UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Tenneco Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
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SEC 1913 (02-02)
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contained in this form are not required to respond unless the form displays a currently valid
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Tenneco Inc.
500 North Field Drive
Lake Forest, Illinois
60045
(847) 482-5000
March 31, 2009
To the Stockholders of Tenneco Inc.:
The Annual Meeting of Stockholders of Tenneco Inc. will be held
Wednesday, May 13, 2009, at 10:00 a.m., local time, at
our headquarters located at 500 North Field Drive, Lake Forest,
Illinois 60045.
Holders of common stock are entitled to vote at the Annual
Meeting on the basis of one vote for each share held.
We are pleased to take advantage of Securities and Exchange
Commission rules that allow us to furnish these proxy materials
and our
Form 10-K
to stockholders on the Internet. We believe that posting these
materials on the Internet enables us to provide stockholders
with the information that they need more quickly, while lowering
our costs of printing and delivery and reducing the
environmental impact of our Annual Meeting.
A record of our activities for the year 2008 is contained in our
Form 10-K,
which you may access by following the instructions contained in
our Notice of Internet Availability of Proxy Materials. We urge
each stockholder who cannot attend the Annual Meeting to please
assist us in preparing for the meeting by following the voting
procedures contained in the Notice of Internet Availability of
Proxy Materials, proxy card or voting instruction form.
Very truly yours,
GREGG M. SHERRILL
Chairman and Chief Executive Officer
TABLE OF CONTENTS
Tenneco Inc.
500 North Field Drive
Lake Forest, Illinois
60045
(847) 482-5000
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
May 13, 2009
The Annual Meeting of Stockholders of Tenneco Inc. will be held
at our headquarters located at 500 North Field Drive, Lake
Forest, Illinois 60045 on Wednesday, May 13, 2009, at
10:00 a.m., local time.
The purposes of the meeting are:
1. To elect ten directors for a term to expire at the 2010
Annual Meeting of Stockholders;
2. To consider and act upon a proposal to ratify the
appointment of Deloitte & Touche LLP as independent
public accountants for 2009;
3. To consider and act upon a proposal to amend the Tenneco
Inc. 2006 Long-Term Incentive Plan to increase the shares of the
Company’s common stock available for delivery under the
plan by 2.3 million additional shares, with each share
underlying an option counting as one share and each share
underlying a full value award counting as 1.25 shares
against the total plan availability; and
4. To consider and act upon such other matters as may
properly be brought before the meeting, or any adjournment or
postponement thereof.
The Board of Directors knows of no other matters at this time
that may be brought before the meeting. Holders of common stock
of record at the close of business on March 16, 2009 are
entitled to vote at the meeting. A list of these stockholders
will be available for inspection for 10 days preceding the
meeting at our headquarters located at 500 North Field Drive,
Lake Forest, Illinois 60045, and also will be available for
inspection at the meeting.
We are pleased to take advantage of Securities and Exchange
Commission rules that allow us to furnish these proxy materials
and our
Form 10-K
on the Internet. Stockholders of record have been mailed a
Notice of Internet Availability of Proxy Materials (the
“Notice”), which provides stockholders with
instructions on how to access the proxy materials and our
Form 10-K,
on the Internet, and, if they prefer, how to request paper
copies of these materials. Plan participants who hold shares in
their Tenneco 401(k) accounts and other stockholders who have
previously requested paper copies of these materials may receive
these materials by email or in paper. We believe that posting
these materials on the Internet enables us to provide
stockholders with the information that they need more quickly,
while lowering our costs of printing and delivery and reducing
the environmental impact of our Annual Meeting.
As a stockholder of Tenneco Inc., your vote is important. All
stockholders are cordially invited to attend the Annual Meeting.
Whether or not you are able to attend the Annual Meeting in
person, it is important that your shares be represented. Please
vote as soon as possible as instructed in the Notice of Internet
Availability of Proxy Materials, proxy card or voting
instruction form.
By Order of the Board of Directors
DAVID A. WARDELL
Corporate Secretary
Lake Forest, Illinois
March 31, 2009
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Tenneco Inc.
500 North Field Drive
Lake Forest, Illinois 60045
(847) 482-5000
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March 31, 2009
PROXY
STATEMENT
ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD MAY 13, 2009
The Board of Directors of Tenneco Inc. (which we refer to as we,
us, our, Tenneco or our company) has made these proxy materials
available to you on the Internet, or, upon your request, has
delivered printed versions of these materials to you by mail. We
are furnishing this proxy statement in connection with the
solicitation by our Board of Directors of proxies to be voted at
the Annual Meeting of Stockholders on May 13, 2009, or at
any adjournment or postponement thereof. Holders of common stock
of record at the close of business on March 16, 2009 will
be entitled to vote at the Annual Meeting. Each share is
entitled to one vote. At March 16, 2009, there were
46,905,047 shares of common stock outstanding and entitled
to vote.
Pursuant to the “notice and access” rules adopted by
the Securities and Exchange Commission, we have elected to
provide stockholders access to our proxy materials over the
Internet. Accordingly, we mailed a Notice of Internet
Availability of Proxy Materials (the “Notice”) on
March 31, 2009 to our stockholders of record. The Notice
provides you with instructions regarding how to:
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View our proxy materials for the Annual Meeting and our
Form 10-K
(which includes our audited financial statements) on the
Internet at www.proxyvote.com;
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Instruct us to provide our future proxy materials to you
electronically by email; and
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If you prefer, request a printed set of the proxy materials and
Form 10-K.
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Plan participants who hold Tenneco shares in their 401(k)
accounts and other stockholders who have previously requested
paper copies of these materials may receive these materials by
email or in paper. We elected to use electronic notice and
access for our proxy materials because we believe this process
will reduce our printing and mailing costs and, by reducing the
amount of printed materials, will reduce the environmental
impact of our annual stockholders’ meetings. Choosing to
receive your future proxy materials by email will help us in
these efforts. If you choose to receive future proxy materials
by email, you will receive an email next year with instructions
containing a link to those materials and a link to the proxy
voting site. Your election to receive proxy materials by email
will remain in effect until you terminate it.
BACKGROUND
In 1996, we were formed and spun off from the company that, at
the time, was known as Tenneco Inc. After the spin-off, we held
the former Tenneco Inc.’s automotive and packaging
operations. In 1999, we spun off the packaging operations and,
at that time, changed our name to “Tenneco Automotive
Inc.” In October 2005, we returned to the name
“Tenneco Inc.,” as we believe the name Tenneco better
represents the continued expansion of our offerings through our
commercial and specialty vehicle businesses.
1
ELECTION OF
DIRECTORS
(Item 1)
Our Board of Directors currently comprises ten individuals, all
of whom are proposed to be elected at this Annual Meeting to
serve for a term to expire at the annual meeting of stockholders
to be held in 2010 and until their successors are chosen and
have qualified.
The persons named as proxy voters in the accompanying proxy
card, or their substitutes, will vote your proxy for all the
nominees, each of whom has been designated as such by the Board
of Directors, unless otherwise indicated in your proxy. In the
event that any nominee for director withdraws or for any reason
is not able to serve as a director, we will vote your proxy for
the remainder of those nominated for director (except as
otherwise indicated in your proxy) and for any replacement
nominee designated by the Compensation/Nominating/Governance
Committee of the Board of Directors.
You may vote “For” or “Against” any or all
of the director nominees, or you may “Abstain” from
voting. Assuming a quorum, each director nominee receiving a
majority of the votes cast at the Annual Meeting (in person or
by proxy) will be elected as director. A “majority of the
votes cast” means the number of “For” votes cast
exceeds the number of “Against” votes cast. A proxy
marked “Abstain” with respect to any director will not
be counted in determining the total number of votes cast.
Brief statements setting forth the age (at March 16, 2009),
the principal occupation, the employment during at least the
past five years, the year in which first elected a director and
other information concerning each nominee appears below.
The Board of Directors recommends that you vote FOR all of
the nominees listed below.
Because Tenneco is a Delaware corporation, under Delaware law,
if an incumbent director is not elected, that director remains
in office until the director’s successor is duly elected
and qualified or until the director’s death, resignation or
retirement. To address this potential outcome, the Board adopted
a director resignation policy in Tenneco’s By-Laws. Under
this policy, the Board of Directors will nominate for directors
only those incumbent candidates who tender, in advance,
irrevocable resignations, and the Board has obtained such
conditional resignations from the nominees in this year’s
proxy statement. The irrevocable resignations will be effective
upon the failure to receive the required vote at any annual
meeting at which they are nominated for re-election and Board
acceptance of the resignation. If a nominee fails to receive the
required vote, the Compensation/Nominating/Governance Committee
will recommend to the Board whether to accept or reject the
tendered resignation. The Board will publicly disclose its
decision within 90 days following certification of the
stockholder vote. In addition, the director whose resignation is
under consideration will not participate in the recommendation
of the Compensation/Nominating/Governance Committee with respect
to the resignation. If the Board does not accept the
resignation, the director will continue to serve until the next
annual meeting and until his or her successor is duly elected,
or until his or her earlier resignation or removal. If the Board
accepts the resignation, then the Board, in its sole discretion,
may fill any resulting vacancy or may decrease the size of the
Board.
2
NOMINEES FOR THE
ELECTION TO THE BOARD OF DIRECTORS
For One-Year Terms Expiring at the 2010 Annual Meeting of
Stockholders
Charles W. Cramb
— Mr. Cramb has been Vice
Chairman, Chief Finance and Strategy Officer of Avon Products,
Inc., a global manufacturer and marketer of beauty and related
products, since September 2007. Mr. Cramb joined Avon in
November 2005 as Executive Vice President, Finance and
Technology and Chief Financial Officer. Mr. Cramb was
Senior Vice President and Chief Financial Officer of The
Gillette Company, a global manufacturer and marketer of a wide
variety of consumer products, from 1997 until October 2005. He
joined Gillette in 1970 and served in a number of financial
positions. From 1976 to 1981, he held several key financial
management positions in Gillette’s European operations,
including Manager, Financial Services, Gillette Europe, and
Financial Controller, Gillette Industries Limited, UK. From 1981
to 1995, he held a series of senior financial management
positions in the United States, including Controller,
International Operations; Vice President, Finance and Strategic
Planning, Gillette North Atlantic Group; Assistant Controller,
The Gillette Company; and Vice President, Finance, Planning and
Administration, Diversified Group. From 1995 to 1997, he was
Corporate Vice President and Corporate Controller. He is a
director of Idenix Pharmaceuticals, Inc., where he is Chairman
of the Audit Committee and a member of the Compensation
Committee. Mr. Cramb was elected a director of our company
in March 2003, is 62 years old and is the Chairman of the
Audit Committee.
Dennis J. Letham
— Mr. Letham serves as
Executive Vice President, Finance and Chief Financial Officer of
Anixter International Inc., overseeing all of the company’s
finance, accounting, tax, human resource and internal audit
activities in 50 countries. Prior to assuming his role as Chief
Financial Officer in 1995, Mr. Letham served as Executive
Vice President and Chief Financial Officer of Anixter, Inc., the
principal operating subsidiary of Anixter International Inc.,
which he joined in 1993. Previously, he had a ten-year career
with National Intergroup Inc., where he was Senior Vice
President and Chief Financial Officer, as well as Vice President
and Controller. From 1983 to 1989, Mr. Letham held a number
of senior financial positions for National Intergroup Inc.,
including its wholly-owned subsidiary National Aluminum
Corporation that included Vice President and Controller,
Director of Corporate Accounting, and Manager for Internal
Audit. Mr. Letham began his career at Arthur
Andersen & Co. in 1973 where he held progressive
responsibilities in the Audit Department. Mr. Letham holds
a bachelors degree from Pennsylvania State University’s
Accounting Honors program. He also is a Certified Public
Accountant. Mr. Letham who is 57 years old was elected
a director of our company in October 2007 and is a member of the
Audit Committee.
Frank E. Macher
— Mr. Macher has served as
Chief Executive Officer of Finance Manufacturing
Acquisition & Capital since 2008. Previously he served
as President and Chief Executive Officer and as a member of the
Board of Directors of Collins & Aikman Corporation, a
global supplier of motor vehicle parts, from July 2005 until his
retirement in January 2007. Mr. Macher served as Chief
Executive Officer of Federal Mogul Corporation, a manufacturer
of motor vehicle parts and supplies, from January 2001 to July
2003 and Chairman of Federal Mogul from October 2001 to his
retirement in January 2004. From June 1997 to his retirement in
July 1999, Mr. Macher served as President and Chief
Executive Officer of ITT Automotive, a supplier of automotive
components. From 1966 to his retirement in 1996, Mr. Macher
was employed by Ford Motor Company, serving most recently as
Vice President and General Manager of the Automotive Components
Division. Mr. Macher is 68 years old and was named a
director of our company in July 2000. Mr. Macher is a
member of the Audit Committee.
Hari N. Nair
— Executive Vice President and
President — International — Mr. Nair
was named our Executive Vice President and President —
International effective March 2007. Previously, Mr. Nair
served as Executive Vice President and Managing Director of our
business in Europe, South America and India. Before that, he was
Senior Vice President and Managing Director —
International. Prior to December 2000, Mr. Nair was the
Vice President and Managing Director — Emerging
Markets. Previously, Mr. Nair was the Managing Director for
Tenneco Automotive Asia, based in Singapore and responsible for
all operations and development projects in Asia. He began his
career with the former Tenneco Inc. in 1987, holding various
positions in strategic planning, marketing, business
development, quality and finance.
3
Prior to joining Tenneco, Mr. Nair was a senior financial
analyst at General Motors Corporation focusing on European
operations. Mr. Nair is 48 years old and became a
director of our company in March 2009.
Roger B. Porter
— Mr. Porter is the IBM
Professor of Business and Government and the Master of Dunster
House at Harvard University. Mr. Porter has served on the
faculty at Harvard University since 1977. Mr. Porter also
held senior economic policy positions in the Ford, Reagan and
George H. W. Bush White Houses, serving as special assistant to
the President and executive secretary of the Economic Policy
Board from 1974 to 1977, as deputy assistant to the President
and director of the White House Office of Policy Development
from 1981 to 1985, and as assistant to the President for
economic and domestic policy from 1989 to 1993. He is also a
director of Zions Bancorporation, Pactiv Corporation, Extra
Space Storage Inc. and Packaging Corporation of America.
Mr. Porter is 62 years old and has been a director of
our company since January 1998. Mr. Porter is the Chairman
of the Compensation/Nominating/Governance Committee.
David B. Price, Jr.
— Mr. Price has
served as Chief Executive Officer, President and Founder of
Birdet Price, LLC, an investment and consulting firm
wholly-owned by Mr. Price, since July 2001. Previously,
Mr. Price was President of Noveon Inc. from February 2001
until May 2001. Noveon, Inc. was formerly the Performance
Materials segment of BF Goodrich Company prior to its sale to an
investor group in February 2001. While with BF Goodrich Company
from July 1997 to February 2001, Mr. Price served as
Executive Vice President of the BF Goodrich Company and
President and Chief Operating Officer of BF Goodrich Performance
Materials. Prior to joining BF Goodrich, Mr. Price held
various executive positions over a
25-year
span
at Monsanto Company, most recently serving as President of the
Performance Materials Division of Monsanto Company from 1995 to
July 1997. From 1993 to 1995, he was Vice President and General
Manager of commercial operations for the Industrial Products
Group and was also named to the management board of
Monsanto’s Chemical Group. He is a director and Chairman of
the YMCA of Greater St. Louis and a Director of St. Lukes
Hospital in St. Louis. He is also a director of CH2M HILL.
Mr. Price is 63 years old and was named a director of
our company in November 1999. Mr. Price is a member of the
Compensation/Nominating/Governance Committee.
Gregg M. Sherrill
— Chairman and Chief
Executive Officer — Mr. Sherrill was named our
Chairman and Chief Executive Officer in January 2007.
Mr. Sherrill joined us from Johnson Controls Inc., where he
served since 1998, most recently as President, Power Solutions.
From 2002 to 2003, Mr. Sherrill served as the Vice
President and Managing Director of Europe, South Africa and
South America for Johnson Controls’ Automotive Systems
Group. Prior to joining Johnson Controls, Mr. Sherrill held
various engineering and manufacturing assignments over a
22-year
span
at Ford Motor Company, including Plant Manager of Ford’s
Dearborn, Michigan engine plant and Director of Supplier
Technical Assistance. Mr. Sherrill is 56 years old and
became a director of our company in January 2007.
Paul T. Stecko
— Mr. Stecko has served as
the Chief Executive Officer of Packaging Corporation of America
since April 1999. From November 1998 to April 1999,
Mr. Stecko served as President and Chief Operating Officer
of Tenneco Inc. From January 1997 to November 1998,
Mr. Stecko served as Chief Operating Officer of Tenneco
Inc. From December 1993 through January 1997, Mr. Stecko
served as Chief Executive Officer of Tenneco Packaging Inc.
Prior to joining Tenneco Packaging Inc., Mr. Stecko spent
16 years with International Paper Company. He is a director
of State Farm Mutual Insurance Company, American Forest and
Paper Association and Smurfit Kappa Group, and is the Chairman
of the Board of Packaging Corporation of America.
Mr. Stecko is 64 years old and has been a director of
our company since November 1998. Mr. Stecko is a member of
the Compensation/Nominating/Governance Committee.
Mitsunobu Takeuchi
— Mr. Takeuchi served
as Chairman Emeritus of DENSO International America, Inc., the
North American arm of Japan-based DENSO Corp., a worldwide
supplier of advanced automotive systems and components, from
2004 until January 2006. Mr. Takeuchi joined DENSO in 1964
and rose through a series of sales and general manager positions
in Japan and North America, with experience in both original
equipment and aftermarket. He became President and Chief
Executive Officer, DENSO International America in 1997, Chairman
and Chief Executive Officer in 2002 and Chairman Emeritus in
2004. He served as a member of the Board of Directors of Denso
Corporation from March 1995
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until his retirement in June 2004. Mr. Takeuchi is a
director of the Economic Club of Detroit and the Motor Equipment
Manufacturers Association and a member and past president of the
Japan Business Society of Detroit. Mr. Takeuchi is
67 years old and has been a director of our company since
January 2006. Mr. Takeuchi is a member of the Audit
Committee.
Jane L. Warner
— Ms. Warner has served as
Executive Vice President at Illinois Tool Works Inc., a global
manufacturer of specialty products and equipment, since August
2007, where she has worldwide responsibility for its Global
Finishing and Software businesses. Ms. Warner joined
Illinois Tool Works Inc. in December 2005 as Group President of
its Finishing and Click Commerce businesses. Prior to this,
Ms. Warner was President of Plexus Systems, L.L.C., a
provider of manufacturing information systems from June 2004
until December 2005 and an executive with Electronic Data
Systems from 2000 through June 2004, where she was President of
their Global Manufacturing Information Solutions Group.
Ms. Warner served as Executive Vice President for first
tier supplier Textron Automotive from 1994 through 1999, where
she was President of its Kautex North America and Randall
divisions. Previously, Ms. Warner held various positions
over a
20-year
span
at General Motors Corporation which included General
Superintendent and Assistant Chief Engineer. She was sponsored
as a Sloan Fellow to Stanford University where she received a
Master’s in Management. Ms. Warner is a board member
of MeadWestvaco Corporation, where she sits on the Audit and
Safety, Health and Environmental Committees and a member of the
Board of Trustees for Kettering University where she is past
Chair and serves on the Finance Committee. Ms. Warner is
62 years old and was named a director of our company in
October 2004. Ms. Warner is a member of the Audit Committee
and the Compensation/Nominating/Governance Committee.
5
CORPORATE
GOVERNANCE
Overview
We have established a comprehensive corporate governance plan
for the purpose of defining responsibilities, setting high
standards of professional and personal conduct and assuring
compliance with these responsibilities and standards. As part of
its annual review process, the Board of Directors monitors
developments in the area of corporate governance. Listed below
are some of the key elements of our corporate governance plan.
Many of these matters are described in more detail elsewhere in
this proxy statement.
Independence
of Directors (see pp. 7-8)
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Eight of the Company’s ten current directors are
independent under the New York Stock Exchange (“NYSE”)
listing standards. Assuming all nominees presented in this Proxy
Statement are elected at the Annual Meeting, eight of our ten
directors will be independent under the NYSE listing standards.
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Independent directors are scheduled to meet separately in
executive session after every regularly scheduled Board of
Directors meeting.
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We have a lead independent director, Mr. Paul T. Stecko.
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Audit
Committee (see pp. 10-11 and p. 43)
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All members meet the independence standards for audit committee
membership under the NYSE listing standards and applicable
Securities and Exchange Commission (“SEC”) rules.
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Two members of the Audit Committee, Messrs. Charles Cramb
and Dennis Letham, have been designated as “audit committee
financial experts” as defined in the SEC rules. All members
of the Audit Committee satisfy the NYSE’s financial
literacy requirements.
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The Audit Committee operates under a written charter that
governs its duties and responsibilities, including its sole
authority to appoint, review, evaluate and replace our
independent auditors.
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The Audit Committee has adopted policies and procedures
governing the pre-approval of all audit, audit-related, tax and
other services provided by our independent auditors.
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Compensation/Nominating/Governance
Committee and Subcommittee (see pp. 8-10 and
p. 42)
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All members meet the independence standards for compensation and
nominating committee membership under the NYSE listing standards.
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The Compensation/Nominating/Governance Committee operates under
a written charter that governs its duties and responsibilities,
including the responsibility for executive compensation.
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In December 2005, an Executive Compensation Subcommittee was
formed which has the responsibility to consider and approve
equity-based compensation for our executive officers which is
intended to qualify as “performance based
compensation” under Section 162(m) of the Internal
Revenue Code.
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Corporate
Governance Principles
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We have adopted Corporate Governance Principles, including
qualification and independence standards for directors.
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Stock
Ownership Guidelines
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We have adopted Stock Ownership Guidelines to align the
interests of our executives with the interests of stockholders
and promote our commitment to sound corporate governance.
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The Stock Ownership Guidelines apply to the non-management
directors, the Chairman and Chief Executive Officer, all
Executive Vice Presidents and all Senior Vice Presidents.
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Communications
with Directors (see pp. 11-12)
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The Audit Committee has established a process for confidential
and anonymous submissions by our employees, as well as
submissions by other interested parties, regarding questionable
accounting or auditing matters.
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Additionally, the Board of Directors has established a process
for stockholders to communicate with the Board of Directors, as
a whole, or any independent director.
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Codes of
Business Conduct and Ethics
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We have adopted a Code of Ethical Conduct for Financial Managers
that applies to our Chief Executive Officer, Chief Financial
Officer, Controller and other key financial managers.
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We also operate under an omnibus Statement of Business
Principles that applies to all directors, officers and employees
and includes provisions ranging from restrictions on gifts to
conflicts of interest. All salaried employees are required to
affirm annually in writing their acceptance of, and compliance
with, these principles.
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Related Party
Transactions Policy (see pp. 12-13)
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We have adopted a Policy and Procedure for Transactions with
Related Persons, under which our Audit Committee must generally
pre-approve transactions involving more than $120,000 with our
directors, executive officers, five percent or greater
stockholders and their immediate family members.
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Equity Award
Policy
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We have adopted a written policy to be followed for all
issuances by our company of compensatory awards in the form of
our common stock or any derivative of our common stock.
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Personal Loans
to Executive Officers and Directors
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We comply with and operate in a manner consistent with the
legislation outlawing extensions of credit in the form of a
personal loan to or for our directors or executive officers.
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Our Audit Committee, Compensation/Nominating/Governance
Committee and Executive Compensation Subcommittee Charters,
Corporate Governance Principles, Stock Ownership Guidelines,
Accounting Complaints Policy, Code of Ethical Conduct for
Financial Managers, Statement of Business Principles, Policy and
Procedures for Transactions with Related Persons, Equity Award
Policy, Director Communications Policy and Audit/Non-Audit
Services Policy may be accessed on our website at
www.tenneco.com.
The contents of the website are not,
however, a part of this proxy statement. In addition, we will
make a copy of any of these documents available to any person,
without charge, upon written request to Tenneco Inc., 500 North
Field Drive, Lake Forest, Illinois 60045, Attn: General Counsel.
We intend to satisfy the disclosure requirements under
Item 5.05 of
Form 8-K
and applicable NYSE rules regarding amendments to or waivers of
our Code of Ethical Conduct for Financial Managers and Statement
of Business Principles by posting this information on our
website at
www.tenneco.com.
The Board of
Directors and Its Committees
General.
Our Board of Directors
currently comprises ten members, eight of whom are not officers
of our company and two of whom are officers of our company. The
Board of Directors believes that our ratio of outside directors
to inside directors represents a commitment to the independence
of the Board and a focus on matters of importance to our
stockholders.
The Board of Directors has determined that all of our
non-management directors are “independent” as that
term is defined under the listing standards of the NYSE. As part
of its analysis, the Board determined that none of the outside
directors has a direct or indirect material relationship with
us. Under written
7
guidelines adopted by the Board, the following commercial or
charitable relationships are not considered to be material
relationships that would impair a director’s independence:
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the director is an employee, director or beneficial owner of
less than 10% of the shares of another company that (directly or
indirectly through its subsidiaries or affiliates) does business
with us and the annual sales to, or purchases from, us are less
than 1% of the annual consolidated revenues of both our company
and the other company;
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the director is an employee, director or beneficial owner of
less than 10% of the shares of another company that (directly or
indirectly through its subsidiaries or affiliates) is indebted
to us, or to which we are indebted, and the total amount of
either company’s consolidated indebtedness to the other is
less than 1% of the total consolidated assets of the indebted
company;
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the director is an executive officer of another company in which
we own a common equity interest, and the amount of our interest
is less than 5% of the total voting power of the other
company; or
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the director serves as an employee, director or trustee of a
charitable organization, and our discretionary charitable
contributions to the organization are less than 1% of that
organization’s total annual charitable receipts.
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No outside director has a relationship with us that is not
within these guidelines.
In making its determinations, the Board of Directors considered
the following relationships, all of which are within these
guidelines: in the case of Mr. Letham, an ordinary course
supply arrangement between our company and the company where he
serves as executive vice president, finance and chief financial
officer; in the case of Mr. Stecko, an ordinary course
supply arrangement between our company and the company where he
serves as chief executive officer; and in the case of
Ms. Warner, an ordinary course supply arrangement between
our company and the company where she serves as executive vice
president.
During 2008, the Board of Directors held eight meetings. All of
our directors who served in 2008 attended at least 75% of the
aggregate of all meetings of the Board of Directors and all
meetings of the committees of the Board held and on which the
director served. The Board of Directors is scheduled to meet in
executive session, without management, after every regularly
scheduled Board meeting. Mr. Stecko acts as lead
independent director to chair these executive sessions and as
primary spokesperson in communicating matters arising out of
these sessions to our management.
All of the directors attended last year’s annual meeting of
the stockholders. The Board of Directors has a policy that,
absent unusual circumstances, all directors attend our annual
stockholder meetings.
The Board of Directors has the following standing committees,
which have the responsibilities and authority described below.
Compensation/Nominating/Governance Committee and
Subcommittee.
The members of the
Compensation/Nominating/Governance Committee are Ms. Warner
and Messrs. Price, Stecko and Porter, who is the Chairman
of the Committee. The Compensation/Nominating/Governance
Committee is comprised solely of outside directors who meet the
independence standards for compensation and nominating committee
members as set forth in the NYSE listing standards.
The Compensation/Nominating/Governance Committee has the
responsibility, among other things, to:
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establish the salary rate of the officers and employees of our
company and its subsidiaries;
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examine periodically our compensation structure;
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supervise our welfare and pension plans and compensation
plans; and
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produce an annual report on executive compensation for inclusion
in our proxy statement in accordance with applicable rules and
regulations of the SEC.
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8
It also has significant corporate governance responsibilities
including, among other things, to:
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review and determine the desirable balance of experience,
qualifications and expertise among members of the Board;
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review possible candidates for membership on the Board and
recommend a slate of nominees for election as directors at each
annual meeting of stockholders;
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review the function and composition of the other committees of
the Board and recommend membership on these committees;
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review the qualifications of and recommend candidates for
election as officers of our company; and
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develop, recommend to the Board of Directors for approval and,
as appropriate, recommend to the Board of Directors revisions to
our applicable Corporate Governance Principles.
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The Compensation/Nominating/Governance Committee may form and
delegate authority to subcommittees when appropriate and to the
extent permitted by applicable law and the rules of the NYSE.
Once a subcommittee of this committee is so formed, the
committee may exercise any authority in its discretion that is
granted to the subcommittee.
An Executive Compensation Subcommittee, consisting of all
Compensation/Nominating/Governance Committee members except
Mr. Stecko, was formed in 2005. This subcommittee has the
responsibility of considering and approving equity-based
compensation for our Chief Executive Officer and our other
executive officers which is intended to qualify as
“performance based compensation” under
Section 162(m) of the Internal Revenue Code. This
subcommittee does not have the authority to further delegate its
responsibilities.
Each of the Compensation/Nominating/Governance Committee and its
Executive Compensation Subcommittee operates pursuant to a
written charter, the current versions of which were reaffirmed
by the Board of Directors and the
Compensation/Nominating/Governance Committee, respectively, in
March 2009 as part of their annual review process. The
Compensation/Nominating/Governance Committee held six meetings
and the Executive Compensation Subcommittee held three meetings
during 2008.
The Compensation/Nominating/Governance Committee engages Hewitt
Associates, LLC as its regular outside compensation consultant.
Hewitt reports directly to the
Compensation/Nominating/Governance Committee and the scope of
its assignment is to (i) assist in decision-making with
respect to executive compensation, (ii) provide plan design
advice, (iii) provide annual competitive market studies
against which committee members can analyze executive
compensation and (iv) apprise the committee members
regarding best practices and pay levels in association with
director compensation. For our director compensation, Hewitt
prepares comparative market data and presents that information
directly to the committee and the Board. The committee and the
Board review this data and establish director compensation in
consultation with Hewitt.
From time to time, the committees will review materials prepared
by other consultants to assist it with specific compensation
matters. For example, in 2006, management engaged Buck
Consultants, a pension actuarial firm, to provide advice
concerning the restructuring of Tenneco’s defined benefit
and defined contribution retirement benefits plans for
U.S. salaried and non-union hourly employees. This
information was reviewed by the
Compensation/Nominating/Governance Committee in connection with
its decision to freeze future accruals under our defined
benefits retirement plans at the end of 2006, as described under
“Executive Compensation — Post-Employment
Compensation — 2006 Changes in Defined Benefits.”
For a discussion of the role of our executive officers in the
establishment of executive officer compensation, see
“Executive Compensation — Compensation Discussion
and Analysis.” Our executive officers do not participate in
the process for establishing director compensation.
A report of the Compensation/Nominating/Governance Committee
regarding executive compensation appears elsewhere in this proxy
statement. For a more detailed discussion of the Compensation/
9
Nominating/Governance Committee’s processes and procedures
for considering and determining executive compensation, see
“Executive Compensation — Compensation Discussion
and Analysis.”
Audit Committee.
The members of the
Audit Committee are Ms. Warner and Messrs. Letham,
Macher, Takeuchi and Cramb, who is the Chairman of the
Committee. The Audit Committee is comprised solely of directors
who meet all of the independence standards for audit committee
membership as set forth in the Sarbanes-Oxley Act of 2002, and
the SEC rules adopted thereunder, and the NYSE listing
standards. The Board of Directors has designated Mr. Cramb
and Mr. Letham as “audit committee financial
experts” as that term is defined in the SEC rules adopted
pursuant to the Sarbanes-Oxley Act of 2002.
Management is responsible for our internal controls over the
financial reporting process. The independent public accounting
firm is responsible for performing an independent audit of our
consolidated financial statements in accordance with generally
accepted audit standards and for issuing a report on its audit.
The Audit Committee’s duty is to oversee and monitor these
activities on behalf of the Board of the Directors.
Specifically, the Audit Committee has the responsibility, among
other things, to:
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select and approve the compensation of our independent public
accountants;
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review and approve the scope of the independent public
accountants’ audit activity and all non-audit services;
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review with management and the independent public accountants
the adequacy of our basic accounting system and the
effectiveness of our internal audit plan and activities;
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review with management and the independent public accountants
our certified financial statements and exercise general
oversight over the financial reporting process;
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review with us litigation and other legal matters that may
affect our financial condition and monitor compliance with
business ethics and other policies;
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review the independence, qualifications and performance of our
independent public accountants;
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provide an avenue of communication among the independent public
accountants, management, the internal auditors and the Board of
Directors; and
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prepare the audit-related report required by the SEC to be
included in our annual proxy statement.
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In fulfilling its responsibilities, the Audit Committee reviewed
with management and the independent public accountants:
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significant issues, if any, regarding accounting principles and
financial statement presentations, including any significant
changes in our selection or application of accounting
principles, and significant issues, if any, as to the adequacy
of our internal controls and any special audit steps adopted in
view of material internal control deficiencies;
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analyses prepared by management
and/or
the
independent public accountants setting forth significant
financial reporting issues and judgments made in connection with
the preparation of the financial statements, including analyses
of the effects of alternative generally accepted accounting
principles methods on financial statements;
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the effect of regulatory and accounting initiatives, as well as
off-balance sheet structures, if any, on our financial
statements; and
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the type and presentation of information to be included in
earnings press releases, as well as any financial information
and earnings guidance provided to analysts and rating agencies.
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In addition, the Audit Committee has discussed our major risk
exposures and the steps that management has taken to monitor and
control such exposures. Management is required to advise the
Committee of any instances of fraud relating to employees who
have a significant role in our internal controls. The Committee
was advised that management was not aware of any such instances
of fraud.
10
The Audit Committee operates under a written charter, the
current version of which was reaffirmed by the Board of
Directors in March 2009 as part of its annual review process.
The Audit Committee held twelve meetings in 2008. A report of
the Audit Committee appears elsewhere in this proxy statement.
Consideration of Director Nominees.
The
Compensation/Nomination/Governance Committee regularly assesses
the size of the Board of Directors, the need for expertise on
the Board of Directors and whether any vacancies are expected on
the Board of Directors due to retirement or otherwise. The
Committee’s process for identifying and evaluating nominees
is as follows: In the case of incumbent directors, the Committee
reviews annually such directors’ overall service to us
during their term, including the number of meetings attended,
level of participation, quality of performance and any
transactions of such directors with us during their term. In the
event that vacancies are anticipated, or otherwise arise, the
Compensation/Nomination/Governance Committee considers various
potential candidates for director which may come to its
attention through a variety of sources, including current Board
members, stockholders or other persons. In addition, from time
to time the Committee will retain a professional search firm to
assist it in identifying director candidates, for which the firm
generally receives a fee. All candidates for director are
evaluated at regular or special meetings of the
Compensation/Nomination/Governance Committee. In evaluating and
determining whether to recommend a person as a candidate for
election as a director, the Compensation/Nomination/Governance
Committee considers the qualification standards set forth in our
Corporate Governance Principles, including: (1) personal
and professional ethics, integrity and values; (2) an
ability and willingness to undertake the requisite time
commitment to Board functions; (3) independence pursuant to
the guidelines set forth in the Corporate Governance Principles
and applicable rules and regulations; (4) age, which must
be less than 72; (5) the potential impact of service on the
board of directors of other public companies, including
competitors of our company; and (6) an absence of
employment at a competitor of our company.
The Compensation/Nominating/Governance Committee will consider
director candidates recommended by stockholders provided the
procedures set forth below are followed by stockholders in
submitting recommendations. The committee does not intend to
alter the manner in which it evaluates candidates, including the
minimum criteria set forth above, based on whether the candidate
was recommended by a stockholder. A stockholder of our company
may nominate persons for election to the Board of Directors at
an annual meeting if the stockholder submits such nomination,
together with certain related information required by our
By-Laws, in writing to our Corporate Secretary at our principal
executive offices not later than the close of business on the
90th day nor earlier than the close of business on the
120th day prior to the first anniversary of the preceding
year’s annual meeting. In the event, however, that the date
of the annual meeting is more than thirty days before or more
than seventy days after that anniversary date, the notice must
be delivered not earlier than the close of business on the
120th day prior to such annual meeting and not later than
the close of business on the later of the 90th day prior to
such annual meeting or the tenth day following the day on which
public announcement of the date of the meeting is first made.
Following verification of the stockholder’s status, the
Compensation/Nomination/Governance Committee will perform an
initial analysis of the qualifications of the nominee pursuant
to the criteria listed above to determine whether the nominee is
qualified for service on our Board of Directors before deciding
to undertake a complete evaluation of the nominee. Other than
the verification of compliance with the procedures set forth in
our By-Laws and stockholder status, and the initial analysis
performed by the Compensation/Nomination/Governance Committee, a
person nominated by a stockholder for election to the Board of
Directors is treated like any other potential candidate during
the review process by the Compensation/Nomination/Governance
Committee.
Communications with the
Directors.
Anyone who has a concern about our
conduct, or about our accounting, internal accounting controls
or auditing matters, may communicate that concern directly to
the Board of Directors, our lead independent director
(Mr. Stecko) or any other non-employee director or the
Audit Committee. All such concerns will be forwarded to the
appropriate directors for their review, and all concerns related
to audit or accounting matters will be forwarded to the Audit
Committee. All reported concerns will be simultaneously reviewed
and addressed by our Chief Compliance Officer and General
Counsel, or his or her designee (unless he or she is alleged to
be involved in the matter at issue). The
11
status of all outstanding concerns addressed to the Board, the
non-employee directors or the Audit Committee will be reported
to the Board or the Audit Committee (as applicable) on a
quarterly basis. The Board or any committee may direct special
treatment, including the retention of outside advisors or
counsel, for any concern addressed to them. Our corporate
policies prohibit retaliatory action against any employee who
raises concerns or questions in good faith about these matters.
Stockholders wishing to communicate with the Board of Directors,
any outside director or the Audit Committee may do so by writing
to our Corporate Secretary at 500 North Field Drive, Lake
Forest, Illinois 60045. The Corporate Secretary will forward any
communications as directed by the stockholder. We maintain a
separate, internal system for the receipt of communications from
employees.
Transactions with
Related Persons
The Board of Directors has adopted its Policy and Procedures for
Transactions with Related Persons. As a general matter, the
policy requires the Audit Committee to review and approve or
disapprove the entry by us or our subsidiaries into certain
transactions with related persons. The policy only applies to
transactions, arrangements and relationships where the aggregate
amount involved could reasonably be expected to exceed $120,000
in any calendar year and in which a related person has a direct
or indirect interest. A related person is:
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any director, nominee for director or executive officer of our
company;
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any immediate family member of a director, nominee for director
or executive officer; and
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any person, and his or her immediate family members, or any
entity, including affiliates, that was a beneficial owner of
five percent or more of any of our outstanding equity securities
at the time the transaction occurred or existed.
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If advance approval of a transaction subject to the policy is
not obtained, it must be promptly submitted to the committee for
possible approval, amendment, termination or rescission. In
reviewing any transaction, the committee will take into account,
among other factors the committee deems appropriate, whether the
transaction is on terms no less favorable than terms generally
available to a third party in similar circumstances and the
extent of the related person’s interest in the transaction.
The Board of Directors has delegated to the chair of the
committee the authority to approve, disapprove or ratify any
transaction with a related person in which the aggregate amount
involved is expected to be less than $1,000,000.
The policy provides that the following transactions are
pre-approved for the purposes of the policy:
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Employment of executive officers and compensation of directors
and executive officers that is otherwise being reported in our
annual proxy statement (as these transactions are otherwise
subject to approval by the Board of Directors or one of its
committees);
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A transaction where the related person’s only interest is
as an employee, director or owner of less than 10% of the other
company’s shares, and if the transaction involves the sale
of purchase or sale of goods or services, the annual sales to or
purchases from our company are less than 1% of the annual
consolidated revenue for both our company and the other company,
or, if the transaction involves lending or borrowing, the total
amount of either company’s indebtedness is less than 1% of
the total consolidated assets of the indebted company;
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Contributions to charitable organizations, foundations or
universities at which a related person’s only relationship
is as an employee, director or trustee, if the aggregate amount
does not exceed 1% of the charitable organization’s total
annual receipts;
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Transactions where the related person’s only interest
arises solely from the ownership of our common stock, and where
all stockholders of our company receive benefits on a pro rata
basis;
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Transactions involving competitive bidding;
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Transactions where the related person renders services as a
common or contract carrier, or public utility, at rates or
charges fixed in conformity with law or governmental
authority; and
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Transactions involving services as a bank depository of funds,
transfer agent, registrar, trustee under a trust indenture or
similar services.
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Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our directors and executive officers and
beneficial owners of 10 percent or more of a registered
class of our equity securities to file with the SEC initial
reports of beneficial ownership (Form 3) and reports
on changes in beneficial ownership (Form 4 or 5). SEC rules
adopted pursuant to Section 16(a) require that such persons
furnish us with copies of all such forms they file with the SEC.
Based solely upon our review of such forms furnished to us
during 2008, and upon the written representations received by us
from certain of our directors and executive officers that no
Forms 5 were required, we believe that our directors,
executive officers and 10% or greater stockholders complied with
all Section 16(a) filing requirements on a timely basis
during 2008.
13
OWNERSHIP OF
COMMON STOCK
Management
The following table shows, as of March 16, 2009, the number
of shares of our common stock, par value $.01 per share (the
only class of voting securities outstanding), beneficially owned
by: (1) each director and nominee for director;
(2) each person who is named in the Summary Compensation
Table below; and (3) all directors and executive officers
as a group.
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Shares of
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Common Stock
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Percent of
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Owned
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Common Stock
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(1)(2)(3)(4)
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Outstanding
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Directors
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Charles W. Cramb
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27,485
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*
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Dennis J. Letham
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13,757
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*
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Frank E. Macher
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13,314
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*
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Hari N. Nair
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324,575
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*
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Roger B. Porter
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49,662
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*
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David B. Price, Jr.
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78,834
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*
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Gregg M. Sherrill
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435,322
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*
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Paul T. Stecko
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33,806
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*
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Mitsunobu Takeuchi
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6,510
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*
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Jane L. Warner
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17,512
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*
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Named Executive
Officers
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Kenneth R. Trammell
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233,960
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*
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Neal A. Yanos
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162,383
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*
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Timothy E. Jackson
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173,163
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*
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All executive officers and directors as a group (18 individuals)
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2,034,019
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(5)
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4.2
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%
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*
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Less than one percent.
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(1)
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Each director and executive officer has sole voting and
investment power over the shares beneficially owned (or has the
right to acquire shares as described in note (2) below) as
set forth in this column, except for restricted shares.
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(2)
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Includes shares of restricted stock. At March 16, 2009,
Messrs. Sherrill, Trammell, Nair, Yanos and Jackson held
213,593, 37,083, 63,077, 28,077 and 21,673 restricted shares,
respectively. Also includes shares that are subject to options
that are exercisable within 60 days of March 16, 2009
for Ms. Warner and Messrs. Cramb, Nair, Porter, Price,
Sherrill, Stecko, Trammell, Yanos and Jackson to purchase 6,502,
16,475, 215,334, 35,000, 35,000, 106,667, 10,000, 149,083,
94,166 and 79,595 shares, respectively.
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(3)
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Each of the individuals listed in the table owns less than 1% of
the outstanding shares of our common stock, respectively, except
for all directors and executive officers as a group, who
beneficially own approximately 4.2% of the outstanding common
stock.
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(4)
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For outside directors, does not include common stock equivalents
received in payment of director fees. These common stock
equivalents are payable in cash or, at our option, shares of
common stock after an outside director ceases to serve as a
director. At March 16, 2009, the total number of common
stock equivalents held by Ms. Warner and
Messrs. Cramb, Letham, Macher, Porter, Price, Stecko and
Takeuchi was: 17,174, 34,793, 20,738, 33,071, 89,641, 55,358,
55,358 and 14,606, respectively.
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(5)
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Includes 957,044 shares that are subject to options that
are exercisable within 60 days of March 16, 2009 by
all executive officers and directors as a group. Includes
434,781 shares of restricted stock. Does not include 91,914
common stock equivalents held by an executive officer pursuant
to a deferred compensation plan.
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14
Certain Other
Stockholders
The following table sets forth, as of March 16, 2009,
certain information regarding the persons known by us to be the
beneficial owner of more than 5% of our outstanding common stock
(the only class of voting securities outstanding).
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Shares of
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Name and Address
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Common Stock
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Percent of Common
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of Beneficial Owner(1)
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Owned(1)
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Stock Outstanding
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Wellington Management Company, L.L.P.(2)
75 State Street
Boston, MA 02109
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6,344,146
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13.53%
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|
FMR LLC, Edward C. Johnson 3d(3)
82 Devonshire Street
Boston, MA 02109
|
|
|
3,766,760
|
|
|
|
8.03%
|
|
Transamerica Investment Management, LLC
|
|
|
3,567,877
|
|
|
|
7.61%
|
|
|
|
|
|
(1)
|
|
This information is based on information contained in filings
made with the SEC regarding the ownership of our common stock.
|
|
|
|
(2)
|
|
Wellington Management Company, L.L.P. (“Wellington”)
has shared voting power for 4,629,845 shares and shared
dispositive power for 6,344,146 shares. The securities
reported by Wellington, in its capacity as investment adviser,
are owned of record by clients of Wellington. Those clients have
the right to receive, or the power to direct the receipt of,
dividends from, or the proceeds from the sale of, such
securities. No such client is known to Wellington to have such
right or power with respect to more than five percent of this
class of securities.
|
|
|
|
(3)
|
|
Fidelity Management & Research Company
(“Fidelity”), 82 Devonshire Street, Boston,
Massachusetts 02109, a wholly-owned subsidiary of FMR LLC, is
the beneficial owner of 3,072,980 shares as a result of
acting as investment adviser to various investment companies.
Edward C. Johnson 3d and FMR LLC, through its control of
Fidelity and the funds, each has sole power to dispose of the
3,072,980 shares owned by the funds. Neither FMR LLC nor
Edward C. Johnson 3d has the sole power to vote or direct the
voting of the shares owned directly by the Fidelity funds, which
power resides with the funds’ Boards of Trustees. Pyramis
Global Advisors Trust Company (“PGATC”), 53 State
Street, Boston, Massachusetts, 02109, an indirect wholly-owned
subsidiary of FMR LLC, is the beneficial owner of
657,780 shares as a result of its serving as investment
manager of institutional accounts owning such shares. Edward C.
Johnson 3d and FMR LLC, through its control of PGATC, each has
sole dispositive power over 657,780 shares and sole power
to vote or to direct the voting of 657,780 shares of Common
Stock owned by the institutional accounts managed by PGATC as
reported above. FIL Limited (“FIL”), Pembroke Hall, 42
Crow Lane, Hamilton, Bermuda, is the beneficial owner of
36,000 shares. Partnerships controlled predominantly by
members of the family of Edward C. Johnson 3d, Chairman of FIL,
or trusts for their benefit, own approximately 47% of the voting
shares of FIL. FMR LLC and FIL are of the view that they are not
acting as a “group” for purposes of Section 13(d)
under the Securities Exchange Act of 1934 and that they are not
otherwise required to attribute to each other the
“beneficial ownership” of securities
“beneficially owned” by the other corporation within
the meaning of
Rule 13d-3
promulgated under the 1934 Act. However, FMR LLC has made
filings with the SEC as if all of the shares are beneficially
owned by FMR LLC and FIL on a joint basis.
|
15
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Introduction
Our executive compensation philosophy, policies, plans and
programs are under the supervision of the
Compensation/Nominating/Governance Committee of our board of
directors. In late 2005, the committee formed an Executive
Compensation Subcommittee, which is responsible for making
executive compensation determinations with respect to stock
options and other equity-based compensation that may qualify as
“performance-based compensation” under
Section 162(m) of the Internal Revenue Code. For a
description of the composition, authority and responsibilities
of the committee and subcommittee, see “Corporate
Governance — The Board of Directors and Its
Committees — Compensation/Nominating/Governance
Committee and Subcommittee.” Unless the context requires
otherwise, in this Compensation Discussion and Analysis when we
refer to the “committee,” we are also referring to the
subcommittee with respect to performance-based compensation
under Section 162(m), and when we refer to
“executives,” we are referring to the named executive
officers whose compensation is shown in this proxy statement
under “— Summary Compensation Table.”
Compensation
Objectives
The basic philosophy underlying our executive compensation
policies, plans and programs is that (1) executive and
stockholder financial interests should be aligned as closely as
possible, and (2) compensation packages should be based on
delivering pay in line with performance.
Accordingly, our executive compensation program has been
structured to:
|
|
|
|
|
|
•
|
Reinforce a results-oriented management culture with executive
pay that varies according to performance.
|
|
|
|
|
•
|
Focus executives on annual and long-term business results with
the overarching goal of enhancing stockholder value.
|
|
|
|
|
•
|
Align the interests of our executives and stockholders through
equity-based compensation awards.
|
|
|
|
|
•
|
Provide executive compensation packages that attract, retain and
motivate executives of the highest qualifications, experience
and ability.
|
Based on these objectives, our executive compensation program is
designed to provide competitive levels of compensation derived
from several sources: salaries; annual cash incentive awards;
stock ownership opportunities through stock options and
restricted stock; and other equity-based long-term compensation.
We also offer other benefits typically offered to executives by
major U.S. corporations, including defined benefit
retirement plans (future benefit accruals under which were
substantially eliminated for senior management in 2006 as
described below), defined contribution retirement plans,
perquisites, employment agreements (in limited cases), severance
and change in control benefits and welfare benefits.
Compensation
Process
In determining competitive compensation, the committee engages a
nationally recognized compensation consulting firm that reports
directly to the committee to maintain its independence. For more
information regarding this consulting firm and the scope of its
assignment, see “Corporate Governance — The Board
of Directors and Its Committees —
Compensation/Nominating/Governance Committee and
Subcommittee.” For our Chief Executive Officer (CEO), the
consulting firm generally provides market data regarding salary,
annual cash incentive award targets, and long-term incentive
compensation awards, and provides advice directly to the
committee as it makes decisions with respect to compensation.
For the other executives, our management formulates the initial
recommendations regarding salary, annual cash incentive award
targets and equity-based and other long-term incentive
compensation awards. The
16
committee reviews the recommendations in light of market data
prepared by the consulting firm. For other forms of compensation
and benefits, management generally makes initial recommendations
that are considered by the committee.
Our policy is to provide salary, annual cash incentive payments
and long-term incentive compensation to executives based on
performance that is competitive and at market levels with
comparable companies when financial and qualitative targets are
met (i.e. 50th percentile for target performance). In
making its determinations regarding these elements of
compensation, the committee regularly reviews data regarding
compensation practices at other companies that it determines to
be relevant to compensation matters affecting our company.
Historically, we have not regularly engaged in any form of
benchmarking regarding other elements of compensation. As
described below, however, we did examine some benchmarking data
in connection with our 2006 decision to substantially eliminate
future accruals to our defined benefit retirement plans and were
provided with advice regarding market practices when determining
to amend and restate our change in control plan in 2007.
The benchmarking information we use in establishing salary,
annual cash incentive payments and equity-based incentive
compensation typically includes the most recently available data
regarding companies believed to be comparable to our company in
terms of industry (automotive parts manufacturing), size (total
revenues, number of employees)
and/or
other
factors. For 2008 compensation determinations, specific data was
reviewed regarding a comparison group of eighteen companies
selected to reflect a balance of automotive sector and other
traditional manufacturing companies. The data was weighted based
on the size of revenues of the comparison companies. The
following is a list of these companies and a description of why
the committee believes they are appropriate for the comparison
group:
|
|
|
|
|
Company
|
|
Basis of Comparison
|
|
|
|
A.O. Smith Corporation
|
|
Manufacturer; comparable employee base; Midwest headquarters
|
|
ArvinMeritor, Inc.
|
|
Automotive industry; comparable revenues and employee base
|
|
BorgWarner Inc.
|
|
Automotive industry; comparable revenues and employee base
|
|
Briggs & Stratton Corporation
|
|
Manufacturer; comparable market capitalization; Midwest
headquarters
|
|
Cummins, Inc.
|
|
Manufacturer; Midwest headquarters
|
|
Eastman Chemical Company
|
|
Comparable revenues; produce paint and plastics for automotive
industry
|
|
FMC Technologies, Inc.
|
|
Manufacturer; comparable revenues; former Midwest headquarters
|
|
The Goodyear Tire & Rubber Company
|
|
Automotive industry
|
|
Johnson Controls, Inc.
|
|
Automotive industry; Midwest headquarters
|
|
Lear Corporation
|
|
Automotive industry
|
|
Lennox International Inc.
|
|
Manufacturer; comparable employee base
|
|
Steelcase Inc.
|
|
Manufacturer; Midwest headquarters
|
|
Stewart & Stevenson Services, Inc.
|
|
Manufacturer for aligned industries
|
|
Teleflex Incorporated
|
|
Manufacturer; comparable employee base
|
|
Temple-Inland Inc.
|
|
Comparable revenues and employee base
|
|
W.W. Grainger, Inc.
|
|
Midwest headquarters
|
|
Whirlpool Corporation
|
|
Manufacturer; Midwest headquarters
|
|
Worthington Industries, Inc.
|
|
Manufacturer; Midwest headquarters
|
In addition, with respect to the executives other than our CEO,
the committee reviewed aggregate data regarding a broader group
of durable goods manufacturers (that were not specifically
identified to the committee). This data was prepared by the
consulting firm and compared targeted and actual
17
compensation paid by these companies to their executive officers
in specified positions to the compensation we pay to executives
in the same or similar positions.
Consistent with our compensation objectives described above, our
executive compensation program is designed to be typical of the
compensation programs that companies of similar size and in
similar industries offer to their executive officers. In
addition to looking at the competitiveness of the elements of
pay, the committee uses “tally sheets” to review the
total amount of compensation and benefits provided to the
executive officers annually as well as over a period of years.
The tally sheets also help the committee consider pay decisions
in the context of an executive’s total compensation.
Traditionally, our CEO and senior human resources executive
annually review with the committee the annual salary, incentive
plan target and long-term and stock-based compensation for each
of our executives and other key management personnel (excluding
the CEO). The committee approves that plan with any changes that
the committee deems appropriate. The compensation that is
developed for each of these executives is based on competitive
market data and on the CEO’s subjective recommendations
regarding the executive’s overall contributions.
Traditionally, the committee also reviews separately and sets
the salary, incentive plan target and long-term and stock-based
compensation of the CEO based on competitive market data as well
as the committee’s assessment of the CEO’s past
performance and anticipated future contributions.
Design and
Elements of Compensation
Our compensation program generally provides that, as an
executive’s level of responsibility increases, a greater
portion of his or her potential total compensation is based on
corporate performance and varies in accordance with the market
price of our common stock. This results in greater potential
variability in the individual’s total compensation from
year-to-year. In designing and administering the components of
the executive compensation program, the committee strives to
balance short and long-term incentive objectives and to employ
prudent judgment when establishing performance criteria,
evaluating performance and determining actual incentive payments.
The following is a description of each element of our executive
compensation program, along with a discussion of the decisions
of and action taken by the committee with respect to each such
aspect of compensation for 2008.
Salary and
Bonus/Non-Equity Incentive Plan Compensation
An executive’s basic annual cash compensation package
consists primarily of a base salary and payments under the
Tenneco Value Added Incentive Compensation Plan, which we call
the TAVA Plan. The TAVA Plan provides for annual incentive
payments based on objective and subjective determinations
regarding corporate performance. These elements of compensation
are customary within our industry.
The 2008 salary levels established for our executives were
designed to be, in general, in the 50th percentile range
when compared to the salaries set by the companies in the
compensation surveys reviewed as described above. For 2008, the
committee’s standard merit increase for executives and
other senior managers was 3.5%, although the average executive
increase was approximately 15% due to adjustments to reflect
promotions and to place the executive at the
50th percentile compared to his counterpart at comparable
companies. The following table shows the base salary for each
named executive officer as of December 31, 2007 and
December 31, 2008 and the reasons for any increase during
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
2007 Base Salary ($)
|
|
|
2008 Base Salary ($)
|
|
|
Reason For Change
|
|
|
|
Gregg M. Sherrill
|
|
|
875,000
|
|
|
|
950,000
|
|
|
Merit/Adjustment to market
|
|
Hari N. Nair
|
|
|
475,000
|
|
|
|
625,000
|
|
|
Merit/Promotion/Adjustment to market
|
|
Kenneth R. Trammell
|
|
|
408,825
|
|
|
|
500,000
|
|
|
Merit/Promotion/Adjustment to market
|
|
Neal A. Yanos
|
|
|
375,000
|
|
|
|
426,937
|
|
|
Merit/Promotion/Adjustment to market
|
|
Timothy E. Jackson
|
|
|
380,000
|
|
|
|
393,000
|
|
|
Merit
|
18
The TAVA Plan target payment levels established for our
executives for 2008 were also designed to be, in general, in the
50th percentile range when compared to target levels for
similar payments set by the companies in the compensation
surveys reviewed as described above. Like executives at peer
companies, under the TAVA Plan our executives had the potential
to earn payouts above or below the targeted 50th percentile
based on our actual corporate performance.
The current annual performance goal for the TAVA Plan was
developed, initially, by Stern Stewart & Co., an
independent consulting firm with expertise in
EVA
®
based incentive programs
(EVA
®
is defined as net operating profit after taxes minus the annual
cost of capital and is a registered trademark of Stern
Stewart & Co.). The firm developed the goal as part of
a multi-year recommendation to the committee made in early 2006.
The firm’s recommended performance goals were reviewed by
the committee. The committee approved the goals with any changes
the committee determined appropriate. At the conclusion of each
year, the committee approves incentive award payments to
executives based on the degree of achievement of the goals
established for that year and on judgments of performance as
follows: (i) 75% of an individual’s award is
determined through a formula tied to our corporate achievement
of pre-established
EVA
®
objectives, and (ii) 25% of an individual’s award is
based on the committee’s discretionary determination of
corporate performance.
We use
EVA
®
as the performance metric for the TAVA Plan because we believe
strong
EVA
®
performance is highly correlated with strong stockholder returns
and that making business decisions based on
EVA
®
balances cash-oriented results and earnings-oriented results. We
continue to base 25% of an individual’s bonus on the
committee’s discretionary determination of corporate
performance because the committee believes that it needs to
retain flexibility to respond to circumstances where
EVA
®
performance alone does not address performance made by our
company for a particular year or where the committee determines
that other factors should be considered in establishing bonuses.
The 25% portion of an individual’s payout that is
discretionary under the TAVA Plan is non-formulaic and is
determined by the committee based on factors which take into
account, but are not limited to, the relative performance of our
company versus our peers in key strategic and operational areas.
The factors considered may change from year to year.
For 2008, the targeted level of
EVA
®
improvement that would have resulted in an executive receiving
an
EVA
®
-based
bonus equal to 100% of his targeted bonus amount was an
improvement of $13 million over
EVA
®
for 2007. While there is no maximum payout, the potential
payouts typically range from zero to two times targeted bonus
based upon the actual
EVA
®
growth in relation to the targeted improvement. For 2008,
EVA
®
would have needed to improve $37 million over
EVA
®
for 2007 for an executive to have received an
EVA
®
-based
bonus equal to two times his targeted bonus amount.
For 2008 performance, no cash awards were made under the TAVA
Plan. As described above, our corporate performance against
EVA
®
objectives accounted for 75% of each executive’s 2008 TAVA
Plan award potential. Our
EVA
®
performance for 2008 was a significant decline which resulted in
no payments being earned in respect of this portion of
executives’ TAVA Plan awards. Payout of the remaining 25%
of each executive’s TAVA Plan award is discretionary and is
determined by the committee based on the various subjective
factors described above. Weighing these factors for 2008, the
committee determined that no discretionary bonus would be paid
to any executive for 2008.
In making its determinations that no discretionary bonuses be
awarded for 2008, the committee considered in particular
Tenneco’s overall financial performance, market conditions
and stock price performance.
Long-Term and
Stock-Based Incentives
Our long-term and stock-based incentive plans have been designed
to align a significant portion of executive compensation with
stockholder interests. The current plan — the 2006
Long-Term Incentive Plan — permits a variety of awards
including stock options, restricted stock, stock equivalent
units and performance units.
19
These awards are based on an analysis of competitive levels of
similar awards. As an individual’s level of responsibility
increases, a greater portion of variable performance-related
compensation will be in the form of long-term and stock-based
awards.
The committee has implemented a long-term and stock-based
compensation program for our executives that is comprised of
(1) stock options which generally vest in
1
/
3
increments over three years, (2) awards of restricted stock
which vest in
1
/
3
increments over three years, and (3) cash-settled long-term
performance units (“LTPUs”) which are payable based on
the level of total stockholder return. These LTPUs were, as
described below, adopted by the committee in 2007 as a
replacement for the company’s prior cash-settled stock
equivalent units (“SEUs”). Each year, the committee
reviews previously granted long-term and stock based awards for
our executives, typically at its meeting held in January.
Prior to 2007, the committee granted executives cash-settled
SEUs that were payable based on the level of
EVA
®
improvement and stock price appreciation. These awards generally
covered a three-year period but a portion of the award was
payable annually. Based on its review of the effectiveness and
purpose of the plan and competitive market data, the committee
determined to eliminate the SEU program beginning in 2007. The
committee adopted in its place the LTPU program. The LTPUs are
denominated in units and are payable based on the level of total
stockholder return (stock price appreciation adjusted for any
dividends) during the performance period. The total stockholder
return is applied against a multiplier that determines the
percentage of the awarded units that is earned based on that
level of total stockholder return. The value of a unit is equal
to the company’s average closing stock price during a
ten-day
period after the announcement of the company’s earnings for
the last year of the performance period. The LTPUs, in general,
are payable at the end of a three-year performance cycle. For
2007 and 2008, the committee granted special LTPUs covering only
a one-year period as part of the phase in to the new program.
In January 2008, the committee granted awards of the type
described above to our executives as set forth under the
“Executive Compensation” section of this Proxy
Statement. Based on the committee’s assumptions regarding
future corporate performance, interest rates and other factors,
the 2008 grants were designed, in general, to place our
executives at approximately the 50th percentile range when
compared to the value of similar awards granted by peer
companies to their executives. In making its determinations for
2008, the committee also considered factors such as internal pay
equity and common stock dilution. Our executives have the
opportunity for the value actually realized from these awards to
be above or below the 50th percentile based on our actual
corporate performance.
For the LTPUs granted in 2008, the committee’s target level
of stockholder return for 2008 and the 2008 to 2010 period was a
10% annualized rate of return. An executive would earn a
percentage of LTPUs based on the actual level of stockholder
return as set forth in the table below. In each case, as
described above, the value of the units at the time of payment
is based on an average of the then prevailing stock prices.
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of 1-Year
|
|
|
|
|
|
|
|
Performance Period (2008)
|
|
|
Percentage of 3-Year Performance
|
|
|
Total Shareholder Return
|
|
LTPUs Earned
|
|
|
Period (2008-2010) LTPUs Earned
|
|
|
|
|
<0%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
0%
|
|
|
50
|
%
|
|
|
50
|
%
|
|
10%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
³
20%
|
|
|
167
|
%
|
|
|
116
|
%
|
For 2008 performance, no cash payout was made under the one-year
LTPUs as our total stockholder return for 2008 was negative.
Based upon this performance, award holders earned no units.
In January 2009, the committee granted stock option and
restricted stock awards to our executives. The limited number of
shares remaining available under our 2006 Long-Term Incentive
Plan, combined with the significant decline in our stock price
due to the unprecedented market conditions (a result of which
was to require more shares to be granted to deliver targeted
value), constrained these awards. Accordingly, based on the
committee’s assumptions regarding future corporate
performance, interest rates and other factors, the 2009 awards
are expected to place our executives at significantly less than
the
20
50th percentile range we have historically targeted. In
January 2009, the committee also considered whether to award
further LTPUs. Because of the uncertainties surrounding market
conditions and our company’s anticipated performance, the
committee did not grant any LTPU awards in January 2009, but
intends to revisit the issue later in 2009.
Allocation Among
Forms of Compensation
In general, we allocate between currently paid compensation and
long-term compensation (excluding retirement benefits) based on
the benchmarking data analyzed as described above. Our
preference in establishing equity-based incentives is to deliver
as much value in awards that result in the issuance of stock as
possible (specifically, options and restricted stock). However,
since emerging as a stand alone company in 1999, we have been
constrained in the amount of stock available for issuance under
our equity incentive plans. As a result, we have used the SEU
and LTPU awards to deliver to our executives the overall value
we intend to deliver based on the benchmarking described above,
payable in cash rather than stock. Awards deliverable in stock
are then allocated between options and restricted stock in line
with the market data described above.
Actual Versus
Targeted Compensation Levels
As mentioned above, we generally target executive pay to be near
the median target pay for similarly situated executives at
comparable companies. However, we expect that, as a result of
our corporate performance in 2008, our executives’ salaries
and equity-based awards granted in 2008, after giving effect to
the absence of TAVA Plan and LTPU payouts, will be below the
market median of actual compensation received by executives at
the companies in the compensation surveys reviewed by the
committee.
Employment
Agreements
In January 2007, Gregg M. Sherrill joined us as our CEO. We
entered into an employment agreement with him that is described
under “— Narrative Disclosure to Summary
Compensation Table and Grants of Plan-Based Awards Table
— Employment Agreements.” Employment agreements
are customary for chief executive officers and necessary to
attract the highest quality candidates. In January 2007, we paid
Mr. Sherrill a bonus of $1,325,000 and granted him
125,000 shares of restricted stock that vest in three equal
installments, subject to his continued employment, in order to
compensate him for the income he was foregoing from his former
employer by accepting our offer. These types of signing
inducements are customary for chief executive officers.
In general, we do not have employment agreements with our other
executive officers. However, for historical reasons there are a
few exceptions. In late 1999, we emerged as an independent,
stand-alone public company focused solely on our automotive
operations. The separation transactions caused substantial
changes in our management, as the senior management of the
automotive operations became the executive officers of our
company and the previous executive officers resigned. In
addition, the separation transactions left us with a highly
leveraged balance sheet in an extremely competitive industry
that historically has faced cycles of exceptionally difficult
operating conditions.
In the face of these challenges, we recognized the importance of
ensuring the continuation of top-notch managerial talent and the
risk our executives were taking in light of our balance sheet
and the cyclicality of the automotive industry. As a result, at
that time, we entered into employment agreements with our then
top eight executive officers. In addition to our recognition of
the importance of these agreements as a recruiting and retention
tool, they were consistent with the types of employment
agreements historically offered by the consolidated Tenneco Inc.
and were viewed as customary. Since then, five of these officers
have left our employ and, in most cases, other managers have
been promoted into positions vacated by them. Other than with
respect to our CEO who was hired in January 2007, we have not,
however, extended these type of employment agreements to these
employees. For 2008, we had two executives, Mr. Nair and
Mr. Jackson, with employment agreements that established
various terms and conditions of their employment as described
under “— Narrative Disclosure to Summary
21
Compensation Table and Grants of Plan-Based Awards
Table — Employment Agreements.” Both of these
agreements were entered into in connection with the series of
transactions in 1999 that resulted in the separation of Tenneco
Inc.’s automotive, packaging and administrative services
businesses. We also still employ one other executive officer
with whom we entered into an employment agreement in 1999.
Retirement
Plans
For those executives hired before April 1, 2005, we offered
defined benefit retirement plans that we believed were customary
for the automotive industry and were consistent with similar
plans maintained by the consolidated Tenneco Inc. prior to our
becoming a stand-alone public company in 1999. These plans
included a customary tax-qualified retirement plan that was
generally available to all
U.S.-based
salaried employees and provided benefits as described under
“— Post Employment Compensation.” In
addition, we maintained a supplemental executive retirement
plan, which we call the “SERP,” that provided benefits
as described under “— Post Employment
Compensation — Tenneco Supplemental Retirement
Plan.”
We also offer to our executives and other
U.S.-based
salaried employees customary, tax-qualified defined contribution
retirement (ESOP/401(k)) plans that provide benefits as
described under “— Summary Compensation
Table.” Prior to January 1, 2009, we provided a 50%
company match on an executive’s contributions (up to 8% of
salary), which we established to be in line with prevailing
practices for major U.S. corporations. In addition to this
matching contribution, we also provide a company contribution
equal to 2% of salary for persons hired on or after
April 1, 2005. We established this company contribution
when we closed our defined benefit retirement plans to new
participants in 2005. We decided to do this because, in general,
companies in our industry have been eliminating traditional
defined benefit retirement plans from compensation packages
being offered to new employees.
At the time of the 1999 separation transactions, five employees
were considered to be of key importance to our successful
transition to being a stand-alone company and were granted
participation in a key executive pension plan, which we call the
“KEPP.” The KEPP provided benefits as described under
‘‘— Post Employment Compensation —
Tenneco Supplemental Pension Plan.” We modeled the KEPP
after the key executive pension plan maintained by the former
consolidated Tenneco Inc. prior to the separation transactions.
In August 2006, we froze, effective December 31, 2006, our
defined benefit retirement plans for certain employees and
replaced them with additional benefits under defined
contribution retirement plans. Prior earned benefits under the
defined benefit retirement plans were, however, preserved. With
the exception of certain officers who had employment contracts
providing for specified benefits (all of whom voluntarily
accepted a benefits reduction as described below), this freeze
impacted all
U.S.-based
salaried employees (including executives) and non-union hourly
employees who participated in any of the plans.
To address the loss of future benefits associated with the
freeze, we amended our existing qualified defined contribution
retirement plans, effective January 1, 2007, to provide for
additional annual company contributions in amounts that increase
with the employee’s age. These additional contributions,
which we refer to as “DB Replacement Contributions,”
are payable for each employee who ceased to accrue benefits or
whose benefits were otherwise modified under any defined benefit
retirement plan in connection with the freeze. In addition,
effective January 1, 2007 we implemented an unfunded
non-qualified defined contribution retirement plan. In general,
our executives and other senior managers are eligible to
participate in this new plan, with allocations under the plan
calculated the same as under the applicable existing defined
contribution retirement plan (as amended), except that
(i) the compensation limit in Section 401(a)(17) of
the Internal Revenue Code is disregarded and awards under the
TAVA Plan or any successor plan are included in calculating
compensation, and (ii) there is an offset for the DB
Replacement Contributions.
Under the terms of his employment agreement, our CEO is entitled
to 150% of the standard age-graded benefit under the
non-qualified defined contribution retirement plan. In addition,
in December 2007, the committee granted our Chief Financial
Officer an enhanced benefit equal to 200% of the standard
age-graded benefit under the non-qualified defined contribution
retirement plan. The committee granted these enhanced benefits
based on competitive data provided by our compensation
consultant.
22
We decided to freeze our defined benefit retirement plans
consistent with an industry trend towards eliminating
traditional defined benefits. We decided to offer additional
defined contribution retirement benefits to remain competitive
in the overall employment marketplace. Specifically, the
committee reviewed information presented by Buck Consultants, a
pension actuarial firm, regarding the industry trends in
retirement compensation, the cost savings to our company of a
revised retirement compensation structure and the degree of
benefit replacement to be achieved through new defined
contribution retirement plans.
Two of our executives — Hari N. Nair and Timothy E.
Jackson — had employment agreements that provided for
their participation in the SERP
and/or
KEPP.
As a result, we did not freeze the KEPP and SERP for these
officers. Instead, each such executive voluntarily agreed to a
reduction in his retirement benefit payable under those plans
and to an offset to benefits payable under those plans for DB
Replacement Contributions received under the existing or new
defined contribution plans. The benefits reduction increases to
a maximum of 5% of the benefit that would have otherwise been
paid, depending on the officer’s age at retirement.
Perquisites
In keeping with the competitive practice of providing
perquisites, each of our executives received a perquisite
allowance in an amount between $30,000 and $50,000 for 2008. The
perquisite allowance was designed to control our costs and to
give flexibility to management. Each executive may spend his
perquisite allowance on those items he deems appropriate.
Severance
Benefits
We maintain a Severance Benefit Plan that applies to all
salaried, full-time employees with at least one month of service
who are terminated by us in connection with a reduction in force
or similar layoff. The benefits payable under this plan are
described under “— Other Potential
Post-Employment Compensation — Other Severance
Benefits.” This plan was originally adopted in the 1990s
based on prevailing practices at other major
U.S. corporations and, after several amendments, we
continue to believe it reflects these prevailing practices.
Except for our CEO, if any of our executives with an employment
agreement (Messrs. Nair and Jackson) is terminated by us
other than in connection with a change in control or for death,
disability or cause, he will be paid two times the total of his
then current salary and bonus for the immediately preceding
year, all outstanding stock-based awards will be vested, subject
to approval by our board of directors, his stock options will
remain exercisable for at least 90 days and he will receive
one year of post-termination health and welfare benefits. We
established these severance benefits at the time of the 1999
separation transaction based on the severance offered by the
former consolidated Tenneco Inc.
Under his employment agreement, we have agreed to pay our CEO
two times his then current salary if we terminate his employment
other than for disability, cause or in connection with a change
in control. We view these benefits as customary and a key
element of the recruiting and retention of executives in light
of company and industry specific factors. See
“— Narrative Disclosure to Summary Compensation
Table and Grants of Plan-Based Awards Table
— Employment Agreements.”
Change in Control
Plan
We maintain a Change in Control Severance Benefit Plan for Key
Executives to enable us to retain and motivate highly qualified
employees by eliminating, to the maximum practicable extent, any
concern that their job security or benefit entitlements will be
jeopardized by a “change in control” of our company.
Benefits are payable under the plan as described in
“— Other Potential Post-Employment
Compensation — Change in Control Severance Benefit
Plan for Key Executives.”
We adopted a version of the plan in connection with the 1999
separation transactions based substantially on the change in
control benefits offered by the former consolidated Tenneco Inc.
We
23
viewed these benefits as a key element of the recruiting and
retention of executives and other senior management at the time
in light of company and industry specific factors. For
executives with employment agreements, other than our CEO, the
terms of this plan as to entitlement to cash payments and the
vesting of awards continue to apply.
In 2007, the committee reevaluated our plan in light of current
market conditions and practices. While the committee continued
to believe that a change in control program was necessary to
keep executive decision-making objective and neutral to
potential job loss, for executive retention during a transaction
and to provide and maintain a competitive total compensation
package, the committee determined that changes should be made to
the plan so that the plan did not exceed current
“median” market practices. The principal differences
between the amended and restated change in control plan adopted
in 2007 and our prior change in control plan are (i) it
applies to far fewer individuals (applies to nine top
executives, which is 46 fewer than the prior plan), (ii) it
redefines what constitutes a “change in control” (more
limited in scope), (iii) it no longer provides that awards
under the plan or any similar benefit plan or compensation
arrangement or program will be treated as exercisable, earned at
target and vested immediately upon the happening of a change in
control and (iv) it removes the provision previously
allowing certain executives voluntarily separating from the
company following a change in control to be paid benefits under
the plan.
Equity Award
Policy
Our board of directors has adopted a formal policy regarding
compensatory awards in the form of our common stock or any
common stock derivative, such as options, stock appreciation
rights and stock equivalent units. Under the policy, in general,
equity awards must be approved by the committee or the full
board of directors. Typically, the committee will make annual
awards that it determines to be appropriate at its meeting held
in January. The committee also has the authority to make interim
awards in its discretion. The strike price of any option or
stock appreciation right must be the fair market value of a
share of our common stock on the date of grant as determined
under the 2006 Long-Term Incentive Plan (which is the average of
the highest and lowest sales price of a share of our common
stock on the date of grant).
Our policy also permits a committee of management to make awards
in certain cases. The management committee consists of our CEO,
General Counsel and Senior Vice President of Global
Administration (or their respective designees). The management
committee has the authority to make equity awards to
(i) newly hired employees and (ii) employees who are
promoted during the course of a year. The awards can be made
only in amounts necessary to provide the employee with awards
consistent with the amount of awards most recently made to
employees of the same salary grade level, pro-rated based on
when the employee was hired or promoted. The awards are
pro-rated to and take effect on the first day of the calendar
quarter beginning after the employee’s hire or promotion
date, as applicable, and any strike price for an option or stock
appreciation right will be the fair market value of a share of
our common stock on that date. The total number of shares that
the management committee can issue under this board of directors
policy is 100,000. The management committee is not authorized to
make awards to new or promoted employees whom we would typically
consider to be at the most senior management or executive
officer level.
Stock
Ownership Guidelines
We maintain stock ownership guidelines that apply to all of our
directors and our senior officers. The individual guidelines are:
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•
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125,000 shares for the Chairman/Chief Executive Officer;
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•
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4,000 shares for the Non-Management Members of Board of
Directors;
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•
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35,000 shares for the Executive Vice Presidents; and
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•
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30,000 shares for the Senior Vice Presidents.
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24
The committee may, from time to time, temporarily suspend or
reevaluate and revise participants’ guidelines to give
effect to changes in our common stock price or other factors the
committee deems relevant. Shares that count towards satisfaction
of the guidelines include: (i) shares owned outright by the
participant or an immediate family member that shares the same
household; (ii) shares held in our defined contribution
plans; (iii) restricted stock issued by us, whether or not
vested; (iv) shares underlying vested options granted by
us; and (v) shares or share equivalent units underlying
deferred compensation of executives or deferred fees paid to
directors.
Participants are required to achieve their guideline within five
years of becoming subject to the guidelines. The committee has
the authority to review each participant’s compliance (or
progress towards compliance) with the guidelines from time to
time. In its discretion, the committee may impose conditions,
restrictions or limitations on any non-compliant participant as
the committee determines to be necessary or appropriate.
Impact of
Regulatory Requirements on Compensation
Section 162(m) of the Internal Revenue Code imposes a
$1 million limit on the amount that a publicly-traded
corporation may deduct for compensation paid to the CEO or one
of the company’s other three most highly compensated
executives who is employed on the last day of the year.
Non-discretionary “performance-based compensation,” as
defined under Internal Revenue Service rules and regulations, is
excluded from this $1 million limitation.
In late 2005, the committee established the Executive
Compensation Subcommittee, comprised of all committee members
except Mr. Stecko. The subcommittee considers and approves
compensation for the CEO and our other executive officers that
is intended to qualify as “performance-based
compensation” under Section 162(m) of the Internal
Revenue Code.
Our compensation programs are structured to support
organizational goals and priorities and stockholder interests.
The committee has not in the past had, and does not currently
have, a policy requiring all compensation to be deductible under
Section 162(m). Amounts payable under the TAVA Plan do not
qualify for the performance-based compensation exemption under
Section 162(m), as the committee retains discretion in
making bonus awards. In addition, the TAVA Plan was not
submitted to stockholders for approval. Additionally, our
restricted stock is not considered performance-based
compensation under Section 162(m) because it vests solely
on the basis of the individual’s continued employment over
a defined period of time. The subcommittee makes grants of LTPUs
and stock option awards that are generally designed to
incorporate the applicable requirements for
“performance-based compensation” under IRS rules and
regulations. However, we seek to preserve the tax deductibility
of executive compensation only to the extent practicable and
consistent with our overall compensation philosophies.
We do not make compensation determinations based on the
accounting treatment of any particular type of award.
25
Summary
Compensation Table
The following table shows the compensation that we paid, for
2008, to: (1) our Chief Executive Officer; (2) our
Chief Financial Officer; and (3) each of our next three
most highly compensated executive officers who were serving at
the end of 2008 based on total compensation less the increase in
actuarial value of defined benefits and any above market or
preferential earnings on non tax-qualified deferred
compensation. We refer to these individuals collectively as the
“Named Executives.” The table shows amounts paid to
the Named Executives for all services provided to our company
and its subsidiaries.
Summary
Compensation Table
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Non-Equity
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Change in
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Stock
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Option
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Incentive Plan
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Pension
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All Other
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Salary
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Bonus(1)
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Awards(2)
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Awards(2)
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Compensation
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Value(3)
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Compensation(4)
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Total
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Name and Principal Position
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Year
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($)
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($)
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($)
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($)
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($)
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($)
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($)
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($)
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Gregg M. Sherrill
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2008
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950,000
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—
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2,122,833
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597,190
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—
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—
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316,815
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3,986,838
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Chairman and CEO
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2007
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841,856
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1,587,500
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2,551,381
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314,775
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787,500
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—
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336,611
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6,419,623
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Kenneth R. Trammell
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2008
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500,000
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—
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323,583
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179,997
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—
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29,858
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165,911
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1,199,349
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Executive Vice President and CFO
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2007
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408,825
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81,900
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691,970
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163,488
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245,700
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40,275
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107,209
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1,739,367
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2006
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395,000
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125,075
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719,400
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109,857
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204,750
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121,254
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46,229
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1,721,565
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Hari N. Nair
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2008
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625,000
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—
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410,667
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198,182
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—
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202,579
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117,003
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1,553,431
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Executive Vice President and President, International
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2007
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466,720
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81,900
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726,641
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171,867
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245,700
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167,638
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115,597
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1,976,063
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2006
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414,000
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125,075
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777,355
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120,733
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204,750
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127,743
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256,678
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2,026,334
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Neal A. Yanos
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2008
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404,297
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—
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203,188
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112,854
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—
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37,380
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101,845
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859,564
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Executive Vice President, North America
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2007
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375,000
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66,900
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480,512
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114,578
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200,700
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33,922
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79,871
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1,351,483
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2006
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327,484
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111,325
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639,983
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80,899
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167,250
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103,785
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43,602
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1,474,328
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Timothy E. Jackson
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2008
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393,300
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—
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192,853
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111,755
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—
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224,007
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84,009
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1,005,924
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Senior Vice President and Chief Technology Officer
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2007
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372,713
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63,800
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464,453
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114,183
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191,399
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416,468
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490,946
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2,113,962
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2006
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327,600
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44,275
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576,439
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78,037
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120,750
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318,937
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216,458
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1,682,496
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(1)
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The amounts under the column
entitled “Bonus” in the table above are comprised of
the discretionary portion of the Named Executive’s bonus
under our TAVA Plan. See “— Compensation
Discussion and Analysis — Design and Elements of
Compensation — Salary and Bonus/Non-Equity Incentive
Plan Compensation.” In addition, the bonus amounts in 2006
for Messrs. Trammell, Nair and Yanos include $50,000 paid
to each of these Named Executives for serving in the Office of
the Chief Executive, the executive committee we formed to
oversee the company during our search for a new Chief Executive
Officer during 2006. The bonus amount for Mr. Sherrill for
2007 includes $1,325,000 paid to him upon his joining our
Company.
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(2)
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See note 8 to our consolidated
financial statements for the year ended December 31, 2006
for a description of how the 2006 data was computed, note 8
of our consolidated financial statements for the year ended
December 31, 2007 for a description of how the 2007 data
was computed and note 9 of our consolidated financial
statements for the year ended December 31, 2008 for a
description of how the 2008 data was computed. The stock award
totals reflect all restricted stock, stock equivalent units
(2006 award) and long term performance units (2007 and 2008
awards) outstanding during each of 2006, 2007 and 2008.
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(3)
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As described below under
“Post-Employment Compensation,” we traditionally
maintained defined benefit and supplemental pension plans for
our senior management (although future benefit accruals were
frozen for most employees as of December 31, 2006 as
described below under “— Post-Employment
Compensation — 2006 Changes in Defined
Benefits”). The change in value shown for 2006 reflects the
change from September 30, 2005 to September 30, 2006.
Due to a change in measurement date, the change in value for
2007 reflects the change from September 30, 2006 to
December 31, 2007. The change in value for 2008 reflects
the change from December 31, 2007 to December 31, 2008.
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(Notes continued on following page.)
26
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(4) The amounts under the column
entitled “All Other Compensation” in the table above
for 2008 are comprised of the following:
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Registrant
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Perquisites
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Contributions
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and Other
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Tax
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to Defined
|
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Personal
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Reimbursements
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Contribution
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Name
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Benefits (a)
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(Gross-ups)
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Plans (b)
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Mr. Sherrill
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$
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55,687
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$
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1,675
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$
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259,453
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Mr. Trammell
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50,959
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6,172
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108,780
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Mr. Nair
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51,536
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|
—
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65,467
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Mr. Yanos
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|
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47,376
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|
|
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5,352
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|
|
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49,117
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Mr. Jackson
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30,300
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|
134
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53,575
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(a)
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Perquisites and other personal
benefits include: (a) for Mr. Sherrill, perquisite
allowance ($50,000) and travel; (b) for Mr. Trammell,
perquisite allowance ($30,000) and travel; (c) for
Mr. Nair, perquisite allowance ($30,000) and travel;
(d) for Mr. Yanos, perquisite allowance ($30,000) and
travel and (e) for Mr. Jackson, perquisite allowance
($30,000). For purposes hereof, such perquisites and personal
benefits are valued at their aggregate incremental cost to our
company based on the following methodology: since each of the
perquisites involved actual cash expenditure by our company,
that cash expenditure is what is reflected as the value of the
perquisites.
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(b)
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For 2008, we offered retirement
benefits to our senior management through a 401(k) savings plan
entitled the Tenneco Employee Stock Ownership Plan for Salaried
Employees. Under the plan, subject to limitations in the
Internal Revenue Code, participants may elect to defer up to 75%
of their salary through contributions to the plan, which are
invested in selected mutual funds or used to buy our common
stock. During 2008, we matched in cash 50% of each
employee’s contribution up to eight percent of the
employee’s salary. All matching contributions vest
immediately. Additional company contributions vest upon the
executive’s third anniversary with Tenneco. In addition, as
described below under “— Post-Employment
Compensation — 2006 Changes in Defined Benefits,”
we implemented additional company contributions and a new excess
defined contribution plan in connection with the
December 31, 2006 freezing of our defined benefit plans.
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27
Grants of
Plan-Based Awards During 2008
The following table shows certain information regarding grants
of plan-based awards we made to the Named Executives during 2008.
Grants of
Plan-Based Awards During 2008
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All Other
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All Other
|
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Estimated Future
|
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Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payouts Under
|
|
|
Estimated Future
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Payouts Under Equity
|
|
|
Number of
|
|
|
Number of
|
|
|
or Base
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
|
Incentive Plan
|
|
|
Incentive Plan
|
|
|
Shares of
|
|
|
Securities
|
|
|
Price of
|
|
|
Closing Price
|
|
|
Fair Value
|
|
|
|
|
|
|
|
Awards(1)
|
|
|
Awards(2)
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Option
|
|
|
on Grant
|
|
|
of Stock
|
|
|
|
|
|
|
|
Target
|
|
|
Minimum
|
|
|
Target
|
|
|
Units(3)
|
|
|
Options(3)
|
|
|
Awards
|
|
|
Date(4)
|
|
|
and Option
|
|
|
Name
|
|
Grant date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
($/Sh)
|
|
|
Awards
|
|
|
|
|
Mr. Sherrill
|
|
|
1/15/2008
|
|
|
$
|
950,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/15/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,543,100
|
|
|
|
|
|
1/15/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000
|
|
|
$
|
23.75
|
|
|
$
|
23.74
|
|
|
|
963,600
|
|
|
|
|
|
3/6/2008
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
700,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
592,785
|
|
|
|
|
|
3/6/2008
|
|
|
|
|
|
|
|
0
|
|
|
|
700,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
468,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Trammell
|
|
|
1/15/2008
|
|
|
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/15/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
332,360
|
|
|
|
|
|
1/15/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000
|
|
|
|
23.75
|
|
|
|
23.74
|
|
|
|
224,840
|
|
|
|
|
|
3/6/2008
|
|
|
|
|
|
|
|
0
|
|
|
|
310,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
262,519
|
|
|
|
|
|
3/6/2008
|
|
|
|
|
|
|
|
0
|
|
|
|
310,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Nair
|
|
|
1/15/2008
|
|
|
|
468,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/15/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
593,500
|
|
|
|
|
|
1/15/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
23.75
|
|
|
|
23.74
|
|
|
|
281,050
|
|
|
|
|
|
3/6/2008
|
|
|
|
|
|
|
|
0
|
|
|
|
380,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
321,798
|
|
|
|
|
|
3/6/2008
|
|
|
|
|
|
|
|
0
|
|
|
|
380,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
254,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Yanos
|
|
|
1/15/2008
|
|
|
|
255,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/15/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,050
|
|
|
|
|
|
1/15/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
23.75
|
|
|
|
23.74
|
|
|
|
120,450
|
|
|
|
|
|
3/6/2008
|
|
|
|
|
|
|
|
0
|
|
|
|
184,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155,818
|
|
|
|
|
|
3/6/2008
|
|
|
|
|
|
|
|
0
|
|
|
|
184,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123,114
|
|
|
|
|
|
7/15/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,330
|
|
|
|
|
|
7/15/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,500
|
|
|
|
12.30
|
|
|
|
12.76
|
|
|
|
28,105
|
|
|
|
|
|
7/15/2008
|
|
|
|
|
|
|
|
0
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,405
|
|
|
|
|
|
7/15/2008
|
|
|
|
|
|
|
|
0
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Jackson
|
|
|
1/15/2008
|
|
|
|
235,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/15/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,050
|
|
|
|
|
|
1/15/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
23.75
|
|
|
|
23.74
|
|
|
|
120,450
|
|
|
|
|
|
3/6/2008
|
|
|
|
|
|
|
|
0
|
|
|
|
184,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155,818
|
|
|
|
|
|
3/6/2008
|
|
|
|
|
|
|
|
0
|
|
|
|
184,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123,114
|
|
|
|
|
|
|
(1)
|
|
Represents targeted incentive payouts that are paid based on our
corporate performance against Economic Value Added
(“EVA
®
”)
goals under the Tenneco Value Added Incentive Plan as described
below under “— Bonus and Non-Equity Incentive
Plan Awards.” There is no threshold or maximum payout.
|
|
|
|
(2)
|
|
Represents awards of long term performance units
(“LTPUs”) under our 2006 Long-Term Incentive Plan as
described under “— Compensation Discussion and
Analysis — Design and Elements of
Compensation — Long-Term and Stock-Based
Incentives.”
|
|
|
|
(3)
|
|
Represents awards of restricted stock and stock options under
our 2006 Long-Term Incentive Plan. One-third of the options and
restricted stock vest on each of the first three anniversaries
of the grant date.
|
|
|
|
(4)
|
|
The difference in the exercise price and closing price on the
grant date results from the application of the provisions of our
2006 Long-Term Incentive Plan. The plan requires that options be
granted with a strike price equal to the fair market value of a
share of our common stock on the date of grant. Fair market
value is defined by taking the average of the high and low sales
price of our common stock on the date in question.
|
28
Narrative
Disclosure to Summary Compensation Table and Grants of
Plan-Based Awards Table
Bonus and
Non-Equity Incentive Plan Awards
Amounts reflected in the Summary Compensation Table under the
column entitled “Bonus” and “Non-Equity Incentive
Plan Compensation” are payments under the Tenneco Value
Added Incentive Plan (“TAVA Plan”). Under the TAVA
Plan, (i) 25% of an individual’s bonus is based on the
Compensation/Nominating/Governance committee’s
discretionary determination of performance (reflected in the
“Bonus” column) and (ii) 75% of an
individual’s bonus is tied to our achievement of
pre-established
EVA
®
objectives (reflected in the “Non-Equity Incentive Plan
Compensation” column). A discussion of why
EVA
®
is used as the performance metric for the TAVA plan can be found
in “— Compensation Discussion and
Analysis — Design and Elements of
Compensation — Salary and Bonus/Non-Equity Incentive
Plan Compensation.”
The annual performance goal for the TAVA Plan was developed,
initially, by Stern Stewart & Co., an independent
consulting firm with expertise in
EVA
®
-based
incentive programs. The firm’s recommended performance
goals are reviewed by the committee. The committee approves the
goals with any changes the committee determines appropriate. At
the conclusion of each year, the committee approves incentive
award payments to executives based on the degree of achievement
of the goals established for that year and on judgments of
performance as follows: (i) 75% of an individual’s
award is tied to our corporate achievement of pre-established
EVA
®
objectives, and (ii) 25% of an individual’s award is
based on the committee’s discretionary determination of
corporate performance.
EVA
®
is after-tax operating profit minus the annual cost of capital
and is a registered trademark of Stern Stewart & Co.
The 25% portion of an individual’s payout that is
discretionary under the TAVA Plan is determined by the committee
based on factors which take into account, but are not limited
to, the relative performance of our company versus our peers in
key strategic and operational areas. The factors considered may
change from year to year.
See “— Compensation Discussion and Analysis”
for a discussion of specific determinations under the TAVA Plan
for 2008.
Despite the absence of any TAVA Plan payout for 2008
performance, a payment of $16,490 for Mr. Trammell, $23,593
for Mr. Nair, $13,532 for Mr. Yanos and $13,914 for
Mr. Jackson was paid in early 2009 in respect of amounts
held in the individual’s bonus bank. After giving effect to
those payments, $32,979, $47,185, $27,065 and $27,827 remained
credited to the bonus bank of Messrs. Trammell, Nair, Yanos
and Jackson, respectively.
Stock
Awards
Amounts reflected in the Summary Compensation Table under the
column entitled “Stock Awards” represent awards of
restricted common stock, long term performance units (2007 and
2008 awards) and stock equivalent units (2006 award) granted to
each Named Executive under our 2006 Long-Term Incentive Plan.
See “— Grants of Plan Based Awards During
2008.”
Our restricted stock awards vest one-third per year during the
three years after the grant date, subject to the officer’s
continued employment. Subject to the terms of any employment
agreement, the unvested portion of these awards is generally
forfeited by a participant if his or her employment is
terminated other than due to death, disability or retirement.
All restrictions lapse upon death, disability or retirement.
As discussed in “— Compensation Discussion and
Analysis,” we decided to eliminate our stock equivalent
units (“SEUs”) beginning in 2007 replacing them with
cash-settled long term performance units (“LTPUs”)
which are payable based on the level of total stockholder
return. The LTPUs are denominated in units and are payable based
on the level of total stockholder return (stock price
appreciation adjusted for any dividends) during the performance
period. The total stockholder return is applied against a
multiplier that determines the percentage of the awarded units
that is earned based on that level of total stockholder return.
The value of a unit is equal to the company’s average stock
price during a
ten-day
period after the announcement of the company’s earnings for
the last year of the performance period. The LTPUs, in
29
general, are payable at the end of a three-year performance
cycle. For 2007 and 2008, the committee granted special LTPUs
covering only a one-year period as part of the phase in to the
new program. Subject to the terms of any employment agreement,
units evidenced by this award are generally forfeited by a
participant if his or her employment is terminated other than
due to death, disability or retirement, unless the committee
determines otherwise. In the event of termination due to death,
disability or retirement, all units initially awarded are deemed
100% earned and paid out in cash at our prevailing stock price
at the time.
Option
Awards
Amounts reflected in the Summary Compensation Table under the
column entitled “Option Awards” represent awards of
nonqualified options to purchase common stock granted to each
Named Executive under our 2006 Long-Term Incentive Plan. See
“— Grants of Plan Based Awards During 2008.”
The awards vest one-third per year during the three years after
the grant date and have a seven-year term. Subject to the terms
of any employment agreement, the unexercised portion of these
awards is generally forfeited by a participant on the date his
or her employment is terminated other than due to death,
disability or retirement. In the event of death, disability or
retirement, the options become fully exercisable and remain
exercisable for a period specified in the applicable award
agreement.
Employment
Agreements
In January 2007, we entered into an agreement with
Mr. Sherrill that sets forth certain terms and conditions
of his employment with our company. The agreement provides that,
under our Change in Control Severance Benefit Plan for Key
Executives, Mr. Sherrill’s cash payment in connection
with a change in control termination will equal three times the
total of his then current base salary plus his highest target
bonus. See “— Post-Employment
Compensation — Other Potential Post-Employment
Compensation” for a discussion of the other benefits
afforded under the Change in Control Severance Benefit Plan for
Key Executives. The agreement also provides that, other than in
connection with a change in control, if Mr. Sherrill’s
employment is terminated by us other than for disability or
cause, he will be paid two times his then current annual salary.
The employment agreement also provides for participation in an
excess non-qualified defined contribution plan which, prior to
offset for amounts contributed under the qualified plan, is
equal to 150% of the standard age-graded benefit under the plan
and for participation in other benefit plans we offer our
employees generally.
Mr. Nair and Mr. Jackson are party to agreements with
us that set forth certain terms and conditions of their
employment with our company. Each of the employment agreements
provides that, under our Change in Control Severance Benefit
Plan for Key Executives, the relevant Named Executive’s
cash payment in connection with a change in control termination
would equal three times the total of his then current base
salary plus the higher of (i) his highest annual target
bonus over the prior three years and (ii) his average
bonuses for the prior three years. Each of the employment
agreements also provides that, other than in connection with a
change in control, if the relevant Named Executive’s
employment is terminated by us other than for death, disability
or nonperformance of duties, he will be paid two times the total
of his then current salary and bonus for the immediately
preceding year, all outstanding stock-based awards would be
vested, subject to Board approval, his stock options would
remain exercisable for at least 90 days and he would
receive one year of post-termination health and welfare
benefits. Pursuant to the terms of their employment agreements,
Messrs. Nair and Jackson are guaranteed a minimum annual
base salary/minimum annual target bonus as follows:
Mr. Nair, $414,000/$273,000 and Mr. Jackson,
$327,600/$161,000. The employment agreements also provide for
participation in benefit plans we offer to our employees
generally, as well as continued participation in supplemental
retirement benefit plans as described under
“— Post-Employment Compensation.”
30
Outstanding
Equity Awards at December 31, 2008
The following table shows certain information regarding the
outstanding equity awards held by the Named Executives at the
end of 2008.
Outstanding
Equity Awards at December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Value of
|
|
|
|
|
Option Awards
|
|
|
Units of
|
|
|
Shares or
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Units of
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
That
|
|
|
Stock
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Have
|
|
|
That
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Not
|
|
|
Have
|
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Vested
|
|
|
Not
|
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable (1)
|
|
|
Price ($)
|
|
|
Date
|
|
|
(#) (1)
|
|
|
Vested ($)
|
|
|
|
|
Mr. Sherrill
|
|
|
33,334
|
|
|
|
66,666
|
|
|
|
26.70
|
|
|
|
1/16/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
120,000
|
|
|
|
23.75
|
|
|
|
1/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,333
|
|
|
|
245,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,666
|
|
|
|
108,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,000
|
|
|
|
191,750
|
|
|
Mr. Trammell
|
|
|
15,000
|
|
|
|
—
|
|
|
|
8.56
|
|
|
|
11/5/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
—
|
|
|
|
3.66
|
|
|
|
1/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
1.57
|
|
|
|
12/5/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
—
|
|
|
|
3.77
|
|
|
|
1/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
—
|
|
|
|
6.45
|
|
|
|
10/1/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
—
|
|
|
|
8.68
|
|
|
|
1/20/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
—
|
|
|
|
16.00
|
|
|
|
1/17/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
5,000
|
|
|
|
21.19
|
|
|
|
1/16/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
16,000
|
|
|
|
26.70
|
|
|
|
1/16/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
28,000
|
|
|
|
23.75
|
|
|
|
1/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
14,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
23,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
|
|
|
41,300
|
|
|
Mr. Nair
|
|
|
20,000
|
|
|
|
—
|
|
|
|
3.19
|
|
|
|
1/2/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
3.37
|
|
|
|
7/2/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,667
|
|
|
|
—
|
|
|
|
1.57
|
|
|
|
12/5/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,000
|
|
|
|
—
|
|
|
|
3.77
|
|
|
|
1/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
—
|
|
|
|
8.68
|
|
|
|
1/20/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
—
|
|
|
|
16.00
|
|
|
|
1/17/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
5,000
|
|
|
|
21.19
|
|
|
|
1/16/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
16,000
|
|
|
|
26.70
|
|
|
|
1/16/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
35,000
|
|
|
|
23.75
|
|
|
|
1/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
14,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
23,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
73,750
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Value of
|
|
|
|
|
Option Awards
|
|
|
Units of
|
|
|
Shares or
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Units of
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
That
|
|
|
Stock
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Have
|
|
|
That
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Not
|
|
|
Have
|
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Vested
|
|
|
Not
|
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable (1)
|
|
|
Price ($)
|
|
|
Date
|
|
|
(#) (1)
|
|
|
Vested ($)
|
|
|
|
|
Mr. Yanos
|
|
|
2,000
|
|
|
|
—
|
|
|
|
3.66
|
|
|
|
1/9/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
—
|
|
|
|
1.57
|
|
|
|
12/5/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
3.77
|
|
|
|
1/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
—
|
|
|
|
3.74
|
|
|
|
7/1/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
—
|
|
|
|
8.68
|
|
|
|
1/20/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
—
|
|
|
|
16.00
|
|
|
|
1/17/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,667
|
|
|
|
3,333
|
|
|
|
21.19
|
|
|
|
1/16/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,334
|
|
|
|
10,666
|
|
|
|
26.70
|
|
|
|
1/16/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
15,000
|
|
|
|
23.75
|
|
|
|
1/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
3,500
|
|
|
|
12.30
|
|
|
|
7/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,333
|
|
|
|
9,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,333
|
|
|
|
15,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
22,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750
|
|
|
|
5,163
|
|
|
Mr. Jackson
|
|
|
30,000
|
|
|
|
—
|
|
|
|
3.77
|
|
|
|
1/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
—
|
|
|
|
8.68
|
|
|
|
1/20/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
—
|
|
|
|
16.00
|
|
|
|
1/17/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,334
|
|
|
|
1,666
|
|
|
|
21.19
|
|
|
|
1/16/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,334
|
|
|
|
1,666
|
|
|
|
21.60
|
|
|
|
3/17/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,133
|
|
|
|
10,267
|
|
|
|
26.70
|
|
|
|
1/16/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
164
|
|
|
|
329
|
|
|
|
24.08
|
|
|
|
3/6/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
15,000
|
|
|
|
23.75
|
|
|
|
1/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,667
|
|
|
|
4,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,333
|
|
|
|
3,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,800
|
|
|
|
14,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
439
|
|
|
|
1,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
21,240
|
|
|
|
|
|
|
(1)
|
|
The vesting dates and number of shares vesting for the options
and restricted stock reflected above as of December 31,
2008, are as set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
Name
|
|
Option Vesting Date
|
|
|
Options Vesting
|
|
|
Stock Vesting Date
|
|
|
Shares Vesting
|
|
|
|
|
Mr. Sherrill
|
|
|
1/15/2009
|
|
|
|
40,000
|
|
|
|
1/15/2009
|
|
|
|
21,667
|
|
|
|
|
|
1/16/2009
|
|
|
|
33,333
|
|
|
|
1/15/2009
|
|
|
|
41,666
|
|
|
|
|
|
1/15/2010
|
|
|
|
40,000
|
|
|
|
1/16/2009
|
|
|
|
18,333
|
|
|
|
|
|
1/16/2010
|
|
|
|
33,333
|
|
|
|
1/15/2010
|
|
|
|
21,667
|
|
|
|
|
|
1/15/2011
|
|
|
|
40,000
|
|
|
|
1/15/2010
|
|
|
|
41,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/16/2010
|
|
|
|
18,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/15/2011
|
|
|
|
21,666
|
|
|
Mr. Trammell
|
|
|
1/15/2009
|
|
|
|
9,333
|
|
|
|
1/15/2009
|
|
|
|
4,667
|
|
|
|
|
|
1/16/2009
|
|
|
|
5,000
|
|
|
|
1/16/2009
|
|
|
|
5,000
|
|
|
|
|
|
1/16/2009
|
|
|
|
8,000
|
|
|
|
1/16/2009
|
|
|
|
4,000
|
|
|
|
|
|
1/15/2010
|
|
|
|
9,333
|
|
|
|
1/15/2010
|
|
|
|
4,667
|
|
|
|
|
|
1/16/2010
|
|
|
|
8,000
|
|
|
|
1/16/2010
|
|
|
|
4,000
|
|
|
|
|
|
1/15/2011
|
|
|
|
9,334
|
|
|
|
1/15/2011
|
|
|
|
4,666
|
|
|
Mr. Nair
|
|
|
1/15/2009
|
|
|
|
11,667
|
|
|
|
1/15/2009
|
|
|
|
8,333
|
|
|
|
|
|
1/16/2009
|
|
|
|
5,000
|
|
|
|
1/16/2009
|
|
|
|
5,000
|
|
|
|
|
|
1/16/2009
|
|
|
|
8,000
|
|
|
|
1/16/2009
|
|
|
|
4,000
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
Name
|
|
Option Vesting Date
|
|
|
Options Vesting
|
|
|
Stock Vesting Date
|
|
|
Shares Vesting
|
|
|
|
|
|
|
|
1/15/2010
|
|
|
|
11,667
|
|
|
|
1/15/2010
|
|
|
|
8,333
|
|
|
|
|
|
1/16/2010
|
|
|
|
8,000
|
|
|
|
1/16/2010
|
|
|
|
4,000
|
|
|
|
|
|
1/15/2011
|
|
|
|
11,666
|
|
|
|
1/15/2011
|
|
|
|
8,334
|
|
|
Mr. Yanos
|
|
|
1/15/2009
|
|
|
|
5,000
|
|
|
|
1/15/2009
|
|
|
|
2,500
|
|
|
|
|
|
1/16/2009
|
|
|
|
3,333
|
|
|
|
1/16/2009
|
|
|
|
3,333
|
|
|
|
|
|
1/16/2009
|
|
|
|
5,333
|
|
|
|
1/16/2009
|
|
|
|
2,667
|
|
|
|
|
|
7/15/2009
|
|
|
|
1,167
|
|
|
|
7/15/2009
|
|
|
|
583
|
|
|
|
|
|
1/15/2010
|
|
|
|
5,000
|
|
|
|
1/15/2010
|
|
|
|
2,500
|
|
|
|
|
|
1/16/2010
|
|
|
|
5,334
|
|
|
|
1/16/2010
|
|
|
|
2,666
|
|
|
|
|
|
7/15/2010
|
|
|
|
1,166
|
|
|
|
7/15/2010
|
|
|
|
584
|
|
|
|
|
|
1/15/2011
|
|
|
|
5,000
|
|
|
|
1/15/2011
|
|
|
|
2,500
|
|
|
|
|
|
7/15/2011
|
|
|
|
1,167
|
|
|
|
7/15/2011
|
|
|
|
583
|
|
|
Mr. Jackson
|
|
|
1/15/2009
|
|
|
|
5,000
|
|
|
|
1/15/2009
|
|
|
|
2,500
|
|
|
|
|
|
1/16/2009
|
|
|
|
1,666
|
|
|
|
1/16/2009
|
|
|
|
1,667
|
|
|
|
|
|
3/17/2009
|
|
|
|
1,666
|
|
|
|
1/16/2009
|
|
|
|
2,400
|
|
|
|
|
|
1/16/2009
|
|
|
|
5,133
|
|
|
|
3/6/2009
|
|
|
|
219
|
|
|
|
|
|
3/6/2009
|
|
|
|
164
|
|
|
|
3/17/2009
|
|
|
|
1,333
|
|
|
|
|
|
1/15/2010
|
|
|
|
5,000
|
|
|
|
1/15/2010
|
|
|
|
2,500
|
|
|
|
|
|
1/16/2010
|
|
|
|
5,134
|
|
|
|
1/16/2010
|
|
|
|
2,400
|
|
|
|
|
|
3/6/2010
|
|
|
|
165
|
|
|
|
3/6/2010
|
|
|
|
220
|
|
|
|
|
|
1/15/2011
|
|
|
|
5,000
|
|
|
|
1/15/2011
|
|
|
|
2,500
|
|
Option Exercises
and Stock Vested During 2008
The following table shows certain information regarding options
exercised and stock vested during 2008 for the Named Executives.
Option Exercises
and Stock Vested During 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
|
|
Acquired on
|
|
|
Realized on
|
|
|
Acquired on
|
|
|
Realized on
|
|
|
|
|
Exercise
|
|
|
Exercise
|
|
|
Vesting (1)
|
|
|
Vesting (1)
|
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
|
|
Mr. Sherrill
|
|
|
—
|
|
|
|
—
|
|
|
|
60,001
|
|
|
|
1,401,506
|
|
|
Mr. Trammell
|
|
|
—
|
|
|
|
—
|
|
|
|
13,000
|
|
|
|
289,530
|
|
|
Mr. Nair
|
|
|
—
|
|
|
|
—
|
|
|
|
15,000
|
|
|
|
333,090
|
|
|
Mr. Yanos
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
222,060
|
|
|
Mr. Jackson
|
|
|
90,000
|
|
|
|
323,100
|
|
|
|
9,618
|
|
|
|
216,520
|
|
|
|
|
|
|
(1)
|
|
Does not give effect to shares withheld to satisfy tax
obligations.
|
33
Post-Employment
Compensation
Pension
Benefits Table
The following table shows certain information regarding
potential benefits as of December 31, 2008 for the Named
Executives under each of our defined benefit retirement plans.
Pension
Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Present value
|
|
|
|
|
|
|
|
years
|
|
|
of
|
|
|
|
|
|
|
|
credited
|
|
|
accumulated
|
|
|
|
|
|
|
|
service (3)
|
|
|
benefit (4)
|
|
|
Name(1)
|
|
Plan name (2)
|
|
|
(#)
|
|
|
($)
|
|
|
|
|
Mr. Trammell
|
|
|
Plan 1
|
|
|
|
9.67
|
|
|
|
121,931
|
|
|
|
|
|
Plan 2
|
|
|
|
9.67
|
|
|
|
375,268
|
|
|
Mr. Nair
|
|
|
Plan 1
|
|
|
|
18.75
|
|
|
|
204,131
|
|
|
|
|
|
Plan 2
|
|
|
|
20.75
|
|
|
|
1,163,445
|
|
|
Mr. Yanos
|
|
|
Plan 1
|
|
|
|
17.33
|
|
|
|
196,727
|
|
|
|
|
|
Plan 2
|
|
|
|
17.33
|
|
|
|
427,390
|
|
|
Mr. Jackson
|
|
|
Plan 1
|
|
|
|
6.50
|
|
|
|
120,968
|
|
|
|
|
|
Plan 2
|
|
|
|
6.50
|
|
|
|
221,162
|
|
|
|
|
|
Plan 3
|
|
|
|
9.00
|
|
|
|
1,817,552
|
|
|
|
|
|
|
(1)
|
|
Mr. Sherrill does not participate in any defined benefit
plan sponsored by us.
|
|
|
|
(2)
|
|
Plan 1 represents the Tenneco Retirement Plan for Salaried
Employees; Plan 2 represents the Tenneco Supplemental Retirement
Plan (which includes, for purposes of these disclosures, its
predecessor plan, the Supplemental Executive Retirement Plan);
and Plan 3 represents the Tenneco Supplemental Pension Plan for
Management (which includes, for purposes of these disclosures,
its predecessor plan, the Key Employee Pension Plan).
|
|
|
|
(3)
|
|
In all cases, the Named Executive’s years of service
credited under the plans is less than his actual years of
service with Tenneco and its predecessors.
|
|
|
|
(4)
|
|
The present value of accrued benefits were calculated as of
December 31, 2008, using the RP-2000 Blended Mortality
Table with a 6.20% discount rate, deferred to the unreduced
retirement age, with no deferral if the participant’s age
on the calculation date is greater than the unreduced retirement
age. The unreduced retirement age for Plan 1 and Plan 2 is
age 62 (normal retirement age is 65) and for Plan 3 is
age 55 (also normal retirement age). In all cases, the
Named Executive’s years of service credited under the plans
is less than his actual years of service with Tenneco and its
predecessors. For Plans 1 and 2, the first year of service is
generally excluded as credited service under the plan. For Plan
3, the officer must earn 1,000 hours of service in order to
be credited with an additional year of service under the plan.
|
Tenneco
Retirement Plan for Salaried Employees
The benefit under the Tenneco Retirement Plan for Salaried
Employees, in which all U.S. salaried employees were
eligible to participate until it was frozen as to new
participants on April 1, 2005, is based on the
participant’s years of service, salary and age at
retirement. The monthly benefit formula is 55% of the
participant’s final average base pay multiplied by the
years of credited service (up to a maximum of 35 years) and
divided by 35 and then by 12. This amount is then reduced by any
benefits accrued under the Pactiv Retirement Plan. (In 1999, we
spun off our packaging and administrative services operations.
The resulting company, now known as Pactiv Corporation, became
the sponsor of our then-existing qualified defined benefit plan
for salaried employees. We adopted the Tenneco Retirement Plan
for Salaried Employees, which is patterned after the
Pactiv-sponsored plan.) The final average base pay excludes all
bonus payments and is the average pay for the last 60 full
months of participation in the plan. Pay is subject to the
Internal Revenue Code Section 401(a)(17) pay limits. If the
participant retires prior to the age of 62, the benefit is
reduced by an early reduction factor.
34
Benefits paid under this plan are payable as an annuity only.
The default form of payment for a single participant is the
Single Life Annuity, and for a married participant is a
Qualified 50% Joint and Survivor Annuity. Other forms of benefit
payments available include the 100% Joint and Survivor Annuity,
the 75% Joint and Survivor Annuity, and the Ten Year Certain and
Life Annuity.
As described below, we froze this plan effective
December 31, 2006 so that no future benefits will be
accrued under the plan.
Tenneco
Supplemental Retirement Plan
The benefit under the Tenneco Supplemental Retirement Plan
(which includes, for purposes of these disclosures, its
predecessor plan, the Supplemental Executive Retirement Plan),
is based on the participant’s years of service, salary and
bonus and age at retirement. The purpose of the plan is to
include bonuses in determining retirement payments, which cannot
be done under the Tenneco Retirement Plan for Salaried Employees
and which we believe provided a level of retirement benefit that
was common in manufacturing companies. The monthly benefit
formula is 55% of the participant’s final average
compensation multiplied by the years of credited service (up to
a maximum of 35 years) and divided by 35 and then by 12.
This amount is then reduced by the accrued benefits from the
Tenneco Retirement Plan for Salaried Employees and the Pactiv
Retirement Plan. The final average compensation for this plan is
the sum of the participant’s average base pay plus the
average bonus pay, where the average is determined as the
highest three out of the past five calendar years. If the
participant retires prior to the age of 62, the benefit will be
reduced by an early reduction factor.
Benefits paid under this plan are payable as a lump sum only. To
calculate the lump sum payment amount, the accrued benefit after
offsets, as calculated above, is multiplied by a lump sum
factor. This factor is determined using the 1994 Group Annuity
Mortality Tables at an interest rate that is the average of the
30 year Treasury Bond yields for the November preceding the
year of distribution.
This plan applied to our approximately top 60 managers. As
described below, effective December 31, 2006, this plan was
frozen as to substantially all managers so that no future
benefits will be accrued under the plan. One executive did not
have his benefits frozen. However, he agreed to a voluntary
reduction in benefits under this plan as described below under
“— 2006 Changes in Defined Benefits.”
Tenneco
Supplemental Pension Plan
The accrued benefit under the Tenneco Supplemental Pension Plan
(which includes, for purposes of these disclosures, its
predecessor plan, the Key Employee Pension Plan), is calculated
based on the participant’s years of vesting service and
salary and bonus. This plan was implemented in 1999 in
connection with the transactions that resulted in our becoming a
stand-alone company. The plan was designed to attract and retain
key management as we faced the challenges of being highly
leveraged in the automotive industry. The monthly benefit
formula is the number of years of vesting service multiplied by
4%, subject to a maximum of 50%, multiplied by one-twelfth of
the participant’s final average compensation. This amount
is then reduced by any accrued benefits from the Tenneco
Retirement Plan for Salaried Employees, the Tenneco Supplemental
Retirement Plan and the Pactiv Retirement Plan. The final
average compensation for this plan is the sum of the
participant’s base pay and bonus payments received during
the last 36 months of participation in the plan. Benefits
from this plan are available to the participant upon reaching
age 55 without any reduction for early retirement.
Benefits paid under this plan are payable as a lump sum only. To
calculate the lump sum payment amount, the accrued benefit after
offsets, as calculated above, is multiplied by a lump sum
factor. This factor is determined using the 1994 Group Annuity
Mortality Tables at an interest rate that is the average of the
30 year Treasury Bond yields for the November preceding the
year of distribution.
As described below, we froze our defined benefits plans as to
substantially all of our executives at December 31, 2006.
Those who were not fully vested in the Supplemental Pension Plan
did not have their
35
benefits frozen. However, they agreed to a voluntary reduction
in benefits under this plan as described below under
“— 2006 Changes in Defined Benefits.”
2006 Changes
in Defined Benefits
In August 2006, we froze, effective December 31, 2006, our
defined benefit pension plans for certain employees and replaced
them with additional benefits under defined contribution plans
beginning in 2007. Prior earned benefits under the defined
benefit plans were, however, preserved. With the exception of
certain executives who had employment contracts providing for
specified benefits (all of whom voluntarily accepted a benefits
reduction as described below), this freeze impacted all
U.S.-based
salaried employees (including executive officers) and non-union
hourly employees who participated in any of the plans.
To address the loss of benefits associated with the freeze, we
amended our existing qualified defined contribution plans,
effective January 1, 2007, to provide for additional annual
company contributions in amounts that increase with the
employee’s age. These additional contributions, which we
refer to as “DB Replacement Contributions,” are
payable for each employee who ceased to accrue benefits or whose
benefits were otherwise modified under any defined benefit plan
in connection with the freeze. In addition, effective
January 1, 2007 we implemented an unfunded non-qualified
defined contribution pension plan as described in
“— Compensation Discussion and
Analysis — Design and Elements of
Compensation — Retirement Plans.”
Two of our executive officers — Mr. Nair and
Mr. Jackson — had employment agreements that
provided for their participation in the Supplemental Retirement
Plan (Mr. Nair and Mr. Jackson)
and/or
Supplemental Pension Plan (Mr. Jackson). As a result, we
did not freeze these plans for these executives. Instead, each
individual executive voluntarily agreed to a reduction in his
retirement benefit payable under those plans and to an offset to
benefits payable under those plans for DB Replacement
Contributions received under the existing or new defined
contribution plans. The benefits reduction increases to a
maximum of 5% of the benefit that would have otherwise been
paid, depending on the executive’s age at retirement.
Nonqualified
Defined Contribution and Other Deferred Compensation Plans
Table
The following table sets forth certain information regarding
potential benefits as of the end of 2008 for the Named
Executives under our nonqualified defined contribution plans.
Nonqualified
Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
|
Contributions
|
|
|
Earnings (Loss) in
|
|
|
Withdrawals/
|
|
|
Balance at
|
|
|
|
|
in 2008
|
|
|
2008(1)
|
|
|
Distributions(2)
|
|
|
12/31/08(3)
|
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
Mr. Sherrill
|
|
$
|
245,453
|
|
|
|
(33,892
|
)
|
|
$
|
—
|
|
|
$
|
301,673
|
|
|
Mr. Trammell
|
|
|
86,280
|
|
|
|
3,680
|
|
|
|
16,490
|
|
|
|
159,088
|
|
|
Mr. Nair
|
|
|
44,217
|
|
|
|
1,637
|
|
|
|
23,593
|
|
|
|
107,683
|
|
|
Mr. Yanos
|
|
|
26,867
|
|
|
|
1,049
|
|
|
|
13,532
|
|
|
|
64,048
|
|
|
Mr. Jackson
|
|
|
29,959
|
|
|
|
1,186
|
|
|
|
13,914
|
|
|
|
69,386
|
|
|
|
|
|
|
(1)
|
|
Reflects earnings on contributions under our non-qualified
defined contribution plan based on the individual’s
selected investments.
|
|
|
|
(2)
|
|
The amounts in this column reflect the portion of the bonus bank
under the TAVA Plan that was paid during 2008. All of these
amounts were earned and reported as part of the applicable
executive’s bonus bank for periods prior to 2008.
|
|
|
|
(3)
|
|
Includes the following amounts remaining in the Named
Executive’s bonus bank under the TAVA Plan after giving
effect to payments for 2008, all of which were earned and
reported as part of the applicable executive’s bonus bank
in years prior to 2007: Mr. Trammell, $32,979,
Mr. Nair, $47,185, Mr. Yanos, $27,065 and
Mr. Jackson, $27,827.
|
36
We maintain a non-qualified defined contribution retirement
plan. As described above in “— Compensation
Discussion and Analysis — Design and Elements of
Compensation — Retirement Plans,” effective
January 1, 2007, our executives and other senior managers
became eligible to participate in this plan, with allocations
under the plan calculated the same as under the applicable
existing defined contribution retirement plan (as amended),
except that (i) the compensation limit in
Section 401(a)(17) of the Internal Revenue Code is
disregarded and awards under the TAVA Plan or any successor plan
are included in calculating compensation, and (ii) there is
an offset for the DB Replacement Contributions.
Other
Potential Post-Employment Compensation
Change in Control
Severance Benefit Plan for Key Executives
We maintain a Change in Control Severance Benefit Plan for Key
Executives, which was amended and restated effective as of
December 2007. The purpose of the plan is to enable us to
continue to attract, retain and motivate highly qualified
employees by eliminating, to the maximum practicable extent, any
concern on the part of such employees that their job security or
benefit entitlements will be jeopardized by a “change in
control” of our company.
Under the amended plan, a “change in control” happens
if:
|
|
|
|
|
|
•
|
any person or group acquires 20% or more of our then outstanding
common stock or the combined voting power of our then
outstanding securities having general voting rights subject to
limited exceptions,
|
|
|
|
|
•
|
our incumbent board of directors ceases to constitute a majority
of our board of directors,
|
|
|
|
|
•
|
any merger, consolidation or sale of all or substantially all
the assets in which our stockholders own less than 50% of the
new company, or
|
|
|
|
|
•
|
we are liquidated or dissolved.
|
Benefits under the plan are payable to a key employee who is
discharged (either actually or constructively) within two years
after a change in control. Under the plan, we must pay an
eligible executive a lump sum cash payment equal to one, two or
three times, depending on his or her grouping under the plan,
(i) his or her base salary and (ii) his or her
targeted annual bonus in effect immediately prior to the change
in control. In addition, we must provide the executive with
(i) a pro rata bonus (payable in a lump sum),
(ii) one, two or three years (depending on his or her
grouping under the plan) of health and welfare benefits
continuation, (iii) out placement services and
(iv) all deferred compensation (payable in a lump sum).
Finally, we are required to provide a tax gross up to employees
whose payments under the plan become subject to the tax imposed
by Section 4999 of the Internal Revenue Code (gross up
payment provisions differ depending on each employee’s
grouping under the plan). Benefits under this plan are not
conditioned on any action by the participant.
For executives with employment agreements, except for our CEO,
various terms of the Change in Control Severance Benefit Plan in
effect prior to December 2007 continue to apply in terms of
entitlement to cash payments and the vesting of awards.
Specifically, for such executives (including Mr. Nair and
Mr. Jackson), a “change in control” happens if:
|
|
|
|
|
|
•
|
any person or group acquires 15% or more of our voting stock and
the acquisition is not approved by our then incumbent board of
directors, or any person or group acquires 40% or more of our
voting stock, in each case subject to limited exceptions,
|
|
|
|
|
•
|
our incumbent board of directors ceases to constitute a majority
of our directors or any person elects during any 24 months
new directors that represent at least 25% of our board of
directors without approval of our incumbent board,
|
|
|
|
|
•
|
any merger, consolidation or sale of all or substantially all
the assets of our company if a majority of our incumbent board
of directors is not a majority of the board of the surviving or
successor company, or
|
|
|
|
|
•
|
we are liquidated.
|
37
These executives are also entitled to a lump sum cash payment
equal to three times (i) his base salary plus,
(ii) the higher of (a) his average bonus for the prior
three years and (b) his targeted annual bonus in effect
immediately prior to the change in control. The employment
agreements further provide that each of the executive’s
outstanding awards under the plan or any similar benefit plan or
compensation arrangement or program will be treated as
exercisable, earned at target and vested immediately upon the
happening of a change in control.
See “— Narrative Disclosure to Summary
Compensation Table and Grants of Plan-Based Awards
Table — Employment Agreements” for additional
discussion of specific provisions in employment agreements
regarding the calculation of benefits under this plan.
Under our 2006 Long-Term Incentive Plan (and its predecessor,
the 2002 Long-Term Incentive Plan), upon a Change in Control,
all options will immediately vest and remain exercisable for up
to 36 months. All restrictions on outstanding restricted
stock will lapse and our LTPUs shall be deemed fully earned on
the date of the Change in Control and paid based on assumed
achievement of targeted performance goals.
Taking into account specific provisions related to the plan
contained in employment agreements, we expect that
Messrs. Sherrill, Trammell, Nair, Yanos and
Mr. Jackson would have become entitled to receive payments
from us as follows had we experienced a change in control on
December 31, 2008 (assuming termination on that date):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term
|
|
|
Early
|
|
|
Early
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
|
Vesting of
|
|
|
Vesting of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Bonus
|
|
|
Unit
|
|
|
Stock
|
|
|
Restricted
|
|
|
Other
|
|
|
Excise Tax and
|
|
|
|
|
|
Name
|
|
Amount
|
|
|
Amount
|
|
|
Payout(1)
|
|
|
Options(2)
|
|
|
Stock(2)
|
|
|
Benefits(3)
|
|
|
Gross-Up(4)
|
|
|
Total(5)
|
|
|
|
|
Mr. Sherrill
|
|
$
|
5,700,000
|
|
|
$
|
950,000
|
|
|
$
|
247,800
|
|
|
$
|
—
|
|
|
$
|
545,751
|
|
|
$
|
52,343
|
|
|
$
|
—
|
|
|
$
|
7,495,894
|
|
|
Mr. Trammell
|
|
|
1,700,000
|
|
|
|
350,000
|
|
|
|
106,200
|
|
|
|
—
|
|
|
|
79,651
|
|
|
|
96,573
|
|
|
|
—
|
|
|
|
2,332,424
|
|
|
Mr. Nair
|
|
|
3,281,250
|
|
|
|
468,750
|
|
|
|
122,720
|
|
|
|
—
|
|
|
|
112,099
|
|
|
|
118,740
|
|
|
|
—
|
|
|
|
4,103,559
|
|
|
Mr. Yanos
|
|
|
1,364,260
|
|
|
|
255,193
|
|
|
|
72,216
|
|
|
|
—
|
|
|
|
52,854
|
|
|
|
86,530
|
|
|
|
—
|
|
|
|
1,831,053
|
|
|
Mr. Jackson
|
|
|
1,898,495
|
|
|
|
235,980
|
|
|
|
64,717
|
|
|
|
—
|
|
|
|
46,429
|
|
|
|
85,770
|
|
|
|
—
|
|
|
|
2,331,391
|
|
|
|
|
|
|
(1)
|
|
Represents full value of all unpaid long term performance units
at their payout levels that would have vested upon a change in
control, based on the closing price of a share of our common
stock on December 31, 2008 of $2.95.
|
|
|
|
(2)
|
|
Represents the difference between the option exercise price and
the closing price of a share of our common stock on
December 31, 2008 for all unvested options and the value of
all unvested restricted shares based on that price.
|
|
|
|
(3)
|
|
Represents welfare benefits, outplacement services and remaining
bonus bank under the TAVA Plan.
|
|
|
|
(4)
|
|
Represents 20% excise tax (where applicable), grossed up for
income tax. Does not represent lost tax deductibility to the
company.
|
|
|
|
(5)
|
|
The amounts presented are estimated without any allocation of
amounts payable to service prior to or after the change in
control.
|
Other Severance
Benefits
Under Mr. Sherrill’s employment agreement, if he is
involuntarily terminated by us other than for disability or
cause or in connection with a change in control, he is entitled
to receive a lump sum payment equal to two times his annual base
salary (which lump sum amount would have been $1,900,000 as of
December 31, 2008). We expect that Mr. Nair and
Mr. Jackson would have become entitled to receive payments
from us as follows had their positions been terminated by us on
December 31, 2008, other than
38
following a change in control and other than for death,
disability or nonperformance of duties (assuming our board of
directors agreed to vest outstanding equity-based awards upon
termination):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term
|
|
|
Early
|
|
|
Early
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
|
Vesting of
|
|
|
Vesting of
|
|
|
Health and
|
|
|
|
|
|
|
|
Severance
|
|
|
Unit
|
|
|
Stock
|
|
|
Restricted
|
|
|
Welfare
|
|
|
|
|
|
Name
|
|
Amount(1)
|
|
|
Payout(1)(2)
|
|
|
Options(3)
|
|
|
Stock(3)
|
|
|
Benefits
|
|
|
Total
|
|
|
|
|
Mr. Nair
|
|
$
|
2,187,500
|
|
|
$
|
122,720
|
|
|
$
|
—
|
|
|
$
|
112,099
|
|
|
$
|
22,962
|
|
|
$
|
2,445,281
|
|
|
Mr. Jackson
|
|
|
1,265,663
|
|
|
|
64,717
|
|
|
|
—
|
|
|
|
46,429
|
|
|
|
19,029
|
|
|
|
1,395,838
|
|
|
|
|
|
|
(1)
|
|
Payable in a lump sum.
|
|
|
|
(2)
|
|
Represents full value of all unpaid long term performance units
at their payout levels, based on the closing price of a share of
our common stock on December 31, 2008 of $2.95.
|
|
|
|
(3)
|
|
Represents the difference between the option exercise price and
the closing price of a share of our common stock on
December 31, 2008 for all unvested options and the value of
all unvested restricted shares based on that price.
|
In addition, we maintain a Severance Benefit Plan that applies
to all salaried, full-time employees with at least one month of
service who are terminated by us in connection with a reduction
in force or similar layoff. Under this plan, eligible employees
receive a severance payment in a lump sum equal to the total of
(1) 1.5 weeks of pay for each full or partial year of
service, (2) an additional payment from four to
12 weeks of pay based on the employee’s age at
termination, and (3) an additional payment from one to
14 weeks of pay based on the employee’s pay grade at
termination, subject to a maximum of 52 weeks of pay. This
plan would apply to Mr. Trammell and Mr. Yanos, who we
expect would have received $379,808 and $422,832, respectively,
if his employment had been terminated by us on December 31,
2008 in connection with a reduction in force or similar layoff.
We require participants to sign a customary release to receive
benefits under this plan.
Director
Compensation
The following table and related narrative shows the compensation
we paid, for 2008, to each of our outside directors for all
services provided to our company and its subsidiaries.
Director
Compensation for 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
Awards(1)
|
|
|
Total
|
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
Mr. Cramb
|
|
$
|
73,389
|
|
|
$
|
71,488
|
|
|
$
|
144,877
|
|
|
Mr. Letham
|
|
|
69,372
|
|
|
|
71,488
|
|
|
|
140,860
|
|
|
Mr. Macher
|
|
|
69,389
|
|
|
|
71,488
|
|
|
|
140,877
|
|
|
Mr. Porter
|
|
|
69,910
|
|
|
|
71,488
|
|
|
|
141,398
|
|
|
Mr. Price
|
|
|
69,922
|
|
|
|
71,488
|
|
|
|
141,410
|
|
|
Mr. Stecko
|
|
|
73,872
|
|
|
|
71,488
|
|
|
|
145,360
|
|
|
Mr. Takeuchi
|
|
|
69,327
|
|
|
|
71,488
|
|
|
|
140,815
|
|
|
Ms. Warner
|
|
|
78,372
|
|
|
|
71,488
|
|
|
|
149,860
|
|
|
|
|
|
|
(1)
|
|
See note 9 to our consolidated financial statements for the
year ended December 31, 2008 for a description of how we
compute this value. The grant date fair value of each award of
restricted stock
|
39
|
|
|
|
|
|
|
made to our directors during 2008, and the aggregate number of
awards of restricted stock and options outstanding at
December 31, 2008, for each director was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
|
|
Fair Value of
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
Name
|
|
Grant Date
|
|
|
($)
|
|
|
|
|
Mr. Cramb
|
|
|
1/15/2008
|
|
|
$
|
71,457
|
|
|
Mr. Letham
|
|
|
1/15/2008
|
|
|
|
71,457
|
|
|
Mr. Macher
|
|
|
1/15/2008
|
|
|
|
71,457
|
|
|
Mr. Porter
|
|
|
1/15/2008
|
|
|
|
71,457
|
|
|
Mr. Price
|
|
|
1/15/2008
|
|
|
|
71,457
|
|
|
Mr. Stecko
|
|
|
1/15/2008
|
|
|
|
71,457
|
|
|
Mr. Takeuchi
|
|
|
1/15/2008
|
|
|
|
71,457
|
|
|
Ms. Warner
|
|
|
1/15/2008
|
|
|
|
71,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
Options
|
|
|
Restricted Shares
|
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Name
|
|
(#)
|
|
|
(#)
|
|
|
|
|
Mr. Cramb
|
|
|
16,475
|
|
|
|
3,010
|
|
|
Mr. Letham
|
|
|
—
|
|
|
|
3,010
|
|
|
Mr. Macher
|
|
|
—
|
|
|
|
3,010
|
|
|
Mr. Porter
|
|
|
35,000
|
|
|
|
3,010
|
|
|
Mr. Price
|
|
|
35,000
|
|
|
|
3,010
|
|
|
Mr. Stecko
|
|
|
10,000
|
|
|
|
3,010
|
|
|
Mr. Takeuchi
|
|
|
—
|
|
|
|
3,010
|
|
|
Ms. Warner
|
|
|
6,502
|
|
|
|
3,010
|
|
Fee
Structure
In 2008, each outside director was paid an annual retainer fee
of $50,000 for service on the Board of Directors. In general,
60% of the retainer fee is paid in the form of common stock
equivalents (the “directors’ stock equivalents”),
as described below, and 40% of the retainer fee is paid in cash.
The outside directors also receive meeting attendance fees,
committee chair and membership fees, and reimbursement of their
expenses for attending meetings of the Board of Directors and
its committees. The fees are generally paid in cash, but at the
option of the director may be paid in directors’ stock
equivalents. Outside directors receive $1,000 for each in-person
meeting of the Board of Directors attended, and $500 for each
telephonic meeting. Outside directors who are members of the
Audit Committee or the Compensation/Nominating/Governance
Committee receive $1,000 for each in-person meeting, and $500
for each telephonic meeting attended. In 2008, each outside
director who served as a Chairman of the Audit Committee or the
Compensation/Nominating/Governance Committee was paid a fee of
$8,000 per chairmanship. Also, the lead independent director was
paid a $6,000 retainer fee for serving as the chairman and
primary spokesman when the Board of Directors meets in executive
session. Outside directors who serve as members of the Audit
Committee or Compensation/Nomination/Governance Committee are
paid $4,000 per committee membership.
Common Stock
Equivalents, Options and Restricted Stock
As described above, all or a portion of an outside
director’s retainer fee is generally paid in common stock
equivalent units. These directors’ stock equivalents are
payable in cash or, at our option, shares of common stock after
an outside director ceases to serve as a director. Final
distribution of these amounts may be made either in a lump sum
or in installments over a period of years. The directors’
stock equivalents are issued at 100% of the fair market value on
the date of the grant.
40
Through 2005, each outside director generally received an annual
grant of an option to purchase up to 5,000 shares of common
stock in January. These directors’ options: (a) were
granted with per share exercise prices equal to 100% of the fair
market value of a share of common stock on the day the option is
granted; (b) in 2005, had terms of seven years (for prior
periods, the terms were ten years); and (c) generally,
fully vested six months from the grant date. Once vested, the
directors’ options are exercisable at any time during the
option term. In December 2005, the Board of Directors determined
to replace the annual option-grant program with annual awards of
restricted stock. In 2008, the
Compensation/Nomination/Governance Committee determined that
this award should be calculated using a target value of $75,000
and paid through a yearly award of restricted stock of
equivalent value. Accordingly, in January 2008, each outside
director was granted 3,010 shares of restricted stock,
which vest on the first anniversary of the date of grant. For
2009, no restricted shares were issued. Instead, each director
will receive $75,000 in cash in January 2010.
Deferred
Compensation Plan
We have a voluntary deferred compensation plan for outside
directors. Under the plan, an outside director may elect, prior
to commencement of the next calendar year, to have some or all
of the cash portion, that is, up to 40%, or $20,000, of his or
her retainer fee and some or all of his or her meeting or other
fees credited to a deferred compensation account. The plan
provides these directors with various investment options. The
investment options include stock equivalent units of our common
stock, which may be paid out in either cash or, at our option,
shares of common stock.
Compensation/Nominating/Governance
Committee Interlocks and Insider Participation
During fiscal 2008, Ms. Warner and Messrs. Price,
Stecko and Porter served on the
Compensation/Nominating/Governance Committee. From November 1998
to April 1999, Mr. Stecko served as our President and Chief
Operating Officer, at a time when we held the former Tenneco
Inc.’s automotive and packaging operations. Prior to that
time, he served in other executive officer capacities in the
former packaging operations. Mr. Stecko, having left our
employment in April 1999 to become Chief Executive Officer of
Packaging Corporation of America (which simultaneously purchased
our former paperboard packaging operations), meets the
independence standards for compensation and nominating committee
membership under the NYSE listing standards.
41
Tenneco Inc.
Compensation/Nominating/Governance Committee
Report On Executive Compensation
The Compensation/Nominating/Governance Committee has reviewed
and discussed the Compensation Discussion and Analysis contained
in this proxy statement with management and, based on such
review and discussion, the Compensation/Nominating/Governance
Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in the
Company’s
Form 10-K
for the year ended December 31, 2008 and in this proxy
statement.
Compensation /Nominating /Governance Committee
Roger B. Porter — Chairman
David B. Price, Jr.
Paul T. Stecko
Jane L. Warner
42
REPORT OF AUDIT
COMMITTEE
General
The Audit Committee comprises five directors and operates under
a written charter for the Audit Committee. All of the members of
the Audit Committee meet the definition of independence for
purposes of the NYSE listing standards. In addition, the Board
has designated Messrs. Cramb and Letham as “audit
committee financial experts” under the applicable SEC
rules. All of the members of the Audit Committee satisfy the
NYSE’s financial literacy requirements.
Report
The Audit Committee has furnished the following report:
The Audit Committee has reviewed and discussed the audited
financial statements of our company for the fiscal year ended
December 31, 2008 with our management. In addition, the
Audit Committee has discussed with Deloitte & Touche
LLP, our independent auditors (“Deloitte &
Touche”), the matters required to be discussed by Statement
on Auditing Standards No. 114, “
The Auditor’s
Communication With Those Charged With Governance
,” and
Regulation S-X
Rule 2-07,
“Communication with Audit Committees.”
The Audit Committee has also received the written disclosures
and the letter from Deloitte & Touche required by
Public Company Accounting Oversight Board Ethics and
Independence Rule 3526, “
Communications with Audit
Committees Concerning Independence
” regarding
Deloitte & Touche’s communications with the audit
committee concerning independence. The Audit Committee has also
discussed Deloitte & Touche’s independence from
our company with Deloitte & Touche.
The Audit Committee has considered whether the services rendered
by our independent public accountants with respect to audit,
audit-related, tax and other non-audit fees are compatible with
maintaining their independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements for our company for the fiscal year ended
December 31, 2008 be included in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 for filing with
the SEC.
Audit Committee
Charles W. Cramb — Chairman
Dennis J. Letham
Frank E. Macher
Minsunobu Takeuchi
Jane L. Warner
43
RATIFY
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(Item 2)
The Board of Directors recommends that you vote FOR this
proposal.
Financial statements of our company and our consolidated
subsidiaries will be included in our
Form 10-K
furnished to all stockholders. The Audit Committee of the Board
of Directors has appointed Deloitte & Touche LLP as
independent public accountants for us to examine our
consolidated financial statements for the year ending
December 31, 2009, and has determined that it would be
desirable to request that the stockholders ratify the
appointment. You may vote for, vote against or abstain from
voting with respect to this proposal. Assuming the presence of a
quorum, the affirmative vote of a majority of the shares
present, in person or by proxy, at the Annual Meeting and
entitled to vote is required to ratify the appointment. If the
stockholders do not ratify the appointment, the Audit Committee
will reconsider the appointment. Deloitte & Touche LLP
was engaged as our principal independent public accountants for
2002 through 2008. Representatives of Deloitte &
Touche LLP are expected to be present at the Annual Meeting and
will have the opportunity to make a statement if they desire to
do so and are also expected to be available to respond to
appropriate questions.
Audit,
Audit-Related, Tax and All Other Fees
The following table summarizes the aggregate fees and expenses
billed to us for the fiscal years ended December 31, 2008
and 2007 by our principal accounting firm, Deloitte &
Touche LLP, the member firms of Deloitte Touche Tohmatsu and
their respective affiliates (collectively,
“Deloitte & Touche”):
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Audit fees(a)
|
|
$
|
5,436,292
|
|
|
$
|
5,441,700
|
|
|
Audit-related fees(b)
|
|
|
14,000
|
|
|
|
348,700
|
|
|
|
|
|
|
|
|
|
|
|
|
Total audit and audit-related fees
|
|
|
5,450,292
|
|
|
|
5,790,400
|
|
|
Tax fees:
|
|
|
|
|
|
|
|
|
|
Compliance and tax audit support(c)
|
|
|
1,238,633
|
|
|
|
1,856,200
|
|
|
Planning and consulting(d)
|
|
|
65,000
|
|
|
|
249,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax fees
|
|
|
1,303,633
|
|
|
|
2,105,200
|
|
|
All other fees
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,753,925
|
|
|
$
|
7,895,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Audit services in 2008 and 2007 consisted of:
|
|
|
|
|
|
|
•
|
Audit of our annual financial statements including audits of
subsidiary financial statements required by local country laws
|
|
|
|
|
•
|
Audit of Management’s assessment of our internal control
over financial reporting in accordance with Section 404 of
the Sarbanes-Oxley Act of 2002
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•
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Reviews of our quarterly financial statements
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•
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Comfort letters, consents and other services related to SEC
matters
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•
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2008 Audit fees include tax audit fees of $562,000. These fees
were included in Tax fees in prior years
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(b)
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Audit-related services in 2008 and 2007 consisted of:
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•
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Employee benefit plan audits and related
Form 11-K
filings
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(c)
|
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Tax compliance services are services rendered based upon facts
already in existence or transactions that have already occurred
to document, compute, support and obtain government approval for
amounts to be included in tax filings. Tax compliance services
in 2008 and 2007 consisted of:
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(Notes continued on following page.)
44
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•
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Federal, state and local income tax return assistance
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•
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Sales and use, property and other tax return assistance
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•
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Transfer pricing documentation
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•
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Requests for technical advice from taxing authorities
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•
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Assistance with tax audits and appeals
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(d)
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Tax planning and consulting services are services rendered with
respect to proposed transactions or that alter a transaction to
obtain a particular tax result. Tax planning and consulting
services in 2008 and 2007 consisted of:
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•
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Tax advice related to intra-group transactions and restructurings
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•
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Tax planning related to certain foreign operations
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In considering the nature of the services provided by
Deloitte & Touche, the Audit Committee determined that
such services are compatible with the provision of independent
audit services. The Audit Committee discussed these services
with Deloitte & Touche and our management to determine
that they are permitted under the rules and regulations
concerning auditor independence promulgated by the SEC to
implement the Sarbanes-Oxley Act of 2002, as well as by the
American Institute of Certified Public Accountants.
Pre-Approval
Policy
At a meeting held in September 2002, shortly after the adoption
of the Sarbanes-Oxley Act of 2002 and its provisions regarding
audit committee pre-approval of non-audit services provided by a
public company’s independent public accountants, the Audit
Committee approved the continued provision to us of audit,
audit-related and tax services as described above by
Deloitte & Touche. In March 2003, after the SEC’s
adoption of final rules regarding provision of non-audit
services by a public company’s independent public
accountants, the Audit Committee adopted a pre-approval policy
regarding these services. All of the services performed by
Deloitte & Touche in 2008 were pre-approved in
accordance with the pre-approval policy adopted by the Audit
Committee at its March 2003 meeting.
The Audit Committee’s pre-approval policy describes the
permitted audit, audit-related, tax and other services
(collectively, the “Disclosure Categories”) that
Deloitte & Touche may perform. The policy requires
that, each fiscal year, a description of the services (the
“Service List”) expected to be performed by
Deloitte & Touche in each of the Disclosure
Categories, as well as related budgeted fee amounts, be
presented to the Audit Committee for approval. Providing a range
of fees for a service incorporates appropriate oversight and
control of the independent auditor relationship, while
permitting us to receive immediate assistance from the
independent auditor when time is of the essence.
Any requests for audit, audit-related, tax and other services
not included on the Service List must be submitted to the Audit
Committee for specific pre-approval and cannot commence until
such approval has been granted. Normally, pre-approval is
provided at regularly scheduled meetings. However, the authority
to grant specific pre-approval between meetings, as necessary,
has been delegated to the Chairman of the Audit Committee. The
Chairman must update the Audit Committee at the next regularly
scheduled meeting of any services that were granted specific
pre-approval. On a quarterly basis, the Audit Committee reviews
the status of services and fees incurred year-to-date against
the original Service List and the forecast of remaining services
and fees for the fiscal year. Any proposed service exceeding
120% of the pre-approved cost level or budgeted amount requires
specific additional pre-approval by the Audit Committee.
45
APPROVAL OF
AMENDMENTS TO THE
TENNECO INC. 2006 LONG-TERM INCENTIVE PLAN
(Item 3)
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL
OF THE AMENDMENTS TO THE 2006 LONG-TERM INCENTIVE PLAN
Background and
Purpose
In March 2006, we established the Tenneco Inc. 2006 Long-Term
Incentive Plan (the “Plan”), which was approved by our
stockholders at the 2006 annual meeting. The purposes of the
Plan are to: (i) promote the long-term success of our
company and its subsidiaries; (ii) attract and retain
persons eligible to participate in the Plan; (iii) motivate
participants in the Plan, by means of appropriate incentives, to
achieve long-range goals; (iv) provide incentive
compensation opportunities that are competitive with those of
other similar companies; (v) further identify
participants’ interests with those of our other
stockholders through compensation that is based on our common
stock; and (vi) thereby promote the growth in value of our
equity and enhancement of long-term stockholder return.
The Plan, as originally approved, provided for the delivery of
up to (a) 2 million shares of the company’s
common stock plus (b) any shares of common stock available
for issuance as of May 9, 2006 under the 2002 Long-Term
Incentive Plan, as amended (the “2002 Plan”), plus
(c) any shares that are represented by awards granted under
the 2002 Plan that were forfeited, expired, canceled or were
settled in cash after May 9, 2006 without delivery of
shares of common stock or which resulted in the forfeiture or
withholding of the shares of common stock, in any case to the
extent that such shares of common stock would have been added
back to the reserve under the terms of the 2002 Plan (in each
case, subject to adjustment as described in the Plan) (the
shares referenced in clauses (b) and (c) being
collectively referred to as the “2002 Plan Shares”).
The Plan as originally approved provided for delivery of a
maximum of 500,000 shares for Full Value Awards (as defined
below) plus the amount of 2002 Plan Shares that, under the 2002
Plan, would have been so available (subject to adjustment as
described in the Plan). At March 16, 2009, 153,851 shares
remained available for delivery under the Plan.
The Board of Directors wishes to ensure our continued ability to
offer equity-based incentives to employees, consultants and
other persons providing services to our company or its
subsidiaries. The Board of Directors believes this type of
compensation is critical to its ability to attract and retain
highly qualified individuals and otherwise attain the goals
described above. However, it does not believe it has sufficient
shares available for future delivery under the Plan to
accomplish these purposes.
Accordingly, on March 11, 2009, the Board of Directors
approved an amendment and restatement of the Plan (the Plan
before giving effect to the amendment and restatement is
referred to herein as the “2006 Plan”). The amendments
to the Plan would (i) increase the total number of shares
of common stock available for delivery pursuant to awards
granted under the Plan from 2 million plus the 2002 Plan
Shares to the sum of (x) 2.3 million plus (y) any
shares of common stock available for issuance under the 2006
Plan as of the date the amendments to the 2006 Plan are approved
by our stockholders, plus (z) any shares of common stock
that are represented by Awards outstanding under the 2002 Plan
or the 2006 Plan as of that approval date that are not delivered
to a participant or beneficiary because the Award expires, is
forfeited or canceled, or the shares of common stock are not
delivered because the Award is settled in cash,
(ii) increase the number of shares of common stock
available for delivery pursuant to Full Value Awards granted
under the Plan by replacing the current limitation on Full Value
Awards with the share counting approach described below, and
(iii) provide that the total number of shares of common
stock available for the grant of incentive stock options (as
described below) is 2.3 million. This represents an
increase in share availability under the Plan of
2.3 million. The incentive stock option limit does not
affect the total number of shares available for issuance under
the Plan. For purposes of determining the number of shares
described under clause (z) above, the following shares of
common stock would not again be made available for issuance
under the Plan: (1) shares of common stock not issued or
delivered as a result of the net settlement of an outstanding
Option or SAR, (2) shares of common stock used to pay the
exercise price of
46
an Award or withholding taxes relating to an outstanding Awards,
and (3) shares of common stock repurchased on the open
market with the proceeds of the Exercise Price.
Under the amended Plan’s share counting approach, shares of
common stock covered by an Award shall only be counted as used
to the extent that they are actually used. A share of common
stock issued in connection with any Award under the Plan will
reduce the total number of shares of common stock available for
issuance under the Plan by one; provided, however, that
(i) for Awards issued prior to the date on which our
stockholders approve the amendments, a share of common stock
issued in connection with a Full Value Award under the Plan will
reduce the total number of shares of common stock available for
issuance under the Plan by one and (ii) for Awards issued
on or after that approval date, a share of common stock issued
in connection with a Full Value Award under the Plan will reduce
the total number of shares of common stock available for
issuance under the Plan by 1.25.
For periods after March 11, 2009 but prior to the date on
which our stockholders approve the amendments, to the extent any
shares of common stock covered by an Award are not delivered to
a participant or beneficiary because the Award expires, is
forfeited or canceled, or the shares of common stock are not
delivered because the Award is settled in cash or used to
satisfy the applicable tax withholding obligation, such shares
of common stock shall not be deemed to have been delivered for
purposes of determining the maximum number of shares of common
stock available for delivery under the Plan or, if applicable,
pursuant to Full Value Awards (and will be added back to the
number of shares reserved on a one for one basis).
For periods on and after the date on which our stockholders
approve the amendments, to the extent any shares of common stock
covered by an Award are not delivered to a participant or
beneficiary because the Award expires, is forfeited or canceled,
or the shares of common stock are not delivered because the
Award is settled in cash, such shares of common stock shall not
be deemed to have been delivered for purposes of determining the
maximum number of shares of common stock available for delivery
under the Plan (and will be added back to the number of shares
reserved on a one for one basis except for Full Value Awards
which will be added back on a 1.25 to one basis). The following
shares of common stock, however, may not again be made available
for issuance as Awards under the Plan: (i) shares of common
stock not issued or delivered as a result of the net settlement
of an outstanding Option or SAR, (ii) shares of common
stock used to pay the Exercise Price or withholding taxes
relating to an outstanding Award, or (iii) shares of common
stock repurchased on the open market with the proceeds of the
Exercise Price.
The Board of Directors is submitting these amendments, as a
single proposal, to the Company’s stockholders for approval
at the 2009 Annual Meeting. Stockholder approval of the
amendments of the Plan is required by the rules of the New York
Stock Exchange and the inclusion of the limitation for incentive
stock options is required under the Code in order for options
granted as incentive stock options to receive special tax
treatment. The affirmative vote of holders of a majority of the
votes cast on the proposal at the Annual Meeting is required to
approve the amendments of the Plan (provided the total votes
cast on the proposal represent more than 50% of the outstanding
shares of common stock on the record date for the Annual
Meeting).
The following is a summary of the principal features of the
Plan, including the amendments described above. The effective
date of the Plan as originally adopted was March 21, 2006,
and no new awards may be granted under the Plan after
March 21, 2016 (except pursuant to commitments entered into
before that ten-year anniversary). The effective date of the
amendments is March 11, 2009, subject to stockholder
approval at the Annual Meeting. A copy of the full text of the
Plan (amended and restated effective as of March 11, 2009,
subject to stockholder approval of the amendments) is attached
to this Proxy Statement as Appendix A and is incorporated
herein by reference. Stockholders are urged to read the actual
text of the Plan in its entirety.
Administration of
the Plan; Participation
The authority to control and manage the operation and
administration of the Plan will be generally vested in a
committee of the Company’s Board of Directors (the
“Committee”), which is selected by the
47
Board and must consist of two or more members of the Board. If
the Committee does not exist, or for any other reason determined
by the Board, the Board may take any action under the Plan that
would otherwise be the responsibility of the Committee. The
Company’s current Compensation/Nominating/Governance
Committee is the “Committee” for purposes of the Plan;
however, as described elsewhere herein, it has delegated certain
of its responsibilities with respect to compensation that is
intended to be “performance-based” for purposes of
Section 162(m) of the Code to an Executive Compensation
Subcommittee (and, as to the delegated duties, the Subcommittee
will act as the “Committee” until those duties are no
longer delegated to it).
Subject to the terms of the Plan, the Committee determines from
among the Eligible Individuals (as defined below) who will
receive awards under the Plan (“Awards”), the number
of shares of common stock subject to the Awards and the exercise
price and other terms of the Awards. The persons eligible to
receive Awards under the Plan are employees of the Company or
its subsidiaries, consultants and other persons providing
services to the Company or its subsidiaries and members of the
Board of Directors (the “Eligible Individuals”),
except that only employees are eligible to receive incentive
stock option Awards under the Plan. As of March 16, 2009,
there were approximately 21,000 persons who would be
considered Eligible Individuals for the purposes of the Plan.
The consideration to be received by the Company for the granting
of Awards under the Plan is service to the Company or its
subsidiaries.
Available Shares
and Share Information
If the amendments are approved at the Annual Meeting,
(i) the maximum total number of shares of common stock that
may be delivered under the Plan will be increased from
2 million plus the 2002 Plan Shares to the sum of
(x) 2.3 million plus (y) any shares of common
stock available for issuance under the 2006 Plan as of the date
on which our stockholders approve the amendments, plus
(z) any shares of common stock that are represented by
Awards outstanding under the 2002 Plan or the 2006 Plan as of
the date on which our stockholders approve the amendments that
are not delivered to a participant or beneficiary because the
Award expires, is forfeited or canceled, or the shares of common
stock are not delivered because the Award is settled in cash,
(ii) the maximum number of shares of common stock that may
be delivered under the Plan in respect of “Full Value
Awards” will be increased from 500,000 plus the 2002 Plan
Shares that would have been so available to a number limited by
the share counting approach described below (subject to
adjustment as described in the Plan), and (iii) the maximum
number of shares of common stock that may be delivered under the
Plan in respect of incentive stock options will be
2.3 million (subject to adjustment as described in the
Plan). Shares of common stock covered by an Award will only be
counted as used to the extent that they are actually used. A
share of common stock issued in connection with any Award under
the Plan will reduce the total number of shares of common stock
available for issuance under the Plan by one; provided, however,
that (i) for Awards issued prior to the date on which our
stockholders approve the amendments, a share of common stock
issued in connection with a Full Value Award under the Plan will
reduce the total number of shares of common stock available for
issuance under the Plan by one and (ii) for Awards issued
on or after the date on which our stockholders approve the
amendments, a share of common stock issued in connection with a
Full Value Award under the Plan will reduce the total number of
shares of common stock available for issuance under the Plan by
1.25. For the purposes of the Plan, “Full Value
Awards” are Bonus Stock, Stock Equivalent Units,
Performance Units, Restricted Stock and Restricted Stock Units
(each as defined below). For purposes of determining the number
of shares described under clause (z) above, the following
shares of common stock would not again be made available for
issuance under the Plan: (1) shares of common stock not
issued or delivered as a result of the net settlement of an
outstanding Option or SAR, (2) shares of common stock used
to pay the exercise price of an Award or withholding taxes
relating to an outstanding Awards, and (3) shares of common
stock repurchased on the open market with the proceeds of the
Exercise Price.
The Company had an aggregate of 46,905,047 shares of common
stock outstanding as of March 16, 2009. The shares of
common stock with respect to which Awards may be made under the
Plan will be shares of common stock currently authorized but
unissued or currently held or, to the extent permitted by
applicable law, subsequently acquired by the Company as treasury
shares, including shares of common
48
stock purchased in the open market or in private transactions.
The closing price per share of common stock on March 16,
2009, as reported by the New York Stock Exchange, was $1.93.
Certain Terms and
Conditions of Awards
An Award under the Plan is subject to such terms and conditions,
not inconsistent with the Plan, as the Committee prescribes. The
terms and conditions of any Award to a participant are reflected
in the form of written document, if any, that is determined by
the Committee. A copy of a document evidencing an Award will be
provided to the participant, and the Committee may, but need
not, require that the participant sign a copy of the document.
Awards may be granted under the Plan as any of the following:
Options; SARs; Bonus Stock Awards; Stock Equivalent Unit Awards;
Restricted Stock Awards; Restricted Stock Unit Awards; and
Performance Unit Awards (each as defined below).
The grant of an “Option” will entitle the participant
to purchase shares of common stock at an exercise price (the
“Exercise Price”) established by the Committee. An
Option may be either an incentive stock option (an
“ISO”) or a non-qualified stock option (an
“NQO”), as determined in the discretion of the
Committee. An ISO is an Option that is intended to satisfy the
requirements applicable to an “incentive stock option”
described in section 422(b) of the Internal Revenue Code of
1986, as amended (the “Code”). An NQO is an Option
that is not intended to be an “incentive stock option”
as that term is described in section 422(b) of the Code.
A stock appreciation right (a “SAR”) entitles the
participant to receive, in cash or shares of common stock, value
equal to (or otherwise based on) the excess of (i) the Fair
Market Value (as defined below) of a specified number of shares
of common stock at the time of exercise, over (ii) an
Exercise Price established by the Committee. No Option or SAR
may be granted with a term that extends beyond the tenth
anniversary of the grant date.
The “Exercise Price” of each Option and SAR granted is
established by the Committee or determined by a method
established by the Committee at the time the Option or SAR is
granted; provided, however, that no Exercise Price may be less
than 100% of the Fair Market Value of a share of common stock on
the date of grant (or, if greater, the par value of a share of
common stock). For purposes of determining the “Fair Market
Value” of a share of common stock as of any date, the
following rules apply: (i) if the principal market for the
shares of common stock is a national securities exchange or the
NASDAQ securities market, then the “Fair Market Value”
as of that date shall be the average of the highest and lowest
sales prices of a share of common stock on that date (or, if
such day is not a business day, the next preceding business day)
on the principal exchange or market on which the shares of
common stock are then listed or admitted to trading;
(ii) if the shares of common stock are not listed on a
national securities exchange and the shares of common stock are
not quoted on the NASDAQ securities market, then the “Fair
Market Value” as of that date shall be the average of the
highest and lowest prices of a share of common stock on that
date (or, if such day is not a business day, the next preceding
business day) as reported on the NASDAQ OTC Bulletin Board
Service or by the National Quotation Bureau, Incorporated or a
comparable service; and (iii) if neither clause (i)
nor (ii) is applicable, then the Fair Market Value of the
shares of common stock shall be determined in good faith by the
Committee.
A “Bonus Stock” Award is a grant of shares of common
stock in return for previously performed services, or in return
for the participant surrendering other compensation that may be
due to such participant from the Company or its subsidiaries.
A “Stock Equivalent Unit” Award is a grant of a right
to receive cash in an amount equal to the value of a specified
number of shares of common stock, in the future, which may be
(but need not be) contingent on the achievement of performance
or other objectives, including without limitation continued
service, during or in respect of a specified period of at least
one year in duration.
A “Performance Unit” Award is a grant of a right to
receive a specified number of shares, or dollar value amount of
shares, of common stock, in the future, which is contingent on
the achievement of performance
49
or other objectives, including without limitation continued
service, during or in respect of a specified period of at least
one year in duration.
A “Restricted Stock” Award is a grant of shares of
common stock, and a “Restricted Stock Unit” Award is a
grant of a right to receive a specified number of shares of
common stock, or cash in an amount equal to the value of a
specified number of shares of common stock, in the future, with
such shares of common stock or right to future delivery of such
shares of common stock or payment of cash subject to a risk of
forfeiture or other restrictions that will lapse upon the
achievement of one or more goals relating to completion of
service by the participant, or achievement of performance or
other objectives, as determined by the Committee. However, the
risk of forfeiture with respect to any Restricted Stock Award
made to any Eligible Individual in respect of his or her
employment by the Company or one of its subsidiaries will not
lapse any sooner than three years after the date of grant of
such Restricted Stock Award (subject, to the extent provided by
the Committee, to pro rated vesting over the course of such
three year period and to acceleration of vesting in the event of
the participant’s death, disability, retirement, or
involuntary termination or a change in control of the Company
(as defined in the Plan)).
The payment of the Exercise Price of an Option granted under the
Plan is subject to the following: (a) subject to
clauses (b) and (c) below, the full Exercise Price for
shares of common stock purchased upon the exercise of any Option
shall be paid at the time of such exercise (except that, in the
case of an exercise arrangement not disapproved by the Committee
and described in clause (c) below, payment may be made as
soon as practicable after the exercise); (b) the Exercise
Price shall be payable in cash, by promissory note, or by
tendering, by either actual delivery of shares of common stock
or by attestation, shares of the Company’s common stock
owned for at least six months or acquired on the open market,
and valued at Fair Market Value as of the day of exercise, or in
any combination thereof, as determined by the Committee; and
(c) except as otherwise provided by the Committee, a
participant may elect to pay the Exercise Price upon the
exercise of an Option by irrevocably authorizing a third party
to sell shares of common stock (or a sufficient portion of the
shares of common stock) acquired upon exercise of the Option and
remit to the Company a sufficient portion of the sale proceeds
to pay the entire Exercise Price and any tax withholding
resulting from such exercise.
In the discretion of the Committee, a participant may be granted
any Award permitted under the provisions of the Plan, and more
than one Award may be granted to a participant. Awards may be
granted as alternatives to or replacement of Awards granted or
outstanding under the Plan, or any other plan or arrangement of
the Company or its subsidiaries.
An Award (other than an Option or SAR Award) may provide the
participant with the right to receive dividend payments,
dividend equivalent payments or dividend equivalent units with
respect to shares of common stock subject to the Award.
The obligation to make payments and distributions with respect
to Awards of Stock Equivalent Units, Performance Units, or
Restricted Stock Units may be satisfied through cash payments,
the delivery of shares of common stock, the granting of
replacement Awards, or any combination thereof as the Committee
determines. Satisfaction of any obligations under an Award,
which is sometimes referred to as “settlement” of the
Award, may be subject to such conditions, restrictions and
contingencies as the Committee determines.
For periods after the effective date but prior to the date on
which our stockholders approve the amendments, to the extent any
shares of common stock covered by an Award are not delivered to
a participant or beneficiary because the Award expires, is
forfeited or canceled, or the shares of common stock are not
delivered because the Award is settled in cash or used to
satisfy the applicable tax withholding obligation, such shares
of common stock shall not be deemed to have been delivered for
purposes of determining the maximum number of shares of common
stock available for delivery under the Plan or, if applicable,
pursuant to Full Value Awards (and will be added back to the
reserve on a one for one basis).
50
For periods on and after the date on which our stockholders
approve the amendments, to the extent any shares of common stock
covered by an Award are not delivered to a participant or
beneficiary because the Award expires, is forfeited or canceled,
or the shares of common stock are not delivered because the
Award is settled in cash, such shares of common stock shall not
be deemed to have been delivered for purposes of determining the
maximum number of shares of common stock available for delivery
under the Plan (and will be added back to the number of shares
reserved on a one for one basis except for Full Value Awards
which will be added back on a 1.25 to one basis). The following
shares of common stock, however, may not again be made available
for issuance as Awards under the Plan: (i) shares of common
stock not issued or delivered as a result of the net settlement
of an outstanding Option or SAR, (ii) shares of common
stock used to pay the Exercise Price or withholding taxes
relating to an outstanding Award, or (iii) shares of common
stock repurchased on the open market with the proceeds of the
Exercise Price.
All distributions under the Plan are subject to withholding of
all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on
satisfaction of the applicable withholding obligations.
Transferability
Except as otherwise provided by the Committee, Awards under the
Plan are not transferable except as designated by the
participant by will or by the laws of descent and distribution.
Certain
Adjustments
In the event of a corporate transaction involving the Company
(including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation,
split-up,
spin-off, combination or exchange of shares), the Committee
shall adjust the terms of the Plan and Awards to preserve the
benefits or potential benefits of the Plan or the Awards as
determined in the sole discretion of the Committee. Action by
the Committee with respect to the Plan or Awards may include:
(i) adjustment of the number and kind of shares which may
be delivered under the Plan (including adjustments to the number
and kind of shares that may be granted to an individual during a
specified time); (ii) adjustment of the number and kind of
shares subject to outstanding Awards; (iii) adjustment of
the Exercise Price of outstanding Options and SARs; and
(iv) any other adjustments that the Committee determines to
be equitable which may include, without limitation,
(I) replacement of Awards with other Awards which the
Committee determines have comparable value and which are based
on stock of a company resulting from the transaction, and
(II) cancellation of the Award in return for a cash payment
of the current value of the Award, determined as though the
Award is fully vested at the time of payment, provided that in
the case of an Option or SAR, the amount of such payment may be
the excess of the value of the Common Stock subject to the
Option or SAR at the time of the transaction over the Exercise
Price).
Amendment or
Termination
The Board may, at any time, amend or terminate the Plan, and may
amend any award agreement under the Plan, provided that no
amendment or termination may, in the absence of written consent
to the change by the affected participant (or, if the
participant is not then living, the affected beneficiary),
adversely affect the rights of any participant or beneficiary
under any Award granted under the Plan prior to the date such
amendment is adopted by the Board. Notwithstanding the
foregoing, (i) no revision of the Plan shall be made
without stockholder approval, if such revision would constitute
a “material revision” of the Plan for purposes of the
rules of the New York Stock Exchange, Inc. or stockholder
approval is otherwise required by applicable law, regulation or
stock exchange rule, and (ii) except in connection with
adjustments made on account of corporate transactions (as
described above), the terms of outstanding Options or SARs may
not be amended to reduce the exercise price and outstanding
Options or SARs may not be cancelled in exchange for cash, other
awards or Options or SARs with an exercise price that is less
than the exercise price of the original Options or SARs without
stockholder approval.
51
Certain
Limitations on Awards and Related Matters
Subject to the provisions relating to adjustments in the case of
corporate transactions and to the extent the award is intended
to constitute “performance-based” compensation (as
that term is used in section 162(m) of the Code), the
aggregate number of shares of common stock underlying Options
and SARs granted to any one individual under the Plan may not
exceed 350,000 (subject to adjustments as described in the Plan)
in any one calendar year period. If an Option is in tandem with
a SAR, such that the exercise of the Option or SAR with respect
to a share of common stock cancels the tandem SAR or Option
right, respectively, with respect to such share, the tandem
Option and SAR rights with respect to each share of common stock
shall be counted as covering only one share of common stock for
purposes of applying the limitation in the preceding sentence.
For Bonus Stock Awards, Stock Equivalent Unit Awards, Restricted
Stock Awards, Restricted Stock Unit Awards and Performance Unit
Awards that are intended to be “performance-based
compensation” (as that term is used for purposes of Code
section 162(m)), no more than 200,000 shares of common
stock and, if such Awards are denominated in cash value, no more
than $4,000,000, may be subject to such Awards granted to any
one individual during any one calendar year. The Committee may
designate whether any such Award being granted to any
participant is intended to be “performance-based
compensation”. Any such Awards designated as intended to be
“performance-based compensation” will be conditioned
on the achievement of one or more of the following Performance
Measures: (1) net earnings; (2) earnings per share;
(3) net sales growth; (4) net income (before or after
taxes); (5) net operating profit; (6) return measures
(including, but not limited to, return on assets, capital,
equity or sales); (7) cash flow (including, but not limited
to, operating cash flow and free cash flow); (8) cash flow
return on investments, which equals net cash flows divided by
owner’s equity; (9) earnings before or after taxes,
interest, depreciation
and/or
amortization; (10) internal rate of return or increase in
net present value; (11) dividend payments to parent;
(12) gross margins; (13) gross margins minus expenses;
(14) operating margin; (15) share price (including,
but not limited to, growth measures and total stockholder
return); (16) expense targets; (17) working capital
targets relating to inventory
and/or
accounts receivable; (18) planning accuracy (as measured by
comparing planned results to actual results);
(19) comparisons to various stock market indices;
(20) comparisons to the performance of other companies;
(21) technological achievement; (22) customer counts;
(23) customer satisfaction, quality management or customer
service performance; and
(24) EVA
®
.
For purposes of this Plan,
“EVA
®
”
means the positive or negative value determined by net operating
profits after taxes over a charge for capital, or any other
financial measure, as determined by the Committee in its sole
discretion
(EVA
®
is a registered trademark of Stern Stewart & Co.). Any
Performance Measure(s) may be used to measure the performance of
the Company as a whole or any business unit or Subsidiary of the
Company or any combination thereof, as the Committee may deem
appropriate, or any such performance as compared to the
performance of a group of comparator companies, or any published
or special index that the Committee, in its sole discretion,
deems appropriate. The Committee may provide in any such Award
that any evaluation of performance may include or exclude any of
the following events that occurs during a performance period:
(a) asset write-downs, (b) litigation or claim
judgments or settlements, (c) the effect of changes in tax
laws, accounting principles, or other laws or provisions
affecting reported results, (d) accruals for reorganization
and restructuring programs, (e) extraordinary nonrecurring
items as described in Accounting Principles Board Opinion
No. 30
and/or
in
management’s discussion and analysis of financial condition
and results of operations appearing in the Company’s annual
report to stockholders for the applicable year,
(f) acquisitions or divestitures, and (g) foreign
exchange gains and losses.
Change in
Control
Upon the occurrence of a change in control of the Company (as
defined in the Plan), unless otherwise specifically prohibited
under applicable laws, or by the rules and regulations of any
applicable governmental agencies or national securities
exchange, or unless the Committee shall otherwise provide in any
award agreement: (a) Options and SARs will become
immediately vested and exercisable and will remain exercisable
for the lesser of 36 months following such change in
control or the remaining maximum term of
52
such Award; (b) any restriction imposed on Restricted Stock
or Restricted Stock Units will lapse; and (c) the target
payout opportunities attainable under all Bonus Stock, Stock
Equivalent Unit and Performance Unit Awards will be deemed to
have been fully earned as of the effective date of the change in
control (based on an assumed achievement of all relevant
targeted performance goals over any applicable performance
period(s)) and each participant holding any such Award will be
entitled to be paid in cash, within 30 days after the
change in control, the total of the fair market value,
determined as of immediately prior to such change in control, of
any such Award held.
New Plan
Benefits
Because grants under the Plan are discretionary, it is not
possible to determine or estimate the benefits or amounts that
will be received in the future by any Eligible Individual under
the Plan, except that, as described above under “Election
of Directors — Compensation of Directors,” it is
anticipated that the portion of Outside Directors’ fees
payable in equivalent units that may be stock-settled will be
awarded under the Plan (see “Election of
Directors — Compensation of Directors”).
Outstanding
Awards
The following table shows, as of December 31, 2008,
information regarding outstanding awards available under our
compensation plans (including individual compensation
arrangements) under which our equity securities may be delivered:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
|
|
|
(c)
|
|
|
|
|
Number of
|
|
|
(b)
|
|
|
Number of
|
|
|
|
|
Securities to be
|
|
|
Weighted-
|
|
|
Securities
|
|
|
|
|
Issued Upon
|
|
|
Average Exercise
|
|
|
Available for
|
|
|
|
|
Exercise of
|
|
|
Price of
|
|
|
Future
|
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Issuance
|
|
|
|
|
Options,
|
|
|
Options,
|
|
|
(Excluding
|
|
|
|
|
Warrants and
|
|
|
Warrants and
|
|
|
Shares in
|
|
|
Plan category
|
|
Rights(1)
|
|
|
Rights
|
|
|
Column (a))(1)
|
|
|
|
|
Equity compensation plans approved by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Ownership Plan(2)
|
|
|
620,667
|
(3)
|
|
$
|
5.73
|
|
|
|
—
|
|
|
2002 Long-Term Incentive Plan (as amended)(4)
|
|
|
1,200,226
|
(5)
|
|
$
|
12.40
|
|
|
|
—
|
|
|
2006 Long-Term Incentive Plan(6)
|
|
|
1,083,252
|
(7)
|
|
$
|
25.11
|
|
|
|
1,214,048
|
|
|
Equity compensation plans not approved by security
holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Stock Ownership Plan(8)
|
|
|
245,231
|
(9)
|
|
$
|
8.56
|
|
|
|
—
|
|
|
|
|
|
|
(1)
|
|
Reflects the number of shares of the Company’s common
stock. Does not include 220,604 shares that may be issued
in settlement of common stock equivalent units that were
credited to outside directors as payment for their retainer and
other fees. In general, these units are settled in cash. At the
option of the Company, however, the units may be settled in
shares of the Company’s common stock. As of March 16,
2009, we had (a) an aggregate of 3,836,794 stock options
outstanding at a weighted average exercise price of $12.75 and a
weighted average remaining term of 5.01 years;
(b) 671,225 shares of restricted stock outstanding;
and (c) 153,851 shares remaining available for future
issuance.
|
|
|
|
(2)
|
|
This plan terminated as to new awards on December 31, 2001
(except awards pursuant to commitments outstanding at that date).
|
|
|
|
(3)
|
|
At March 16, 2009, due to forfeitures since the end of
2008, outstanding awards of options, warrants, and rights
granted under this plan covered the delivery of up to
619,967 shares of common stock.
|
(Notes continued on following page.)
53
|
|
|
|
|
(4)
|
|
This plan terminated as to new awards upon adoption of our 2006
Long-Term Incentive Plan (except awards pursuant to commitments
outstanding on that date). Does not include 40,825 shares
subject to outstanding restricted stock (vest over time) as of
December 31, 2008 that were issued at a weighted-average
issue price of $21.23 per share.
|
|
|
|
(5)
|
|
At March 16, 2009, due to forfeitures since the end of
2008, outstanding awards of options, warrants, and rights
granted under this plan covered the delivery of up to
1,195,344 shares of common stock. There were 4,081 shares
of restricted stock outstanding under this plan at
March 16, 2009.
|
|
|
|
(6)
|
|
Does not include 413,664 shares subject to outstanding
restricted stock (vest over time) as of December 31, 2008
that were issued at a weighted-average issue price of $25.05 per
share. Under this plan, as of December 31, 2008, a maximum
of 442,484 shares remained available for delivery under
Full Value Awards.
|
|
|
|
(7)
|
|
At March 16, 2009, due to plan activity since the end of
2008, (i) outstanding awards of options, warrants, and
rights granted under this plan covered the delivery of up to
1,776,252 shares of common stock, (ii) 153,851 shares
remained available under the plan, of which 71,055 shares
could be delivered as Full Value Awards and (iii)
667,144 shares of restricted stock were outstanding under
this plan that were issued with a weighted average exercise
price of $9.95.
|
|
|
|
(8)
|
|
The plan described in the table above as not having been
approved by security holders is the Tenneco Inc. Supplemental
Stock Ownership Plan. This plan, which terminated on
December 31, 2001 as to new awards (except awards pursuant
to commitments outstanding at that date), originally covered the
delivery of up to 1.5 million shares of common stock held
in the Company’s treasury. This plan was and continues to
be administered by the Compensation/Nominating/Governance
Committee. The Company’s directors, officers and other
employees were eligible to receive awards under this plan,
although awards under the plan were limited to the
Company’s non-executive employees. Awards under the plan
could take the form of non-statutory stock options, stock
appreciation rights, restricted stock, stock equivalent units or
performance units. All awards made under this plan were
discretionary. The committee determined which eligible persons
received awards and determined all terms and conditions
(including form, amount and timing) of each award.
|
|
|
|
(9)
|
|
At March 16, 2009, outstanding awards of options, warrants,
and rights granted under this plan covered the delivery of up to
245,231 shares of common stock.
|
Federal Income
Tax Consequences of Awards of Options
The federal income tax discussion set forth below is included
for general information only. Eligible Individuals are urged to
consult their tax advisors to determine the particular tax
consequences applicable to them, including the application and
effect of foreign, state and local income and other tax laws.
No income results to the holder of an ISO upon the grant thereof
or issuance of shares upon exercise thereof. The amount realized
on the sale or taxable exchange of the shares received upon
exercise of the ISO in excess of the Exercise Price will be
considered a capital gain, except that, if a sale, taxable
exchange or other disposition occurs within one year after
exercise of the ISO or two years after the grant of the ISO
(generally considered to be a “disqualifying
disposition”), the participant will realize compensation,
for federal income tax purposes, on the amount by which the
lesser of the Fair Market Value on the date of exercise, or the
amount realized on the sale of the shares, exceeds the Exercise
Price. Any appreciation on the shares between the exercise date
and the disposition will be taxed to the participant as capital
gain. The difference between the Exercise Price and the Fair
Market Value of the shares acquired at the time of exercise is a
tax preference item for the purpose of calculating the
alternative minimum tax on individuals under the Code. This
preference amount will not be included again in alternative
minimum taxable income in the year the taxpayer disposes of the
stock.
No compensation will be realized by a participant holding a NQO
at the time it is granted. Upon the exercise of a NQO, a
participant will realize compensation for federal income tax
purposes on the difference between the Exercise Price and the
Fair Market Value of the shares acquired at the time of exercise.
54
If the participant exercises a NQO by surrendering previously
owned shares of common stock, the basis and the holding period
of the previously owned shares carry over to the same number of
shares received in exchange for the previously owned shares. The
compensation income recognized on exercise of these Options is
added to the basis of the shares received. If the exercised
Option is an ISO and the shares surrendered were acquired
through the exercise of an ISO and have not been held for the
applicable holding period, the participant will recognize income
on such exchange, and the basis of the shares received will be
equal to the Fair Market Value of the shares surrendered. If the
applicable holding period has been met on the date of exercise
of such an ISO, there will be no income recognition and the
basis and the holding period of the previously owned shares will
carry over to the same number of shares received in exchange,
and the remaining shares will begin a new holding period and
have a zero basis.
The Company recognizes no deduction at the time of grant or
exercise of an ISO and recognizes no deduction at the time of
grant of a NQO. The Company will recognize a deduction at the
time of exercise of a NQO in an amount equal to the difference
between the Exercise Price and the Fair Market Value of the
shares on the date of exercise. The Company also will recognize
a deduction to the extent the participant recognizes income upon
a disqualifying disposition of shares underlying an ISO.
55
OTHER
MATTERS
The Board of Directors is not aware of any other matters that
may properly come before the Annual Meeting. However, should any
such matters come before the Annual Meeting, it is the intention
of the persons named in the enclosed form of proxy card to vote
all proxies (unless otherwise directed by stockholders) in
accordance with their judgment on such matters.
SOLICITATION OF
PROXIES AND VOTING
Stockholders may specify their choices, by following the
instructions in the Notice of Internet Availability of Proxy
Materials, by Internet or by Telephone, or if you request
printed copies of proxy materials by mail, by signing and
submitting your proxy card and returning by mail. We encourage
you to submit your vote via the Internet.
All properly completed, unrevoked proxies, which are received
prior to the close of voting at the Annual Meeting, will be
voted in accordance with the specifications made. If a properly
executed, unrevoked written proxy card does not specifically
direct the voting of shares covered, the proxy will be voted
(i)
FOR
the election of all nominees for election as
director described in this proxy statement, (ii)
FOR
the ratification of the appointment of Deloitte &
Touche LLP as our independent public accountants for 2009,
(iii)
FOR
approval of the amendments to the Tenneco
Inc. 2006 Long-Term Incentive Plan, and (iv) in accordance
with the judgment of the persons named in the proxy as to such
other matters as may properly come before the Annual Meeting.
A proxy may be revoked at any time prior to the voting at the
Annual Meeting by submitting a later-dated proxy (including a
later-dated proxy via the Internet or telephone), giving timely
written notice of such revocation to the Corporate Secretary of
our company or by attending the Annual Meeting and voting in
person.
The presence at the Annual Meeting, in person or by proxy, of
holders of a majority of the issued and outstanding shares of
common stock as of the record date is considered a quorum for
the transaction of business. If you submit a properly completed
proxy or if you appear at the Annual Meeting to vote in person,
your shares of common stock will be considered part of the
quorum. Directions to withhold authority to vote for any
director, abstentions and broker non-votes (described below)
will be counted to determine if a quorum for the transaction of
business is present. Once a quorum is present, voting on
specific proposals may proceed.
The cost of solicitation of Proxies will be borne by us.
Solicitation will be made by mail, and may be made by directors,
officers, and employees, personally or by telephone, telecopy or
telegram. Proxy cards and material also will be distributed to
beneficial owners of stock through brokers, custodians, nominees
and other like parties, and we expect to reimburse such parties
for their charges and expenses. Georgeson Inc., New York, New
York, has been retained to assist us in the solicitation of
proxies at a fee estimated not to exceed $15,000.
EFFECT OF
ABSTENTIONS AND BROKER NON-VOTES
Abstentions and “broker non-votes” (which occur when a
nominee holding shares for a beneficial owner does not vote on a
proposal because the nominee does not have discretionary voting
power with respect to that item and has not received
instructions from the beneficial owner) will be counted in
determining the presence or absence of a quorum for the
transaction of business at the Annual Meeting.
Assuming the presence of a quorum, the affirmative vote of
(1) a majority of the votes cast at the Annual Meeting (in
person or by proxy) is required for the election of directors,
(2) holders of a majority of the common stock present at
the Annual Meeting (in person or by proxy) and entitled to vote
is required to ratify Deloitte & Touche LLP as our
independent public accountants for 2009, and (3) the
majority of votes cast on the proposal at the Annual Meeting (in
person or by proxy) is required to approve the amendments
56
to the Tenneco Inc. 2006 Long-Term Incentive Plan, assuming the
total votes cast on the proposal represent more than 50% of the
outstanding common stock on the record date for the Annual
Meeting.
Because the election of directors is determined on the basis of
a majority of the votes cast, abstentions have no effect on the
election of directors. Because the vote standard for the
approval of Deloitte & Touche LLP is a majority of
shares present and entitled to vote, abstentions have the effect
of a vote against and broker non-votes would have no effect on
the proposal. Because the vote standard for the approval of the
amendments to the Tenneco Inc. 2006 Long-Term Incentive Plan is
a majority of votes cast on the proposal, abstentions have the
effect of a vote against and, assuming the total votes cast on
the proposal represent more than 50% of the outstanding common
stock on the record date for the Annual Meeting, broker
non-votes would have no effect on the proposal.
INCORPORATION BY
REFERENCE
To the extent that this proxy statement is incorporated by
reference in any other filing by us under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended, the information included or incorporated in the
sections of this proxy statement entitled “Executive
Compensation — Tenneco Inc.
Compensation/Nominating/Governance Committee Report on Executive
Compensation” and “Report of Audit Committee”
will not be deemed to be incorporated, unless specifically
provided otherwise in such filing.
DIRECTIONS TO
ANNUAL MEETING
If you plan to attend the annual meeting in person, below are
directions to our headquarters located at 500 North Field Drive,
Lake Forest, Illinois 60045.
From North
Take 294 South
Exit Route 60 (Town Line Road) (left/east)
Left on Field Drive (2nd light)
Tenneco on Left Side
From O’Hare Airport and South
Take 294 North
Exit Route 60 (Town Line Road) (right/east)
Left on Field Drive (1st light)
Tenneco on Left Side
From Downtown Chicago
Kennedy Expressway, I-90, west
To Edens Expressway, I-94, toward Milwaukee
To 294 North
Exit Route 60 (Town Line Road) (right/east)
Left on Field Drive (1st light)
Tenneco on Left Side
57
SUBMISSION OF
STOCKHOLDER PROPOSALS
Stockholder
Proposals — Inclusion in Company Proxy
Statement
For a stockholder proposal to be considered by us for inclusion
in our proxy statement and form of proxy relating to the annual
meeting of stockholders to be held in 2010, the proposal must be
received by December 1, 2009.
Other
Stockholders Proposals — Discretionary Voting
Authority and By-Laws
With respect to stockholder proposals not included in the
Company’s proxy statement and form of proxy, we may utilize
discretionary authority conferred by proxy in voting on any such
proposals if, among other situations, the stockholder does not
give timely notice of the matter to us by the date determined
under our By-Laws for the submission of business by
stockholders. This notice requirement and deadline are
independent of the notice requirement and deadline described
above for a stockholder proposal to be considered for inclusion
in our proxy statement. Our By-Laws state that, to be timely,
notice and certain related information must be received at the
principal executive offices not later than the close of business
on the 90th day nor earlier than the close of business on
the 120th day prior to the first anniversary of the
preceding year’s annual meeting. However, in the event that
the date of the annual meeting is more than thirty days before
or more than seventy days after the anniversary date, the notice
must be delivered not earlier than the close of business on the
120th day prior to such annual meeting and not later than
the close of business on the later of the 90th day prior to
such annual meeting or the tenth day following the day on which
public announcement of the date of such meeting is first made.
Therefore, to be timely under our By-Laws, a proposal for the
2010 annual meeting not included by or at the direction of the
Board must be received not earlier than January 1, 2010,
nor later than February 1, 2010.
DAVID A. WARDELL
Corporate Secretary
The Company has made available to you its
Form 10-K
which you may access by following the instructions contained in
the Notice of Internet Availability of Proxy Materials. We will
furnish without charge to each person whose proxy is being
solicited, upon the written request of any such person, a copy
of our
Form 10-K
for the fiscal year ended December 31, 2008, as filed with
the Securities and Exchange Commission, including the financial
statements and schedules thereto. Requests for copies of such
report should be directed to General Counsel, Tenneco Inc., 500
North Field Drive, Lake Forest, Illinois 60045.
58
APPENDIX A
TENNECO INC.
2006 LONG-TERM INCENTIVE PLAN
(As Amended and Restated Effective March 11,
2009)
ARTICLE 1
GENERAL
1.1.
Purpose.
The Tenneco
Inc. 2006 Long-Term Incentive Plan (the “Plan”) has
been established by Tenneco Inc. (the “Company”) to:
(i) promote the long-term success of the Company and its
Subsidiaries (as defined herein); (ii) attract and retain
persons eligible to participate in the Plan; (iii) motivate
Participants (as defined herein), by means of appropriate
incentives, to achieve long-range goals; (iv) provide
incentive compensation opportunities that are competitive with
those of other similar companies; (v) further identify
Participants’ interests with those of the Company’s
other stockholders through compensation that is based on the
Company’s common stock; and (vi) thereby promote the
growth in value of the Company’s equity and enhancement of
long-term stockholder return. The following provisions
constitute an amendment, restatement and continuation of the
Plan effective as of March 11
,
2009.
1.2.
Participation.
Subject
to the terms and conditions of the Plan, the Committee (as
defined herein) shall determine and designate, from time to
time, from among the Eligible Individuals (as defined herein),
including without limitation transferees of Eligible Individuals
to the extent the transfer is permitted by the Plan and the
applicable Award Agreement (as defined herein), those persons
who will be granted one or more Awards (as defined herein) under
the Plan, and thereby become “Participants” in the
Plan.
1.3.
Operation and
Administration.
The operation and
administration of the Plan, including the Awards made under the
Plan, shall be subject to the provisions of Article 5
(relating to operation and administration).
ARTICLE 2
CERTAIN DEFINED TERMS
As used in this Plan, the following terms shall have the
meanings set forth or referenced below. In addition, other terms
may be defined in the other Articles and Sections of this Plan,
and, unless the context otherwise requires, shall have the
specified meanings throughout the Plan:
(a)
Approval Date.
The term
“Approval Date” means the date on which the Plan, as
amended and restated effective as of March 11, 2009, is
approved by the Company’s stockholders.
(b)
Award.
The term
“Award” means any award or benefit granted under the
Plan, including, without limitation, the grant of Options, SARs,
Bonus Stock Awards, Stock Equivalent Unit Awards, Restricted
Stock Awards, Restricted Stock Unit Awards and Performance Unit
Awards.
(c)
Board.
The term
“Board” means the Board of Directors of the Company.
(d)
Change in Control.
The term
“Change in Control” means any of the following events
(but no event other than one of the following events):
(1) any person, alone or together with any of its
affiliates or associates, becomes the beneficial owner, directly
or indirectly, of securities of the Company representing
(A) twenty percent (20%) or more of either the
Company’s then outstanding shares of common stock or the
combined voting power of the Company’s then outstanding
securities having general voting rights, and a majority of the
Incumbent Board does not approve the acquisition, or
(b) forty percent (40%) or more of either the
Company’s then outstanding shares of common stock or the
combined voting power of the Company’s then outstanding
securities having general voting rights; provided, however,
that, notwithstanding the foregoing, a Change in Control shall
not be deemed to occur pursuant to this clause (1) solely
because the requisite percentage of either the
A-1
Company’s then outstanding shares of common stock or the
combined voting power of the Company’s then outstanding
securities having general voting rights is acquired by one or
more employee benefit plans maintained by the Company or any of
its subsidiaries; or
(2) members of the Incumbent Board cease to constitute a
majority of the Board; or
(3) the consummation of any plan of merger, consolidation,
share exchange or combination between the Company and any
person, including without limitation becoming a subsidiary of
any other person, or the consummation of any sale, exchange or
other disposition of all or substantially all of the
Company’s assets (any such transaction, a
“Business Combination”
) without all or
substantially all of the persons who are the beneficial owners
of the then outstanding shares of the common stock of the
Company
(“Outstanding Common Stock”)
or
of the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the
“Outstanding Voting
Securities”
) immediately prior to such Business
Combination constituting the beneficial owners, directly or
indirectly, of fifty percent (50%) or more of, respectively, the
outstanding shares of common stock and the combined voting power
of the outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without
limitation, an entity which as a result of such transaction owns
the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the
Outstanding Common Stock and the Outstanding Voting Securities,
as the case may be; or
(4) the Company’s stockholders approve a plan of
complete liquidation or dissolution of the Company.
(e)
Code.
The term
“Code” means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include
reference to any successor provision of the Code.
(f)
Common Stock.
The term
“Common Stock” means the Company’s common stock,
par value $.01 per share.
(g)
Covered Employee.
The term
“Covered Employee” means a Participant who, as of the
date of vesting
and/or
payout of an Award, as applicable, is a “covered
employee,” as defined in Code Section 162(m) and the
regulations promulgated under Code Section 162(m).
(h)
Effective Date.
The term
“Effective Date” has the meaning set forth in
Section 5.1.
(i)
Eligible Individual.
For
purposes of the Plan, the term “Eligible Individual”
means any employee of the Company or a Subsidiary, any
consultant or other person providing services to the Company or
a Subsidiary and any member of the Board; provided, however,
that an incentive stock option may only be granted to an
employee of the Company or a Subsidiary.
(j)
Fair Market Value.
For
purposes of determining the “Fair Market Value” of a
share of Common Stock as of any date, the following rules shall
apply:
(i) If the principal market for the shares of Common Stock
is a national securities exchange or the NASDAQ securities
market, then the “Fair Market Value” as of that date
shall be the average of the highest and lowest sales prices of a
share of Common Stock on that date (or, if such day is not a
business day, the next preceding business day) on the principal
exchange or market on which the shares of Common Stock are then
listed or admitted to trading.
(ii) If the shares of Common Stock are not listed on a
national securities exchange and the shares of Common Stock are
not quoted on the NASDAQ securities market, then the “Fair
Market Value” as of that date shall be the average of the
highest and lowest prices of a share of Common Stock on that
date (or, if such day is not a business day, the next preceding
business day) as reported on the NASDAQ OTC Bulletin Board
Service or by the National Quotation Bureau, Incorporated or a
comparable service.
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(iii) If subparagraphs (i) and (ii) next above
are otherwise inapplicable, then the Fair Market Value of the
shares of Common Stock shall be determined in good faith by the
Committee.
(k)
Incumbent Board.
The
“Incumbent Board” shall consist of the following
persons:
(i) the members of the Board on the Effective Date, to the
extent that they continue to serve as members of the
Board; and
(ii) any individual who becomes a member of the Board after
the Effective Date, (1) upon the death or disability or
retirement of, and as the successor to or replacement for, a
member of the Board or (2) if his or her election or
nomination for election as a director is approved by a vote of
at least a majority of the then Incumbent Board, except that a
director whose initial assumption of office is in connection
with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of
directors of the Company shall not be considered a member of the
Incumbent Board for purposes of this clause (2).
(l)
Participants.
The term
“Participants” has the meaning set forth in
Section 1.2.
(m)
Performance Measure.
The term
“Performance Measure” means any of the following:
(1) net earnings; (2) earnings per share; (3) net
sales growth; (4) net income (before or after taxes);
(5) net operating profit; (6) return measures
(including, but not limited to, return on assets, capital,
equity or sales); (7) cash flow (including, but not limited
to, operating cash flow and free cash flow); (8) cash flow
return on investments, which equals net cash flows divided by
owner’s equity; (9) earnings before or after taxes,
interest, depreciation
and/or
amortization; (10) internal rate of return or increase in
net present value; (11) dividend payments to parent;
(12) gross margins; (13) gross margins minus expenses;
(14) operating margin; (15) share price (including,
but not limited to, growth measures and total stockholder
return); (16) expense targets; (17) working capital
targets relating to inventory
and/or
accounts receivable; (18) planning accuracy (as measured by
comparing planned results to actual results);
(19) comparisons to various stock market indices;
(20) comparisons to the performance of other companies;
(21) technological achievement; (22) customer counts;
(23) customer satisfaction, quality management or customer
service performance; and
(24) EVA
®
.
For purposes of this Plan,
“EVA
®
”
means the positive or negative value determined by net operating
profits after taxes over a charge for capital, or any other
financial measure, as determined by the Committee in its sole
discretion.
(EVA
®
is a registered trademark of Stern Stewart & Co.)
(n)
Subsidiary.
The term
“Subsidiary” means any corporation, partnership, joint
venture or other entity during any period in which at least a
fifty percent voting or profits interest is owned, directly or
indirectly, by the Company (or by any entity that is a successor
to the Company), and any other business venture designated by
the Committee in which the Company (or any entity that is a
successor to the Company) has a significant interest, as
determined in the discretion of the Committee. For purposes of
the grant of incentive stock options, the term
“Subsidiary” means a subsidiary corporation within the
meaning of Code Section 424(f).
(o)
2002 Plan.
The term “2002
Plan” means the Tenneco Automotive Inc. 2002 Long-Term
Incentive Plan.
(p)
2006 Plan.
The term “2006
Plan” means the Tenneco Inc. 2006 Long-Term Incentive Plan,
before giving effect to the amendments reflected herein.
ARTICLE 3
OPTIONS AND SARS
3.1.
Certain Definitions.
(a) The grant of an “Option” entitles the
Participant to purchase shares of Common Stock at an Exercise
Price (as defined herein) established by the Committee. Any
Option granted under this Article 3 may be either an
incentive stock option (an “ISO”) or a non-qualified
stock option (an “NQO”), as
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determined in the discretion of the Committee. An
“ISO” is an Option that is intended to satisfy the
requirements applicable to an “incentive stock option”
described in Code Section 422(b). An “NQO” is an
Option that is not intended to be an “incentive stock
option” as that term is described in Code
Section 422(b).
(b) A stock appreciation right (an “SAR”)
entitles the Participant to receive, in cash or shares of Common
Stock (as determined in accordance with Section 5.2), value
equal to (or otherwise based on) the excess of: (i) the
Fair Market Value of a specified number of shares of Common
Stock at the time of exercise; over (ii) an Exercise Price
established by the Committee.
3.2.
Exercise Price.
The
“Exercise Price” of each Option and SAR granted under
this Article 3 shall be established by the Committee or
shall be determined by a method established by the Committee at
the time the Option or SAR is granted; provided, however, that
the Exercise Price shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date of grant
(or, if greater, the par value of a share of Common Stock).
3.3.
Exercise.
An Option and
an SAR granted under this Article 3 shall be exercisable in
accordance with such terms and conditions and during such
periods as may be established by the Committee; provided,
however, that no Option or SAR shall be exercisable after the
tenth anniversary of the date as of which such Award was granted.
3.4.
Payment of Option Exercise
Price.
The payment of the Exercise Price of
an Option granted under this Article 3 shall be subject to
the following:
(a) Subject to the following provisions of this
Section 3.4, the full Exercise Price for shares of Common
Stock purchased upon the exercise of any Option shall be paid at
the time of such exercise (except that, in the case of an
exercise arrangement not disapproved by the Committee and
described in Section 3.4(c), payment may be made as soon as
practicable after the exercise).
(b) The Exercise Price shall be payable to the Company in
full either: (i) in cash or its equivalent, (ii) by
tendering (either by actual delivery or attestation) previously
acquired shares of Common Stock having an aggregate Fair Market
Value at the time of exercise equal to the total Exercise Price
(provided that the shares that are tendered must have been held
by the Participant for at least six (6) months prior to
their tender to satisfy the Exercise Price or must have been
purchased on the open market), (iii) by a combination of
(i) and (ii), or (iv) by any other method approved by
the Committee in its sole discretion at the time of grant and as
set forth in the Award Agreement.
(c) Except as otherwise provided by the Committee, a
Participant may elect to pay the Exercise Price upon the
exercise of an Option by irrevocably authorizing a third party
to sell shares of Common Stock (or a sufficient portion of the
shares of Common Stock) acquired upon exercise of the Option and
remit to the Company a sufficient portion of the sale proceeds
to pay the entire Exercise Price and any tax withholding
resulting from such exercise.
3.5.
Settlement of
Award.
Settlement of Options and SARs is
subject to the provisions of Section 5.7.
ARTICLE 4
OTHER STOCK-RELATED
AWARDS
4.1.
Certain Definitions.
(a) A “Bonus Stock” Award is a grant of shares of
Common Stock in return for previously performed services, or in
return for the Participant surrendering other compensation that
may be due to such Participant from the Company or a Subsidiary.
(b) A “Stock Equivalent Unit” Award is a grant of
a right to receive cash in an amount equal to the value of a
specified number of shares of Common Stock, in the future, which
may be contingent on the
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achievement of performance or other objectives, including
without limitation continued service, during or in respect of a
specified period of at least one year in duration.
(c) A “Performance Unit” Award is a grant of a
right to receive a specified number of shares, or dollar amount
of shares, of Common Stock, in the future, which is contingent
on the achievement of performance or other objectives, including
without limitation continued service, during or in respect of a
specified period of at least one year in duration.
(d) A “Restricted Stock” Award is a grant of
shares of Common Stock, and a “Restricted Stock Unit”
Award is a grant of a right to receive a specified number of
shares of Common Stock, or cash in an amount equal to the value
of a specified number of shares of Common Stock, in the future,
with such shares of Common Stock or right to future delivery of
such shares of Common Stock or payment of cash subject to a risk
of forfeiture or other restrictions that will lapse upon the
achievement of one or more goals relating to completion of
service by the Participant, or achievement of performance or
other objectives, as determined by the Committee.
Notwithstanding the foregoing, the risk of forfeiture with
respect to any Restricted Stock Award made to any Eligible
Individual in respect of his or her employment by the Company or
a Subsidiary shall not lapse any sooner than three years after
the date of grant of such Restricted Stock Award (subject, to
the extent provided by the Committee, to pro rated vesting over
the course of such three year period and to acceleration of
vesting in the event of the Participant’s death,
disability, retirement, or involuntary termination or a Change
in Control).
4.2.
Restrictions on
Awards.
Each Bonus Stock Award, Stock
Equivalent Unit Award, Restricted Stock Award, Restricted Stock
Unit Award and Performance Unit Award shall be subject to such
conditions, restrictions and contingencies as the Committee
shall determine. The Committee may designate whether any such
Award being granted to any Participant is intended to be
“performance-based compensation” as that term is used
in Code Section 162(m). Any such Awards designated as
intended to be “performance-based compensation” shall
be conditioned on the achievement of one or more Performance
Measures, to the extent required by Code Section 162(m).
For Awards under this Section 4.2 intended to be
“performance-based compensation,” the grant of the
Awards and the establishment of the Performance Measures shall
be made during the period required under Code
Section 162(m). Any Performance Measure(s) may be used to
measure the performance of the Company as a whole or any
business unit or Subsidiary of the Company or any combination
thereof, as the Committee may deem appropriate, or any such
performance as compared to the performance of a group of
comparator companies, or any published or special index that the
Committee, in its sole discretion, deems appropriate. The
Committee also has the authority to provide for accelerated
vesting of any Award made under this Article 4 based on the
achievement of performance goals pursuant to the Performance
Measures specified herein. The Committee may provide in any such
Award that any evaluation of performance may include or exclude
any of the following events that occurs during a performance
period: (a) asset write-downs, (b) litigation or claim
judgments or settlements, (c) the effect of changes in tax
laws, accounting principles, or other laws or provisions
affecting reported results, (d) accruals for reorganization
and restructuring programs, (e) extraordinary nonrecurring
items as described in Accounting Principles Board Opinion
No. 30
and/or
in
management’s discussion and analysis of financial condition
and results of operations appearing in the Company’s annual
report to stockholders for the applicable year,
(f) acquisitions or divestitures, and (g) foreign
exchange gains and losses. To the extent such inclusions or
exclusions affect Awards to Covered Employees intended to
qualify as “performance-based compensation,” they
shall be prescribed in a form that meets the requirements of
Code Section 162(m) for deductibility. Awards that are
designed to qualify as “performance-based
compensation,” and that are held by Covered Employees, may
not be adjusted upward (the Committee shall retain the
discretion to adjust such Awards downward). In the event that
applicable tax
and/or
securities laws change to permit Board or Committee discretion
to alter the governing Performance Measures without obtaining
stockholder approval of such changes, the Board and Committee
shall have the discretion to make such changes without obtaining
stockholder approval. In addition, in the event that the
Committee determines that it is advisable to grant Awards under
this Article 4 that shall not qualify as
“performance-based compensation,” the Committee may
make such grants without satisfying the requirements of Code
Section 162(m).
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ARTICLE 5
OPERATION AND
ADMINISTRATION
5.1.
Effective Date; Approval Date and Effect
on 2006 Plan.
Subject to the provisions of
Section 5.2, the Plan, as amended and restated as of
March 11, 2009, shall be effective as of the date that such
amendment and restatement is adopted by the Board (the
“Effective Date”
); provided, however,
that Awards granted after the Effective Date and prior to the
Approval Date under the Plan will be contingent on approval of
the amendment and restatement of the Plan by the Company’s
stockholders (unless shares were available for such Awards under
the 2006 Plan prior to the Effective Date). The Plan shall be
unlimited in duration and, in the event of Plan termination,
shall remain in effect as long as any Awards under it are
outstanding; provided, however, that no Awards may be granted
under the Plan after March 21, 2016 (except for Awards
granted pursuant to commitments entered into prior to such
date). From and after the Approval Date, no further awards will
be made under the 2006 Plan. No further awards have been made
under the 2002 Plan since the date of stockholder approval of
the 2006 Plan. Any awards made under the 2006 Plan or the 2002
Plan shall continue to be subject to the terms and conditions of
the 2006 Plan or 2002 Plan, respectively. If the Approval Date
does not occur, Awards may continue to be made under the 2006
Plan.
5.2.
Plan and Other
Limitations.
The Awards that may be granted
under the Plan shall be subject to the following:
(a) The shares of Common Stock with respect to which Awards
may be made under the Plan shall be shares of Common Stock
currently authorized but unissued or currently held or, to the
extent permitted by applicable law, subsequently acquired by the
Company as treasury shares, including shares of Common Stock
purchased in the open market or in private transactions.
(b) Until the Approval Date occurs, the maximum number of
shares of Common Stock that may be delivered to Participants and
their beneficiaries shall be determined under the provisions of
the 2006 Plan and, if the Approval Date does not occur, the
maximum number of shares of Common Stock that may be delivered
under the Plan shall be determined in accordance with the
provisions of the 2006 Plan, except as otherwise provided herein.
(c) If the Approval Date occurs and subject to the
provisions of this Section 5.2, the maximum number of
shares of Common Stock that may be delivered to Participants and
their beneficiaries under the Plan shall be equal to the sum of
(i) 2,300,000 shares of Common Stock, plus
(i) any shares of Common Stock available for issuance as of
the Approval Date under the 2006 Plan, plus (iii) any
shares of Common Stock that are represented by awards
outstanding under the 2002 Plan or the 2006 Plan as of the
Approval Date that are not delivered to a Participant or
beneficiary because the award expires, is forfeited or canceled,
or the shares of Common Stock are not delivered because the
Award is settled in cash; provided, however that the following
shares of Common Stock may not again be made available for
issuance as Awards under the Plan pursuant to this subparagraph
: (a) shares of Common Stock not issued or delivered as a
result of the net settlement of an outstanding Option or SAR,
(2) shares of Common Stock used to pay the Exercise Price
or withholding taxes relating to an outstanding Award, or
(3) shares of Common Stock repurchased on the open market
with the proceeds of the Exercise Price.
(d) Shares of Common Stock covered by an Award shall only
be counted as used to the extent that they are actually used. A
share of Common Stock issued in connection with any Award under
the Plan shall reduce the total number of shares of Common Stock
available for issuance under the Plan by one; provided, however,
that (i) for Awards issued prior to the Approval Date, a
share of Common Stock issued in connection with a Full Value
Award under the Plan shall reduce the total number of shares of
Common Stock available for issuance under the Plan by one and
(ii) for Awards issued on or after the Approval Date, a
share of Common Stock issued in connection with a Full Value
Award under the Plan shall reduce the total number of shares of
Common Stock available for issuance under the Plan by 1.25. For
the purposes of this Plan, “Full Value Awards” shall
be Awards of Bonus Stock, Stock
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Equivalent Units, Performance Units, Restricted Stock or
Restricted Stock Units. The maximum number of shares of Common
Stock that may be delivered to Participants pursuant to ISOs is
2,300,000.
(e) To the extent provided by the Committee, any Award of
Stock Equivalent Units, Performance Units or Restricted Stock
Units may be settled in cash rather than shares of Common Stock.
(i) For periods after the Effective Date but prior to the
Approval Date, the provisions of this Section 5.2(e)(i)
shall apply. To the extent any shares of Common Stock covered by
an Award are not delivered to a Participant or beneficiary
because the Award expires, is forfeited or canceled, or the
shares of Common Stock are not delivered because the Award is
settled in cash or used to satisfy the applicable tax
withholding obligation, such shares of Common Stock shall not be
deemed to have been delivered for purposes of determining the
maximum number of shares of Common Stock available for delivery
under the Plan or, if applicable, pursuant to Full Value Awards
(and, for the avoidance of doubt, shall be added back to the
number of shares reserved on a one for one basis).
(ii) For periods on and after the Approval Date, the
provisions of this Section 5.2(e)(ii) shall apply. To the
extent any shares of Common Stock covered by an Award are not
delivered to a Participant or beneficiary because the Award
expires, is forfeited or canceled, or the shares of Common Stock
are not delivered because the Award is settled in cash, such
shares of Common Stock shall not be deemed to have been
delivered for purposes of determining the maximum number of
shares of Common Stock available for delivery under the Plan
(and, for the avoidance of doubt, shall be added back to the
number of shares reserved on a one for one basis except for Full
Value Awards which shall be added back on a 1.25 to one basis).
The following shares of Common Stock, however, may not again be
made available for issuance as Awards under the Plan:
(i) shares of Common Stock not issued or delivered as a
result of the net settlement of an outstanding Option or SAR,
(ii) shares of Common Stock used to pay the Exercise Price
or withholding taxes relating to an outstanding Award, or
(iii) shares of Common Stock repurchased on the open market
with the proceeds of the Exercise Price.
(f) Subject to Section 5.2(g), the following
additional limitations are imposed under the Plan.
(i) For Awards granted pursuant to Article 3 (relating
to Options and SARs, including ISOs) that are intended to
constitute “performance-based compensation” (as that
term is used for purposes of Code Section 162(m)), no more
than 350,000 (Three Hundred Fifty Thousand) shares of Common
Stock may be subject to such Awards granted to any one
individual during any one calendar year. If an Option is in
tandem with an SAR, such that the exercise of the Option or SAR
with respect to a share of Common Stock cancels the tandem SAR
or Option right, respectively, with respect to such share, the
tandem Option and SAR rights with respect to each share of
Common Stock shall be counted as covering only one share of
Common Stock for purposes of applying the limitations of this
subparagraph (i).
(ii) For Awards granted pursuant to Article 4 that are
intended to be “performance-based compensation” (as
that term is used for purposes of Code Section 162(m)), no
more than 200,000 (Two Hundred Thousand) shares of Common Stock
and, if such Awards are denominated in cash value, no more than
$4,000,000, may be subject to such Awards granted to any one
individual during any one calendar year (regardless of whether
settlement of the Award is to occur prior to, at the time of or
after the time of vesting). If, after shares have been earned,
the delivery is deferred, any additional shares attributable to
dividends or other amounts attributable to actual or deemed
earnings or other investment experience during the deferral
period shall be disregarded. Unless otherwise indicated by the
Committee at the time of grant, all Awards granted pursuant to
Article 4 for which the vesting or payment are conditioned
on achievement of one or more Performance Measures shall be
deemed to be intended to be “performance-based
compensation” for the purposes of Code Section 162(m).
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(g) In the event of a corporate transaction involving the
Company (including, without limitation, any stock dividend,
stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation,
split-up,
spin-off, combination or exchange of shares), the Committee
shall adjust the terms of the Plan and Awards to preserve the
benefits or potential benefits of the Plan or the Awards as
determined in the sole discretion of the Committee. Action by
the Committee with respect to the Plan or Awards under this
Section 5.2(g) may include, in its sole discretion:
(i) adjustment of the number and kind of shares which may
be delivered under the Plan (including adjustments to the number
and kind of shares that may be granted to an individual during
any specified time as described above); (ii) adjustment of
the number and kind of shares subject to outstanding Awards;
(iii) adjustment of the Exercise Price of outstanding
Options and SARs; and (iv) any other adjustments that the
Committee determines to be equitable (which may include, without
limitation, (I) replacement of Awards with other Awards
which the Committee determines have comparable value and which
are based on stock of a company resulting from the transaction,
and (II) cancellation of the Award in return for a cash
payment of the current value of the Award, determined as though
the Award is fully vested at the time of payment, provided that
in the case of an Option or SAR, the amount of such payment may
be the excess of the value of the Common Stock subject to the
Option or SAR at the time of the transaction over the Exercise
Price). Notwithstanding any other provision of the Plan or any
Award Agreement to the contrary, any adjustment to any Award
under this Section 5.2(g), including but not limited to any
adjustment to any Option or SAR, shall be exempt from, or
compliant with, the requirements of Code Section 409A and
the Treasury regulations issued thereunder.
5.3.
General
Restrictions.
Delivery of shares of Common
Stock or other amounts under the Plan shall be subject to the
following:
(a) Notwithstanding any other provision of the Plan, the
Company shall have no liability to deliver any shares of Common
Stock under the Plan or make any other distribution of benefits
under the Plan unless such delivery or distribution would comply
with all applicable laws (including, without limitation, the
requirements of the Securities Act of 1933, as amended), and the
applicable requirements of any securities exchange or similar
entity.
(b) To the extent that the Plan provides for issuance of
certificates to reflect the issuance of shares of Common Stock,
the issuance may be effected on a non-certificated basis, to the
extent not prohibited by applicable law or the applicable rules
of any securities exchange.
5.4.
Tax Withholding.
All
distributions under the Plan shall be subject to withholding of
all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on
satisfaction of the applicable withholding obligations. Except
as otherwise provided by the Committee, such withholding
obligations may be satisfied (a) through cash payment by
the Participant, (b) through the surrender of shares of
Common Stock which the Participant already owns, or
(c) through the surrender of shares of Common Stock to
which the Participant is otherwise entitled under the Plan;
provided, however, that such shares of Common Stock under this
Section 5.4(c) may be used to satisfy not more than the
Company’s minimum statutory withholding obligation (based
on minimum statutory withholding rates for Federal and state tax
purposes, including without limitation payroll taxes, that are
applicable to such supplemental taxable income).
5.5.
Grant and Use of
Awards.
In the discretion of the Committee, a
Participant may be granted any Award permitted under the
provisions of the Plan, and more than one Award may be granted
to a Participant. Awards may be granted as alternatives to or
replacement of Awards granted or outstanding under the Plan, or
any other plan or arrangement of the Company or a Subsidiary
(including a plan or arrangement of a business or entity, all or
a portion shares of common stock of which is acquired by the
Company or a Subsidiary). The Committee may use available shares
of Common Stock hereunder as the form of payment for
compensation, grants or rights earned or due under any other
compensation plans or arrangements of the Company or a
Subsidiary, including the plans and arrangements of the Company
or a Subsidiary assumed in business combinations.
Notwithstanding any other provision of the Plan or any Award
Agreement to the contrary, any replacement or substitution of
any outstanding Award under the
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Plan shall be exempt from, or compliant with, the requirements
of Code Section 409A and the Treasury regulations issued
thereunder.
5.6.
Dividends and Dividend
Equivalents.
An Award (other than an Option
or a SAR Award) may provide the Participant with the right to
receive dividend payments, dividend equivalent payments or
dividend equivalent units with respect to shares of Common Stock
subject to the Award (both before and after the shares of Common
Stock subject to the Award are earned, vested, or acquired),
which payments may be either made currently or credited to an
account for the Participant, and may be settled in cash or
shares of Common Stock as determined by the Committee. Any such
settlements, and any such crediting of dividends or dividend
equivalents or reinvestment in shares of Common Stock or Common
Stock equivalents, may be subject to such conditions,
restrictions and contingencies as the Committee shall establish,
including the reinvestment of such credited amounts in Common
Stock equivalents.
5.7.
Settlement of
Awards.
The obligation to make payments and
distributions with respect to Awards of Stock Equivalent Units,
Performance Units or Restricted Stock Units may be satisfied
through cash payments, the delivery of shares of Common Stock,
the granting of replacement Awards, or any combination thereof
as the Committee shall determine. Satisfaction of any
obligations to make payments or distributions under an Award,
which is sometimes referred to as “settlement” of the
Award, may be subject to such conditions, restrictions and
contingencies as the Committee shall determine. Each Subsidiary
shall be liable for payment of cash due under the Plan with
respect to any Participant to the extent that such benefits are
attributable to the services rendered for that Subsidiary by the
Participant. Any disputes relating to liability of a Subsidiary
for cash payments shall be resolved by the Committee.
Notwithstanding any other provision of the Plan or an Award
Agreement to the contrary and except as expressly provided in
the applicable Award Agreement (i) settlement of any
Performance Unit with a performance period no greater than one
calendar year shall be made after the end of the performance
period; and (ii) settlement of any Performance Unit with a
performance period greater than one calendar year, granted after
December 31, 2009, shall be made after the end of the
performance period.
5.8.
Transferability.
Except
as otherwise provided by the Committee, Awards under the Plan
are not transferable except as designated by the Participant by
will or by the laws of descent and distribution.
5.9.
Form and Time of
Elections.
Unless otherwise specified herein,
each election required or permitted to be made by any
Participant or other person entitled to benefits under the Plan,
and any permitted modification or revocation thereof, shall be
in writing filed with the Committee at such times, in such form
and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall
require.
5.10.
Agreement With
Company.
An Award under the Plan shall be
subject to such terms and conditions, not inconsistent with the
Plan, as the Committee shall, in its sole discretion, prescribe.
The terms and conditions of any Award to any Participant shall
be reflected in such form of written document, if any, as is
determined by the Committee. A copy of such document shall be
provided to the Participant, and the Committee may, but need
not, require that the Participant sign a copy of such document.
Such document is referred to in the Plan as an “Award
Agreement” regardless of whether any Participant signature
is required.
5.11.
Action by Company or
Subsidiary.
Any action required or permitted
to be taken by the Company or any Subsidiary shall be by
resolution of its board of directors, or by action of one or
more members of the board (including a committee of the board)
who are duly authorized to act for the board, or (except to the
extent prohibited by applicable law or applicable rules of any
stock exchange) by a duly authorized officer of such company.
5.12.
Gender and
Number.
Where the context admits, words in
any gender shall include any other gender, words in the singular
shall include the plural and the plural shall include the
singular.
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5.13.
Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by
reason of participation in the Plan, acquire any right in or
title to any assets, funds or property of the Company or any
Subsidiary whatsoever, including, without limitation, any
specific funds, assets or other property which the Company or
any Subsidiary, in its sole discretion, may set aside in
anticipation of a liability under the Plan. A Participant shall
have only a contractual right to the shares of Common Stock or
amounts, if any, payable under the Plan, unsecured by any assets
of the Company or any Subsidiary, and nothing contained in the
Plan shall constitute a guarantee that the assets of the Company
or any Subsidiary shall be sufficient to pay any benefits to any
person.
(b) The Plan does not constitute a contract of employment
or continued service, and selection as a Participant will not
give any participating individual the right to be retained in
the employ or continued service of the Company or any
Subsidiary, nor any right or claim to any benefit under the
Plan, unless such right or claim has specifically accrued under
the terms of the Plan. Except as otherwise provided in the Plan,
no Award under the Plan shall confer upon the holder thereof any
rights as a stockholder of the Company prior to the date on
which the individual fulfills all conditions for receipt of such
rights.
5.14.
Evidence.
Evidence
required of anyone under the Plan may be by certificate,
affidavit, document or other information which the person acting
on it considers pertinent and reliable, and signed, made or
presented by the proper party or parties.
ARTICLE 6
CHANGE IN CONTROL
Subject to the provisions of Section 5.2(g) (relating to
certain adjustments), upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under
applicable laws, or by the rules and regulations of any
applicable governmental agencies or national securities
exchange, or unless the Committee shall otherwise provide in the
Award Agreement:
(a) any and all Options and SARs granted hereunder shall
become immediately vested and exercisable and shall remain
exercisable for the lesser of 36 months following such
Change in Control or the remaining maximum term of such Award
(regardless of whether the applicable Participant’s
employment or directorship is terminated upon or after such
Change in Control);
(b) any period of restriction and restrictions imposed on
Restricted Stock or Restricted Stock Units granted hereunder
shall lapse; and
(c) the target payout opportunities attainable under all
Bonus Stock, Stock Equivalent Unit and Performance Unit Awards
granted hereunder shall be deemed to have been fully earned as
of the effective date of the Change in Control (based on an
assumed achievement of all relevant targeted performance goals
over any applicable performance period(s)) and each Participant
holding any such Award shall be entitled to be paid in cash,
within 30 days after the Change in Control, the total of
the fair market value, determined as of immediately prior to
such Change in Control, of any such Award which he or she held
immediately prior to such Change in Control.
ARTICLE 7
COMMITTEE
7.1.
Administration.
The
authority to control and manage the operation and administration
of the Plan shall be vested in a committee (the
“Committee”) in accordance with this Article 7.
The Committee shall be selected by the Board, and shall consist
solely of two or more members of the Board. From and after the
Effective Date, unless removed by the Board or unless said
committee no longer exists, the Company’s
Compensation/Nominating/Governance Committee shall be the
Committee for purposes of
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this Plan. If the Committee does not exist, or for any other
reason determined by the Board, the Board may take any action
under the Plan that would otherwise be the responsibility of the
Committee.
7.2.
Powers of
Committee.
The Committee’s
administration of the Plan shall be subject to the following:
(a) Subject to the provisions of the Plan, the Committee
will have the authority and discretion to select from among the
Eligible Individuals those persons who shall receive Awards, to
determine the time or times of receipt, to determine the types
of Awards and the number of shares of Common Stock or other
amounts covered by the Awards, to establish the terms,
conditions, performance criteria, restrictions and other
provisions of such Awards and (subject to the restrictions
imposed by Article 8) to cancel or suspend Awards.
(b) To the extent that the Committee determines that the
restrictions imposed by the Plan preclude the achievement of the
material purposes of the Awards in jurisdictions outside the
United States, the Committee will have the authority and
discretion to modify those restrictions as the Committee
determines to be necessary or appropriate to conform to
applicable requirements or practices of jurisdictions outside of
the United States.
(c) The Committee will have the authority and discretion to
conclusively interpret the Plan, to establish, amend and rescind
any rules and regulations relating to the Plan, to determine the
terms and provisions of any Award Agreement made pursuant to the
Plan and to make all other determinations that may be necessary
or advisable for the administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any
decision made by it under the Plan is final and binding on all
persons.
(e) In controlling and managing the operation and
administration of the Plan, the Committee shall take action in a
manner that conforms to the certificate of incorporation and
by-laws of the Company, and applicable state corporate law.
7.3.
Delegation by
Committee.
Except to the extent prohibited by
applicable law or the applicable rules of a securities exchange,
the Committee may allocate all or any portion of its
responsibilities and powers to any one or more of its members
and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such
allocation or delegation may be revoked by the Committee at any
time.
7.4.
Information to be Furnished to
Committee.
The Company and Subsidiaries shall
furnish the Committee with such data and information as it
determines may be required for it to discharge its duties. The
records of the Company and Subsidiaries as to an
individual’s employment or service, termination of
employment or service, leave of absence, reemployment or
recommencement of service and compensation shall be conclusive
on all persons unless determined to be incorrect. Participants
and other persons entitled to benefits under the Plan must
furnish the Committee such evidence, data or information as the
Committee considers desirable to carry out the terms of the Plan.
ARTICLE 8
AMENDMENT AND
TERMINATION
The Board may, at any time, amend or terminate the Plan, and may
amend any Award Agreement, provided that no amendment or
termination may, in the absence of written consent to the change
by the affected Participant (or, if the Participant is not then
living, the affected beneficiary), adversely affect the rights
of any Participant or beneficiary under any Award granted under
the Plan prior to the date such amendment is adopted by the
Board; and further provided that adjustments pursuant to
Section 5.2(g) shall not be subject to the foregoing
limitations of this Article 8. Notwithstanding anything
herein to the contrary, (i) no revision of the Plan shall
be made without stockholder approval if such revision would
constitute a “material revision” of the Plan for
purposes of the rules of the New York Stock Exchange, Inc. or
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stockholder approval is otherwise required by applicable law,
regulation or stock exchange rule, and (ii) except in
connection with adjustments made in accordance with
Section 5.2(f), the terms of outstanding Options or SARs
may not be amended to reduce the exercise price and outstanding
Options or SARs may not be cancelled in exchange for cash, other
Awards or Options or SARs with an exercise price that is less
than the exercise price of the original Options or SARs without
stockholder approval.
ARTICLE 9
MISCELLANEOUS
9.1.
Governing Law.
The
validity, construction and effect of the Plan, and any actions
taken or relating to the Plan, shall be determined in accordance
with the laws of the State of Illinois and applicable federal
law.
9.2.
Severability.
If for
any reason any provision or provisions of the Plan are
determined invalid or unenforceable, the validity and effect of
the other provisions of the Plan shall not be affected thereby.
ARTICLE 10
CODE
SECTION 409A
10.1.
Time and Form of
Settlement.
The time and form of settlement
of Stock Equivalent Unit Awards, Restricted Stock Unit Awards,
and Performance Unit Awards granted under the Plan shall be made
in accordance with the Plan and applicable Award Agreement,
provided that with respect to termination of employment for
reasons other than death, the settlement at such time can be
characterized as a ‘short-term deferral’ for purposes
of Code Section 409A or as otherwise exempt from the
provisions of Code Section 409A, or if any portion of the
settlement cannot be so characterized, and the Participant is a
‘specified employee’ under Code Section 409A,
such portion of the settlement shall be delayed until the
earlier to occur of the Participant’s death or the date
that is six months and one day following the Participant’s
termination of employment (the ‘Delay Period’). Upon
the expiration of the Delay Period, all settlements and benefits
delayed pursuant to this Section 10.1 shall be paid to the
Participant in a lump sum payment and any remaining settlements
due under the applicable Award Agreement shall be settled at the
same time and in the same form as such amounts would have been
settled in accordance with their original settlement schedule
under such Award Agreement, provided such settlement complies
with the terms of the Plan. For purposes of the Plan and any
applicable Award Agreement, the terms ‘terminated,’
‘terminates,’ ‘termination of employment’
and variations thereof, as used in the Plan and any applicable
Award Agreement in relation to the settlement of any Award, are
intended to mean a termination of employment that constitutes a
‘separation from service’ under Code Section 409A.
10.2
Prohibition on Acceleration of
Payment.
Except as otherwise permitted under
Code Section 409A and the guidance and Treasury regulations
issued thereunder, the time or schedule of any payment or amount
scheduled to be paid pursuant to this Plan or an applicable
Award Agreement may not be accelerated.
10.3
Savings
Clause.
Notwithstanding any other provision
of the Plan or an Award Agreement to the contrary, to the extent
that the Committee determines that any Award granted under the
Plan is subject to Code Section 409A, it is the intent of
the parties to the applicable Award Agreement that such Award
Agreement incorporate the terms and conditions necessary to
avoid the consequences specified in Code Section 409A(a)(1)
and that such Award Agreement and the terms of the Plan as
applicable to such Award be interpreted and construed in
compliance with Code Section 409A and the Treasury
regulations and other interpretive guidance issued thereunder.
Notwithstanding the foregoing, the Company shall not be required
to assume any increased economic burden in connection therewith.
Although the Company and the Committee intend to administer the
Plan so that it will comply with the requirements of Code
Section 409A, neither the Company nor the Committee
represents or warrants that the Plan will comply with Code
Section 409A or any other provision of federal, state,
local, or
non-United
States law. Neither the
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Company, its Subsidiaries, nor their respective directors,
officers, employees or advisers shall be liable to any
Participant (or any other individual claiming a benefit through
the Participant) for any tax, interest, or penalties the
Participant may owe as a result of participation in the Plan,
and the Company and its Subsidiaries shall have no obligation to
indemnify or otherwise protect any Participant from the
obligation to pay any taxes pursuant to Code
Section 409A.”
IN WITNESS WHEREOF
, the Company has caused the Plan to be
executed on its behalf by its respective officer thereunder duly
authorized, on the day and year set forth below.
TENNECO INC.
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By:
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/s/ Gregg
M. Sherrill
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Its:
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Chairman and Chief
Executive Officer
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Date: As of March 11, 2009
A-13
NOTICE OF ANNUAL
MEETING AND
PROXY STATEMENT
Annual Meeting
of Stockholders
May 13, 2009
Tenneco Inc.
500 North Field Drive, Lake
Forest, Illinois 60045
Tenneco Inc.
500 North Field Drive
Lake Forest, Illinois 60045
March 31, 2009
Dear Benefit Plan Participant:
The Annual Meeting of the Stockholders of Tenneco Inc. is
scheduled to be held Wednesday, May 13, 2009, at
10:00 a.m., local time, at our headquarters located at 500
North Field Drive, Lake Forest, Illinois 60045. A Notice and
proxy statement, which is being sent to all benefit plan
participants in connection with the Annual Meeting, is enclosed
for your information.
Also enclosed with this letter is a form of proxy card, which
designates the number of shares held in your benefit plan
account. By executing this proxy card you instruct the benefit
plan trustee (the “Trustee”) how to vote the shares of
Tenneco Inc. stock in your account which you are entitled to
vote. The Trustee will vote all shares eligible to be voted by
benefit plan participants in accordance with their instructions.
Please submit your vote by May 10, 2009 so that the Trustee can
vote the shares in your benefit plan account in accordance with
your instructions.
If you return your form of proxy executed but without furnishing
voting instructions, the eligible shares in your account will be
voted by the Trustee, as holder of record of the shares in your
account, FOR the election of the nominees for director named in
the proxy statement, FOR the approval of the appointment of
Deloitte & Touche LLP as independent public
accountants for 2009, FOR the approval of the amendment to the
Tenneco Inc. 2006 Long-Term Incentive Plan, and in the
discretion of the proxies on all other matters as may be
properly brought before the Annual Meeting.
If you do not return your executed form of proxy to the Trustee,
then your shares can be voted by the Trustee only in accordance
with the requirements of your benefit plan, which may or may not
reflect your views.
Your vote is confidential and will not be disclosed except as
required by law.
Your vote is important. Please send your executed form of proxy
card with your voting instructions at your earliest opportunity.
For your convenience, a return envelope is enclosed.
YOUR BENEFITS COMMITTEE
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TENNECO INC. 500 N.
FIELD DRIVE LAKE
FOREST, IL 60045
VOTE BY INTERNET — www.proxyvote.com
Use the Internet to transmit your voting instructions
and for electronic delivery of information up until
11:59 P.M. Eastern Time the day before the cut-off
date or meeting date. Have your proxy card in hand
when you access the web site and follow the
instructions to obtain your records and to create an
electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our
company in mailing proxy materials, you can consent
to receiving all future proxy statements, proxy cards
and annual reports electronically via e-mail or the
Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the
Internet and, when prompted, indicate that you agree
to receive or access proxy materials electronically
in future years.
VOTE BY PHONE — 1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day
before the cut-off date or meeting date. Have your
proxy card in hand when you call and then follow the
instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in
the postage-paid envelope we have provided or return
it to Vote Processing, c/o Broadridge, 51 Mercedes
Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
M11496 KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
TENNECO INC.
The Board of Directors recommends a vote “FOR” Items
1, 2 and 3.
Vote On Directors
1. Election of 10 Director Nominees
Nominees: For Against Abstain
1a) Charles W. Cramb
0 0 0 Vote On Proposals For Against Abstain
1b) Dennis J. Letham
0 0 0
2. Approve appointment of Deloitte & Touche LLP
0 0 0
as independent public accountants for 2009.
1c) Frank E. Macher
0 0 0
3. Approve amendment of the Tenneco Inc. 2006
0 0 0
Long-Term Incentive Plan to increase shares
available by 2.3 million, with each share
1d) Hari N. Nair
0 0 0
underlying an award counting as one share
(provided that each share underlying a full value
1e) Roger B. Porter
0 0 0
award counts as 1.25 shares) against the total
plan availability.
1f) David B. Price, Jr.
0 0 0
4. In the discretion of the Proxies named herein,
the Proxies are authorized to vote upon such
other matters as may properly come before the
1g) Gregg M. Sherrill
0 0 0
meeting (or any adjournment or
postponement thereof). 1h) Paul T. Stecko
0 0 0
1i) Mitsunobu Takeuchi
0 0 0
1j) Jane L. Warner
0 0 0
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com.
TENNECO INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The Stockholder(s) hereby appoint(s) Gregg M. Sherrill and David A. Wardell, or either of them, as
proxies, each with the power to appoint his substitute, and hereby authorize(s) them to represent
and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of
Tenneco Inc. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders
to be held at 10:00 a.m., Central time, on Wednesday, May 13, 2009, at our headquarters located at
500 North Field Drive, Lake Forest, Illinois 60045.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDERS. IF NO SUCH
DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE
REVERSE SIDE FOR THE BOARD OF DIRECTORS AND FOR EACH PROPOSAL.
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