on shares of the Preferred Stock shall accrue
from the date of issuance, or from such other date or dates as may be fixed by
the Board of Directors for any series, and shall be cumulative. Each share of
Preferred Stock shall rank on a parity with each other share of Preferred Stock,
irrespective of series, with respect to preferential dividends at the respective
rates fixed for such series, and no dividend shall be declared or paid or set
apart for payment for the Preferred Stock of any series unless at the same time
a dividend in like proportion to the dividends accrued upon the Preferred Stock
of each other series shall be declared or paid or set apart for payment, as the
case may be, on Preferred Stock of each other series then outstanding.
3. So long as any shares of Preferred Stock shall remain outstanding, in no
event shall any dividends whatsoever, whether in cash, stock, or otherwise, be
paid or declared, or any distribution be made, on any class of stock ranking
junior to the Preferred Stock, nor shall any shares of stock ranking junior to
the Preferred Stock be purchased, retired or otherwise acquired for a valuable
consideration by the corporation, unless all dividends on the Preferred Stock
for all past quarter-yearly dividend periods shall have been paid, or declared
and a sum sufficient for the payment thereof set apart, and the full dividend
thereon for the then current quarter-yearly dividend period shall have been paid
or declared.
4. The corporation at the option of the Board of Directors may redeem the
Preferred Stock of any series which by its terms is redeemable, at the time or
times and on the terms and conditions fixed for such series, upon notice duly
given as hereinafter provided, by paying therefor in cash the sum fixed for such
series, together, in each case, with an amount equal to accrued and unpaid
dividends thereon. The term "accrued and unpaid dividends" as used in this Part
I of Article FOURTH with respect to Preferred Stock of any series shall mean
dividends on all outstanding shares of Preferred Stock of such series at the
rate fixed for such series, from the date or dates from which such dividends
accrued to the date as of which accrued and unpaid dividends are being
determined, less the aggregate amount of all dividends theretofore declared and
paid or set apart for payment upon such outstanding Preferred Stock.
At least thirty days' previous notice of any such redemption of Preferred
Stock shall be mailed, addressed to the holders of record of the shares to be
redeemed at their respective addresses as the same shall appear on the books of
the corporation, and such notice may also be published in a newspaper printed in
the English language and published daily for at least five days per calendar
week (other than legal holidays) and of general circulation in the Borough of
Manhattan, The City of New York, New York.
In case of the redemption of only part of the Preferred Stock of any series at
the time outstanding, subject to the limitations and provisions herein
contained, the shares to be redeemed may be selected pro rata, or by lot, or by
such other equitable method as may be determined by the Board of Directors, and
the Board of Directors shall have full power and authority to prescribe the
manner in which the redemption shall be conducted.
If such notice of redemption shall have been duly given by publication as
aforesaid at least thirty days prior to the redemption date, and if on or before
the redemption date specified in such notice all funds
2
<PAGE>
necessary for such redemption shall have been set aside by the corporation,
separate and apart from its other funds, in trust for the pro rata benefit of
the holders of the shares so called for redemption, so as to be and continue to
be available therefor, then, notwithstanding that any certificate for shares of
Preferred Stock so called for redemption shall not have been surrendered for
cancellation, the shares represented thereby shall no longer be deemed
outstanding, the right to receive dividends thereon shall cease to accrue from
and after the date of redemption so designated and all rights with respect to
such shares of Preferred Stock so called for redemption shall forthwith on such
redemption date cease and terminate except only the right of the holders thereof
to receive the redemption price of such shares so to be redeemed, but without
interest thereon.
The corporation may, however, prior to the redemption date specified in the
notice of redemption, deposit in trust for the account of the holders of the
Preferred Stock to be redeemed, with a bank or trust company in good standing
organized under the laws of the United States of America or of the State of New
York, doing business in the Borough of Manhattan, The City of New York, having a
capital, surplus and undivided profits aggregating at least $50,000,000,
designated in such notice of redemption, all funds necessary for such
redemption, together with irrevocable written instructions authorizing such bank
or trust company, on behalf and at the expense of the corporation, to cause the
notice of redemption to be duly mailed and, at the option of the corporation,
the publication of such notice to be made as herein provided at least thirty
days prior to the redemption date, and thereupon, notwithstanding that any
certificate for shares of Preferred Stock so called for redemption shall not
have been surrendered for cancellation, all shares of Preferred Stock with
respect to which such deposit shall have been made shall no longer be deemed to
be outstanding and all rights with respect to such shares of Preferred Stock
shall forthwith upon such deposit in trust cease and terminate, except only the
right of the holders thereof to receive from such bank or trust company, at any
time after the time of such deposit, the redemption price of such shares so to
be redeemed.
Any moneys so deposited by the corporation and unclaimed at the end of six
months from the date fixed for such redemption shall be repaid to the
corporation upon its request expressed in a resolution of its Board of
Directors, after which repayment the holders of the shares so called for
redemption shall look only to the corporation for payment thereof.
5. (A) So long as any shares of Preferred Stock are outstanding the
corporation shall not, without the consent of the holders of at least two-thirds
of the number of shares of Preferred Stock at the time outstanding, given in
person or by proxy, either in writing or by vote at an annual meeting or a
special meeting called for the purpose, amend, alter or repeal any of the
provisions of this Article FOURTH (other than provisions relating exclusively
to the shares of Preferred Stock of a particular series) so as to affect
adversely the rights, powers or preferences of Preferred Stock or of the holders
thereof; and so long as any shares of any particular series of Preferred Stock
are outstanding the corporation shall not, without the consent of the holders of
at least two-thirds of the number of shares of Preferred Stock of such series at
the time outstanding, given in person or by proxy, either in writing or by a
vote at an annual meeting or a special meeting called for the purpose, amend,
alter or repeal any of the provisions of this Article FOURTH or of any
resolution or resolutions relating exclusively to the shares of Preferred Stock
of such series, so as to affect adversely the rights, powers or preferences of
the Preferred Stock of such series or the holders thereof.
(B) So long as any shares of Preferred Stock are outstanding the corporation
shall not, without the consent of the holders of at least a majority of the
number of shares of Preferred Stock at the time outstanding, given in person or
by proxy, either in writing or by vote at an annual meeting or a special meeting
called for that purpose:
(a) create or authorize any class of stock ranking prior to the Preferred
Stock in respect of dividends or distribution of assets on liquidation; or
increase the authorized amount of any class of stock ranking prior to the
Preferred Stock in respect of dividends or distribution of assets on
liquidation; or create or authorize any obligation or security convertible
into shares of stock of any class ranking prior to the Preferred Stock in
respect of dividends or distribution of assets on liquidation; or
3
<PAGE>
(b) sell, lease, transfer or convey all, or substantially all, of its
property or business, or consolidate with or merge into any other corporation
or corporations; provided, however, that this subparagraph shall not apply to
any merger of another corporation into the corporation or to any mortgage,
pledge or other hypothecation of property of the corporation.
(C) So long as any shares of Preferred Stock are outstanding the corporation
shall not, without the consent of the holders of at least a majority of the
number of shares of Preferred Stock at the time outstanding, given in person or
by proxy, either in writing or by vote at an annual meeting or a special meeting
called for the purpose:
(a) create or authorize any class of stock ranking on a parity with the
Preferred Stock in respect of dividends or distribution of assets on
liquidation; or
(b) increase the authorized amount of the Preferred Stock or of any class
of stock ranking on a parity with the Preferred Stock in respect of dividends
or distributions of assets on liquidation; or
(c) create or authorize any obligation or security convertible into shares
of Preferred Stock or shares of stock of any class ranking on a parity with
the Preferred Stock in respect of dividends or distribution of assets on
liquidation.
(D) So long as any shares of Preferred Stock are outstanding the corporation
shall not purchase, redeem or otherwise acquire for value any shares of
Preferred Stock or of any other stock ranking on a parity with the Preferred
Stock in respect of dividends or distribution of assets on liquidation during
the continuance of any default in the payment of dividends on the Preferred
Stock without the consent, given in person or by proxy or by vote at an annual
meeting or at a special meeting called for that purpose, of the holders of at
least a majority of the number of shares of Preferred Stock present in person or
by proxy at such meeting, provided that a quorum, consisting of at least a
majority of the then outstanding shares of Preferred Stock, is present.
(E) Any action specified in this subdivision 5 as requiring the consent of the
holders of at least a specified proportion of the number of shares of Preferred
Stock or of any particular series thereof at the time outstanding or represented
at a meeting may be taken with such consent and with such additional vote or
consent, if any, of stockholders as may be from time to time required by this
Certificate of Incorporation, as amended from time to time, or by law.
6. In the event of any liquidation, dissolution or winding up of the affairs
of the corporation, then, before any distribution or payment shall be made to
the holders of any class of stock of the corporation ranking junior to the
Preferred Stock, the holders of the Preferred Stock of the respective series
shall be entitled to be paid in full the respective amounts fixed for such
series. After such payment shall have been made in full to the holders of the
Preferred Stock, the remaining assets and funds of the corporation shall be
distributed among the holders of the stock of the corporation ranking junior to
the Preferred Stock according to their respective rights. In the event that the
assets of the corporation available for distribution to holders of Preferred
Stock shall not be sufficient to make the payment herein required to be made in
full, such assets shall be distributed to the holders of the respective shares
of Preferred Stock pro rata in proportion to the amounts payable hereunder upon
each share thereof.
7. Except as otherwise provided in any resolution of the Board of Directors
providing for the issuance of any particular series of Preferred Stock,
Preferred Stock redeemed or otherwise acquired by the corporation shall assume
the status of authorized but unissued Preferred Stock and may thereafter,
subject to the provisions of this Part I of Article FOURTH and of any
restrictions contained in any resolution of the Board of Directors providing for
the issue of any particular series of Preferred Stock, be reissued in the same
manner as other authorized but unissued Preferred Stock.
4
<PAGE>
II.
1. The Junior Preferred Stock may be issued in one or more series. The
designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof, of the
Junior Preferred Stock of each series shall be such as are stated and expressed
herein and, to the extent not stated and expressed herein, shall be such as may
be fixed by the Board of Directors (authority so to do being hereby expressly
granted) and stated and expressed in a resolution or resolutions adopted by the
Board of Directors providing for the issue of Junior Preferred Stock of such
series. Subject to the prior rights of the holders of the Preferred Stock as set
forth in Part I of this Article FOURTH, such resolution or resolutions shall
(a) specify the series to which such Junior Preferred Stock shall belong, (b)
state whether a dividend shall be payable in cash, stock or otherwise, whether
such dividend shall be cumulative or non-cumulative and whether the Junior
Preferred Stock of such series shall rank on a parity with or junior to other
series of Junior Preferred Stock as to dividends, and fix the dividend rate
therefor (or the manner of computing the rate of such dividends), (c) fix the
amount which the holders of the Junior Preferred Stock of such series shall be
entitled to be paid in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the corporation, (d) state whether or not the
Junior Preferred Stock of such series shall be redeemable and at what times and
under what conditions and the amount or amounts payable thereon in the event of
redemption; and may, in a manner not inconsistent with the provisions of this
Article FOURTH, (i) limit the number of shares of such series which may be
issued, (ii) provide for a sinking fund for the purchase or redemption, or a
purchase fund for the purchase, of shares of such series and the terms and
provisions governing the operation of any such fund and the status as to
reissuance of shares of Junior Preferred Stock purchased or otherwise reacquired
or redeemed or retired through the operation thereof, and that so long as the
corporation is in default as to such sinking or purchase fund the corporation
shall not (with such exceptions, if any, as may be provided) pay any dividends
upon or purchase or redeem shares of capital stock ranking junior to the Junior
Preferred Stock with respect to dividends or distribution of assets upon
liquidation (referred to in this Part II of Article FOURTH as "stock ranking
junior to the Junior Preferred Stock"), (iii) grant voting rights to the holders
of shares of such series in addition to and not inconsistent with those granted
by this Part II of Article FOURTH to the holders of Junior Preferred Stock, and
in the absence of such grant the holders of such series of Junior Preferred
Stock shall have no such additional voting rights, (iv) impose conditions or
restrictions upon the creation of indebtedness of the corporation or upon the
issue of additional Junior Preferred Stock or other capital stock ranking on a
parity therewith or prior thereto with respect to dividends or distribution of
assets upon liquidation, (v) impose conditions or restrictions upon the payment
of dividends upon, or the making of other distributions to, or the acquisition
of, stock ranking junior to the Junior Preferred Stock, (vi) grant to the
holders of the Junior Preferred Stock of such series the right to convert such
stock into shares of stock ranking junior to the Junior Preferred Stock, and
(vii) grant such other special rights to the holders of shares of such series as
the Board of Directors may determine and as shall not be inconsistent with the
provisions of this Article FOURTH or the prior rights of the holders of
Preferred Stock as set forth in Part I of this Article FOURTH. The term "fixed
for such series" and similar terms as used in this Part II of Article FOURTH
shall mean stated and expressed in this Part II of Article FOURTH or in a
resolution or resolutions adopted by the Board of Directors providing for the
issue of Junior Preferred Stock of the series referred to therein.
2. So long as any shares of Junior Preferred Stock shall remain outstanding,
in no event shall any dividends whatsoever, whether in cash, stock or otherwise,
be paid or declared, or any distribution be made on any class of stock ranking
junior to the Junior Preferred Stock, nor shall any shares of stock ranking
junior to the Junior Preferred Stock be purchased, retired or otherwise acquired
for a valuable consideration by the corporation, unless all dividends on the
Junior Preferred Stock for all past periods shall have been paid, or declared
and a sum sufficient for the payment of such dividends set apart, and the full
dividend thereon for the then current dividend period shall have been paid or
declared.
3. (A) So long as any shares of Junior Preferred Stock are outstanding the
corporation shall not, without the consent of the holders of at least two-thirds
of the number of shares of Junior Preferred Stock at the time outstanding, given
in person or by proxy, either in writing or by vote at an annual meeting or a
special meeting called for the purpose, amend, alter, or repeal any of the
provisions of this Article FOURTH (other than provisions relating exclusively
to the shares of Junior Preferred Stock of a particular
5
<PAGE>
series) so as to affect adversely the rights, powers or preferences of Junior
Preferred Stock or of the holders thereof, and so long as any shares of any
particular series of Junior Preferred Stock are outstanding the corporation
shall not, without the consent of the holders of at least two-thirds of the
number of shares of Junior Preferred Stock of such series at the time
outstanding, given in person or by proxy, either in writing or by a vote at an
annual meeting or a special meeting called for the purpose, amend, alter or
repeal any of the provisions of this Article FOURTH (relating exclusively to
the shares of Junior Preferred Stock of a particular series) or of any
resolution or resolutions relating exclusively to the shares of Junior Preferred
Stock of such series, so as to affect adversely the rights, powers or
preferences of the Junior Preferred Stock of such series or the holders thereof.
(B) So long as any shares of Junior Preferred Stock are outstanding the
corporation shall not, without the consent of the holders of at least a majority
of the number of shares of Junior Preferred Stock at the time outstanding, given
in person or by proxy, either in writing or by vote at an annual meeting or a
special meeting called for that purpose:
(a) create or authorize any additional class of stock ranking prior to the
Junior Preferred Stock in respect of dividends or distribution of assets on
liquidation; or increase the authorized amount of Preferred Stock or any
additional class of stock ranking prior to the Junior Preferred Stock in
respect of dividends or distribution of assets on liquidation; or create or
authorize any obligation or security convertible into shares of Preferred
Stock or shares of stock of any additional class ranking prior to the Junior
Preferred Stock in respect of dividends or distribution of assets on
liquidation; or
(b) sell, lease, transfer or convey all, or substantially all, of its
property or business, or consolidate with or merge into any other corporation
or corporations; provided, however, that this subparagraph shall not apply to
any merger of another corporation into the corporation or to any mortgage,
pledge or other hypothecation of property of the corporation.
(C) So long as any shares of Junior Preferred Stock are outstanding the
corporation shall not, without the consent of the holders of at least a majority
of the number of shares of Junior Preferred Stock at the time outstanding, given
in person or by proxy, either in writing or by vote at an annual meeting or a
special meeting called for the purpose:
(a) create or authorize any class of stock ranking on a parity with the
Junior Preferred Stock in respect of dividends or distribution of assets on
liquidation; or
(b) increase the authorized amount of the Junior Preferred Stock or of any
class of stock ranking on a parity with the Junior Preferred Stock in respect
of dividends or distributions of assets on liquidation; or
(c) create or authorize any obligation or security convertible into shares
of Junior Preferred Stock or shares of stock of any class ranking on a parity
with the Junior Preferred Stock in respect of dividends or distribution of
assets on liquidation.
(D) So long as any shares of Junior Preferred Stock are outstanding the
corporation shall not purchase, redeem or otherwise acquire for value any shares
of Junior Preferred Stock or of any other stock ranking on a parity with the
Junior Preferred Stock in respect of dividends or distribution of assets on
liquidation during the continuance of any default in the payment of dividends on
the Junior Preferred Stock without the consent, given in person or by proxy or
by vote at an annual meeting or at a special meeting called for that purpose, of
the holders of at least a majority of the number of shares of Junior Preferred
Stock present in person or by proxy at such meeting, provided that a quorum,
consisting of at least a majority of the then outstanding shares of Junior
Preferred Stock, is present.
(E) Any action specified in this subdivision 3 as requiring the consent of the
holders of at least a specified proportion of the number of shares of Junior
Preferred Stock or of any particular series thereof at the time outstanding or
represented at a meeting may be taken with such consent and with such additional
vote or consent, if any, of stockholders as may be from time to time required by
this Certificate of Incorporation, as amended from time to time, or by law.
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4. In the event of any liquidation, dissolution or winding up of the affairs
of the corporation, then, before any distribution or payment shall be made to
the holders of any class of stock of the corporation ranking junior to the
Junior Preferred Stock, the holders of the Junior Preferred Stock of the
respective series (subject to the rights of the Preferred Stock) shall be
entitled to be paid in full the respective amounts fixed for such series. After
such payment shall have been made in full to the holders of the Junior Preferred
Stock, the remaining assets and funds of the corporation shall be distributed
among the holders of the stock of the corporation ranking junior to the Junior
Preferred Stock according to their respective rights. In the event that the
assets of the corporation available for distribution to holders of Junior
Preferred Stock shall not be sufficient to make the payment herein required to
be made in full, such assets shall be distributed to the holders of the
respective shares of Junior Preferred Stock pro rata in proportion to the
amounts payable hereunder upon each share thereof.
5. Except as otherwise provided in any resolution of the Board of Directors
providing for the issuance of any particular series of Junior Preferred Stock,
shares of Junior Preferred Stock redeemed or otherwise acquired by the
corporation shall assume the status of authorized but unissued Junior Preferred
Stock and may thereafter, subject to the provisions of this Part II of Article
FOURTH and of any restrictions contained in any resolution of the Board of
Directors providing for the issue of any particular series of Junior Preferred
Stock, be reissued in the same manner as other authorized but unissued Junior
Preferred Stock.
III.
Subject to the prior and superior rights of the Preferred Stock and Junior
Preferred Stock, and on the conditions set forth in the foregoing Parts I and II
of this Article FOURTH or in any resolution of the Board of Directors providing
for the issuance of any particular series of Preferred Stock or Junior Preferred
Stock, and not otherwise, such dividends (payable in cash, stock or otherwise)
as may be determined by the Board of Directors may be declared and paid on the
Common Stock from time to time out of any funds legally available therefor.
Subject to the provisions of Parts I and II of this Article FOURTH, the
holders of the Common Stock shall be entitled to one vote for each share held at
all meetings of the stockholders of the corporation.
After payment shall have been made in full to the holders of the Preferred
Stock and Junior Preferred Stock in the event of any liquidation, dissolution or
winding up of the affairs of the corporation, the remaining assets and funds of
the corporation shall be distributed among the holders of the Common Stock
according to their respective shares.
IV.
Ownership of shares of any class of the capital stock of the corporation shall
not entitle the holders thereof to any preemptive right to subscribe for or
purchase or to have offered to them for subscription or purchase any additional
shares of capital stock of any class of the corporation or any securities
convertible into any class of capital stock of the corporation, however
acquired, issued or sold by the corporation, it being the purpose and intent
that the Board of Directors shall have full right, power and authority to offer
for subscription or sell or to make any disposal of any or all unissued shares
of the capital stock of the corporation or any securities convertible into stock
or any or all shares of stock or convertible securities issued and thereafter
acquired by the corporation, for such consideration, not less than the par value
of shares having a par value, in money or property, as the Board of Directors
shall determine.
FIFTH: (A) The business and affairs of the corporation shall be managed by or
under the direction of a Board of Directors consisting of not less than three
nor more than sixteen directors, the exact number of directors to be determined
from time to time by resolution adopted by affirmative vote of a majority of the
entire Board of Directors. The directors shall be divided into three classes,
designated Class I, Class II
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and Class III. Each class shall consist, as nearly as may be possible, of one-
third of the total number of directors constituting the entire Board of
Directors. The incorporator of the corporation shall elect the initial directors
of the corporation and shall designate the class of each director. Class I
directors shall serve until the first annual meeting of the stockholders of the
corporation, Class II directors shall serve until the second annual meeting of
stockholders of the corporation, and Class III directors shall serve until the
third annual meeting of stockholders of the corporation. At each annual meeting
of stockholders, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office. Any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled by a majority of the Board of
Directors then in office, provided that a quorum is present, and any other
vacancy occurring in the Board of Directors may be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of his
predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more classes
or series of Preferred Stock or Junior Preferred Stock or any other class of
stock issued by the corporation shall have the right, voting separately by class
or series, to elect directors at an annual or special meeting of stockholders,
the election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Certificate of
Incorporation applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Article FIFTH unless expressly provided by
such terms.
(B) In furtherance and not in limitation of the powers which are now or may
hereafter be conferred by statute or the By-Laws of the corporation, the Board
of Directors is expressly authorized:
(a) To fix, determine and vary from time to time the amount to be
maintained as surplus and the amount or amounts to be set apart as working
capital.
(b) To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purposes and/or to abolish any
such reserve in the manner in which it was created.
(c) To make, amend, alter, change, add to or repeal By-Laws for the
corporation, without any action on the part of the stockholders. The By-Laws
made by the Board of Directors may be amended, altered, changed, added to or
repealed by the stockholders.
(d) To authorize and cause to be executed mortgages and liens, without
limit as to amount, upon the real and personal property of the corporation.
(e) From time to time to determine whether and to what extent, at what time
and place, and under what conditions and regulations the accounts and books
of the corporation or any of them, shall be open to the inspection of any
stockholder, and no stockholder shall have any right to inspect any account
or book or document of the corporation except as conferred by statute or the
By-Laws or as authorized by a resolution of the stockholders or the Board of
Directors.
(f) To authorize the payment of compensation to the directors for services
to the corporation, including fees for attendance at meetings of the Board of
Directors, and of any committees, and to determine the amount of such
compensation and fees.
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(g) To designate by resolution or resolutions passed by a majority of the
whole Board one or more committees, each committee to consist of two or more
of the directors of the corporation, which to the extent provided in said
resolution or resolutions or in the By-Laws of the corporation shall have and
may exercise the powers of the Board of Directors in the management of the
business and affairs of the corporation and may have power to authorize the
seal of the corporation to be affixed to all papers which may require it.
(h) At any time or from time to time (without any action by the
stockholders of the corporation) to create and issue, whether or not in
connection with the issue and sale of any shares of stock or other securities
of the corporation, rights or options entitling the holders thereof to
purchase from the corporation any shares of its capital stock of any class or
classes or of any series of any class or classes, such rights or options to
be evidenced by or in such instrument or instruments as shall be approved by
the Board of Directors. The terms upon which, the time or times, which may be
limited or unlimited in duration, at or within which, and the price or prices
at which any such shares may be purchased from the corporation upon the
exercise of any such right or option shall be such as shall be fixed and
stated in the resolution or resolutions adopted by the Board of Directors
providing for the creation and issue of such rights or options and, in every
case, set forth or incorporated by reference in the instrument or instruments
evidencing such rights or options.
SIXTH: The name and mailing address of the sole incorporator is the following:
Tenneco Inc., P.O. Box 2511, Houston, Texas 77252-2511.
SEVENTH: A director of this corporation shall not be disqualified by his
office from dealing or contracting with the corporation either as a vendor,
purchaser or otherwise, nor shall any transaction or contract of the corporation
be void or voidable by reason of the fact that any director or any firm of which
any director is a member, or any corporation of which any director is a
shareholder, officer or director, is in any way interested in such transaction
or contract, provided that such transaction or contract is or shall be
authorized, ratified or approved either (1) by a vote of a majority of a quorum
of the Board of Directors or of the Executive Committee, without counting in
such majority or quorum any director so interested or a member of a firm so
interested, or a shareholder, officer or director of a corporation so
interested, or (2) by the written consent, or by the vote at any stockholders'
meeting, of the holders of record of a majority of all the outstanding shares of
stock of the corporation entitled to vote, nor shall any director be liable to
account to the corporation for any profits realized by or from or through any
such transaction or contract of the corporation authorized, ratified or approved
as aforesaid by reason of the fact that he, or any firm of which he is a member
or any corporation of which he is a shareholder, officer or director was
interested in such transaction or contract. Nothing herein contained shall
create liability in the events above described or prevent the authorization,
ratification or approval of such contracts in any other manner permitted by law.
A director shall be fully protected in relying in good faith upon the books of
account of the corporation or statements prepared by any of its officials as to
the value and amount of the assets, liabilities and/or net profits of the
corporation, or any other facts pertinent to the existence and amount of surplus
or other funds from which dividends might properly be declared and paid.
EIGHTH: The corporation is to have perpetual existence.
NINTH: A. In addition to any affirmative vote required by law or this
Certificate of Incorporation or the By-Laws of the corporation, and except as
otherwise expressly provided in Section B of this Article NINTH, a Business
Combination (as hereinafter defined) with, or proposed by or on behalf of, any
Interested Stockholder (as hereinafter defined) or any Affiliate or Associate
(as hereinafter defined) of any Interested Stockholder or any person who
thereafter would be an Affiliate or Associate of such Interested Stockholder
shall require the affirmative vote of not less than 66 2/3% of the votes
entitled to be cast by the holders of all the then outstanding shares of Voting
Stock (as hereinafter defined), voting together as a single class, excluding
Voting Stock beneficially owned by any Interested Stockholder. Such affirmative
vote shall be required notwithstanding the fact that no vote may be required, or
that a lesser percentage or separate class vote may be specified, by law or in
any agreement with any national securities exchange or otherwise.
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B. The provisions of Section A of this Article NINTH shall not be applicable
to any particular Business Combination, and such Business Combination shall
require only such affirmative vote, if any, as is required by law or by any
other provision of this Certificate of Incorporation or the By-Laws of the
corporation, or any agreement with any national securities exchange, if all of
the conditions specified in either of the following Paragraphs 1 or 2 are met
or, in the case of a Business Combination not involving the payment of
consideration to the holders of the corporation's outstanding Capital Stock (as
hereinafter defined), if the condition specified in the following Paragraph I is
met:
1. The Business Combination shall have been approved either specifically or
as a transaction which is within an approved category of transactions, by a
majority (whether such approval is made prior to or subsequent to the
acquisition of, or announcement or public disclosure of the intention to
acquire, beneficial ownership of the Voting Stock that caused the Interested
Stockholder to become an Interested Stockholder) of the Continuing Directors
(as hereinafter defined).
2. All of the following conditions shall have been met:
a. the aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the Business
Combination, of consideration other than cash to be received per share by
holders of Common Stock in such Business Combination shall be at least
equal to the highest amount determined under clauses (i) and (ii) below:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid
by or on behalf of the Interested Stockholder for any share of Common
Stock in connection with the acquisition by the Interested Stockholder of
beneficial ownership of shares of Common Stock (x) within the two-year
period immediately prior to the first public announcement of the proposed
Business Combination (the "Announcement Date") or (y) in the transaction
in which it became an Interested Stockholder, whichever is higher, in
either case as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to Common Stock; and
(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder (the "Determination Date"), whichever is
higher, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to Common Stock.
b. The aggregate amount of cash and the Fair Market Value, as of the date
of the consummation of the Business Combination, of consideration other
than cash to be received per share by holders of shares of any class or
series of outstanding Capital Stock, other than Common Stock, shall be at
least equal to the highest amount determined under clauses (i), (ii),
(iii) and (iv) below
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees ) paid
by or on behalf of the Interested Stockholder for any share of such class
or series of Capital Stock in connection with the acquisition by the
Interested Stockholder of beneficial ownership of shares of such class or
series of Capital Stock (x) within the two-year period immediately prior
to the Announcement Date, or (y) in the transaction in which it became an
Interested Stockholder, whichever is higher, in either case as adjusted
for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of Capital Stock;
(ii) the Fair Market Value per share of such class or series of Capital
Stock on the Announcement Date or on the Determination Date, whichever is
higher, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to such class or series of
Capital Stock;
(iii) (if applicable) the price per share equal to the Fair Market
Value per share of such class or series of Capital Stock determined
pursuant to the immediately preceding clause (ii), multiplied by the
ratio of (x) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by or on
behalf of
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the Interested Stockholder for any share of such class or series of
Capital Stock in connection with the acquisition by the Interested
Stockholder of beneficial ownership of shares of such class or series of
Capital Stock within the two-year period immediately prior to the
Announcement Date, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to such class or
series of Capital Stock to (y) the Fair Market Value per share of such
class or series of Capital Stock on the first day in such two-year period
on which the Interested Stockholder acquired beneficial ownership of any
share of such class or series of Capital Stock, as adjusted for any
subsequent stock split, stock dividend, subdivision or reclassification
with respect to such class or series of Capital Stock; and
(iv) (if applicable) the highest preferential amount per share to which
the holders of shares of such class or series of Capital Stock would be
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the corporation regardless of
whether the Business Combination to be consummated constitutes such an
event.
The provisions of this Paragraph 2 shall be required to be met with
respect to every class or series of outstanding Capital Stock, whether or
not the Interested Stockholder has previously acquired beneficial ownership
of any shares of a particular class or series of Capital Stock.
c. The consideration to be received by holders of a particular class or
series of outstanding Capital Stock shall be in cash or in the same form as
previously has been paid by or on behalf of the Interested Stockholder in
connection with its direct or indirect acquisition of beneficial ownership
of shares of such class or series of Capital Stock. If the consideration so
paid for shares of any class or series of Capital Stock varied as to form,
the form of consideration for such class or series of Capital Stock shall
be either cash or the form used to acquire beneficial ownership of the
largest number of shares of such class or series of Capital Stock
previously acquired by the Interested Stockholder.
d. After the Determination Date and prior to the consummation of such
Business Combination: (i) except as approved by a majority of the
Continuing Directors, there shall have been no failure to declare and pay
at the regular date therefor any full quarterly dividends (whether or not
cumulative) payable in accordance with the terms of any outstanding Capital
Stock; (ii) there shall have been no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to reflect any
stock split, stock dividend or subdivision of the Common Stock), except as
approved by a majority of the Continuing Directors; (iii) there shall have
been an increase in the annual rate of dividends paid on the Common Stock
as necessary to reflect any reclassification (including any reverse stock
split), recapitalization, reorganization or any similar transaction that
has the effect of reducing the number of outstanding shares of Common
Stock, unless the failure so to increase such annual rate is approved by a
majority of the Continuing Directors; and (iv) such Interested Stockholder
shall not have become the beneficial owner of any additional shares of
Capital Stock except as part of the transaction that results in such
Interested Stockholder becoming an Interested Stockholder and except in a
transaction that, after giving effect thereto, would not result in any
increase in the Interested Stockholder's percentage beneficial ownership of
any class or series of Capital Stock.
e. A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (the "Act") (or any
subsequent provisions replacing such Act, rules or regulations) shall be
mailed to all stockholders of the corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions). The proxy or information statement shall contain on
the first page thereof, in a prominent place, any statement as to the
advisability (or inadvisability) of the Business Combination that the
Continuing Directors, or any of them, may choose to make and, if deemed
advisable by a majority of the
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Continuing Directors, the opinion of an investment banking firm selected by
a majority of the Continuing Directors as to the fairness (or not) of the
terms of the Business Combination from a financial point of view to the
holders of the outstanding shares of Capital Stock other than the
Interested Stockholder and its Affiliates or Associates (as hereinafter
defined), such investment banking firm to be paid a reasonable fee for its
services by the corporation.
f. Such Interested Stockholder shall not have made any major change in
the corporation's business or equity capital structure without the approval
of a majority of the Continuing Directors.
C. The following definitions shall apply with respect to this Article NINTH:
1. The term "Business Combination" shall mean:
a. any merger or consolidation of the corporation or any Subsidiary (as
hereinafter defined) with (i) any Interested Stockholder or (ii) any
other company (whether or not itself an Interested Stockholder) which is
or after such merger or consolidation would be an Affiliate or Associate
of an Interested Stockholder; or
b. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition or security arrangement, investment, loan, advance,
guarantee, agreement to purchase, agreement to pay, extension of credit,
joint venture participation or other arrangement (in one transaction or a
series of transactions) with or for the benefit of any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder
involving any assets, securities or commitments of the corporation, any
Subsidiary or any Interested Stockholder or any Affiliate or Associate of
any Interested Stockholder which (except for any arrangement, whether as
employee, consultant or otherwise, other than as a director, pursuant to
which any Interested Stockholder or any Affiliate or Associate thereof
shall, directly or indirectly, have any control over or responsibility
for the management of any aspect of the business or affairs of the
corporation, with respect to which arrangements the value tests set forth
below shall not apply), together with all other such arrangements
(including all contemplated future events), has an aggregate Fair Market
Value and/or involves aggregate commitments of $25,000,000 or more or
constitutes more than five percent of the book value of the total assets
(in the case of transactions involving assets or commitments other than
capital stock) or five percent of the stockholders' equity (in the case
of transactions in capital stock) of the entity in question (the
"Substantial Part"), as reflected in the most recent fiscal year-end
consolidated balance sheet of such entity existing at the time the
stockholders of the corporation would be required to approve or authorize
the Business Combination involving the assets, securities and/or
commitments constituting any Substantial Part; or
c. the adoption of any plan or proposal for the liquidation or
dissolution of the corporation or for any amendment to the corporation's
By-Laws; or
d. any reclassification of securities (including any reverse stock
split), or recapitalization of the corporation, or any merger or
consolidation of the corporation with any of its Subsidiaries or any
other transaction (whether or not with or otherwise involving an
Interested Stockholder) that has the effect, directly or indirectly, of
increasing the proportionate share of any class or series of Capital
Stock, or any securities convertible into Capital Stock or into equity
securities of any Subsidiary, that is beneficially owned by any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder; or
e. any agreement, contract or other arrangement providing for any one
or more of the actions specified in the foregoing clauses (a) to (d).
2. The term "Capital Stock" shall mean all capital stock of the corporation
authorized to be issued from time to time under Article FOURTH of this
Certificate of Incorporation, and the term "Voting Stock" shall mean all
Capital Stock which by its terms may be voted on all matters submitted to
stockholders of the corporation generally.
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3. The term "person" shall mean any individual, firm, company or other
entity and shall include any group comprised of any person and any other
person with whom such person or any Affiliate or Associate of such person has
any agreement, arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Capital Stock.
4. The term "Interested Stockholder" shall mean any person (other than the
corporation or any Subsidiary and other than any profit-sharing, employee
stock ownership or other employee benefit plan of the corporation or any
Subsidiary or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) who (a) is or has announced or publicly disclosed
a plan or intention to become the beneficial owner of Voting Stock
representing five percent or more of the votes entitled to be cast by the
holders of all then outstanding shares of Voting Stock; or (b) is an
Affiliate or Associate of the corporation and at any time within the two-year
period immediately prior to the date in question was the beneficial owner of
Voting Stock representing five percent or more of the votes entitled to be
cast by the holders of all then outstanding shares of Voting Stock.
5. A person shall be a "beneficial owner" of any Capital Stock (a) which
such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (b) which such person or any of its Affiliates or
Associates has, directly or indirectly, (i) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement, arrangement
or understanding; or (c) which are beneficially owned, directly or
indirectly, by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any shares of
Capital Stock. For the purposes of determining whether a person is an
Interested Stockholder pursuant to Paragraph 4 of this Section C, the number
of shares of Capital Stock deemed to be outstanding shall include shares
deemed beneficially owned by such person through application of this
Paragraph 5 of Section C, but shall not include any other shares of Capital
Stock that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
6. The terms "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Act as in effect on March 5,
1985 (the term "registrant" in said Rule 12b-2 meaning in this case the
corporation).
7. The term "Subsidiary" means any company of which a majority of any class
of equity securities are beneficially owned by the corporation; provided,
however, that for the purposes of the definition of Interested Stockholder
set forth in Paragraph 4 of this Section C, the term "Subsidiary" shall mean
only a company of which a majority of each class of equity security is
beneficially owned by the corporation.
8. The term "Continuing Director" means any member of the Board of
Directors of the corporation (the "Board of Directors"), while such person is
a member of the Board of Directors, who is not an Affiliate or Associate or
representative of the Interested Stockholder and was a member of the Board of
Directors prior to the time that the Interested Stockholder became an
Interested Stockholder, and any successor of a Continuing Director while such
successor is a member of the Board of Directors, who is not an Affiliate or
Associate or representative of the Interested Stockholder and is recommended
or elected to succeed the Continuing Director by a majority of Continuing
Directors.
9. The term "Fair Market Value" means (a) in the case of cash, the amount
of such cash; (b) in the case of stock, the highest closing sale price
during the 30-day period immediately preceding the date in question of a
share of such stock on the Composite Tape for New York Stock Exchange-Listed
Stocks, or, if such stock is not quoted on the Composite Tape, on the New
York Stock Exchange, or, if such stock is not listed on such Exchange, on the
principal United States securities exchange registered under the Act on which
such stock is listed, or, if such stock is not listed on any such exchange,
the highest closing bid quotation with respect to a share of such stock
during the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotation System or any
similar system then in use, or if no such quotations are available, the fair
market value
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on the date in question of a share of such stock as determined by a majority
of the Continuing Directors in good faith; and (c) in the case of property
other than cash or stock, the fair market value of such property on the date
in question as determined in good faith by a majority of the Continuing
Directors.
10. In the event of any Business Combination in which the corporation
survives, the phrase "consideration other than cash to be received" as used
in Paragraphs 2.a and 2.b of Section B of this Article NINTH shall include
the shares of Common Stock and/or the shares of any other class or series of
Capital Stock retained by the holders of such shares.
D. A majority of the Continuing Directors shall have the power and duty to
determine for the purposes of this Article NINTH, on the basis of information
known to them after reasonable inquiry, all questions arising under this Article
NINTH, including, without limitation, (a) whether a person is an Interested
Stockholder, (b) the number of shares of Capital Stock or other securities
beneficially owned by any person, (c) whether a person is an Affiliate or
Associate of another, (d) whether a Proposed Action is with, or proposed by, or
on behalf of an Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder, (e) whether the assets that are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $25,000,000 or more, and (f)
whether the assets or securities that are the subject of any Business
Combination constitute a Substantial Part. Any such determination made in good
faith shall be binding and conclusive on all parties.
E. Nothing contained in this Article NINTH shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
F. The fact that any Business Combination complies with the provisions of
Section B of this Article NINTH shall not be construed to impose any fiduciary
duty, obligation or responsibility on the Board of Directors, or any member
thereof, to approve such Business Combination or recommend its adoption or
approval to the stockholders of the corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
G. For the purposes of this Article NINTH, a Business Combination or any
proposal to amend, repeal or adopt any provision of this Certificate of
Incorporation inconsistent with this Article NINTH (collectively, "Proposed
Action") is presumed to have been proposed by or on behalf of, an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder or a
person who thereafter would become such if (1) after the Interested Stockholder
became such, the Proposed Action is proposed following the election of any
director of the corporation who with respect to such Interested Stockholder
would not qualify to serve as a Continuing Director or (2) such Interested
Stockholder, Affiliate, Associate or person votes for or consents to the
adoption of any such Proposed Action, unless as to such Interested Stockholder,
Affiliate, Associate or person a majority of the Continuing Directors makes a
good faith determination that such Proposed Action is not proposed by or on
behalf of such Interested Stockholder, Affiliate, Associate or person, based on
information known to them after reasonable inquiry.
H. Notwithstanding any other provisions of this Certificate of Incorporation
or the By-Laws of the corporation (and notwithstanding the fact that a lesser
percentage or separate class vote may be specified by law, this Certificate of
Incorporation or the By-Laws of the corporation), any proposal to amend, repeal
or adopt any provision of this Certificate of Incorporation inconsistent with
this Article NINTH which is proposed by or on behalf of an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder shall
require the affirmative vote of the holders of not less than 66 2/3% of the
votes entitled to be cast by the holders of all the then outstanding shares of
Voting Stock, voting together as a single class, excluding Voting Stock
beneficially owned by any Interested Stockholder, provided, however, that this
Section H shall not apply to, and such 66 2/3% vote shall not be required for,
any amendment, repeal or adoption unanimously recommended by the Board of
Directors if all of such directors are persons who would be eligible to serve as
Continuing Directors within the meaning of Paragraph 8 of Section C of this
Article NINTH.
14
<PAGE>
TENTH: A director of this corporation shall not be liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
the law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
IN WITNESS WHEREOF, said Tenneco Inc., being the sole incorporator, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, has caused this Certificate to be signed by J. L. Ketelsen,
its Chairman and Chief Executive Officer, and its corporate seal to be affixed
and attested by Karl A. Stewart, its Secretary, this 7th day of October, 1987,
thereby declaring and certifying that this is its act and deed and the facts
herein stated are true.
TENNECO INC.
Sole Incorporator
By: /s/ J. L. KETELSEN
--------------------------------
J. L. Ketelsen,
Chairman and Chief Executive Officer
[CORPORATE SEAL]
ATTEST:
/s/ KARL A. STEWART
- -----------------------------------
Karl A. Stewart, Secretary
15
<PAGE>
[CONFORMED COPY]
TENNECO HOLDINGS, INC
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF PREFERRED STOCK
BY RESOLUTION OF THE BOARD OF DIRECTORS PROVIDING FOR AN ISSUE OF
1,859,000 SHARES OF PREFERRED STOCK DESIGNATED
"PARTICIPATING PREFERRED STOCK"
-----------------------
We, Robert T. Blakely, Senior Vice President, and Karl A. Stewart, Secretary
of Tenneco Holdings, Inc. (hereinafter referred to as the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 151 thereof, do
HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said Corporation, as amended (hereinafter
referred to as the "Certificate of Incorporation"), said Board of Directors, by
unanimous written consent, pursuant to Section 141(f) of the General Corporation
Law of the State of Delaware, dated as of October 9, 1987, adopted a resolution
providing for the issuance of a series of Preferred Stock, to be designated
"Participating Preferred Stock", which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
the Corporation by the Certificate of Incorporation, the Board of Directors
does hereby provide for the issue of a series of Preferred Stock, without par
value, of the Corporation, to be designated "Participating Preferred Stock"
(hereinafter referred to as the "Participating Preferred Stock"), consisting of
1,859,000 shares, and to the extent that the designations, powers, preferences
and relative and other special rights and the qualifications, limitations and
restrictions of the Participating Preferred Stock are not stated and expressed
in the Certificate of Incorporation, does hereby fix and herein state and
express such designations, powers, preferences and relative and other special
rights and the qualifications, limitations and restrictions thereof, as follows
(all terms used herein which are defined in the Certificate of Incorporation
shall be deemed to have the meanings provided therein):
(1) Dividends on shares of the Participating Preferred Stock shall accrue
from, and as if issued on, January 31, 1985, except that if the number of
shares of Participating Preferred Stock shall hereafter be increased by
further resolution of the Board of Directors, dividends on such additional
shares shall accrue from such other date or dates as may be fixed by the
Board of Directors in such resolution.
(2) (a) On or before April 15, 1988 and each April 15 thereafter so long as
any shares of the Participating Preferred Stock are outstanding, the
Corporation shall pay in cash as dividends to each holder of record of such
shares the lesser of
(i) $10 per share, or
(ii) an amount per share computed by multiplying "Adjusted Operating
Income", for the next preceding calendar year, by .025, and dividing the
product thereof by 1,859,000.
For purposes hereof, the term "Adjusted Operating Income" for any year shall
be determined as follows:
The amount shown as "Income (loss) from continuing operations before
allocated overhead, management fee and taxes" on a statement of income and
retained earnings of J. I. Case Company and its consolidated subsidiaries
for such year, prepared in accordance with generally accepted accounting
principles and certified by independent public accountants of recognized
standing, reduced by the cumulative amount of losses, if any, shown as
"Income (loss) from continuing operations before allocated overhead,
management fee and taxes" on statements of income and retained earnings of
J. I. Case Company and its consolidated subsidiaries, prepared in
accordance with generally accepted accounting principles and certified by
independent public accountants of recognized standing, for 1985 and each
year thereafter to the extent such losses have not previously been applied
as a reduction in any prior year in computing Adjusted Operating Income.
<PAGE>
With respect to the calendar year 1985, the amount of losses, if any, which
may be applied to reduce Adjusted Operating Income in subsequent years shall
be equal to the product of (x) a fraction, the numerator of which is the
number of months in 1985 remaining after the end of the month in which the
closing under the Purchase Agreement dated as of November 26, 1984 among
Tenneco Inc., J. I. Case Company and International Harvester Company (the
"Purchase Agreement") occurs, and the denominator of which is twelve, and (y)
the amount shown as "Income (loss) from continuing operations before
allocated overhead, management fee and taxes" on a statement of income and
retained earnings of J. I. Case Company and its consolidated subsidiaries for
the calendar year 1985, prepared in accordance with generally accepted
accounting principles and certified by independent public accountants of
recognized standing.
(b) For purposes hereof, the holder of record of any share of the
Participating Preferred Stock entitled to receive a dividend payment pursuant
to the provisions of clause 2(a) above shall be the holder of record of such
share as of the close of business on the first day of April in the year such
dividend payment is to be made, as shown on the stockholder records of the
Corporation.
(3) The amounts which the holders of the Participating Preferred Stock
shall be entitled to receive in the event of a liquidation, dissolution, or
winding-up of the affairs of the Corporation shall, in the event of a
voluntary or involuntary liquidation, dissolution or winding-up, be $100.00
per share, plus in each case a sum equal to accrued and unpaid dividends to
the date of payment.
(4) The Participating Preferred Stock shall be redeemable in whole or in
part at any time or from time to time at the option of the Corporation at the
applicable prices set forth below; the sums payable upon the redemption
thereof at the option of the Corporation (in addition to accrued and unpaid
dividends) shall be
(i) $106 per share if redeemed prior to April 30, 1988, or
(ii) $103 per share if redeemed on or after April 30, 1988 and prior to
April 30, 1989, or
(iii) $101 per share if redeemed on or after April 30, 1989 and prior to
April 30, 1990, or
(iv) $100 per share if redeemed on or after April 30, 1990.
(5) Within each twelve month period commencing with the twelve month period
ended December 31, 1990, the Corporation shall have the right to, and shall,
acquire (and retire), either by redemption thereof at $100.00 per share plus
accrued and unpaid dividends (hereinafter referred to as the "mandatory
redemption price") or by purchase thereof in such manner as the Board of
Directors may determine from time to time at a price not exceeding the
mandatory redemption price thereof, an amount of Participating Preferred
Stock issued in connection with the transactions contemplated by the Purchase
Agreement equal to the lesser of (i) 250,000 shares of Participating
Preferred Stock or (ii) the number of shares of Participating Preferred Stock
outstanding.
If (i) more than said amounts of Participating Preferred Stock shall be
so acquired pursuant to the first paragraph of this clause (5) in any such
twelve month period, or (ii) shares of Participating Preferred Stock are
redeemed under clause (4) above, or (iii) shares of Participating Preferred
Stock are acquired by purchase at any time, and in any such case, the
certificates therefor are cancelled, the number of shares so acquired may be
credited against the amount required to be acquired in any one or more of the
twelve month periods described in the first paragraph of this clause (5)
subsequent to the date of acquisition of such shares which the Corporation
may designate.
(6) Any shares of the Participating Preferred Stock which shall have been
redeemed or otherwise acquired shall assume the status of authorized but
unissued Preferred Stock.
2
<PAGE>
(7) The number of shares of Participating Preferred Stock may, to the
extent of the Corporation's authorized and unissued Preferred Stock, be
increased by further resolution duly adopted by the Board of Directors and
the filing and recording of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that such increase
has been so authorized.
IN WITNESS WHEREOF, said Tenneco Holdings, Inc. has caused this Certificate to
be signed by Robert T. Blakely, as Senior Vice President, and its corporate seal
to be hereunto affixed and attested by Karl A. Stewart, as Secretary, this 9th
day of October, 1987.
TENNECO HOLDINGS, INC.
By: /s/ ROBERT T. BLAKELY
----------------------------
Robert T. Blakely, Senior Vice President
[CORPORATE SEAL]
ATTEST:
/s/ KARL A. STEWART
- ----------------------------------
Karl A. Stewart, Secretary
3
<PAGE>
[CONFORMED COPY]
TENNECO HOLDINGS, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF PREFERRED STOCK
BY RESOLUTION OF THE BOARD OF DIRECTORS PROVIDING FOR AN ISSUE OF
1,957,607 SHARES OF PREFERRED STOCK DESIGNATED
"$7.40 CUMULATIVE PREFERRED STOCK"
----------------------------------
We, Robert T. Blakely, Senior Vice President, and Karl A. Stewart, Secretary,
of Tenneco Holdings, Inc. (hereinafter referred to as the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 151 thereof, do
HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said Corporation, as amended (hereinafter
referred to as the "Certificate of Incorporation"), said Board of Directors, by
unanimous written consent, pursuant to Section 141(f) of the General
Corporation Law of the State of Delaware, dated as of October 9, 1987, adopted a
resolution providing for the issuance of a series of Preferred Stock, to be
designated "$7.40 Cumulative Preferred Stock", which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
the Corporation by the Certificate of Incorporation, the Board of Directors does
hereby provide for the issue of a series of Preferred Stock, without par value,
of the Corporation, to be designated "$7.40 Cumulative Preferred Stock"
(hereinafter referred to as the "$7.40 Preferred Stock"), consisting of
1,957,607 shares, and to the extent that the designations, powers, preferences
and relative and other special rights and the qualifications, limitations and
restrictions of the $7.40 Preferred Stock are not stated and expressed in the
Certificate of Incorporation, does hereby fix and herein state and express such
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions thereof, as follows (all terms used
herein which are defined in the Certificate of Incorporation shall be deemed to
have the meanings provided therein):
(1) The dividend rate on the $7.40 Preferred Stock shall be $7.40 per
annum. Dividends shall accrue on shares of the $7.40 Preferred Stock from,
and as if issued on, the quarter-yearly dividend payment date next preceding
the date of issuance thereof unless the date of issuance is a quarter-yearly
dividend payment date, in which event dividends thereon shall accrue from
such date.
(2) The amounts which the holders of the $7.40 Preferred Stock shall be
entitled to receive in the event of a liquidation, dissolution or winding-up
of the affairs of the corporation shall, in the event of a voluntary
liquidation, dissolution or winding-up, be the respective amounts which they
would be entitled to receive if on the date of such liquidation, dissolution
or winding-up the shares of the $7.40 Preferred Stock held by them had been
redeemed by the Corporation in accordance with the provisions of Subdivision
4 of Part I of Article FOURTH of the Certificate of Incorporation at the
prices set forth in paragraph (3) of this resolution, or if the $7.40
Preferred Stock shall not at the time be redeemable at the option of the
Corporation, then at $101.00 per share, or, in the event of an involuntary
liquidation, dissolution or winding-up, at $100.00 per share, plus in each
case a sum equal to accrued and unpaid dividends to the date of payment.
(3) Commencing March 1, 1988, the $7.40 Preferred Stock shall be redeemable
in whole or in part at any time or from time to time at the option of the
corporation at the applicable prices set forth below; the sums payable upon
the redemption thereof at the option of the corporation (in addition to
accrued and unpaid dividends) shall be
$101.00 per share if redeemed on or after March 1, 1988 and prior to
March 1, 1993 or
$100.00 per share if redeemed on or after March 1, 1993.
(4) (a) Within each twelve months period commencing with the twelve months
period ended March 1, 1989, the Corporation shall acquire (and retire)
either by redemption thereof at $100.00 per share plus accrued and unpaid
dividends (hereinafter referred to as the "mandatory redemption price") or by
purchase thereof in such manner as the Board of Directors may
<PAGE>
determine from time to time at a price not exceeding the mandatory
redemption prices thereof, l95,761 shares of $7.40 Preferred Stock, provided,
however, that all shares of $7.40 Preferred Stock outstanding on March 1,
1998 shall be so acquired by the corporation on such date.
If more than said amounts of $7.40 Preferred Stock shall be so acquired
pursuant to this clause (a) in any such twelve months period and the
certificates therefor cancelled, the excess may be credited against the
amount required to be acquired in any one or more of the subsequent twelve
months periods which the Corporation may designate.
(b) Within each twelve months period commencing with the twelve months
period ended March 1, 1989, the Corporation, at its option, shall be entitled
to acquire (and retire) by redemption thereof at $100.00 per share plus
accrued and unpaid dividends an amount of $7.40 Preferred Stock up to but not
exceeding 195,761 shares, which option, if not exercised, is noncumulative.
(5) (a) The holders of $7.40 Preferred Stock shall be entitled to one vote
for each share held at all meetings of the stockholders of the Corporation.
(b) Whenever, at any time or times, dividends payable on the $7.40
Preferred Stock shall be in arrears in an aggregate amount equivalent to six
full quarter-yearly dividends (in determining the amount of dividends in
arrears, the full amount of the quarter-yearly dividend shall be included for
each quarter-yearly dividend which was not paid in full), the holders of
outstanding $7.40 Preferred Stock shall have the exclusive right, voting
separately and as a class, to elect two directors of the Corporation and the
remaining directors shall be elected by the holders of the class or classes
of stock entitled to vote therefor at each meeting of the stockholders held
for the purpose of electing directors, until such time as all accrued and
unpaid dividends on the $7.40 Preferred Stock shall have been paid in full,
at which time the right of the holders of the $7.40 Preferred Stock to vote
pursuant to the provisions of this clause (b) shall terminate, subject to
revesting in the event of each and every subsequent default of the character
and for the time above mentioned. During any period of time in which the
holders of the $7.40 Preferred Stock shall have the right to elect two
directors of the Corporation as herein in this clause (b) provided, the
voting right conferred upon the holders of such stock by clause (a) of this
paragraph (5) shall be suspended with respect to the election of directors,
but shall otherwise continue in effect.
At any time when voting rights shall, pursuant to the provisions of this
clause (b), be vested in the $7.40 Preferred Stock, the number of directors
of the Corporation shall be not less than that number required so that two
directors may be elected by the holders of the $7.40 Preferred Stock and a
proper officer of the Corporation shall, upon the written request of the
holders of record of at least ten percent (10%) in aggregate stated value of
the $7.40 Preferred Stock then outstanding, addressed to the Secretary of the
Corporation, call a special meeting of holders of the $7.40 Preferred Stock
and of any other class or classes of stock having voting power with respect
to the election of directors. Such meeting shall be held at the earliest
practicable date at the place at which the last preceding annual meeting of
the stockholders of the Corporation was held, but may be held at the time and
place of the annual meeting if such annual meeting is to be held within 60
days after such voting rights shall be vested in the $7.40 Preferred Stock.
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 (10%) in aggregate stated value of
the $7.40 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
annual meeting of the stockholders of the Corporation was held. Any holder of
the $7.40 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.
2
<PAGE>
At any meeting so called, and at any other meeting of stockholders held for
the purpose of electing directors at which the holders of the $7.40 Preferred
Stock shall have the right, voting separately and as a class, to elect
directors as aforesaid, the presence in person or by proxy of one-third of
the outstanding shares of the $7.40 Preferred Stock shall be required to
constitute a quorum of such class for the election of any director by the
holders of the $7.40 Preferred Stock voting as a class.
At any such meeting or adjournment thereof, (x) the absence of a quorum of
the $7.40 Preferred Stock shall not prevent the election of directors other
than those to be elected by the $7.40 Preferred Stock voting as a class 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 $7.40 Preferred
Stock voting as a class, and (y) in the absence of either or both such
quorums, a majority 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 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.
The term of office of all directors in office at any time when voting power
shall, as aforesaid, become vested in the $7.40 Preferred Stock shall
terminate upon the election of any new directors at any meeting of
stockholders called for the purpose of electing directors. Upon any
termination of the right of the holders of the $7.40 Preferred Stock to vote
for directors as a class as in this clause (b) provided, the term of office
of all directors then in office shall terminate upon the election of new
directors at a meeting of the class or classes of the Corporation then
entitled to vote for directors, which meeting may be held at any time after
such termination of such voting right of the $7.40 Preferred Stock, upon
notice as above provided, and shall be called by the Secretary of the
Corporation upon written request of the holders of record of ten percent
(10%) of the aggregate number of outstanding shares of such class or classes
of stock then entitled to vote for directors.
(6) Any shares of the $7.40 Preferred Stock which shall have been redeemed
or otherwise acquired shall assume the status of authorized but unissued
Preferred Stock and shall not be reissued as shares of the $7.40 Preferred
Stock.
(7) The number of shares of $7.40 Preferred Stock may, to the extent of the
Corporation's authorized and unissued Preferred Stock, be increased by
further resolution duly adopted by the Board of Directors and the filing and
recording of a certificate pursuant to the provisions of the General
Corporation Law of the State of Delaware stating that such increase has been
so authorized.
(8) No shares of Preferred Stock, in addition to the shares designated
herein as $7.40 Preferred Stock shall be issued as $7.40 Preferred Stock.
IN WITNESS WHEREOF, said Tenneco Holdings, Inc. has caused this Certificate to
be signed by Robert T. Blakely, as Senior Vice President, and its corporate seal
to be hereunto affixed and attested by Karl A. Stewart, as Secretary, this 9th
day of October, 1987.
TENNECO HOLDINGS, INC.
By: /s/ ROBERT T. BLAKELY
--------------------------------
Robert T. Blakely, Senior Vice President
[CORPORATE SEAL]
ATTEST:
/s/ KARL A. STEWART
- -------------------------------------
Karl A. Stewart, Secretary
3
<PAGE>
[CONFORMED COPY]
TENNECO HOLDINGS, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF PREFERRED STOCK
BY RESOLUTION OF THE BOARD OF DIRECTORS PROVIDING FOR AN ISSUE OF
803,723 SHARES OF PREFERRED STOCK DESIGNATED
"$4.50 CUMULATIVE PREFERRED STOCK"
--------------------------
We, Robert T. Blakely, Senior Vice President, and Karl A. Stewart, Secretary,
of Tenneco Holdings, Inc. (hereinafter referred to as the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 151 thereof, do
HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said Corporation, as amended (hereinafter
referred to as the "Certificate of Incorporation"), said Board of Directors, by
unanimous written consent, pursuant to Section 141 (f) of the General
Corporation Law of the State of Delaware, dated as of October 9, 1987, adopted a
resolution providing for the issuance of a series of Preferred Stock, to be
designated "$4.50 Cumulative Preferred Stock", which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
the Corporation by the Certificate of Incorporation, the Board of Directors
does hereby provide for the issue of a series of Preferred Stock, without par
value, of the Corporation, to be designated "$4.50 Cumulative Preferred Stock"
(hereinafter referred to as the "$4.50 Preferred Stock"), consisting of 803,723
shares, and to the extent that the designations, powers, preferences and
relative and other special rights and the qualifications, limitations and
restrictions of the $4.50 Preferred Stock are not stated and expressed in the
Certificate of Incorporation, does hereby fix and herein state and express such
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions thereof, as follows (all terms
used herein which are defined in the Certificate of Incorporation shall be
deemed to have the meanings provided therein):
(1) (a) The dividend rate on the $4.50 Preferred Stock shall be $4.50 per
annum, payable by the corporation on each 12th day of March commencing in the
year 1988 (each annual dividend payment date is hereinafter referred to as an
"Annual Dividend Payment Date") so long as any shares of the $4.50 Preferred
Stock are outstanding, in cash in United States dollars to each holder of
record of such shares.
(b) The holder of record of any share of the $4.50 Preferred Stock entitled
to receive a dividend payment pursuant to the provisions of clause (1) (a)
above shall be the holder of record of such shares as of the close of
business on the first day of March in the year such dividend payment is to be
made, as shown on the stockholder records of the Corporation.
(2) Dividends on shares of the $4.50 Preferred Stock shall accrue from, and
as if issued on, March 12, 1987, except that if the number of shares of $4.50
Preferred Stock shall hereafter be increased by further resolution of the
Board of Directors, dividends on such additional shares shall accrue from
such other date or dates as may be fixed by the Board of Directors in such
resolution.
(3) The amounts which the holders of the $4.50 Preferred Stock shall be
entitled to receive in the event of a liquidation, dissolution, or winding-up
of the affairs of the Corporation shall be $100.00 per share, plus in each
case a sum equal to accrued and unpaid dividends to the date of payment.
(4) (a) The $4.50 Preferred Stock shall be redeemable in whole or in part
at any time or from time to time at the option of the Corporation at $100.00
per share plus accrued and unpaid dividends.
(b) In the event of the redemption of only part of the $4.50 Preferred
Stock at the time outstanding, the shares to be redeemed shall be selected
pro rata.
<PAGE>
(5) On or before the Annual Dividend Payment Date in the year 1999,
the Corporation shall acquire (and retire) the $4.50 Preferred Stock by
redemption thereof at $100.00 per share plus accrued and unpaid
dividends (hereinafter referred to as the "mandatory redemption price"),
or by purchase thereof in such manner as the Board of Directors may
determine from time to time at a price not exceeding the mandatory
redemption price thereof.
(6) At least 90 days' prior notice of any redemption of the $4.50
Preferred Stock pursuant to either clause (4) or clause (5) above shall
be mailed, addressed to the holders of record of the shares to be
redeemed at their respective addresses as the same shall appear on the
books of the Corporation.
(7) Any shares of the $4.50 Preferred Stock which shall have been
redeemed or otherwise acquired by the Corporation shall assume the
status of authorized but unissued Preferred Stock and shall not be
reissued as shares of the $4.50 Preferred Stock.
(8) The number of shares of $4.50 Preferred Stock may, to the extent
of the Corporation's authorized and unissued Preferred Stock, be
increased by further resolution duly adopted by the Board of Directors
and the filing and recording of a certificate pursuant to the provisions
of the General Corporation Law of the State of Delaware stating that
such increase has been so authorized.
(9) No shares of Preferred Stock shall be issued as $4.50 Preferred
Stock after December 31, 1987.
IN WITNESS WHEREOF, said Tenneco Holdings, Inc. has caused this Certificate to
be signed by Robert T. Blakely, as Senior Vice President, and its corporate seal
to be hereunto affixed and attested by Karl A. Stewart, as Secretary, this 9th
day of October, 1987.
TENNECO HOLDINGS, INC.
By: /s/ ROBERT T. BLAKELY
-------------------------------------
Robert T. Blakely, Senior Vice President
[CORPORATE SEAL]
ATTEST:
/s/ KARL A. STEWART
- ----------------------------------
Karl A. Stewart, Secretary
2
<PAGE>
[CONFORMED COPY]
TENNECO HOLDINGS, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF PREFERRED STOCK
BY RESOLUTION OF THE BOARD OF DIRECTORS PROVIDING FOR AN ISSUE OF
200,396 SHARES OF PREFERRED STOCK DESIGNATED
"VARIABLE RATE PREFERRED STOCK"
--------------------------
We, Robert T. Blakely, Senior Vice President, and Karl A. Stewart, Secretary,
of Tenneco Holdings, Inc. (hereinafter referred to as the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 151 thereof, do
HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said Corporation, as amended (hereinafter
referred to as the "Certificate of Incorporation"), said Board of Directors, by
unanimous written consent, pursuant to Section 141(f) of the General Corporation
Law of the State of Delaware, dated as of October 9, 1987, adopted a resolution
providing for the issuance of a series of Preferred Stock, to be designated
"Variable Rate Preferred Stock", which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
the Corporation by the Certificate of Incorporation, the Board of Directors
does hereby provide for the issue of a series of Preferred Stock, without par
value, of the Corporation, to be designated "Variable Rate Preferred Stock"
(hereinafter referred to as the "Variable Rate Preferred Stock"), consisting
of 200,396 shares, and to the extent that the designations, powers,
preferences and relative and other special rights and the qualifications,
limitations and restrictions of the Variable Rate Preferred Stock are not
stated and expressed in the Certificate of Incorporation, does hereby fix and
herein state and express such designations, powers, preferences and relative
and other special rights and the qualifications, limitations and restrictions
thereof, as follows (all terms used herein which are defined in the
Certificate of Incorporation shall be deemed to have the meanings provided
therein):
(1) Dividends on shares of the Variable Rate Preferred Stock shall accrue
from, and as if issued on, April 30, 1987, except that if the number of
shares of Variable Rate Preferred Stock shall hereafter be increased by
further resolution of the Board of Directors, dividends on such additional
shares shall accrue from such other date or dates as may be fixed by the
Board of Directors in such resolution.
(2) (a) On or before April 30, 1988 and each April 30 thereafter so long
as any shares of the Variable Rate Preferred Stock are outstanding, the
Corporation shall pay in cash and in U.S. dollars as dividends to each
holder of record of such shares an amount calculated as follows:
DIVIDEND PAYABLE APRIL 30
IN EACH OF THE YEARS: DIVIDEND RATE PER ANNUM
------------------------- -----------------------
1988............................... $ 3.00 per share
1989-1991.......................... 5.00 per share
1992-1994.......................... 9.00 per share
1995-1997.......................... 10.00 per share
(b) For purposes hereof, the holder of record of any share of the Variable
Rate Preferred Stock entitled to receive a dividend payment pursuant to the
provisions of clause (2)(a) above shall be the holder of record of such
share as of the close of business on the first day of April in the year such
dividend payment is to be made, as shown on the stockholder records of the
Corporation.
(3) The amounts which the holders of the Variable Rate Preferred Stock
shall be entitled to receive in the event of a liquidation, dissolution, or
winding-up of the affairs of the Corporation shall, in the event of a
voluntary or involuntary liquidation, dissolution or winding-up, be $100.00
per share, plus in each case a sum equal to accrued and unpaid dividends to
the date of payment.
<PAGE>
(4) The Variable Rate Preferred Stock shall be redeemable in whole or in
part at any time or from time to time at the option of the Corporation at
$100.00 per share plus accrued and unpaid dividends.
(5) Within each twelve month period commencing with the twelve month
period ended April 30, 1992, the Corporation shall have the right to, and
shall, acquire (and retire) either by redemption thereof at $100.00 per
share plus accrued and unpaid dividends (hereinafter referred to as the
"mandatory redemption price") or by purchase thereof in such manner as the
Board of Directors may determine from time to time at a price not exceeding
the mandatory redemption price thereof, 32,564 shares of Variable Rate
Preferred Stock; provided however, that all shares of Variable Rate
Preferred Stock outstanding on April 30, 1997 shall be so acquired by the
Corporation on that date.
If (i) more than said amounts of Variable Rate Preferred Stock shall be so
acquired pursuant to the first paragraph of this clause (5) in any such
twelve month period, or (ii) shares of Variable Rate Preferred Stock are
redeemed under clause (4) above, or (iii) shares of Variable Rate Preferred
Stock are acquired by purchase at any time, and in any such case, the
certificates therefor are cancelled, the number of shares so acquired may be
credited against the amount required to be acquired in any one or more of
the twelve month periods described in the first paragraph of this clause (5)
subsequent to the date of acquisition of such shares which the Corporation
may designate.
(6) Any shares of the Variable Rate Preferred Stock which shall have been
redeemed or otherwise acquired shall assume the status of authorized but
unissued Preferred Stock.
(7) The number of shares of Variable Rate Preferred Stock may, to the
extent of the Corporation's authorized and unissued Preferred Stock, be
increased by further resolution duly adopted by the Board of Directors and
the filing and recording of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that such increase
has been so authorized.
IN WITNESS WHEREOF, said Tenneco Holdings, Inc. has caused this Certificate to
be signed by Robert T. Blakely, as Senior Vice President, and its corporate seal
to be hereunto affixed and attested by Karl A. Stewart, as Secretary, this 9th
day of October, 1987.
TENNECO HOLDINGS, INC.
By: /s/ ROBERT T. BLAKELY
----------------------------------------
Robert T. Blakely, Senior Vice President
[CORPORATE SEAL]
ATTEST:
/s/ KARL A. STEWART
- ----------------------------------
Karl A. Stewart, Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TENNECO HOLDINGS, INC.
----------------------
TENNECO HOLDINGS, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Company, by Unanimous Written
Consent dated December 7, 1987, adopted a resolution setting forth a proposed
amendment to the Certificate of Incorporation of the Company, declaring said
amendment to be advisable, the resolution setting forth the proposed amendment
is as follows:
RESOLVED, that the Certificate of Incorporation of the Company be amended by
deleting in its entirety Article FIRST thereof, and by inserting in lieu
thereof the provision hereinafter set forth so that, as amended, the said
Article FIRST shall be and read as follows:
"FIRST: The name of the corporation is Tenneco Inc."
;and it is further
RESOLVED, that the Certificate of Incorporation of the Company be amended by
deleting in its entirety the first sentence of Article FIFTH, Subsection (A)
thereof, and by inserting in lieu thereof the provision hereinafter set forth
so that, as amended, the said Article FIFTH, Subsection (A) shall be and read
as follows:
"The business and affairs of the corporation shall be managed by or under
the direction of a Board of Directors consisting of not less than eight nor
more than sixteen directors, the exact number of directors to be determined
from time to time by resolution adopted by affirmative vote of a majority of
the entire Board of Directors."
SECOND: That thereafter, the said Amendment has been consented to and
authorized by the holder of all the issued and outstanding stock entitled to
vote thereon by a written Consent given in accordance with the provisions of
Section 228 of the General Corporation Law of the State of Delaware and filed
with the Corporation on the 7th day of December, 1987.
<PAGE>
THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said TENNECO HOLDINGS, INC. has caused this Certificate to
be signed by M. W. Meyer, Vice President, and its corporate seal to be hereunto
affixed and attested by Karl A. Stewart, Secretary, this 7th day of December,
1987.
TENNECO HOLDINGS, INC.
By: /s/ M. W. Meyer
----------------------------------
M. W. Meyer
Vice President
[CORPORATE SEAL]
ATTEST:
By: /s/ Karl A. Stewart
-------------------------
Karl A. Stewart,
Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TENNECO INC.
------------
TENNECO INC., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the "Company"), DOES HEREBY
CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Company resolutions
were adopted setting forth a proposed amendment to the Certificate of
Incorporation of said corporation, declaring said amendment to be advisable and
directing that the amendment be considered at the annual meeting of the
stockholders of said corporation. The resolutions setting forth the proposed
amendment are as follows:
RESOLVED, that Section 2 and Section 3 of Part I of Article FOURTH to the
Company's Certificate of Incorporation providing for the payment of
dividends on Preferred Stock of the Company, be, and the same hereby are,
amended and restated in their entirety as follows:
"2. The holders of the Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of any funds legally
available therefor, cumulative preferential dividends in cash, at the rate
per annum fixed for such series, and no more, payable to the stockholders
of record on a date fixed for the purpose by the Board of Directors in
advance of payment of each particular dividend. Unless other dividend
periods and dividend payment dates are fixed for any series of Preferred
Stock, dividends on the Preferred Stock shall be payable quarter-yearly on
the last days of March, June, September and December in each year.
Dividends on shares of the Preferred Stock shall accrue from the date of
issuance, or from such other date or dates as may be fixed by the Board of
Directors for any series, and shall be cumulative. Each share of Preferred
Stock shall rank on a parity with each other share of Preferred Stock,
irrespective of series, with respect to preferential dividends at the
respective rates fixed for such series, and no dividend shall be declared
or paid or set apart for payment on the Preferred Stock of any series
unless at the same time there shall have been theretofore or concurrently
declared or paid or set apart for payment, as the case may be, a dividend
in like proportion upon the Preferred Stock of each other
<PAGE>
series in respect of all past dividend periods and any then current
dividend period the payment date for which precedes or coincides with the
dividend payment date for the dividend proposed to be so declared or paid
or set apart for payment.
"3. So long as any shares of Preferred Stock shall remain outstanding,
in no event shall any dividends whatsoever, whether in cash, stock, or
otherwise, be paid or declared, or any distribution be made, on any class
of stock ranking junior to the Preferred Stock, nor shall any shares of
stock ranking junior to the Preferred Stock be purchased, retired or
otherwise acquired for a valuable consideration by the corporation, unless
all dividends on the Preferred Stock in respect of all past dividend
periods shall have been paid, or declared and a sum sufficient for the
payment thereof set apart, and unless there shall have been theretofore or
concurrently declared or paid the full dividend thereon in respect of any
then current dividend period the payment date for which precedes or
coincides with the proposed date of payment or distribution on, or
proposed date of purchase, retirement or acquisition of, as the case may
be, any stock ranking junior to the Preferred Stock."
and it is further
RESOLVED, that the amendment to the Company's Certificate of Incorporation
as set forth in the preceding resolution shall be submitted to those
stockholders of the Company who are entitled under applicable law to vote on
the adoption of such provisions, for their consideration at the 1988 Annual
Meeting of Stockholders to be held on May 10, 1988, and that the Board of
Directors does hereby declare said amendment advisable and in the best
interests of the Company, and does hereby recommend that the stockholders of
the Company vote in favor of such amendment; and it is further
RESOLVED, that upon the adoption by the stockholders of the Company
entitled to vote thereon at the Annual Meeting of Stockholders to be held on
May 10, 1988, of the amendment to the Company's Certificate of Incorporation
set forth in the above resolution to be acted upon at said meeting, the
officers of the Company be, and they hereby are, authorized, empowered and
directed (i) to file with the Secretary of State of the State of Delaware a
Certificate of Amendment of the Certificate of Incorporation of the
Corporation, and (ii) to take such further action as may be deemed necessary
or advisable by such officers to carry out the intent and purpose of said
resolutions.
2
<PAGE>
SECOND: That thereafter, pursuant to the resolution of its Board of Directors,
an annual meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware, at which meeting a majority of the outstanding stock
entitled to vote thereon, as required by the General Corporation Law of the
State of Delaware and the Company's Certificate of Incorporation, as amended,
voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That said amendment does not effect any change in the issued shares of
the Company.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by M. W. Meyer, as Vice President, and its corporate seal to be hereunto affixed
and attested by Karl A. Stewart, as Secretary, this 17th day of May, 1988.
TENNECO INC.
By: /s/ M. W. MEYER
-------------------
M. W. Meyer
Vice President
TENNECO INC.
DELAWARE
CORPORATE
1987
SEAL
ATTEST:
By: /s/ KARL A. STEWART
------------------------
Karl A. Stewart
Secretary
3
<PAGE>
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF SERIES A
PARTICIPATING JUNIOR PREFERRED STOCK
TENNECO INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, J. L. Ketelsen, Chairman of the Board and Karl A. Stewart, Secretary, of
Tenneco Inc., a corporation organized and existing under the General Corporation
Law of the State of Delaware (the "Corporation"), in accordance with the
provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the said Corporation, the said Board of
Directors on May 24, 1988, adopted the following resolution creating a series of
3,500,000 shares of Junior Preferred Stock designated as Series A Participating
Junior Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
this Corporation in accordance with the provisions of its Certificate of
Incorporation, a series of Junior Preferred Stock of the Corporation be and it
hereby is created, and that the designation and amount thereof and the voting
powers, preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Participating Junior Preferred Stock" and the number of
shares constituting such series shall be 3,500,000.
Section 2. Dividends and Distributions.
(A) The dividend rate on the shares of Series A Participating Junior Preferred
Stock for each quarterly dividend period (hereinafter referred to as a
"quarterly dividend period"), which quarterly dividend periods shall commence on
January 1, April 1, July 1 and October 1 in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date") (or in the case of
original issuance, from the date of original issuance) and shall end on and
include the day next preceding the first date of the next quarterly dividend
period,
<PAGE>
shall be equal (rounded to the nearest cent) to the greater of (a) $5 or (b)
subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in cash, based upon the fair market value at the time
the non-cash dividend or other distribution is declared as determined in good
faith by the Board of Directors) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared (but not withdrawn) on the common stock, par value $5.00
per share, of this Corporation (the "Common Stock") during the immediately
preceding quarterly dividend period, or, with respect to the first quarterly
dividend period, since the first issuance of any share or fraction of a share of
Series A Participating Junior Preferred Stock. In the event the Corporation
shall at any time after May 24, 1988 (the "Rights Declaration Date") (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the amount to which holders
of shares of Series A Participating Junior Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Dividends shall begin to accrue and be cumulative on outstanding shares of
Series A Participating Junior Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Participating Junior Preferred Stock, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of shares of
Series A Participating Junior Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Participating Junior
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a
2
<PAGE>
record date for the determination of holders of shares of Series A Participating
Junior Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 45 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Participating
Junior Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each share
of Series A Participating Junior Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation and will vote together with the shares of Common Stock as one
class on all such matters. In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of shares of
Series A Participating Junior Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) (i) If at any time dividends on any Series A Participating Junior
Preferred Stock shall be in arrears in an amount equal to six quarterly
dividends thereon, the holders of the Series A Participating Junior Preferred
Stock, voting as a separate series from all other series of Junior Preferred
Stock and classes of capital stock, shall be entitled to elect two members of
the Board of Directors in addition to any Directors elected by any other series,
class or classes of securities and the authorized number of Directors will
automatically be increased by two. Promptly thereafter, the Board of Directors
of this Corporation shall, as soon as may be practicable, call a special meeting
of holders of Series A Participating Junior Preferred Stock for the purpose of
electing such members of the Board of Directors. Said special meeting shall in
any event be held within 45 days of the occurrence of such arrearage.
(ii) During any period when the holders of Series A Participating Junior
Preferred Stock, voting as a separate series, shall be entitled and shall have
exercised their right to elect two Directors, then and during such time as such
right continues (a) the then authorized number of Directors shall
3
<PAGE>
be increased by two, and the holders of Series A Participating Junior Preferred
Stock, voting as a separate series, shall be entitled to elect the additional
Director so provided for, and (b) each such additional Director shall not be a
member of Class I, Class II or Class III of the Board of Directors, but shall
serve until the next annual meeting of stockholders for the election of
Directors, or until his successor shall be elected and shall qualify, or until
his right to hold such office terminates pursuant to the provisions of this
Section 3B.
(iii) A Director elected pursuant to the terms hereof may be removed with or
without cause by the holders of Series A Participating Junior Preferred Stock
entitled to vote in an election of such Director.
(iv) If, during any interval between annual meetings of stockholders for the
election of Directors and while the holders of Series A Participating Junior
Preferred Stock shall be entitled to elect two Directors, there is no such
Director in office by reason of resignation, death or removal, then, promptly
thereafter, the Board of Directors shall cause a special meeting of the holders
of Series A Participating Junior Preferred Stock for the purpose of filling such
vacancy and such vacancy shall be filled at such special meeting. Such special
meeting shall in any event be held within 45 days of the occurrence of such
vacancy.
(v) At such time as the arrearage is fully cured, and all dividends
accumulated and unpaid on any shares of Series A Participating Junior Preferred
Stock outstanding are paid, and, in addition thereto, at least one regular
dividend has been paid when subsequent to curing such arrearage, the term of
office of any Director elected pursuant hereto, or his successor, shall
automatically terminate, and the authorized number of Directors shall
automatically decrease by two, the rights of the holders of the shares of the
Series A Participating Junior Preferred Stock to vote as provided in this
Section shall cease, subject to renewal from time to time upon the same terms
and conditions, and the holders of shares of the Series A Participating Junior
Preferred Stock shall have only the limited voting rights elsewhere herein set
forth.
Section 4. Required Shares. Any shares of Series A Participating Junior
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Junior Preferred Stock and may be reissued as part of a new
series of Junior Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
4
<PAGE>
Section 5. Liquidation, Dissolution or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of the Series A Participating Junior Preferred Stock
shall be entitled to receive the greater of (a) $100 per share, plus accrued
dividends to the date of distribution, whether or not earned or declared, or (b)
an amount per share, subject to the provision for adjustment hereinafter set
forth, equal to 100 times the aggregate amount to be distributed per share to
holders of Common Stock. In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount to which holders of shares of Series A Participating
Junior Preferred Stock were entitled immediately prior to such event pursuant to
clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction of the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 6. Optional Redemption. (a) The Company shall have the option to
redeem the whole or any part of the Series A Participating Junior Preferred
Stock at any time at a redemption price equal to, subject to the provision for
adjustment hereinafter set forth, 100 times the "current per share market price"
of the Common Stock on the date of the mailing of the notice of redemption,
together with unpaid accumulated dividends to the date of such redemption. In
the event the Company shall at any time after June 10, 1988 (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount to which holders of
shares of Series A Participating Junior Preferred Stock were otherwise entitled
immediately prior to such event under the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. The "current per share market
price" on any date shall be deemed to be the average of the closing price per
share of such Common Stock for the 10 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date. The closing price for each
day shall be the last sale price, regular way, or, in case no such
5
<PAGE>
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use or, if on any such date the Common Stock is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Common Stock selected by
the Board of Directors of the Company. If on such date no such market maker is
making a market in the Common Stock, the fair value of the Common Stock on such
date as determined in good faith by the Board of Directors of the Company shall
be used. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking institutions in the State of New
York are not authorized or obligated by law or executive order to close.
(b) Notice of any such redemption shall be given by mailing to the holders
of the Series A Participating Junior Preferred Stock a notice of such
redemption, first class postage prepaid, not later than the thirtieth day and
not earlier than the sixtieth day before the date fixed for redemption, at their
last address as the same shall appear upon the books of the Company. Any notice
which is mailed in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the shareholder received such notice, and
failure duly to give such notice by mail, or any defect in such notice, to any
holder of Series A Participating Junior Preferred Stock shall not affect the
validity of the proceedings for the redemption of such Series A Participating
Junior Preferred Stock. If less than all the outstanding shares of Series A
Participating Junior Preferred Stock are to be redeemed, the redemption shall be
made by lot as determined by the Board of Directors.
6
<PAGE>
(c) The notice of redemption to each holder of Series A Participating Junior
Preferred Stock shall specify (a) the number of shares of Series A Participating
Junior Preferred Stock of such holder to be redeemed, (b) the date fixed for
redemption, (c) the redemption price and (d) the place of payment of the
redemption price.
(d) If any such notice of redemption shall have been duly given or if the
Company shall have given to the bank or trust company hereinafter referred to
irrevocable written authorization promptly to give or complete such notice, and
if on or before the redemption date specified therein the funds necessary for
such redemption shall have been deposited by the Company with the bank or trust
company designated in such notice, doing business in the City of Houston, State
of Texas, and having a capital, surplus and undivided profits aggregating at
least $25,000,000 according to its last published statement of condition, in
trust for the benefit of the holders of Series A Participating Junior Preferred
Stock called for redemption, then, notwithstanding that any certificate for such
shares so called for redemption shall not have been surrendered for
cancellation, from and after the time of such deposit all such shares called for
redemption shall no longer be deemed outstanding and all rights with respect to
such shares shall no longer be deemed outstanding and shall forthwith cease and
terminate, except the right of the holders thereof to receive from such bank or
trust company at any time after the time of such deposit the funds so deposited,
without interest, and the right to exercise, up to the close of business on the
fifth day before the date fixed for redemption. In case less than all the shares
represented by any surrendered certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares. Any interest accrued on such funds
shall be paid to the Company from time to time. Any funds so deposited and
unclaimed at the end of six years from such redemption date shall be repaid to
the Company, after which the holders of shares of Series A Participating Junior
Preferred Stock called for redemption shall look only to the Company for payment
thereof.
Section 7. Fractional Shares. Series A Participating Junior Preferred Stock
may be issued in fractions of a share that shall entitle the holder, in
proportion to such holders fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Participating Junior Preferred Stock.
7
<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury as of the 24th day
of May, 1988.
/s/ J. L. KETELSEN
-------------------------------
J. L. Ketelsen
[CORPORATE SEAL] Chairman of the Board
Attest:
/s/ K. A. STEWART
- ---------------------------
K. A. Stewart
Secretary
8
<PAGE>
TENNECO INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
---------------------
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to-wit: One Hundred Ninety-
Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: That this Certificate of Retirement shall be effective on March 1,
1989.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by Peter Menikoff, a Vice President, and attested by Karl A. Stewart, Secretary,
this 21st day of February, A.D., 1989.
TENNECO INC. TENNECO INC.
DELAWARE
CORPORATE
1987 /s/ Peter Menikoff
SEAL ------------------------------
Vice President
ATTEST:
/s/ Karl A. Stewart
- -----------------------------
Secretary
<PAGE>
TENNECO INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
---------------------
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to-wit: One Hundred Ninety-
Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: That this Certificate of Retirement shall be effective on March 1,
1990.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by Peter Menikoff, a Vice President and Treasurer, and attested by Karl A.
Stewart, Secretary, this 21st day of February, A.D., 1990.
TENNECO INC. TENNECO INC.
DELAWARE
CORPORATE
1987 /s/ Peter Menikoff
SEAL ------------------------------
Vice President and Treasurer
ATTEST:
/s/ Karl A. Stewart
- ------------------------------
Secretary
<PAGE>
TENNEC0 INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
---------------------
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to-wit: One Hundred Ninety-
Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: This Certificate shall become effective on March 1, 1991.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by Peter Menikoff, a Vice President and Treasurer, and attested by Karl A.
Stewart, Secretary, this 21st day of February, 1991.
TENNECO INC.
BY: /s/ Peter Menikoff
-----------------------------
Peter Menikoff,
Vice President and Treasurer
[CORPORATE SEAL]
ATTEST:
/s/ Karl A. Stewart
- ------------------------------
Karl A. Stewart, Secretary
<PAGE>
[CONFORMED COPY]
TENNECO INC.
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF PREFERRED STOCK
BY RESOLUTIONS OF THE BOARD OF DIRECTORS
PROVIDING FOR AN ISSUE OF
10,062,500 SHARES
OF PREFERRED STOCK DESIGNATED
"SERIES A CUMULATIVE PREFERRED STOCK"
-------------------------
We, Robert T. Blakely, Senior Vice President, and Karl A. Stewart, 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 (hereinafter
referred to as the "Certificate of Incorporation"), the Board of Directors is
authorized to issue Preferred Stock, without par value, of the Corporation
in one or more series, and the Board of Directors (i) has authorized the
issuance of the series of Preferred Stock hereinafter provided for, (ii) has
authorized a special committee of the Board of Directors (hereinafter referred
to as the "Stock Issuance Committee") to adopt the resolution set forth below
creating a series of 10,062,500 shares of Preferred Stock, without par value,
designated as Series A Cumulative Preferred Stock and (iii) has adopted the
immediately following resolution granting voting rights to the holders of such
series of Preferred Stock in addition to the voting rights granted to holders of
Preferred Stock by the Certificate of Incorporation:
RESOLVED, that the series of Preferred Stock that the Stock Issuance
Committee has been authorized by the Board of Directors to create (hereinafter
called "Preferred Stock of Such Series") shall have the following voting
rights in addition to the voting rights granted to holders of Preferred Stock
by the Certificate of Incorporation:
Whenever, at any time or times, dividends payable on the Preferred Stock of
Such Series shall be in arrears in an aggregate amount equivalent to six full
quarter-yearly dividends (in determining the amount of dividends in arrears,
the full amount of the quarter-yearly dividend shall be included for each
quarter-yearly dividend which was not paid in full), the holders of
outstanding Preferred Stock of Such Series shall have the exclusive right,
voting separately and as a class, to elect two directors of the Corporation
and the remaining directors shall be elected by the holders of the class or
classes of stock entitled to vote therefor at each meeting of the stockholders
held for the purpose of electing directors, until such time as all accrued and
unpaid dividends on the Preferred Stock of Such Series shall have been paid in
full, at which time the right of the holders of the Preferred Stock of Such
Series to vote pursuant to the provisions of this resolution 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
resolution, be vested in the Preferred Stock of Such Series, the number of
directors of the Corporation shall be not less than that number required so
that two directors may be elected by the holders of the Preferred Stock of
Such Series and a proper officer of the Corporation shall, upon the written
request of the holders of record of at least ten percent in aggregate stated
value of the Preferred Stock of Such Series then outstanding, addressed to the
Secretary of the Corporation, call a special meeting of holders of the
Preferred Stock of Such Series and of any other class or classes of stock
having voting power with respect to the election of directors. Such meeting
shall be held at the earliest practicable date at the place at which the last
preceding annual meeting of the stockholders of the Corporation was held, but
may be held at the time
<PAGE>
and place of the annual meeting if such annual meeting is to be held within 60
days after such voting rights shall be vested in the Preferred Stock of Such
Series. 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 stated value of the Preferred Stock of Such Series 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 annual meeting of the stockholders of the Corporation was held.
Any holder of the Preferred Stock of Such Series 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.
At any meeting so called, and at any other meeting of stockholders held for
the purpose of electing directors at which the holders of the Preferred Stock
of Such Series shall have the right, voting separately and as a class, to
elect directors as aforesaid, the presence in person or by proxy of a majority
of the outstanding shares of the Preferred Stock of Such Series shall be
required to constitute a quorum of such class for the election of any director
by the holders of the Preferred Stock of Such Series voting as a class.
At any such meeting or adjournment thereof, (x) the absence of a quorum of
the Preferred Stock of Such Series shall not prevent the election of directors
other than those to be elected by the Preferred Stock of Such Series voting as
a class 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 Preferred
Stock of Such Series voting as a class, and (y) in the absence of either or
both such quorums, a majority 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 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.
Upon any termination of the right of the holders of the Preferred Stock of
Such Series to vote for directors as a class as herein provided, the term of
office of the directors so elected by the holders of the Preferred Stock of
Such Series shall terminate and the number of directors shall be reduced
accordingly.
and that the Stock Issuance Committee has adopted the following resolution
creating a series of 10,062,500 shares of Preferred Stock, without par value,
designated as Series A Cumulative Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
the Corporation by the Certificate of Incorporation and the authority vested
by such Board in a Stock Issuance Committee, all of the members of which are
members of such Board, a series of Preferred Stock, without par value, of the
Corporation be, and hereby is created, to be designated "Series A Cumulative
Preferred Stock" (hereinafter referred to as the "Series A Preferred Stock"),
consisting of l0,062,500 shares, and to the extent that the designations,
powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of the Series A Preferred Stock
are not stated and expressed in the Certificate of Incorporation or in
resolutions adopted by the Board of Directors of the Corporation, such
designations, powers, preferences and relative and other special rights and
the qualifications, limitations and restrictions thereof, are hereby fixed and
stated to be as follows (all terms used herein which are defined in the
Certificate of Incorporation shall be deemed to have the meanings provided
therein):
Section 1. Dividends. The dividend rate on the Series A Preferred Stock
shall be $5.60 per annum ($l.40 per quarter-year). Dividends on shares of the
Series A Preferred Stock shall accrue on a daily basis from December 24, l991
to and including the Final Conversion Date (as defined in Section 2) or such
earlier date on which such shares are converted as provided herein. The first
dividend payment
2
<PAGE>
will be for the period from December 24, 1991 to and including March 31, 1992.
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.
Section 2. Conversions (a) Final Conversion. Unless earlier converted in
accordance with the provisions hereof, on December 31, 1994 (the "Final
Conversion Date"), all outstanding shares of Series A Preferred Stock shall be
converted automatically into, through the issue by the Corporation in the manner
provided hereinafter of, fully paid and non-assessable shares of Common Stock.
On such date, each holder of shares of Series A Preferred Stock, upon conversion
of the Series A Preferred Stock, shall:
(i) receive the number of shares of Common Stock equal to the product of the
Common Equivalent Rate (determined as provided in paragraph (d) of this
Section 2) in effect on the Final Conversion Date multiplied by the number of
shares of Series A Preferred Stock owned by such holder; and
(ii) be entitled to receive an amount in cash equal to all accrued and
unpaid dividends to and including the Final Conversion Date, whether or not
earned or declared, out of funds legally available therefor.
(b) Upon Certain Mergers or Consolidations or Other Events. Upon either:
(1) immediately prior to the effectiveness of a merger or consolidation of
the Corporation that results in the conversion or exchange of the Common Stock
into the right to receive other securities or other property (whether of the
Corporation or any other entity) (any such merger or consolidation is referred
to herein as a "Merger or Consolidation"), or
(2) immediately prior to the close of business on the business day
immediately preceding the Distribution Date (as defined in clause (iv) of
paragraph (h) of this Section 2) (the occurrence of the Distribution Date is
referred to herein as the "Distribution Date Event").
then, in either event each outstanding share of Series A Preferred Stock shall
be converted automatically into the following:
(i) one share of Common Stock multiplied by the Common Equivalent Rate in
effect on the effective date of a Merger or Consolidation or on such business
day immediately preceding the Distribution Date, as the case may be; plus
(ii) the right to receive an amount in cash equal to all accrued and unpaid
dividends, out of funds legally available therefor, on such share of Series A
Preferred Stock to and including the Settlement Date (as defined in clause
(vi) of paragraph (h) of this Section 2) (and dividends shall cease to accrue
as of the Settlement Date); plus
(iii) the right to receive an amount in cash initially equal to $7.20,
reduced by $0.006624 on each day from December 24, 199l (computed on the basis
of a 360-day year of twelve 30-day months) to and including October 31, 1994,
and equal to zero thereafter, in each case to and including the Settlement
Date, unless sooner converted.
At the option of the Corporation, it may deliver on the Settlement Date, in
lieu of the cash consideration described in clauses (ii) and (iii) of the
preceding sentence, a number of shares of Common Stock equal to one times a
fraction, the numerator of which is the amount of cash consideration described
in such clauses (ii) and (iii) and the denominator of which is the Current
Market Price of the Common Stock determined, in the case of a Merger or
Consolidation, as of the second Trading Date immediately preceding the Notice
Date and, in the case of a Distribution Date Event, as of the second Trading
Date immediately preceding the Distribution Date.
Such option may be exercised by the Corporation in whole or in part with respect
to the outstanding Series A Preferred Stock.
3
<PAGE>
(c) Right to Call for Conversion. At any time and from time to time prior to
the Final Conversion Date, the Corporation shall have the right to call, in
whole or in part, the outstanding shares of Series A Preferred Stock for
conversion into shares of Common Stock (subject to the notice provisions set
forth in paragraph (i) of this Section 2) and to deliver to the holders thereof
in exchange for each such share called for conversion, a number of shares of
Common Stock equal to one times a fraction, the numerator of which is the Call
Price (as defined in paragraph (h) of this Section 2) on the conversion date and
the denominator of which is the Current Market Price (as defined in clause (v)
of paragraph (d) of this Section 2) of the Common Stock determined as of the
second Trading Date preceding the Notice Date, plus in each case an amount in
cash equal to accrued and unpaid dividends to and including the date of
conversion.
(d) Common Equivalent Rate; Adjustments. The Common Equivalent Rate to be used
to determine the number of shares of Common Stock to be delivered on the
conversion of the Series A Preferred Stock into shares of Common Stock pursuant
to paragraphs (a) and (b) of this Section 2 shall be initially two shares of
Common Stock for each share of Series A Preferred Stock; provided, however, that
such Common Equivalent Rate shall be subject to adjustment from time to time as
provided below in this paragraph (d). All adjustments to the Common Equivalent
Rate shall be calculated to the nearest l/100th of a share of Common Stock. Such
rate in effect at any time is herein called the "Common Equivalent Rate."
(i) If the Corporation shall either:
(l) pay a dividend or make a distribution with respect to Common Stock in
shares of Common Stock,
(2) subdivide or split its outstanding shares of Common Stock,
(3) combine its outstanding shares of Common Stock into a smaller number
of shares, or
(4) issue by reclassification of its shares of Common Stock any shares of
common stock of the Corporation
then, in any such event, the Common Equivalent Rate in effect immediately
prior thereto shall be adjusted so that the holder of a share of the Series A
Preferred Stock shall be entitled to receive on the conversion of such share
of the Series A Preferred Stock, the number of shares of Common Stock of the
Corporation which such holder would have owned or been entitled to receive
after the happening of any of the events described above had such shares of
the Series A Preferred Stock been surrendered for conversion at the Common
Equivalent Rate in effect immediately prior to such time. Such adjustment
shall become effective at the opening of business on the business day next
following the record date for determination of stockholders entitled to
receive such dividend or distribution in the case of a dividend or
distribution and shall become effective immediately after the effective date
in case of a subdivision, combination or reclassification; and any shares of
Common Stock issuable in payment of a dividend shall be deemed to have been
issued immediately prior to the close of business on the record date for such
dividend for purposes of calculating the number of outstanding shares of
Common Stock under clauses (ii) and (iii) below.
(ii) If the Corporation shall issue rights or warrants to all holders of its
Common Stock entitling them (for a period not exceeding 45 days from the date
of such issuance) to subscribe for or purchase shares of Common Stock at a
price per share less than the Current Market Price per share (determined
pursuant to clause (v) below) of the Common Stock on the record date for the
determination of stockholders entitled to receive such rights or warrants,
then in each case the Common Equivalent Rate shall be adjusted by multiplying
the Common Equivalent Rate in effect immediately prior thereto by a fraction,
of which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants, immediately
prior to such issuance, plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the denominator shall he
the number of shares of Common Stock outstanding on the date of issuance of
such rights or warrants, immediately prior to such issuance, plus the number
of shares which the aggregate offering
4
<PAGE>
price of the total number of shares so offered for subscription or purchase
would purchase at such Current Market Price (determined by multiplying such
total number of shares by the exercise price of such rights or warrants and
dividing the product so obtained by such Current Market Price). Shares of
Common Stock owned by the Corporation or by another corporation of which a
majority of the shares entitled to vote in the election of directors are held,
directly or indirectly, by the Corporation shall not be deemed to be
outstanding for purposes of such computation. Such adjustment shall become
effective at the opening of business on the business day next following the
record date for the determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are not
delivered after the expiration of such rights or warrants, the Common
Equivalent Rate shall be readjusted to the Common Equivalent Rate which would
then be in effect had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock actually delivered.
(iii) If the Corporation shall pay a dividend or make a distribution to all
holders of its Common Stock of evidence of its indebtedness or other assets
(including shares of capital stock but excluding any cash dividends or
distributions and dividends referred to in clause (i) above), or shall
distribute to all holders of its Common Stock rights or warrants to subscribe
for or purchase securities of the Corporation or any of its subsidiaries
(other than those referred to in clause (ii) above), then in each such case
the Common Equivalent Rate shall be adjusted by multiplying the Common
Equivalent Rate in effect immediately prior to the date of such distribution
by a fraction, of which the numerator shall be the Current Market Price per
share of Common Stock (determined pursuant to clause (v) below) on the record
date mentioned below, and of which the denominator shall be such Current
Market Price per share of Common Stock less the then fair market value (as
determined by the Board of Directors of the Corporation, whose determination
shall be conclusive) as of such record date of the portion of the assets or
evidences of indebtedness so distributed, or of such subscription rights or
warrants, applicable to one share of Common Stock. Such adjustment shall
become effective on the opening of business on the business day next following
the record date for the determination of stockholders entitled to receive such
distribution.
(iv) Anything in this Section 2 notwithstanding, the Corporation shall be
entitled to make such increases in the Common Equivalent Rate, in addition to
those required by this Section 2, as it in its discretion shall determine to
be advisable in order that any stock dividends, subdivision of shares,
distribution of rights to purchase stock or securities, or a distribution of
securities convertible into or exchangeable for stock (or any transaction
which could be treated as any of the foregoing transactions pursuant to
Section 305 of the Internal Revenue Code of l986, as amended) hereafter made
by the Corporation to its stockholders shall not be taxable. No adjustment in
the Common Equivalent Rate shall be made as a result of the rights issued in
connection with the Rights Agreement (as defined in clause (iv) of paragraph
(h) of this Section 2).
(v) As used in this Section 2, the Current Market Price per share of Common
Stock on any date shall be the average of the daily Closing Prices for the
five consecutive Trading Dates ending on the date of determination of the
Current Market Price (appropriately adjusted to take into account the
occurrence during such five-day period of any event that results in an
adjustment of the Common Equivalent Rate); provided, however, that if the
Closing Price for the Trading Date next succeeding such five-day period (the
"next-day closing price") is less than 95% of such five-day average, then the
Current Market Price per share of Common Stock on such date of determination
shall be the next-day closing price.
(vi) In any case in which paragraph (d) of this Section 2 shall require that
an adjustment as a result of any event become effective at the opening of
business on the business day next following a record date and the date fixed
for conversion pursuant to paragraph (a) or (c) of this Section 2 occurs after
such record date, but before the occurrence of such event, the Corporation may
in its sole discretion elect to defer the following until after the occurrence
of such event:
(1) issuing to the holder of any shares of the Series A Preferred Stock
surrendered for conversion the additional shares of Common Stock issuable
upon such conversion over and above
5
<PAGE>
the shares of Common Stock issuable upon such conversion on the basis of the
Common Equivalent Rate prior to adjustment; and
(2) paying to such holder any amount in cash in lieu of a fractional share
of Common Stock pursuant to paragraph (f) of this Section 2.
(e) Notice of Adjustments. Whenever the Common Equivalent Rate is adjusted as
herein provided the Corporation shall:
(i) forthwith compute the adjusted Common Equivalent Rate in accordance with
this Section 2 and prepare a certificate signed by the Chief Executive
Officer, the President or any Vice President of the Corporation setting forth
the adjusted Common Equivalent Rate, the method of calculation thereof in
reasonable detail and the facts requiring such adjustment and upon which such
adjustment is based, and file such certificate forthwith with the transfer
agent or agents for the Series A Preferred Stock and the Common Stock; and
(ii) mail a notice stating that the Common Equivalent Rate has been
adjusted, the facts requiring such adjustment and upon which such adjustment
is based and setting forth the adjusted Common Equivalent Rate to the holders
of record of the outstanding shares of the Series A Preferred Stock at or
prior to the time the Corporation mails an interim statement to its
stockholders covering the quarter-yearly period during which the facts
requiring such adjustment occurred, but in any event within 45 days of the end
of such quarter.
(f) No Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of shares of the Series A Preferred Stock but, in lieu of any
fraction of a share of Common Stock which would otherwise be issuable in respect
of the aggregate number of shares of the Series A Preferred Stock surrendered by
the same holder for conversion on any conversion date, the holders shall have
the right to receive in lieu of such fraction an amount in cash equal to the
same fraction of the Current Market Price of the Common Stock determined, in the
case of any conversion other than a conversion in connection with a Distribution
Date Event, as of the second Trading Date immediately preceding the relevant
Notice Date and, in the case of a conversion in connection with a Distribution
Date Event, as of the second Trading Date immediately preceding the Distribution
Date.
(g) Cancellation. All shares of Series A Preferred Stock which shall have been
converted or exchanged for shares of Common Stock or which shall have been
purchased or otherwise acquired by the Corporation shall assume the status of
authorized but unissued shares of Preferred Stock undesignated as to series.
(h) Definitions. As used in this Section 2,
(i) the term "business day" shall have the same meaning set forth in the
Rights Agreement (as defined in subparagraph (iv) of this paragraph (h));
(ii) the term "Call Price" shall mean the per share price, which shall be
initially $92.70, reduced by $0.006624 on each day from December 24, 1991
(computed on the basis of a 360-day year of twelve 30-day months) to and
including October 31, 1994 and to $85.50 thereafter, if not sooner converted;
(iii) the term "Closing Price" on any day shall mean the closing sales price
regular way on such day or, in case no such sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in each case
on the New York Stock Exchange, or, if the Common Stock is not listed or
admitted to trading on such Exchange, on the principal national securities
exchange on which the Common Stock is listed or admitted to trading, or, if
not listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices of the Common Stock on the over-
the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similarly generally accepted reporting
service, or if not so available in such manner as furnished by any New York
Stock Exchange member firm selected from time to time by the Board of
Directors of the Corporation for that purpose;
6
<PAGE>
(iv) the term "Distribution Date" shall have the meaning set forth in the
Rights Agreement dated as of May 24, 1988, as amended and restated as of
October 1, 1989 between the Corporation and First Chicago Trust Company of New
York, as Rights Agent, as the same may be further amended, modified or
supplemented (the "Rights Agreement");
(v) the term "Notice Date" with respect to any notice given by the
Corporation in connection with a conversion of any of the Series A Preferred
Stock shall be the date of the commencement of the mailing of such notice to
the holders of Series A Preferred Stock or the date such notice is first
published in accordance with paragraph (i) of this Section 2; and
(vi) the term "Settlement Date" shall mean the following:
(x) with respect to a Distribution Date Event, the business day
immediately preceding the Distribution Date, and
(y) with respect to a Merger or Consolidation, immediately prior to the
effective time of the Merger or Consolidation; and
(vii) the term "Trading Date" shall mean a date on which the New York Stock
Exchange (or any successor to such Exchange) is open for the transaction of
business.
(i) Notice of Conversion. The Corporation will provide notice of any
conversion (including any potential conversion described in paragraph (b) of
this Section 2) of shares of Series A Preferred Stock to holders of record of
the Series A Preferred Stock to be converted not less than 30 nor more than 60
days prior to the date fixed for conversion (including the effective date of any
applicable Merger or Consolidation defined in clause (l) of paragraph (b) of
this Section 2); provided, however, that such notice need only be given in the
case of a potential Distribution Date Event not less than seven business days
prior to any Distribution Date but not less than 30 days prior to the Settlement
Date if the Corporation elects to deliver cash pursuant to clauses (ii) or (iii)
of paragraph (b) of Section 2. Such notice will be provided by mailing notice of
such conversion, first class postage prepaid, to the holders of record of the
Series A Preferred Stock to be converted, at such holder's address as it appears
on the stock register of the Corporation. In addition, such notice may be given
by publishing notice thereof in The Wall Street Journal or The New York Times,
or, if neither such newspaper is then being published, any other daily newspaper
of national circulation (each, an "Authorized Newspaper"). In the case of notice
of conversion upon a potential Distribution Date Event, upon such notice by
mail, the Corporation shall also publish notice of such conversion promptly in
an Authorized Newspaper. Each such mailed or published notice shall state, as
appropriate, the following:
(i) the conversion date; provided, however, that, in the case of a potential
Distribution Date Event, the notice need only specify the earliest anticipated
conversion date and that the Distribution Date may not occur;
(ii) the number of shares of Series A Preferred Stock to be converted and,
if less than all the shares held by such holder are to be converted, the
number of such shares to be converted from such holder;
(iii) the Call Price (in the case of an optional conversion pursuant to
paragraph (c) of this Section 2) and the number of shares of Common Stock
deliverable and the amount of accrued dividends payable upon conversion;
(iv) the place or places where certificates for such shares are to be
surrendered for conversion; and
(v) that dividends on the shares of Series A Preferred Stock to be converted
will cease to accrue on such conversion date unless the corporation shall
default in providing the shares of Common Stock and any funds necessary for
the conversion at the time and place specified in such notice.
In the event, following the giving of a notice in connection with a potential
Distribution Date Event, the rights issued under the Rights Agreement are
redeemed or expire or the occurrence of a Distribution Date as a result of the
event which gave rise to the giving of such notice will not occur, a notice to
such effect shall promptly be given to the holders of Series A Preferred Stock.
7
<PAGE>
The Corporation's obligation to deliver shares of Common Stock and provide
funds in accordance with this Section 2 shall be deemed fulfilled if, on or
before the conversion date, the Corporation shall deposit, with (a) a
corporation organized and doing business under the laws of the United States or
of the States of New York or Texas (or of any other state of the United States
so long as such corporation is authorized to do business as a banking
institution in the States of New York or Texas), in good standing, having a
principal office in the States of New York or Texas, which is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination and which has at the time of such deposit a combined
capital and surplus of at least $50,000,000 or (b) an affiliate of a corporation
described in clause (a) of this sentence, shares of Common Stock for conversion
(including the payment of fractional share amounts), together with shares of
Common Stock or funds sufficient to pay all accrued and unpaid dividends and
amounts to be paid under Section 2(b)(iii) on the shares to be converted as
required by this Section 2, in trust for the account of the holders of the
shares to be converted (and so as to be and continue to be available therefor),
with irrevocable instructions and authority to such corporation that such shares
and funds be delivered upon conversion of the shares of Series A Preferred Stock
so called for conversion. Any interest accrued on such funds shall be paid to
the Corporation from time to time. Any shares of Common Stock or funds so
deposited and unclaimed at the end of three years from such conversion date
shall be repaid and released to the Corporation, after which the holder or
holders of such shares of Series A Preferred Stock so called for conversion
shall look only to the Corporation for delivery of shares of Common Stock
following such surrender and the date of conversion. Each holder of shares of
Series A Preferred Stock called for conversion shall surrender the certificates
evidencing such shares to the Corporation at a place designated in such notice
and shall thereupon be entitled to receive certificates evidencing shares of
Common Stock. In case less than all the shares represented by any such
surrendered certificate are converted, a new certificate shall be issued at the
expense of the Corporation representing the unconverted shares. If notice of
conversion shall have been duly given by publication in an Authorized Newspaper
at least 30 days prior to the Settlement Date, and if on the date fixed for
conversion shares of Common Stock and any funds necessary for the conversion
shall have been either set aside by the Corporation separate and apart from its
other funds or assets in trust for the account of the holders of the shares so
to be converted (and so as to be and continue to be available therefor) or
deposited with a corporation as provided above, then, notwithstanding that the
certificates evidencing any shares of Series A Preferred Stock so called for
conversion shall not have been surrendered, the shares represented thereby so
called for conversion shall be deemed no longer outstanding, dividends with
respect to the shares so called for conversion shall cease to accrue after the
date fixed for conversion and all rights with respect to the shares so called
for conversion shall forthwith after such date cease and terminate, except for
the right of the holders to receive the shares of Common Stock (and any funds
required by this Section 2) without interest upon surrender of their
certificates therefor. If less than all the outstanding shares of Series A
Preferred Stock are to be called for conversion, shares to be converted shall be
selected by the Corporation from outstanding shares of Series A Preferred Stock
not previously converted by lot or pro rata (as nearly as may be) or by any
other equitable method determined by the Board of Directors of the Corporation.
Section 3. Liquidation Rights. The amount which 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 $59.00 per share plus
accrued and unpaid dividends to the date of Liquidation, 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
privilege of exchange or conversion or to any other powers, preferences, rights
or privileges, including voting rights, and such shares of Series A Preferred
Stock shall be surrendered for cancellation to the Corporation.
Section 4. Voting Rights. Except as otherwise provided in the Certificate of
Incorporation or in resolutions adopted by the Board of Directors of the
Corporation or as required by law, the holders of shares of Series A Preferred
Stock shall not be entitled to vote on any matter on which the holders of any
voting securities of the Corporation shall be entitled to vote.
8
<PAGE>
Section 5. Increase in Shares. The number of shares of Series A Preferred
Stock may, to the extent of the Corporation's authorized and unissued Preferred
Stock, be increased by further resolution duly adopted by the Board of Directors
and the filing and recording of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that such increase has
been so authorized.
Section 6. Issuance of Additional Shares. No shares of Series A Preferred
Stock, in addition to the shares designated herein as Series A Preferred Stock,
shall be issued as Series A Preferred Stock after March 3l, 1992.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by Robert T. Blakely, as Senior Vice President, and its corporate seal to be
hereunto affixed and attested by Karl A. Stewart, as Secretary, this 19th day of
December, 1991.
TENNECO INC.
By: /s/ Robert T. Blakely
---------------------------
Robert T. Blakely
Senior Vice President
[CORPORATE SEAL]
ATTEST:
/s/ Karl A. Stewart
- --------------------------
Karl A. Stewart, Secretary
9
<PAGE>
TENNECO INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
---------------------
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to-wit: One Hundred Ninety-
Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: This Certificate shall become effective on March 1,1992.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by E. J. Milan, Vice President and Controller, and attested by Karl A. Stewart,
Secretary, this 21st day of February, 1992.
TENNECO INC.
BY: /s/ E. J. Milan
---------------------------
E. J. Milan, Vice President
and Controller
ATTEST:
/s/ Karl A. Stewart
- --------------------------
Karl A. Stewart, Secretary
<PAGE>
TENNECO INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
--------------------------------------------
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the Corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to wit: One Hundred Ninety-
Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: This Certificate shall become effective on March 1, 1993.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by E. J. Milan, Vice President and Controller, and attested by Karl A. Stewart,
Secretary, this 22nd day of February, 1993.
TENNECO INC.
BY: /s/ E. J. Milan
---------------------------
E. J. Milan, Vice President
and Controller
ATTEST:
/s/ Karl A. Stewart
- --------------------------
Karl A. Stewart, Secretary
<PAGE>
TENNECO INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
--------------------------------------------
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to-wit: One Hundred Ninety-
Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: This Certificate shall become effective on March 1, 1994.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by E. J. Milan, Vice President and Controller, and attested by James D. Gaughan,
Assistant Secretary, this 14th day of February, 1994.
TENNECO INC.
By: /s/ E. J. Milan
---------------------------
E. J. Milan, Vice President
and Controller
ATTEST:
/s/ James D. Gaughan
- --------------------
James D. Gaughan
Assistant Secretary
<PAGE>
TENNECO INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to-wit: One-Hundred
Ninety-Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: This Certificate shall become effective on March 1, 1995.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by E. J. Milan, Vice President and Controller, and attested by James D. Gaughan,
Assistant Secretary, this 15th day of February, 1995.
TENNECO INC.
(SIGNATURE OF E. J. MILAN
BY: APPEARS HERE)
---------------------------------
E. J. Milan, Vice President
ATTEST: and Controller
(SIGNATURE OF JAMES D. GAUGHAN
APPEARS HERE)
- -------------------------------
James D. Gaughan
Assistant Secretary
<PAGE>
TENNECO INC.
CERTIFICATE OF RETIREMENT OF PREFERRED STOCK
REDEEMED OR PURCHASED
---------------------------------------------
Tenneco Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
FIRST: That pursuant to the provisions of Section 160 of the General
Corporation Law of the State of Delaware, and subject to the provisions of its
Certificate of Incorporation, as amended, One Hundred Ninety-Five Thousand Seven
Hundred Sixty-One (195,761) shares of its issued and outstanding $7.40
Cumulative Preferred Stock were purchased and/or redeemed by the corporation and
pursuant to the provisions of Section 243 of the General Corporation Law of the
State of Delaware, such shares of stock have the status of retired shares.
SECOND: That the Certificate of Incorporation of the corporation prohibits the
reissuance of such retired shares of Cumulative Preferred Stock.
THIRD: That pursuant to the provisions of Section 243 of the General
Corporation Law of the State of Delaware, upon this Certificate becoming
effective, the Certificate of Incorporation of the corporation shall be amended
so that the authorized Cumulative Preferred Stock of the corporation shall be
reduced by the aggregate of the shares so retired, to wit: One Hundred
Ninety-Five Thousand Seven Hundred Sixty-One (195,761) shares.
FOURTH: This Certificate shall become effective on March 1, 1996.
IN WITNESS WHEREOF, said Tenneco Inc. has caused this Certificate to be signed
by Mark A. McCollum, Vice President and Controller, and attested by James D.
Gaughan, Assistant Secretary, this 16th day of February, 1996.
TENNECO INC.
BY: /s/ Mark A. McCollum
---------------------------------
Mark A. McCollum, Vice President
and Controller
ATTEST:
/s/ James D. Gaughan
- --------------------------------
James D. Gaughan
Assistant Secretary
04-200.ANN
<PAGE>
CERTIFICATE OF ELIMINATION OF THE
SERIES A CUMULATIVE PREFERRED STOCK OF TENNECO INC.
Pursuant to Section 151(g)
of the General Corporation Law
of the State of Delaware
Tenneco Inc., a corporation organized and existing under the laws of the State
of Delaware (the "Corporation"), in accordance with the provisions of Section
151(g) of the General Corporation Law of the State of Delaware, hereby
certifies as follows:
1. That, pursuant to Section 151 of the General Corporation Law of the State
of Delaware and authority granted in the Certificate of Incorporation of the
Corporation, as theretofore amended, the Board of Directors of the Corporation,
by resolution duly adopted, authorized the issuance of a series of 10,062,500
shares of Series A Cumulative Preferred Stock, without par value (the "Series A
Cumulative Preferred Stock"), and established the voting powers, designations,
preferences and relative, participating and other rights, and the
qualifications, limitations or restrictions thereof, and, on December 19, 1991,
filed a Certificate of Designation with respect to such Series A Cumulative
Preferred Stock in the office of the Secretary of State of the State of
Delaware.
2. That no shares of said Series A Cumulative Preferred Stock are outstanding
and no shares thereof will be issued subject to said Certificate of Designation.
3. That the Board of Directors of the Corporation has adopted the following
resolutions:
WHEREAS, by resolution of the Board of Directors of the Corporation and by
a Certificate of Designation filed in the office of the Secretary of State of
the State of Delaware on December 19, 1991, this Corporation authorized the
issuance of a series of 10,062,500 shares of Series A Cumulative Preferred
Stock, without par value, of the Corporation (the "Series A Cumulative
Preferred Stock") and established the voting powers, designations, preferences
and relative, participating and other rights, and the qualifications,
limitations or restrictions thereof; and
WHEREAS, as of the date hereof no shares of such Series A Cumulative
Preferred Stock are outstanding and no shares of such Series A Cumulative
Preferred
<PAGE>
Stock will be issued subject to said Certificate of Designation; and
WHEREAS, it is desirable that all matters set forth in the Certificate of
Designation with respect to such Series A Cumulative Preferred Stock be
eliminated from the Certificate of Incorporation, as heretofore amended, of
the Corporation;
NOW, THEREFORE, BE IT AND IT HEREBY IS
RESOLVED, that all matters set forth in the Certificate of Designation
with respect to such Series A Cumulative Preferred Stock be eliminated from
the Certificate of Incorporation, as heretofore amended, of the Corporation;
and it is further
RESOLVED, that the officers of the Corporation be, and hereby are,
authorized and directed to file a Certificate with the office of the Secretary
of State of the State of Delaware setting forth a copy of these resolutions
whereupon all matters set forth in the Certificate of Designation with respect
to such Series A Cumulative Preferred Stock shall be eliminated from the
Certificate of Incorporation, as heretofore amended, of the Corporation.
4. That, accordingly, all matters set forth in the Certificate of Designation
with respect to such Series A Cumulative Preferred Stock be, and hereby are,
eliminated from the Certificate of Incorporation, as heretofore amended, of the
Corporation.
IN WITNESS WHEREOF, Tenneco Inc. has caused this Certificate to be signed by
Robert T. Blakely, its Senior Vice President, as of this 27th day of February,
1996.
TENNECO INC.
BY: /s/ Robert T. Blakely
-------------------------------------
Robert T. Blakely
Senior Vice President
ATTEST:
/s/ James D. Gaughan
- ------------------------------------
James D. Gaughan
Assistant Secretary
<PAGE>
CERTIFICATE OF ELIMINATION OF THE
VARIABLE RATE PREFERRED STOCK OF TENNECO INC.
Pursuant to Section 151(g)
of the General Corporation Law
of the State of Delaware
Tenneco Inc., a corporation organized and existing under the laws of the State
of Delaware (the "Corporation"), in accordance with the provisions of Section
151(g) of the General Corporation Law of the State of Delaware, hereby certifies
as follows:
1. That, pursuant to Section 151 of the General Corporation Law of the State
of Delaware and authority granted in the Certificate of Incorporation of the
Corporation, as theretofore amended, the Board of Directors of the Corporation,
by resolution duly adopted, authorized the issuance of a series of 200,396
shares of Variable Rate Preferred Stock, without par value (the "Variable Rate
Preferred Stock"), and established the voting powers, designations, preferences
and relative, participating and other rights, and the qualifications,
limitations or restrictions thereof, and, on October 9, 1987, filed a
Certificate of Designation with respect to such Variable Rate Preferred Stock in
the office of the Secretary of State of the State of Delaware.
2. That no shares of said Variable Rate Preferred Stock are outstanding and no
shares thereof will be issued subject to said Certificate of Designation.
3. That the Board of Directors of the Corporation has adopted the following
resolutions:
WHEREAS, by resolution of the Board of Directors of the Corporation and by
a Certificate of Designation filed in the office of the Secretary of State of
the State of Delaware on October 9, 1987, this Corporation authorized the
issuance of a series of 200,396 shares of Variable Rate Preferred Stock, without
par value, of the Corporation (the "Variable Rate Preferred Stock") and
established the voting powers, designations, preferences and relative,
participating and other rights, and the qualifications, limitations or
restrictions thereof; and
WHEREAS, as of the date hereof no shares of such Variable Rate Preferred
Stock are outstanding and no shares of such Variable Rate Preferred Stock will
be issued subject to said Certificate of Designation; and
<PAGE>
WHEREAS, it is desirable that all matters set forth in the Certificate of
Designation with respect to such Variable Rate Preferred Stock be eliminated
from the Certificate of Incorporation, as heretofore amended, of the
Corporation;
NOW, THEREFORE, BE IT AND IT HEREBY IS
RESOLVED, that all matters set forth in the Certificate of Designation
with respect to such Variable Rate Preferred Stock be eliminated from the
Certificate of Incorporation, as heretofore amended, of the Corporation;
and it is further
RESOLVED, that the officers of the Corporation be, and hereby are,
authorized and directed to file a Certificate with the office of the
Secretary of State of the State of Delaware setting forth a copy of these
resolutions whereupon all matters set forth in the Certificate of
Designation with respect to such Variable Rate Preferred Stock shall be
eliminated from the Certificate of Incorporation, as heretofore amended, of
the Corporation.
4. That, accordingly, all matters set forth in the Certificate of
Designation with respect to such Variable Rate Preferred Stock be, and hereby
are, eliminated from the Certificate of Incorporation, as heretofore amended, of
the Corporation.
IN WITNESS WHEREOF, Tenneco Inc. has caused this Certificate to be signed by
Robert T. Blakely, its Senior Vice President, as of this 27th day of February,
1996.
TENNECO INC.
By: /s/ ROBERT T. BLAKELY
------------------------------
Robert T. Blakely
Senior Vice President
ATTEST:
/s/ JAMES D. GAUGHAN
- -----------------------
James D. Gaughan
Assistant Secretary
2
<PAGE>
CERTIFICATE OF ELIMINATION OF THE
PARTICIPATING PREFERRED STOCK OF TENNECO INC.
Pursuant to Section 151(g)
of the General Corporation Law
of the State of Delaware
Tenneco Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"), in accordance with the provisions of
Section 151(g) of the General Corporation Law of the State of Delaware, hereby
certifies as follows:
1. That, pursuant to Section 151 of the General Corporation Law of the State
of Delaware and authority granted in the Certificate of Incorporation of the
Corporation, as theretofore amended, the Board of Directors of the Corporation,
by resolution duly adopted, authorized the issuance of a series of 1,859,000
shares of Participating Preferred Stock, without par value (the "Participating
Preferred Stock"), and established the voting powers, designations, preferences
and relative, participating and other rights, and the qualifications,
limitations or restrictions thereof, and, on October 9, 1987, filed a
Certificate of Designation with respect to such Participating Preferred Stock in
the office of the Secretary of State of the State of Delaware.
2. That no shares of said Participating Preferred Stock are outstanding and
no shares thereof will be issued subject to said Certificate of Designation.
3. That the Board of Directors of the Corporation has adopted the following
resolutions:
WHEREAS, by resolution of the Board of Directors of the Corporation and
by a Certificate of Designation filed in the office of the Secretary of State of
the State of Delaware on October 9, 1987, this Corporation authorized the
issuance of a series of 1,859,000 shares of Participating Preferred Stock,
without par value, of the Corporation (the "Participating Preferred Stock") and
established the voting powers, designations, preferences and relative,
participating and other rights, and the qualifications, limitations or
restrictions thereof; and
WHEREAS, as of the date hereof no shares of such Participating Preferred
Stock are outstanding and no shares of such Participating Preferred Stock will
be issued subject to said Certificate of Designation; and
<PAGE>
WHEREAS, it is desirable that all matters set forth in the Certificate of
Designation with respect to such Participating Preferred Stock be eliminated
from the Certificate of Incorporation, as heretofore amended, of the
Corporation;
NOW, THEREFORE, BE IT AND IT HEREBY IS
RESOLVED, that all matters set forth in the Certificate of Designation with
respect to such Participating Preferred Stock be eliminated from the Certificate
of Incorporation, as heretofore amended, of the Corporation; and it is further
RESOLVED, that the officers of the Corporation be, and hereby are,
authorized and directed to file a Certificate with the office of the Secretary
of State of the State of Delaware setting forth a copy of these resolutions
whereupon all matters set forth in the Certificate of Designation with respect
to such Participating Preferred Stock shall be eliminated from the Certificate
of Incorporation, as heretofore amended, of the Corporation.
4. That, accordingly, all matters set forth in the Certificate of
Designation with respect to such Participating Preferred Stock be, and hereby
are, eliminated from the Certificate of Incorporation, as heretofore amended, of
the Corporation.
IN WITNESS WHEREOF, Tenneco Inc. has caused this Certificate to be signed
by Robert T. Blakely, its Senior Vice President, as of this 27th day of
February, 1996.
TENNECO INC.
By: /s/ ROBERT T. BLAKELY
--------------------------------
Robert T. Blakely
Senior Vice President
ATTEST:
/s/ James D. Gaughan
- --------------------------------
James D. Gaughan
Assistant Secretary
2
<PAGE>
EXHIBIT 11
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
(UNAUDITED)
<TABLE>
<CAPTION>
(MILLIONS EXCEPT SHARE
AMOUNTS)
THREE MONTHS ENDED MARCH 31,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
COMPUTATION FOR STATEMENTS OF INCOME
Primary Earnings Per Share (average shares
outstanding):
Income from continuing operations.......... $ 156 $ 128
Income from discontinued operations, net of
income tax................................ 339 25
------------ ------------
Net income................................. 495 153
Preferred stock dividends.................. 3 3
------------ ------------
Net income to common stock................. $ 492 $ 150
============ ============
Average shares of common stock
outstanding(a)............................ 170,440,074 177,792,872
============ ============
Earnings per average share of common stock:
Continuing operations.................... $ .90 $ .71
Discontinued operations.................. 1.99 .13
------------ ------------
$ 2.89 $ .84
============ ============
ADDITIONAL COMPUTATIONS(B)
Net income to common stock, per above....... $ 492 $ 150
============ ============
Primary Earnings Per Share (including common
stock equivalents):
Average shares of common stock
outstanding(a)............................ 170,440,074 177,792,872
Incremental common shares applicable to
common stock options based on the common
stock daily average market price during
the period................................ 535,013 49,907
Incremental common shares applicable to
performance units based upon the
attainment of specified goals............. 88,125 27,625
------------ ------------
Average common shares, as adjusted......... 171,063,212 177,870,404
============ ============
Earnings per average share of common stock
(including common stock equivalents):
Continuing operations.................... $ .90 $ .71
Discontinued operations.................. 1.98 .13
------------ ------------
$ 2.88 $ .84
============ ============
Fully Diluted Earnings Per Share:
Average shares of common stock
outstanding(a)............................ 170,440,074 177,792,872
Incremental common shares applicable to
common stock options based on the more
dilutive of the common stock ending or
average market price during the period.... 774,770 64,438
Average common shares issuable assuming
conversion of Tenneco Inc. 10% loan stock. -- 39,329
Incremental common shares applicable to
performance units based upon the
attainment of specified goals............. 88,125 27,625
------------ ------------
Average common shares assuming full
dilution.................................. 171,302,969 177,924,264
============ ============
Fully diluted earnings per average share,
assuming conversion of all applicable
securities:
Continuing operations.................... $ .89 $ .71
Discontinued operations.................. 1.98 .13
------------ ------------
$ 2.87 $ .84
============ ============
</TABLE>
- --------
NOTES:(a) In 1992, 12,000,000 shares of common stock were issued to the Stock
Employee Compensation Trust ("SECT"). Shares of common stock issued
to a related trust are not considered to be outstanding in the
computation of average shares of common stock until the shares are
utilized to fund the obligations for which the trust was
established. For the periods ended March 31, 1996 and 1995, the SECT
utilized 717,256 and 737,799 shares, respectively.
(b) These calculations are submitted in accordance with Securities and
Exchange Commission requirements although not required by Accounting
Principles Board Opinion No. 15 because they result in dilution of
less than 3%.
<PAGE>
EXHIBIT 12
TENNECO INC. AND CONSOLIDATED SUBSIDIARIES
COMBINED WITH 50% OWNED UNCONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31,
----------
1996 1995
---- ----
<S> <C> <C>
Income from continuing operations.................................. $156 $128
Add:
Interest......................................................... 108 107
Portion of rentals representative of interest factor............. 15 14
Preferred stock dividend requirements of majority-owned
subsidiaries.................................................... 5 6
Income tax expense and other taxes on income..................... 69 83
Amortization of interest capitalized applicable to nonutility
companies....................................................... 1 1
Undistributed earnings of affiliated companies in which less than
a 50% voting interest is owned.................................. (4) (2)
---- ----
Earnings as defined............................................ $350 $337
==== ====
Interest........................................................... $108 $107
Interest capitalized............................................... 6 1
Portion of rentals representative of interest factor............... 15 14
Preferred stock dividend requirements of majority-owned
subsidiaries on a pretax basis.................................... 7 10
---- ----
Fixed charges as defined....................................... $136 $132
==== ====
Ratio of earnings to fixed charges................................. 2.57 2.55
==== ====
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TENNECO
INC. AND CONSOLIDATED SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 237
<SECURITIES> 0
<RECEIVABLES> 1,509
<ALLOWANCES> 0
<INVENTORY> 1,252
<CURRENT-ASSETS> 3,811
<PP&E> 12,144
<DEPRECIATION> 5,748
<TOTAL-ASSETS> 13,312
<CURRENT-LIABILITIES> 3,473
<BONDS> 3,482
111
0
<COMMON> 957
<OTHER-SE> 2,575
<TOTAL-LIABILITY-AND-EQUITY> 13,312
<SALES> 2,725
<TOTAL-REVENUES> 2,725
<CGS> 2,062
<TOTAL-COSTS> 2,062
<OTHER-EXPENSES> 420
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 89
<INCOME-PRETAX> 230
<INCOME-TAX> 69
<INCOME-CONTINUING> 156
<DISCONTINUED> 339
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 495
<EPS-PRIMARY> 2.89
<EPS-DILUTED> 2.87
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TENNECO
INC. AND CONSOLIDATED SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 354
<SECURITIES> 0
<RECEIVABLES> 921
<ALLOWANCES> 0
<INVENTORY> 1,181
<CURRENT-ASSETS> 3,582
<PP&E> 11,962
<DEPRECIATION> 5,643
<TOTAL-ASSETS> 13,451
<CURRENT-LIABILITIES> 3,836
<BONDS> 3,751
130
0
<COMMON> 957
<OTHER-SE> 2,191
<TOTAL-LIABILITY-AND-EQUITY> 13,451
<SALES> 8,899
<TOTAL-REVENUES> 8,899
<CGS> 6,688
<TOTAL-COSTS> 6,688
<OTHER-EXPENSES> 1,340
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 306
<INCOME-PRETAX> 790
<INCOME-TAX> 279
<INCOME-CONTINUING> 489
<DISCONTINUED> 246
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 735
<EPS-PRIMARY> 4.16
<EPS-DILUTED> 4.16
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TENNECO
INC. AND CONSOLIDATED SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 712
<SECURITIES> 0
<RECEIVABLES> 1,026
<ALLOWANCES> 0
<INVENTORY> 1,002
<CURRENT-ASSETS> 3,665
<PP&E> 11,000
<DEPRECIATION> 5,629
<TOTAL-ASSETS> 12,383
<CURRENT-LIABILITIES> 2,875
<BONDS> 3,310
129
0
<COMMON> 957
<OTHER-SE> 2,172
<TOTAL-LIABILITY-AND-EQUITY> 12,383
<SALES> 6,497
<TOTAL-REVENUES> 6,497
<CGS> 4,819
<TOTAL-COSTS> 4,819
<OTHER-EXPENSES> 961
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 222
<INCOME-PRETAX> 633
<INCOME-TAX> 265
<INCOME-CONTINUING> 351
<DISCONTINUED> 201
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 552
<EPS-PRIMARY> 3.11
<EPS-DILUTED> 3.11
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TENNECO
INC. AND CONSOLIDATED SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 107
<SECURITIES> 0
<RECEIVABLES> 1,192
<ALLOWANCES> 0
<INVENTORY> 976
<CURRENT-ASSETS> 3,257
<PP&E> 10,760
<DEPRECIATION> 5,548
<TOTAL-ASSETS> 12,090
<CURRENT-LIABILITIES> 2,855
<BONDS> 3,309
129
0
<COMMON> 957
<OTHER-SE> 1,954
<TOTAL-LIABILITY-AND-EQUITY> 12,090
<SALES> 4,361
<TOTAL-REVENUES> 4,361
<CGS> 3,236
<TOTAL-COSTS> 3,236
<OTHER-EXPENSES> 638
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152
<INCOME-PRETAX> 453
<INCOME-TAX> 185
<INCOME-CONTINUING> 257
<DISCONTINUED> 81
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 338
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.89
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TENNECO
INC. AND CONSOLIDATED SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 569
<SECURITIES> 0
<RECEIVABLES> 1,293
<ALLOWANCES> 0
<INVENTORY> 933
<CURRENT-ASSETS> 3,731
<PP&E> 10,309
<DEPRECIATION> 5,458
<TOTAL-ASSETS> 12,220
<CURRENT-LIABILITIES> 2,768
<BONDS> 3,559
128
0
<COMMON> 957
<OTHER-SE> 1,975
<TOTAL-LIABILITY-AND-EQUITY> 12,220
<SALES> 2,163
<TOTAL-REVENUES> 2,163
<CGS> 1,624
<TOTAL-COSTS> 1,624
<OTHER-EXPENSES> 313
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75
<INCOME-PRETAX> 216
<INCOME-TAX> 83
<INCOME-CONTINUING> 128
<DISCONTINUED> 25
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 153
<EPS-PRIMARY> .84
<EPS-DILUTED> .84
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TENNECO
INC. AND CONSOLIDATED SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 405
<SECURITIES> 0
<RECEIVABLES> 1,535
<ALLOWANCES> 0
<INVENTORY> 910
<CURRENT-ASSETS> 3,895
<PP&E> 11,108
<DEPRECIATION> 5,881
<TOTAL-ASSETS> 12,542
<CURRENT-LIABILITIES> 3,054
<BONDS> 3,570
147
0
<COMMON> 957
<OTHER-SE> 1,943
<TOTAL-LIABILITY-AND-EQUITY> 12,542
<SALES> 8,298
<TOTAL-REVENUES> 8,298
<CGS> 6,408
<TOTAL-COSTS> 6,408
<OTHER-EXPENSES> 1,024
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 263
<INCOME-PRETAX> 759
<INCOME-TAX> 249
<INCOME-CONTINUING> 503
<DISCONTINUED> (51)
<EXTRAORDINARY> (5)
<CHANGES> (39)
<NET-INCOME> 408
<EPS-PRIMARY> 2.20
<EPS-DILUTED> 2.20
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TENNECO
INC. AND CONSOLIDATED SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 492
<SECURITIES> 0
<RECEIVABLES> 3,255
<ALLOWANCES> 0
<INVENTORY> 1,720
<CURRENT-ASSETS> 6,525
<PP&E> 12,579
<DEPRECIATION> 6,672
<TOTAL-ASSETS> 16,310
<CURRENT-LIABILITIES> 5,218
<BONDS> 4,616
146
9
<COMMON> 870
<OTHER-SE> 3,104
<TOTAL-LIABILITY-AND-EQUITY> 16,310
<SALES> 6,234
<TOTAL-REVENUES> 6,234
<CGS> 4,847
<TOTAL-COSTS> 4,847
<OTHER-EXPENSES> 738
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 189
<INCOME-PRETAX> 553
<INCOME-TAX> 192
<INCOME-CONTINUING> 358
<DISCONTINUED> 62
<EXTRAORDINARY> (5)
<CHANGES> (39)
<NET-INCOME> 376
<EPS-PRIMARY> 2.04
<EPS-DILUTED> 2.04
</TABLE>
