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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________ 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-12387
TENNECO INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

500 North Field Drive, Lake Forest, Illinois
(Address of principal executive offices)


76-0515284
(I.R.S. Employer
Identification No.)

60045
(Zip Code)
Registrant’s telephone number, including area code: (847) 482-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Class A Voting Common Stock, par value $0.01 per share TEN New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes        No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes        No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
The number of shares of Class A Voting Common Stock, par value $0.01 per share: 61,123,440 shares outstanding as of November 2, 2020. The number of shares of Class B Non-Voting Common Stock, par value $0.01 per share: 20,308,454 shares outstanding as of November 2, 2020.



TABLE OF CONTENTS
 
    Page
Part I — Financial Information
Item 1.
5
6
7
8
9
10
12
Item 2.
48
Item 3.
73
Item 4.
74
Part II — Other Information
Item 1.
75
Item 1A.
75
Item 2.
77
Item 3. Defaults Upon Senior Securities *
Item 4. Mine Safety Disclosures *
Item 5.
  77
Item 6.
79
 
* No response to this item is included herein for the reason that it is inapplicable or the answer to such item is negative.
2



CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning, among other things, our prospects and business strategies. These forward-looking statements are included in various sections of this report. The words “may,” “will,” “believe,” “should,” “could,” “plan,” “expect,” “anticipate,” “estimate,” and similar expressions (and variations thereof), identify these forward-looking statements. Although we believe the expectations reflected in these forward-looking statements are based on reasonable assumptions, these expectations may not prove to be correct. Because these forward-looking statements are also subject to risks and uncertainties, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include:
general economic, business and market conditions, including the effects of the COVID-19 pandemic;
disasters, local and global public health emergencies or other catastrophic events, such as fires, earthquakes and flooding, pandemics or epidemics (including the COVID-19 pandemic), where we or other customers do business and any resultant disruptions in the supply or production of goods or services to us or by us in demand by our customers or in the operation of our system, disaster recovery capabilities or business continuity capabilities;
our ability (or inability) to successfully execute cost reduction, performance improvement and other plans, including our plans to respond to the COVID-19 pandemic and our previously announced accelerated performance improvement plan ("Accelerate"), and to realize the anticipated benefits from these plans;
changes in capital availability or costs, including increases in our cost of borrowing (i.e., interest rate increases), the amount of our debt, our ability to access capital markets at favorable rates, and the credit ratings of our debt and our financial flexibility to respond to the COVID-19 pandemic;
our ability to maintain compliance with the agreements governing our indebtedness and otherwise have sufficient liquidity through the COVID-19 pandemic;
our ability to comply with the covenants contained in our debt instruments;
our working capital requirements;
our ability to source and procure needed materials, components and other products, and services in accordance with customer demand and at competitive prices;
the cost and outcome of existing and any future claims, legal proceedings or investigations, including, but not limited to, any of the foregoing arising in connection with the ongoing global antitrust investigation, product performance, product safety or intellectual property rights;
changes in consumer demand for our original equipment ("OE") products or aftermarket products, prices and our ability to have our products included on top selling vehicles, including any shifts in consumer preferences away from historically higher margin products for our customers and us, to other lower margin vehicles, for which we may or may not have supply arrangements;
the cyclical nature of the global vehicle industry, including the performance of the global aftermarket sector and the impact of vehicle parts' longer product lives;
changes in automotive and commercial vehicle manufacturers' production rates and their actual and forecasted requirements for our products, due to difficult economic conditions and/or regulatory or legal changes affecting internal combustion engines and/or aftermarket products;
our dependence on certain large customers, including the loss of any of our large OE manufacturer customers (on whom we depend for a substantial portion of our revenues), or the loss of market shares by these customers if we are unable to achieve increased sales to other OE-customers or any change in customer demand due to delays in the adoption or enforcement of worldwide emissions regulations;
new technologies that reduce the demand for certain of our products or otherwise render them obsolete;
our ability to introduce new products and technologies that satisfy customers' needs in a timely fashion;
the overall highly competitive nature of the automotive and commercial vehicle parts industries, and any resultant inability to realize the sales represented by our awarded book of business (which is based on anticipated pricing and volumes over the life of the applicable program);
risks inherent in operating a multi-national company, including economic conditions, such as currency exchange and inflation rates, political conditions in the countries where we operate or sell our products, adverse changes in trade agreements, tariffs, immigration policies, political stability, tax and other laws, and potential disruptions of production and supply;
increasing competition from lower cost, private-label products;
3



damage to the reputation of one or more of our leading brands;
the impact of improvements in automotive parts on aftermarket demand for some of our products;
industry-wide strikes, labor disruptions at our facilities or any labor or other economic disruptions at any of our significant customers or suppliers or any of our customers’ other suppliers;
developments relating to our intellectual property, including our ability to adapt to changes in technology and the availability and effectiveness of legal protection for our innovations and brands;
costs related to product warranties and other customer satisfaction actions;
the failure, breach of, or potential disruption to our information technology systems, including cyber attacks, such as ransomware or similar intrusions, cyber incidents, or misappropriation, exposure or corruption of sensitive information stored on such systems and the interruption to our business that such failure, breach or disruption may cause;
the impact of consolidation among vehicle parts suppliers and customers on our ability to compete in the highly competitive automotive and commercial vehicle supplier industry;
changes in distribution channels or competitive conditions in the markets and countries where we operate;
the evolution towards alternative powertrains, including electrification, car and ride sharing, and autonomous vehicles;
customer acceptance of new products;
our ability to successfully integrate, and benefit from, any acquisitions we complete;
our ability to effectively manage our joint ventures and other third-party relationships;
the potential impairment in the carrying value of our long-lived assets, goodwill, and other intangible assets or the inability to fully realize our deferred tax assets;
the negative impact of fuel price volatility on transportation and logistics costs, raw material costs, discretionary purchases of vehicles or aftermarket products, and demand for off-highway equipment;
increases in the costs of raw materials or components, including our ability to successfully reduce the impact of any such cost increases through materials substitutions, cost reduction initiatives, customer recovery, and other methods;
changes by the Financial Accounting Standards Board ("FASB") or the Securities and Exchange Commission ("SEC") of generally accepted accounting principles or other authoritative guidance;
changes in accounting estimates and assumptions, including changes based on additional information;
any changes by the International Organization for Standardization ("ISO") or other such committees in their certification protocols for processes and products, which may have the effect of delaying or hindering our ability to bring new products to market;
the impact of the extensive, increasing, and changing laws and regulations to which we are subject, including environmental laws and regulations, which may result in our incurrence of environmental liabilities in excess of the amount reserved or increased costs or loss of revenues relating to products subject to changing regulation;
potential volatility in our effective tax rate;
acts of war and/or terrorism, as well as actions taken or to be taken by the United States and other governments as a result of further acts or threats of terrorism, and the impact of these acts on economic, financial, and social conditions in the countries where we operate; 
pension obligations and other postretirement benefits;
our hedging activities to address commodity price fluctuations; and
the timing and occurrence (or non-occurrence) of other transactions, events and circumstances which may be beyond our control.
In addition, this report includes forward-looking statements regarding the Company's ongoing review of strategic alternatives and the potential separation of the Company into a powertrain technology company and an aftermarket and ride performance company. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include (in addition to the risks set forth above):
the ability to identify and consummate strategic alternatives that yield additional value for shareholders;
the timing, benefits, and outcome of the Company's strategic review process;
the structure, terms, and specific risk and uncertainties associated with any potential strategic alternative;
potential disruptions in our business and stock price as a result of our exploration, review, and pursuit of any strategic alternatives;
the possibility that the Company may not complete a separation of the aftermarket and ride performance business from the powertrain technology business (or achieve some or all of the anticipated benefits of such a separation);
4



the ability to retain and hire key personnel and maintain relationships with customers, suppliers or other business partners;
the potential diversion of management's attention resulting from a separation;
the risk the combined company and each separate company following a separation will underperform relative to our expectations;
the ongoing transaction costs and risk we may incur greater costs following a separation of the business;
the risk a spin-off is determined to be a taxable transaction;
the risk the benefits of a separation may not be fully realized or may take longer to realize than expected;
the risk a separation may not advance our business strategy; and
the risk a transaction may have an adverse effect on existing arrangements with us, including those related to transition, manufacturing and supply services and tax matters.
The risks included here are not exhaustive. Refer to “Part II, Item 1A — Risk Factors” herein and “Part I, Item 1A — Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 for further discussion regarding our exposure to risks. Additionally, new risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor to assess the effect such risk factors might have on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Unless otherwise indicated in this report, the forward-looking statements in this report are made as of the date of this report, and, except as required by law, the Company does not undertake any obligation, and disclaims any obligation, to publicly disclose revisions or updates to any forward-looking statements.




5


PART I FINANCIAL INFORMATION

ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TENNECO INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited)
(in millions, except share and per share amounts) 
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Revenues
   Net sales and operating revenues $ 4,256  $ 4,319  $ 10,729  $ 13,307 
Costs and expenses
Cost of sales (exclusive of depreciation and amortization) 3,610  3,660  9,447  11,331 
Selling, general, and administrative 214  252  658  862 
Depreciation and amortization 151  165  481  503 
Engineering, research, and development 67  78  199  248 
Restructuring charges, net and asset impairments 17  33  622  98 
Goodwill and intangible impairment charges —  383  69 
4,059  4,197  11,790  13,111 
Other income (expense)
Non-service pension and other postretirement benefit (costs) credits 18  (2) 20  (8)
Equity in earnings (losses) of nonconsolidated affiliates, net of tax 26  34 
Other income (expense), net 12  27  31  43 
39  26  77  69 
Earnings (loss) before interest expense, income taxes, and noncontrolling interests 236  148  (984) 265 
Interest expense (68) (79) (209) (242)
Earnings (loss) before income taxes and noncontrolling interests 168  69  (1,193) 23 
Income tax (expense) benefit (648) (453) (5)
Net income (loss) (480) 78  (1,646) 18 
Less: Net income (loss) attributable to noncontrolling interests 19  42  39 
Net income (loss) attributable to Tenneco Inc. $ (499) $ 70  $ (1,688) $ (21)
Earnings (loss) per share
Basic earnings (loss) per share:
Earnings (loss) per share $ (6.12) $ 0.87  $ (20.75) $ (0.25)
Weighted average shares outstanding 81,456,821  80,916,676  81,325,385  80,903,967 
Diluted earnings (loss) per share:
Earnings (loss) per share $ (6.12) $ 0.87  $ (20.75) $ (0.25)
Weighted average shares outstanding 81,456,821  80,916,676  81,325,385  80,903,967 
See accompanying notes to the condensed consolidated financial statements.
6



TENNECO INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(in millions)
 
  Three Months Ended September 30, Nine Months Ended September 30,
  2020 2019 2020 2019
Net income (loss) $ (480) $ 78  $ (1,646) $ 18 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 43  (97) (134) (80)
Cash flow hedges — 
Defined benefit plans (14) (15)
30  (94) (146) (77)
Comprehensive income (loss) (450) (16) (1,792) (59)
Less: Comprehensive income (loss) attributable to noncontrolling interests 29  (14) 39  22 
Comprehensive income (loss) attributable to common shareholders $ (479) $ (2) $ (1,831) $ (81)
See accompanying notes to the condensed consolidated financial statements.

7




TENNECO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions, except shares)
September 30,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents $ 716  $ 564 
Restricted cash
Receivables:
Customer notes and accounts, net 2,675  2,438 
Other 108  100 
Inventories 1,678  1,999 
Prepayments and other current assets 597  632 
Total current assets 5,779  5,735 
Property, plant, and equipment, net 2,968  3,627 
Long-term receivables, net 10 
Goodwill 507  775 
Intangibles, net 1,214  1,422 
Investments in nonconsolidated affiliates 541  518 
Deferred income taxes 282  607 
Other assets 511  532 
Total assets $ 11,811  $ 13,226 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt, including current maturities of long-term debt $ 176  $ 185 
Accounts payable 2,708  2,647 
Accrued compensation and employee benefits 370  325 
Accrued income taxes 89  72 
Accrued expenses and other current liabilities 1,178  1,070 
Total current liabilities 4,521  4,299 
Long-term debt 5,596  5,371 
Deferred income taxes 90  106 
Pension and postretirement benefits 1,129  1,145 
Deferred credits and other liabilities 518  490 
Commitments and contingencies (Note 13)
Total liabilities 11,854  11,411 
Redeemable noncontrolling interests 63  196 
Tenneco Inc. shareholders’ equity:
Preferred stock — $0.01 par value; none issued
—  — 
Class A voting stock — $0.01 par value; shares issued: September 30, 2020 — 75,692,772 and December 31, 2019 — 71,727,061
Class B non-voting convertible stock — $0.01 par value; shares issued: September 30, 2020 — 20,308,454 and December 31, 2019 — 23,793,669
—  — 
Additional paid-in capital 4,437  4,432 
Accumulated other comprehensive loss (854) (711)
Accumulated deficit (3,055) (1,367)
529  2,355 
Shares held as treasury stock — at cost: September 30, 2020 and December 31, 2019 — 14,592,888
(930) (930)
Total Tenneco Inc. shareholders’ equity (401) 1,425 
Noncontrolling interests 295  194 
Total equity (106) 1,619 
Total liabilities, redeemable noncontrolling interests, and equity $ 11,811  $ 13,226 
See accompanying notes to the condensed consolidated financial statements.
8


TENNECO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Nine Months Ended September 30,
2020 2019
Operating Activities
Net income (loss) $ (1,646) $ 18 
Adjustments to reconcile net income (loss) to cash (used) provided by operating activities:
Goodwill and intangible impairment charges 383  69 
Depreciation and amortization 481  503 
Deferred income taxes 302  (115)
Stock-based compensation 13  20 
Restructuring charges and asset impairments, net of cash paid 529  12 
Change in pension and other postretirement benefit plans (49) (49)
Equity in earnings of nonconsolidated affiliates (26) (34)
Cash dividends received from nonconsolidated affiliates 18  45 
Loss (gain) on sale of assets (1) — 
Other (gains) losses — 
Changes in operating assets and liabilities:
Receivables (429) (457)
Inventories 303  112 
Payables and accrued expenses 242  99 
Accrued interest and accrued income taxes 23  (12)
Other assets and liabilities 10  (147)
Net cash (used) provided by operating activities 155  64 
Investing Activities
Acquisitions, net of cash acquired —  (158)
Proceeds from sale of assets
Net proceeds from sale of business 22 
Cash payments for property, plant, and equipment (308) (541)
Proceeds from deferred purchase price of factored receivables 176  203 
Other — 
Net cash (used) provided by investing activities (118) (466)
Financing Activities
Proceeds from term loans and notes 143  171 
Repayments of term loans and notes (196) (278)
Debt issuance costs of long-term debt (16) — 
Borrowings on revolving lines of credit 4,852  6,804 
Payments on revolving lines of credit (4,647) (6,548)
Issuance (repurchase) of common shares (1) (2)
Cash dividends —  (20)
Net increase (decrease) in bank overdrafts (12)
Other 10  (2)
Distributions to noncontrolling interest partners (18) (20)
Net cash (used) provided by financing activities 136  93 
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash (18)
Increase (decrease) in cash, cash equivalents, and restricted cash 155  (307)
Cash, cash equivalents, and restricted cash, beginning of period 566  702 
Cash, cash equivalents, and restricted cash, end of period $ 721  $ 395 
Supplemental Cash Flow Information
Cash paid during the period for interest $ 188  $ 230 
Cash paid during the period for income taxes, net of refunds $ 114  $ 139 
Lease assets obtained in exchange for new operating lease liabilities $ 61  $ 54 
Non-cash inventory charge due to aftermarket product line exit $ 73  $ — 
Non-cash Investing Activities
Period end balance of accounts payable for property, plant, and equipment $ 79  $ 118 
Deferred purchase price of receivables factored in the period $ 197  $ 208 
Reduction in assets from redeemable noncontrolling interest transaction with owner $ 53  $ — 
See accompanying notes to the condensed consolidated financial statements.
9



TENNECO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(in millions)
Tenneco Inc. Shareholders' Equity
$0.01 Par Value Common Stock Treasury Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Tenneco Inc. Shareholders' Equity Noncontrolling Interests Total Equity
Balance at December 31, 2019 $ $ (930) $ 4,432  $ (1,367) $ (711) $ 1,425  $ 194  $ 1,619 
Net income (loss) (839) (839) (837)
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments (199) (199) (13) (212)
Derivatives (2) (2) —  (2)
Defined benefit plans — 
Comprehensive income (loss) (1,036) (11) (1,047)
Stock-based compensation, net —  —  —  —  — 
Reclassification of redeemable noncontrolling interest to permanent equity —  —  —  —  —  —  82  82 
Redeemable noncontrolling interest transaction with owner —  —  (7) —  —  (7) —  (7)
Balance at March 31, 2020 (930) 4,427  (2,206) (908) 384  265  649 
Net income (loss) (350) (350) (344)
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments 35  35  39 
Derivatives — 
Defined benefit plans (5) (5) —  (5)
Comprehensive income (loss) (316) 10  (306)
Stock-based compensation, net —  —  —  —  — 
Balance at June 30, 2020 (930) 4,433  (2,556) (874) 74  275  349 
Net income (loss) (499) (499) 12  (487)
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments 33  33  41 
Derivatives — 
Defined benefit plans (14) (14) —  (14)
Comprehensive income (loss) (479) 20  (459)
Stock-based compensation, net —  —  —  —  — 
Balance at September 30, 2020 $ $ (930) $ 4,437  $ (3,055) $ (854) $ (401) $ 295  $ (106)



10



TENNECO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(in millions)
Tenneco Inc. Shareholders' Equity
$0.01 Par Value Common Stock Treasury Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Tenneco Inc. Shareholders' Equity Noncontrolling Interests Total Equity
Balance at December 31, 2018 $ $ (930) $ 4,360  $ (1,013) $ (692) $ 1,726  $ 190  $ 1,916 
Net income (loss) (117) (117) (110)
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments 29  29  33 
Derivatives — 
Defined benefit plans — 
Comprehensive income (loss) (83) 11  (72)
Stock-based compensation, net —  —  —  —  — 
Cash dividends ($0.25 per share)
—  —  —  (20) —  (20) —  (20)
Purchase accounting measurement period adjustment —  —  (1) (1)
Distributions declared to noncontrolling interests —  —  (1) (1)
Balance at March 31, 2019 (930) 4,365  (1,150) (658) 1,628  199  1,827 
Net income (loss) 26  26  35 
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments (17) (17) —  (17)
Derivatives (3) (3) —  (3)
Defined benefit plans (2) (2) —  (2)
Comprehensive income (loss) 13 
Stock-based compensation, net —  —  —  —  — 
Distributions declared to noncontrolling interests —  —  —  —  —  —  (2) (2)
Balance at June 30, 2019 (930) 4,371  (1,124) (680) 1,638  206  1,844 
Net Income (loss) 70  70  74 
Other comprehensive income (loss)—net of tax:
Foreign currency translation adjustments (75) (75) (11) (86)
Defined benefit plans — 
Comprehensive income (loss) (2) (7) (9)
Acquisitions and other —  —  —  —  —  —  (3) (3)
Stock-based compensation, net —  —  —  —  — 
Purchase accounting measurement period adjustment —  —  —  —  —  —  (1) (1)
Balance at September 30, 2019 $ $ (930) $ 4,377  $ (1,054) $ (752) $ 1,642  $ 195  $ 1,837 

See accompanying notes to the condensed consolidated financial statements.

11


TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in millions, except share and per share amounts, or as otherwise noted)

1. Description of Business

Tenneco Inc. ("Tenneco" or "the Company") was formed under the laws of Delaware in 1996. Tenneco designs, manufactures, and sells products and services for light vehicle, commercial truck, off-highway, industrial, and aftermarket customers. The Company is one of the world's leading manufacturers of clean air, powertrain, and ride performance products and systems, and serves both original equipment manufacturers ("OEM") and replacement markets worldwide.

On October 1, 2018, the Company completed the acquisition of Federal-Mogul LLC (“Federal-Mogul”) (the “Federal-Mogul Acquisition”), a global supplier of technology and innovation in vehicle and industrial products for fuel economy, emissions reductions, and safety systems. Federal-Mogul serves the world’s foremost OEM and servicers (“OES”, and together with OEM, “OE”) of automotive, light, medium and heavy-duty commercial vehicles, off road, agricultural, marine, rail, aerospace, and power generation and industrial equipment, as well as the worldwide aftermarket.

The Company has previously announced its review of a full range of strategic options to enhance shareholder value creation, including a potential separation of the Company into an Aftermarket and Ride Performance company and a new Powertrain Technology company. Current end-market conditions and the effects of the ongoing COVID-19 pandemic are affecting the Company's ability to complete a separation. In light of these ongoing conditions, the Company is pursuing additional options to optimize shareholder value creation, including a focus on operational improvements, reducing structural costs, lowering capital intensity, and reducing debt.

In the second quarter of 2020, the Motorparts segment initiated a rationalization of its supply chain and distribution network to achieve supply chain efficiencies and improve throughput to its customers. As a result, certain assets including inventory, real estate, and personal property will no longer be utilized. As such, during the nine months ended September 30, 2020, the Motorparts segment recognized an $82 million non-cash charge to write-down inventory to its net realizable value, a $16 million impairment charge to write-down property, plant, and equipment to its fair value, and a $9 million impairment charge to its operating lease right-of-use assets. Additionally, the Motorparts segment recognized $4 million in restructuring charges related to cash severance expected to be paid in connection with this action. Refer to Note 4, Restructuring Charges, Net and Asset Impairments for additional information.

2. Summary of Significant Accounting Policies

Basis of Presentation Interim Financial Statements
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been condensed or omitted pursuant to such rules and regulations. These statements include all adjustments (consisting of normal recurring adjustments) management believes are necessary to fairly state the results of operations, comprehensive income, financial position, changes in shareholders' equity, and cash flows. The Company's management believes the disclosures are adequate to make the information presented not misleading when read in conjunction with the audited consolidated financial statements and the notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission on March 2, 2020. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. There are many uncertainties related to the COVID-19 global pandemic that could negatively affect the Company's results of operations, financial position, and cash flows. In response to the expected economic effects of COVID-19, the Company implemented various cost reduction initiatives, including, but not limited to reductions to salary costs and unpaid furloughs; the restructuring actions as discussed in Note 4, Restructuring Charges, Net and Asset Impairments; and the deferral of the Company’s portion of its 2020 employer paid payroll taxes and its U.S. qualified pension plan contributions under the Coronavirus Aid, Relief, and Economic Security Act.
At September 30, 2020, the Company was in compliance with all financial covenants under its credit agreement. On May 5, 2020, the Company entered into a third amendment to its credit agreement to increase the maximum leverage ratio and decrease the minimum interest coverage ratio. The amendment is discussed in more detail in Note 10, Debt and Other Financing Arrangements.
12

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)

Reclassifications: Certain amounts in the prior period have been aggregated or disaggregated to conform to current year presentation. These reclassifications included reclassifying amounts from restructuring charges, net and asset impairments to cost of sales (exclusive of depreciation and amortization), and selling, general, and administrative expenses. These reclassifications affected the three and nine months ended September 30, 2019 and have no effect on previously reported net income within the condensed consolidated statements of income (loss), other comprehensive income (loss) within the condensed consolidated statements of comprehensive income (loss), and the cash (used) provided by operating, investing or financing activities within the condensed consolidated statements of cash flows.

During the three and nine months ended September 30, 2019, the Company recorded an immaterial $5 million charge in its Ride Performance segment related to prior periods.

Redeemable noncontrolling interests: The Company has noncontrolling interests with redemption features. These redemption features could require the Company to make an offer to purchase the noncontrolling interests in the event of a change in control of Tenneco Inc. or certain of its subsidiaries or the passage of time.

At September 30, 2020 and December 31, 2019, the Company held redeemable noncontrolling interests of $33 million and $44 million which were not currently redeemable or probable of becoming redeemable. The redemption of these redeemable noncontrolling interests is not solely within the Company's control, therefore, they are presented in the temporary equity section of the Company's condensed consolidated balance sheets. The Company does not believe it is probable the redemption features related to these noncontrolling interest securities will be triggered, as a change in control event is generally not probable until it occurs. As such, these noncontrolling interests have not been remeasured to redemption value.

In addition, at September 30, 2020 and December 31, 2019, the Company held redeemable noncontrolling interests of $30 million and $152 million which were currently redeemable or probable of becoming redeemable. These noncontrolling interests are also presented in the temporary equity section of the Company's condensed consolidated balance sheets and have been remeasured to redemption value. The Company immediately recognizes changes to redemption value as a component of net income (loss) attributable to noncontrolling interests in the condensed consolidated statements of income (loss). These redeemable noncontrolling interests include the following:
During the first quarter of 2020, the Company completed the process to make a tender offer of the shares it did not own for a subsidiary in India acquired by the Company as part of the Federal-Mogul Acquisition on October 1, 2018, in accordance with local regulations. As a result of completing the tender offer, the redeemable noncontrolling interest was no longer redeemable or probable of becoming redeemable and the amount of $82 million was reclassified to permanent equity during the nine months ended September 30, 2020. Refer to Note 17, Related Party Transactions, for additional information related to the tender offer of this noncontrolling interest; and
A 9.5% ownership interest in Öhlins Intressenter AB (the “KÖ Interest”) was retained by K Öhlin Holding AB (“Köhlin”), as a result of the Öhlins acquisition on January 10, 2019. Köhlin has an irrevocable right at any time after the third anniversary of the Öhlins acquisition to sell the KÖ Interest to the Company. Since it is probable the KÖ Interest will become redeemable, the Company recognized the change in carrying value and recorded an increase of $10 million during the nine months ended September 30, 2020 to reflect its redemption value of $30 million at September 30, 2020.

For the nine months ended September 30, 2019, the Company recorded a decrease to the redeemable noncontrolling interests of $8 million, as a result of adjustments made in the measurement period to the preliminary purchase price allocation from the Federal-Mogul Acquisition.
13

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)

The following is a rollforward of activities in the Company's redeemable noncontrolling interests:
Nine Months Ended September 30,
2020 2019
Balance at beginning of period $ 196  $ 138 
Net income (loss) attributable to redeemable noncontrolling interests 12  19 
Other comprehensive income (loss) (2) (10)
Acquisition and other —  17 
Noncontrolling interest tender offer redemption (46) — 
Redemption value measurement adjustment 10  — 
Purchase accounting measurement period adjustment —  (8)
Reclassification of noncontrolling interest to permanent equity (82) — 
Dividends declared (25) (17)
Balance at end of period $ 63  $ 139 

Income taxes: On December 22, 2017, the Tax Cuts and Jobs Act ("TCJA") was enacted into U.S. law, which, among other provisions, included an anti-deferral provision (the Global Intangible Low-Taxed Income tax or "GILTI") effective from 2018 wherein taxes on foreign income are imposed in excess of a deemed return on tangible assets of non-U.S. corporations. The Company has elected the “tax law ordering approach” in that the Company will look to tax law ordering to determine whether its net operating loss ("NOL") carryforward deferred tax asset is expected to be realized. Based on the tax law ordering approach, NOL carryforwards are realizable if they will reduce the expected tax liability when utilized, regardless if the 50% GILTI deduction or related foreign tax credits may have been available.

Earnings (loss) per share: Basic earnings (loss) per share is calculated by dividing net earnings (loss) by the weighted average shares outstanding during the period. Diluted earnings (loss) per share reflects the weighted average effect of all potentially dilutive securities from the date of issuance. Actual weighted average shares outstanding used in calculating earnings (loss) per share were:
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Weighted average shares of common stock outstanding 81,456,821  80,916,676  81,325,385  80,903,967 
Effect of dilutive securities:
Restricted stock, PSUs, and RSUs —  —  —  — 
Stock options —  —  —  — 
Dilutive shares outstanding 81,456,821  80,916,676  81,325,385  80,903,967 

For the three and nine months ended September 30, 2020, the calculation of diluted earnings (loss) per share excluded 2,424,215 and 2,246,177 of share-based awards, as the effect on the calculation would have been anti-dilutive. For the three and nine months ended September 30, 2019, the calculation of diluted earnings (loss) per share excluded 1,895,180 and 1,865,345 of share-based awards, as the effect on the calculation would have been anti-dilutive.

New Accounting Pronouncements
Adoption of New Accounting Standards
Income Taxes In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2019-12: Simplifying the Accounting for Income Taxes (Topic 740), which removes certain exceptions to the general principles in Topic 740 and improves consistent application of and simplifies U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The ASU allows certain simplifications in the annual effective tax rate computations, which did not have a material effect on the financial statements. The Company early adopted this ASU on a prospective basis beginning January 1, 2020.

Intangibles On January 1, 2020, the Company adopted ASU 2018-15, Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement
14

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)

That Is a Service Contract, which includes amendments to align the accounting for costs incurred to implement a cloud computing arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The Company adopted this guidance on a prospective basis beginning January 1, 2020 and the effects of the adoption were not material on the consolidated financial statements.

Retirement benefitsIn August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20). The new standard (i) requires the removal of disclosures that are no longer considered cost beneficial; (ii) clarifies specific requirements of certain disclosures; and (iii) adds new disclosure requirements, including reasons for significant gains and losses related to changes in the benefit obligation. The amendments in this update are effective for fiscal years ending after December 15, 2020. The Company will adopt the enhanced disclosures in the consolidated financial statements for the year ending December 31, 2020.

3. Acquisitions and Divestitures

Öhlins Intressenter AB Acquisition
On January 10, 2019, the Company completed the acquisition of a 90.5% ownership interest in Öhlins Intressenter AB (“Öhlins”, the “Öhlins Acquisition”), a Swedish technology company that develops premium suspension systems and components for the automotive and motorsport industries for a purchase price of $162 million (including $4 million of cash acquired). The remaining 9.5% ownership interest in Öhlins was retained by Köhlin. Köhlin has an irrevocable right at any time after the third anniversary of the Öhlins Acquisition to sell the KÖ Interest to the Company. Refer to Note 2, Summary of Significant Accounting Policies, for further information on the KÖ Interest.

Pro Forma Results
Pro forma results of operations have not been presented because the effects of the Öhlins Acquisition were not material to the Company’s condensed consolidated results of operations.

Assets Held for Sale
On October 17, 2020, the Company entered into an agreement to sell a non-core business and its related assets for $15 million. The sale of the business closed on October 31, 2020 and the related assets shortly thereafter. The Company received $5 million of the purchase price at closing with the remaining to be received in installment payments through the fourth quarter of 2023. The Company recognized an impairment on these assets held for sale of $2 million and $1 million during the three and nine months ended September 30, 2020.

The related assets and liabilities for this non-core business are classified as held for sale at September 30, 2020 and December 31, 2019:
                           September 30, 2020 December 31, 2019
Assets
Receivables $ $
Inventories
Other current assets
Long-lived assets 17  18 
Goodwill
Impairment on carrying value (9) (8)
Total assets held for sale $ 21  $ 28 
Liabilities
Accounts payable $ $
Accrued liabilities
Total liabilities held for sale $ $

15

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
In addition to the non-core business above, at September 30, 2020, the Company had approximately $22 million of property, plant, and equipment, primarily land and buildings and non-core machinery and equipment, and $2 million of related liabilities across multiple segments that are expected to be sold in the next twelve months. The related assets and liabilities have been classified as held for sale at September 30, 2020 and are not included in the table above. The Company recognized a non-cash impairment charge of $1 million during the nine months ended September 30, 2020 related to these assets held for sale.

The assets and liabilities held for sale are recorded in prepayments and other current assets and accrued expenses and other current liabilities in the condensed consolidated balance sheets at September 30, 2020 and December 31, 2019.

On March 1, 2019, in accordance with a stock and asset purchase agreement, the Company sold certain assets and liabilities related to a non-core business and received sale proceeds of $22 million, subject to customary working capital adjustments. During the three and nine months ended September 30, 2020, the Company received $3 million of proceeds due to the finalization of working capital adjustments.

4. Restructuring Charges, Net and Asset Impairments

The Company's restructuring activities are undertaken as necessary to execute management's strategy and streamline operations, consolidate and take advantage of available capacity and resources, and ultimately achieve net cost reductions. Restructuring activities include efforts to integrate and rationalize the Company's businesses and to relocate operations to best cost locations.

The Company's restructuring charges consist primarily of employee costs (principally severance and/or termination benefits) and facility closure and exit costs. The 2019 amounts below reflect the reclassifications to the prior period as discussed in Note 2, Summary of Significant Accounting Policies.

For the three and nine months ended September 30, 2020 and 2019, restructuring charges, net and asset impairments by segment are as follows:
Three Months Ended September 30, 2020
Clean Air Powertrain Ride Performance Motorparts Corporate Total
Severance and other charges, net $ $ 13  $ —  $ —  $ —  $ 14 
Asset impairments related to restructuring actions —  —  —  — 
Impairment of assets held for sale —  —  —  — 
Total asset impairment charges —  —  —  — 
Total restructuring charges, net and asset impairments $ $ 13  $ —  $ $ —  $ 17 
Three Months Ended September 30, 2019
Clean Air Powertrain Ride Performance Motorparts Corporate Total
Severance and other charges, net $ $ 11  $ $ $ $ 25 
Impairment of assets held for sale —  —  —  — 
Total restructuring charges, net and asset impairments $ $ 11  $ $ 10  $ $ 33 
16

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Nine Months Ended September 30, 2020
Clean Air Powertrain Ride Performance Motorparts Corporate Total
Severance and other charges, net $ 23  $ 50  $ 24  $ 17  $ $ 119 
Asset impairments related to restructuring actions —  —  26  —  29 
Other non-restructuring asset impairments —  —  455  —  17  472 
Impairment of assets held for sale —  —  — 
Total asset impairment charges —  455  27  17  503 
Total restructuring charges, net and asset impairments $ 23  $ 54  $ 479  $ 44  $ 22  $ 622 
Nine Months Ended September 30, 2019
Clean Air Powertrain Ride Performance Motorparts Corporate Total
Severance and other charges, net $ 25  $ 29  $ 20  $ 12  $ $ 88 
Other non-restructuring asset impairments —  —  — 
Impairment of assets held for sale —  —  —  — 
Total restructuring charges, net and asset impairments $ 26  $ 29  $ 20  $ 21  $ $ 98 
    
Severance and other charges, net
Severance and other charges, net for the three months ended September 30, 2020 include the following actions:
In conjunction with the Company's previously announced Project Accelerate, and in response to the COVID-19 global pandemic, the Company is executing global headcount reductions, subject to negotiation with works councils in certain jurisdictions. The Company began implementing these actions during the second quarter of 2020 and expects to complete them during 2021. During the three months ended September 30, 2020, the Powertrain segment recognized an incremental $1 million charge in connection with these actions.
In addition to the actions above, the Company initiated several other cost reduction initiatives across all segments and regions aimed at optimizing the Company's cost structure. During the three months ended September 30, 2020, the Powertrain segment recognized a cash severance charge of $4 million in connection with these programs, which was offset by a revision to previously recorded estimates of $3 million in the Ride Performance segment.
During the three months ended September 30, 2020, the Company incurred $3 million in restructuring and other costs related to previously announced plant relocation and closures within its Ride Performance segment.

Severance and other charges, net for the nine months ended September 30, 2020 include the following actions:
In conjunction with the Company's previously announced Project Accelerate, and in response to the COVID-19 global pandemic, the Company is executing global headcount reductions, subject to negotiation with works councils in certain jurisdictions. The Company began implementing these actions during the second quarter of 2020 and expects to complete them during 2021. During the nine months ended September 30, 2020, the Company recognized a charge of $26 million in connection with the cash severance costs expected to be paid in connections with these actions. Clean Air recognized charges of $9 million, Powertrain recognized charges of $8 million, Motorparts recognized charges of $5 million, Ride Performance recognized charges of $3 million, and corporate recognized charges of $1 million.
In addition to the actions above, the Company initiated several other cost reduction initiatives across all segments and regions aimed at optimizing the Company's cost structure. During the nine months ended September 30, 2020, the Company recognized cash severance charges of $33 million expected to be paid under these programs. Clean Air recognized charges of $12 million, Powertrain recognized charges of $12 million, Motorparts recognized charges of $2 million, and Ride Performance recognized charges of $7 million.
During the nine months ended September 30, 2020, the Powertrain segment incurred $16 million in restructuring and other costs related to plant relocations and closures, and $5 million related to a cost reduction program in one of its product lines.
During the nine months ended September 30, 2020, the Company incurred $13 million in restructuring and other costs related to previously announced plant relocation and closures within its Ride Performance segment.
17

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
In the second quarter of 2020, the Motorparts segment initiated a rationalization of its supply chain and distribution network to achieve supply chain efficiencies and improve throughput to its customers; as discussed in Note 1, Description of Business. During the nine months ended September 30, 2020, the Motorparts segment recognized $4 million in restructuring charges related to cash severance expected to be paid in connection with this action. In addition, the Motorparts segment also recognized charges during the nine months ended September 30, 2020 of $4 million in connection with an infrastructure cost reduction program in one of its regions.
The Company also incurred $4 million in cash severance costs for the elimination of certain redundant positions within its corporate component in the nine months ended September 30, 2020.

On June 30, 2020, the Company approved a voluntary termination program within the Powertrain segment at one of its European bearings plants aimed at reducing headcount, as negotiated with the works council and union. The Company anticipates implementing headcount reductions during 2020 and continuing into 2021 through a voluntary early retirement program and a voluntary special termination program. Restructuring and related charges are expected to be incurred during the remainder of 2020 and in 2021 aggregating to approximately $31 million. The charges are expected to be comprised of approximately $10 million for postemployment benefits, including an early retirement program, and $21 million of special termination benefits. In addition, the Company expects to incur additional costs of approximately $2 million for customer validation, equipment transfer, and related expenditures. During the three and nine months ended September 30, 2020, restructuring costs incurred related to this program were $6 million and $7 million.

During the three and nine months ended September 30, 2019, the Company incurred $3 million and $12 million in restructuring and related costs and reduced previously recorded estimates by $1 million and $3 million related to a restructuring plan designed to achieve a portion of the synergies the Company anticipated achieving in connection with the Federal-Mogul Acquisition. Pursuant to the plan, the Company reduced its headcount globally across all segments. During the three and nine months ended September 30, 2019, the Ride Performance segment incurred $5 million and $13 million in restructuring and other costs related to plant relocations and closures.

Restructuring reserve rollforward
Amounts related to activities that were charged to restructuring reserves by reportable segments are as follows:
Reportable Segments
Clean Air Powertrain Ride Performance Motorparts Total Reportable Segments Corporate Total
Balance at December 31, 2019 $ 23  $ 30  $ 23  $ 16  $ 92  $ $ 101 
Provisions —  11  15 
Revisions to estimates —  (1) (1) —  (2) —  (2)
Payments (4) (4) (9) (4) (21) (9) (30)
Foreign currency —  —  (1) —  (1) —  (1)
Balance at March 31, 2020 19  27  19  14  79  83 
Provisions 24  36  18  17  95  96 
Revisions to estimates (2) —  —  (2) (4) —  (4)
Payments (6) (6) (17) (5) (34) (1) (35)
Balance at June 30, 2020 35  57  20  24  136  140 
Provisions 14  19  —  19 
Revisions to estimates —  (1) (3) (1) (5) —  (5)
Payments (5) (11) (3) (6) (25) (3) (28)
Foreign currency —  —  —  —  — 
Balance at September 30, 2020 $ 31  $ 59  $ 17  $ 18  $ 125  $ $ 127 
18

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Reportable Segments
Clean Air Powertrain Ride Performance Motorparts Total Reportable Segments Corporate Total
Balance at December 31, 2018 $ 17  $ 15  $ 25  $ 43  $ 100  $ $ 103 
Provisions 15  16 
Payments (6) (3) (5) (14) (28) (2) (30)
Balance at March 31, 2019 16  13  25  33  87  89 
Provisions 14  17  10  49  —  49 
Revisions to estimates —  —  —  (2) (2) —  (2)
Payments (2) (4) (7) (7) (20) (1) (21)
Balance at June 30, 2019 28  26  28  32  114  115 
Provisions 11  26  27 
Revisions to estimates —  —  —  (2) (2) —  (2)
Payments (7) (4) (9) (13) (33) (2) (35)
Foreign currency (1) —  —  —  (1) —  (1)
Balance at September 30, 2019 $ 26  $ 33  $ 24  $ 21  $ 104  $ —  $ 104 

The following table provides a summary of the Company's restructuring liabilities and related activity for each type of exit costs:
Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019
Employee Costs Facility Closure and Other Costs Total Employee Costs Facility Closure and Other Costs Total
Balance at beginning of period $ 97  $ $ 101  $ 98  $ $ 103 
Provisions 10  15  11  16 
Revisions to estimates (2) —  (2) —  —  — 
Payments (23) (7) (30) (25) (5) (30)
Foreign currency (1) —  (1) —  —  — 
Balance at March 31 81  83  84  89 
Provisions 90  96  44  49 
Revisions to estimates (4) —  (4) (2) —  (2)
Payments (31) (4) (35) (16) (5) (21)
Balance at June 30 136  140  110  115 
Provisions 16  19  22  27 
Revisions to estimates (4) (1) (5) (2) —  (2)
Payments (24) (4) (28) (29) (6) (35)
Foreign currency —  (1) —  (1)
Balance at end of period $ 125  $ $ 127  $ 100  $ $ 104 

Asset impairments
Asset impairments related to restructuring actions
During the nine months ended September 30, 2020, as a result of the actions in the Motorparts segment discussed above, asset impairment charges of $25 million were recognized which included $16 million related to the write-down of property, plant, and equipment to its fair value, and $9 million of impairment charge to its operating lease right-of-use assets. Refer to Note 1, Description of Business, for additional information.

During the nine months ended September 30, 2020, the Powertrain segment incurred $3 million in asset impairment charges in connection with its plant relocation and closure actions.

19

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Other non-restructuring asset impairments
The Company evaluates its long-lived assets for impairment whenever events or circumstances indicate the value of these long-lived asset groups are not recoverable. During the first quarter of 2020, the Company concluded impairment triggers had occurred for certain long-lived asset groups in the Ride Performance segment as a result of the effects of the COVID-19 global pandemic on the Company's projected financial information. Accordingly, the Company tested these long-lived asset groups for recoverability by performing undiscounted cash flow analyses. Based on these analyses, the net carrying values of these asset groups exceeded their undiscounted future cash flows. As such, the Company estimated the fair values of these asset groups at March 31, 2020 and compared them to their carrying values. As the net carrying values of these long-lived asset groups exceeded their fair values, the Company recorded long-lived asset impairment charges for property, plant, and equipment of $455 million during the nine months ended September 30, 2020. Refer to Note 9, Fair Value for additional information on the fair value estimates used in these analyses.

As a result of changes in the business, during the first quarter of 2020, the Company assessed and concluded an impairment trigger had occurred for certain long-lived asset groups in its corporate component. Accordingly, the Company tested these long-lived asset groups for recoverability. The Company estimated the fair value of these asset groups and compared it to the carrying value. As the net carrying value exceeded fair value, the Company recorded long-lived asset impairment charges of $17 million during the nine months ended September 30, 2020. Included in the asset impairment charges for the nine months ended September 30, 2020 are $11 million related to property, plant, and equipment and $6 million related to operating lease right-of-use assets.

There are many uncertainties regarding the COVID-19 global pandemic that could negatively affect the Company's results of operations, financial position, and cash flows. As a result, if there is an adverse change to the Company’s projected financial information, due to business performance or market conditions, this may be indicative the value of its long-lived assets are not recoverable, which may result in additional non-cash long-lived asset impairment charges in a future period.

Impairment of assets held for sale
Refer to Note 3, Acquisitions and Divestitures, for additional information on impairments of assets held for sale.

5. Inventories

At September 30, 2020 and December 31, 2019, inventory consists of the following:
September 30, 2020 December 31, 2019
Finished goods $ 734  $ 1,027 
Work in process 441  460 
Raw materials 400  408 
Materials and supplies 103  104 
$ 1,678  $ 1,999 

6. Goodwill and Other Intangible Assets

During the three months ended September 30, 2020, the Company performed a review of potential triggering events, and concluded no events indicated it was more likely than not that the fair values of its reporting units had declined to below their carrying values. There are many uncertainties regarding the COVID-19 global pandemic that could negatively affect the Company's results of operations, financial position, and cash flows. As a result, if there is an adverse change to the Company’s projected financial information, due to business performance or market conditions, this may be indicative that the fair value of its reporting units have declined below their carrying values, which may result in non-cash goodwill or intangible asset impairment charges in a future period.

20

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
During the first quarter of 2020, the Company concluded it was more likely than not that the fair values of certain of its reporting units and its indefinite-lived intangible assets had declined to below their carrying values as a result of the effects of the COVID-19 global pandemic on the Company's projected financial information. The Company completed a goodwill impairment analysis for four of its reporting units with goodwill in the Powertrain, Motorparts, and Ride Performance segments. The difference between the reporting units' carrying values and fair values were recognized as impairment charges. The Company recognized $267 million in non-cash impairment charges related to its goodwill during the nine months ended September 30, 2020, which represented full impairments of the goodwill in one reporting unit in the Powertrain segment and one reporting unit in the Ride Performance segment, and partial impairments of goodwill in one reporting unit in the Powertrain segment and one reporting unit in the Motorparts segment.

During the first quarter of 2020, the Company also completed an analysis to determine the fair value of its trade names and trademarks for its reporting units in the Ride Performance and Motorparts segments. It was determined their carrying values exceeded their fair values and the Company recognized $51 million in non-cash impairment charges related to these indefinite-lived intangible assets during the nine months ended September 30, 2020, which represented a full impairment of the trade names and trademarks in one of the reporting units in the Motorparts segment, and a partial impairment of the trade names and trademarks in one of the reporting units in the Ride Performance segment and one of the reporting units in the Motorparts segment.

As discussed in more details in Note 4, Restructuring Charges, Net and Asset Impairments, the Company concluded impairment triggers had occurred during the first quarter of 2020 for certain long-lived asset groups within the Ride Performance segment. As a result, the Company recorded non-cash impairment charges of $65 million related to its definite-lived intangible assets during the nine months ended September 30, 2020, which represented full impairments of the definite-lived intangible assets in these two reporting units.

Impairment charges for goodwill and intangible assets recognized by segment during the nine months ended September 30, 2020 consist of the following:
Nine Months Ended September 30, 2020
Powertrain Ride Performance Motorparts Total
Goodwill impairment charges $ 160  $ 37  $ 70  $ 267 
Trade names and trademarks intangible asset impairment charges —  11  40  51 
Definite-lived intangible asset impairment charges —  65  —  65 
$ 160  $ 113  $ 110  $ 383 

The following table shows a summary of the number of reporting units with goodwill in each segment and whether or not the reporting unit's fair value exceeds its carrying value by more or less than 10% based on each respective reporting units most recent goodwill impairment analysis:
Segments
Clean Air Powertrain Ride Performance Motorparts
Number of reporting units with goodwill
Number of reporting units where fair value exceeds carrying value:
Greater than 10% —  — 
Less than 10% —  — 
Goodwill for reporting units where fair value exceeds carrying value:
Greater than 10% $ 22  $ —  $ $ — 
Less than 10% —  165  —  313 
$ 22  $ 165  $ $ 313 

21

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
At September 30, 2020 and December 31, 2019, goodwill consists of the following:
Clean Air Powertrain Ride Performance Motorparts Total
Gross carrying amount at December 31, 2019 $ 22  $ 343  $ 259  $ 620  $ 1,244 
Foreign exchange —  —  (3) —  (3)
Gross carrying amount at March 31, 2020 22  343  256  620  1,241 
Foreign exchange —  —  — 
Gross carrying amount at June 30, 2020 22  343  259  620  1,244 
Reclassified from held for sale —  —  — 
Foreign exchange —  — 
Gross carrying amount at September 30, 2020 22  343  260  623  1,248 
Accumulated impairment loss at December 31, 2019 —  (18) (212) (239) (469)
Impairment —  (160) (37) (70) (267)
Accumulated impairment loss at March 31, 2020 —  (178) (249) (309) (736)
Foreign exchange —  —  (3) —  (3)
Accumulated impairment loss at June 30, 2020 —  (178) (252) (309) (739)
Foreign exchange —  —  (1) (1) (2)
Accumulated impairment loss at September 30, 2020 —  (178) (253) (310) (741)
Net carrying value at September 30, 2020 $ 22  $ 165  $ $ 313  $ 507 

During the first quarter of 2019, the Company reorganized the reporting structure of its Aftermarket, Ride Performance, and Motorparts segments and the underlying reporting units within those segments. The Company reassigned assets and liabilities (excluding goodwill) to the reporting units affected. Goodwill was then reassigned to the reporting units using a relative fair value approach based on the fair value of the elements transferred and the fair value of the elements remaining within the original reporting units. The Company tested goodwill for impairment on a pre-reorganization basis and determined there was no impairment for the affected reporting units. The Company also performed an impairment analysis on a post-reorganization basis and determined $60 million of goodwill was impaired for two reporting units within its Ride Performance segment, one of which was a full impairment of the goodwill. As a result, this non-cash charge was recorded in the nine months ended September 30, 2019. Goodwill allocated to other reporting units was supported by the valuation performed at that time.

During the third quarter of 2019, the Company completed purchase accounting for the Federal-Mogul Acquisition. As a result, the final goodwill allocation was reassigned to the reorganized segments and reporting unit structure that occurred in the first quarter of 2019 using a relative fair value approach and the Company determined an incremental $9 million of goodwill was impaired for one reporting unit in its Ride Performance segment. This non-cash charge was recorded in the three months ended September 30, 2019 and the total impairment charges recognized in the nine months ended September 30, 2019 for the reorganization of the reporting units that occurred in the first quarter of 2019 was $69 million.

22

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
At September 30, 2020 and December 31, 2019, the Company's intangible assets consist of the following:
  September 30, 2020 December 31, 2019
  Useful Lives Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value
Definite-lived intangible assets:
Customer relationships and platforms
10 years
$ 990  $ (257) $ 733  $ 988  $ (123) $ 865 
Customer contract
10 years
(6) (6)
Patents
10 to 17 years
(1) —  (1) — 
Technology rights
10 to 30 years
135  (47) 88  133  (37) 96 
Packaged kits know-how 10 years 54  (11) 43  54  (7) 47 
Catalogs 10 years 47  (9) 38  47  (6) 41 
Licensing agreements
3 to 5 years
64  (31) 33  63  (18) 45 
Land use rights
28 to 46 years
48  (4) 44  47  (3) 44 
1,347  (366) 981  1,341  (201) 1,140 
Indefinite-lived intangible assets:
Trade names and trademarks 233  282 
Total $ 1,214  $ 1,422 

The amortization expense associated with definite-lived intangible assets is as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Amortization expense $ 32  $ 33  $ 98  $ 101 

The expected future amortization expense for the Company's definite-lived intangible assets is as follows:
2020 2021 2022 2023 2024 2025 and thereafter Total
Expected amortization expense $ 32  $ 129  $ 124  $ 121  $ 114  $ 461  $ 981 

7. Investment in Nonconsolidated Affiliates

The Company's ownership interest in affiliates accounted for under the equity method is as follows:
September 30, 2020 December 31, 2019
Anqing TP Goetze Piston Ring Company Limited (China) 35.7  % 35.7  %
Anqing TP Powder Metallurgy Co., Ltd (China) 20.0  % 20.0  %
Dongsuh Federal-Mogul Industrial Co. Ltd. (Korea) 50.0  % 50.0  %
Farloc Argentina SAIC Y F (Argentina) 23.9  % 23.9  %
Federal-Mogul Powertrain Otomotiv A.S. (Turkey) 50.0  % 50.0  %
Federal-Mogul TP Liner Europe Otomotiv Ltd. Sti. (Turkey) 25.0  % 25.0  %
Federal-Mogul TP Liners, Inc. (U.S.) 46.0  % 46.0  %
Frenos Hidraulicos Automotrices, S.A. de C.V. (Mexico) 49.0  % 49.0  %
JURID do Brasil Sistemas Automotivos Ltda. (Brazil) 19.9  % 19.9  %
KB Autosys Co., Ltd. (Korea) 33.6  % 33.6  %
Montagewerk Abgastechnik Emden GmbH (Germany) 50.0  % 50.0  %

23

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
The Company's investments in its nonconsolidated affiliates at September 30, 2020 and December 31, 2019 is as follows:
September 30, 2020 December 31, 2019
Investments in nonconsolidated affiliates $ 541  $ 518 

The carrying amount of the Company's investments in its nonconsolidated affiliates accounted for under the equity method exceeded its share of the underlying net assets by $265 million and $251 million at September 30, 2020 and December 31, 2019.

The following table represents the activity from the Company's investments in its nonconsolidated affiliates for the three and nine months ended September 30, 2020 and 2019:
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Equity in earnings (losses) of nonconsolidated affiliates, net of tax $ $ $ 26  $ 34 
Cash dividends received from nonconsolidated affiliates $ —  $ 18  $ 18  $ 45 

During the three and nine months ended September 30, 2019, the Company made adjustments in the measurement period to the preliminary purchase price allocation for the Federal-Mogul Acquisition which resulted in a reduction to the fair value of its investments in nonconsolidated affiliates of $4 million. As a result of finalizing purchase accounting and completing a purchase price allocation for certain equity method investments, a $10 million reduction to equity in earnings was recognized in the three and nine months ended September 30, 2019. The non-cash reduction in equity earnings was to recognize the basis difference between the fair value and book value of certain assets, including inventory, property, plant, and equipment, and intangible assets. The purchase price allocation for the Federal-Mogul Acquisition was finalized in the third quarter of 2019.

The following tables present summarized aggregated financial information of the Company's nonconsolidated affiliates for the three and nine months ended September 30, 2020 and 2019. The amounts represent 100% of the interest in the nonconsolidated affiliates and not the Company's proportionate share:
Three Months Ended September 30, 2020
Statements of Income Otomotiv A.S. Anqing TP Goetze Other Total
Sales $ 73  $ 72  $ 140  $ 285 
Gross profit $ 21  $ 17  $ 27  $ 65 
Income from continuing operations $ 16  $ 18  $ $ 43 
Net income $ 11  $ 16  $ $ 35 
Three Months Ended September 30, 2019
Statements of Income Otomotiv A.S. Anqing TP Goetze Other Total
Sales $ 85  $ 33  $ 115  $ 233 
Gross profit $ 18  $ $ 20  $ 46 
Income from continuing operations $ 13  $ $ 11  $ 32 
Net income $ 12  $ $ $ 28 
Nine Months Ended September 30, 2020
Statements of Income Otomotiv A.S. Anqing TP Goetze Other Total
Sales $ 193  $ 113  $ 286  $ 592 
Gross profit $ 53  $ 28  $ 53  $ 134 
Income from continuing operations $ 43  $ 29  $ 20  $ 92 
Net income $ 34  $ 26  $ 16  $ 76 
24

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Nine Months Ended September 30, 2019
Statements of Income Otomotiv A.S. Anqing TP Goetze Other Total
Sales $ 261  $ 111  $ 360  $ 732 
Gross profit $ 61  $ 34  $ 66  $ 161 
Income from continuing operations $ 49  $ 28  $ 35  $ 112 
Net income $ 51  $ 25  $ 31  $ 107 

Refer to Note 17, Related Party Transactions, for additional information on balances and transactions with equity method investments.

8. Derivatives and Hedging Activities

The Company is exposed to market risk, such as fluctuations in foreign currency exchange rates, commodity prices, equity compensation liabilities, and changes in interest rates, which may result in cash flow risks. For exposures not offset within its operations, the Company may enter into various derivative transactions pursuant to its risk management policies, which prohibit holding or issuing derivative financial instruments for speculative purposes. Designation of derivative instruments is performed on a transaction basis to support hedge accounting. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in the fair value or cash flows of the underlying exposures being hedged. The Company assesses the initial and ongoing effectiveness of its hedging relationships in accordance with its documented policy.

Market Risks
Foreign Currency Exchange Rate Risk
The Company manufactures and sells its products in North America, South America, Asia, Europe, and Africa. As a result, the Company's financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets in which the Company manufactures and sells its products. The Company generally tries to use natural hedges within its foreign currency activities, including the matching of revenues and costs, to minimize foreign currency exchange rate risk. Where natural hedges are not in place, the Company considers managing certain aspects of its foreign currency activities and larger transactions through the use of foreign currency options or forward contracts. Principal currencies hedged have historically included the U.S. dollar, euro, British pound, Polish zloty, Singapore dollar, Thailand bhat, South African rand, Mexican peso, and Canadian dollar.

Concentrations of Credit Risk
Financial instruments including cash equivalents and derivative contracts expose the Company to counterparty credit risk for non-performance. The Company's counterparties for cash equivalents and derivative contracts are banks and financial institutions that meet the Company's requirement of high credit standing. The Company's counterparties for derivative contracts are substantial investment and commercial banks with significant experience using such derivatives. The Company manages its credit risk through policies requiring minimum credit standing and limiting credit exposure to any one counterparty and through monitoring counterparty credit risks. The Company's concentration of credit risk related to derivative contracts at September 30, 2020 and December 31, 2019 is not material.

Other
The Company presents its derivative positions and any related material collateral under master netting agreements on a net basis. For derivatives designated as cash flow hedges, changes in the time value are excluded from the assessment of hedge effectiveness. Unrealized gains and losses associated with ineffective hedges, determined using the hypothetical derivative method, are recognized in cost of sales in the condensed consolidated statements of income (loss). Derivative gains and losses included in accumulated other comprehensive income (loss) for effective hedges are reclassified into operations upon recognition of the hedged transaction. Derivative gains and losses associated with undesignated hedges are recognized in cost of sales in the condensed consolidated statements of income (loss).

25

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Derivative Instruments
Foreign Currency Forward Contracts
The Company enters into foreign currency forward purchase and sale contracts to mitigate its exposure to changes in exchange rates on certain intercompany and third-party trade receivables and payables. In managing its foreign currency exposures, the Company identifies and aggregates existing offsetting positions and then hedges residual exposures through third-party derivative contracts. The gains or losses on these contracts are recognized as foreign currency gains (losses) within cost of sales in the condensed consolidated statements of income (loss). The fair value of foreign currency forward contracts is recorded in prepayments and other current assets or accrued expenses and other current liabilities in the condensed consolidated balance sheets. The fair value of these derivative instruments is not considered material to the condensed consolidated financial statements, refer to Note 9, Fair Value for additional information.

The following table summarizes by position the notional amounts for foreign currency forward contracts at September 30, 2020 (all of which mature in 2020):
  Notional Amount
Long positions $ 43 
Short positions $ (43)

Cash-Settled Share and Index Swap Transactions
The Company selectively uses swaps to reduce market risk associated with its deferred compensation liabilities, which increase as the Company's stock price increases and decrease as the Company's stock price decreases. The Company has entered into a cash-settled share swap agreement that moves in the opposite direction of these liabilities, allowing the Company to fix a portion of the liabilities at a stated amount. At September 30, 2020, the Company hedged its deferred compensation liability related to approximately 1,700,000 common share equivalents, an increase of 1,100,000 common share equivalents from December 31, 2019. In the first quarter of 2020, the Company entered into an S&P 500 index fund ETF swap agreement to further reduce its market risk, which will act as a natural hedge offsetting an equivalent amount of indexed investments in the Company's deferred compensation plans. The fair value of these swap agreements is recorded in prepayments and other current assets or accrued expenses and other current liabilities in the condensed consolidated balance sheets. The fair value of these derivative instruments is not considered material to the condensed consolidated financial statements, refer to Note 9, Fair Value for additional information.

Hedging Instruments
Cash Flow Hedges — Commodity Price Risk — The Company’s production processes are dependent upon the supply of certain raw materials that are exposed to price fluctuations on the open market. The primary purpose of the Company’s commodity price forward contract activity is to manage the volatility associated with forecasted purchases for up to eighteen months in the future. The Company monitors its commodity price risk exposures regularly to maximize the overall effectiveness of its commodity forward contracts. Principal raw materials hedged include copper, tin, and nickel. In certain instances, within this program, foreign currency forwards may be used in order to match critical terms for commodity exposure.

The Company has designated these contracts as cash flow hedging instruments. The Company records unrecognized gains and losses in other comprehensive income (loss) (“OCI or OCL”) and makes regular reclassifying adjustments into cost of sales within the condensed consolidated statements of income (loss) when the underlying hedged transaction is recognized in earnings. The Company had commodity derivatives outstanding with an equivalent notional amount of $14 million and $19 million at September 30, 2020 and December 31, 2019. Substantially all of the commodity price hedge contracts mature within one year.

Net Investment Hedge — Foreign Currency Borrowings — The Company has foreign currency denominated debt, €779 million of which was designated as a net investment hedge in certain foreign subsidiaries and affiliates of the Company. Changes to its carrying value are included in the condensed consolidated statements of changes in shareholders' equity in the foreign currency translation component of OCL and offset against the translation adjustment on the underlying net assets of those foreign subsidiaries and affiliates, which are also recorded in OCL. The Company’s debt instruments are discussed further in Note 10, Debt and Other Financing Arrangements.

26

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
The following table is a summary of the carrying value of derivative and non-derivative instruments designated as hedges at September 30, 2020 and December 31, 2019:
       Carrying Value
  Balance sheet classification    September 30, 2020 December 31, 2019
Commodity price hedge contracts designated as cash flow hedges Prepayments and other current assets    $    $ — 
Foreign currency borrowings designated as net investment hedges Long-term debt    $ 913     $ 850 

The following table represents the amount of gain (loss) recognized in accumulated other comprehensive income (loss) before any reclassifications into net income (loss) for derivative and non-derivative instruments designated as hedges for the three and nine months ended September 30, 2020 and 2019:
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Commodity price hedge contracts designated as cash flow hedges    $    $ (1) $    $ — 
Foreign currency borrowings designated as net investment hedges    $ (38)    $ 38  $ (40)    $ 45 

The Company estimates approximately $2 million included in accumulated OCI or OCL at September 30, 2020 will be reclassified into net income (loss) within the following twelve months. Refer to Note 15, Shareholders' Equity for further information.

9. Fair Value

A three-level valuation hierarchy, based upon observable and unobservable inputs, is used for fair value measurements. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions based on the best evidence available. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy definition prioritizes the inputs used in measuring fair value into the following levels:
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.
Level 3 Unobservable inputs based on the Company's own assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents the assets and liabilities included in the Company's condensed consolidated balance sheets at September 30, 2020 and December 31, 2019 that are recognized at fair value on a recurring basis and indicate the fair value hierarchy utilized to determine such fair values:
  September 30, 2020 December 31, 2019
  Fair value
hierarchy
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Derivative asset (liability) instruments:
Swap agreements Level 2 $ $ $ (1) $ (1)
Commodity contracts Level 2 $ $ $ —  $ — 

Asset and Liability Instruments
The carrying value of cash and cash equivalents, restricted cash, short and long-term receivables, accounts payable, and short-term debt approximates fair value.

Cash-Settled Share and Index Swap Agreements
The Company's stock price is used as an observable input in determining the fair value of the cash-settled share swap agreement. The S&P 500 index ETF price is used as an observable input in determining the fair value of this swap agreement.
27

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)

Commodity Contracts and Foreign Currency Contracts
The Company calculates the fair value of its commodity contracts and foreign currency contracts using commodity forward rates and currency forward rates, to calculate forward values, and then discounts the forward values. The discount rates for all derivative contracts are based on bank deposit rates. The fair value of the Company's foreign currency forward contracts was a net asset position of less than $1 million at September 30, 2020 and December 31, 2019.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
In addition to items measured at fair value on a recurring basis, assets may be measured at fair value on a nonrecurring basis. These assets include long-lived assets and intangible assets which may be written down to fair value as a result of impairment.

Long-Lived Assets
The Company evaluates its long-lived assets for impairment whenever events or circumstances indicate the value of these long-lived asset groups are not recoverable. During the first quarter of 2020, the Company concluded certain impairment triggers had occurred for certain long-lived asset groups as a result of the effects of the COVID-19 global pandemic on the Company's projected financial information. After failing the undiscounted cash flow recoverability test, the Company estimated the fair values of these long-lived asset groups and compared them to their net carrying values. The fair value measurements related to these long-lived asset groups rely primarily on Company-specific inputs and the Company's assumptions about the use of the assets, as observable inputs are not available (level 3). To determine the fair value of the long-lived asset groups, the Company utilized an asset-based approach. The Company believes the assumptions and estimates used to determine the estimated fair values of the long-lived asset groups are reasonable; however, these estimates and assumptions are subject to a high degree of uncertainty. Due to the many variables inherent in estimating fair value differences in assumptions could have a material effect on the results of the analyses.

As the net carrying values of the long-lived asset groups exceeded their fair values, the Company recorded long-lived asset impairment charges consisting of $65 million of definite-lived intangible assets and $455 million of property, plant, and equipment, during the nine months ended September 30, 2020. Refer to Note 4, Restructuring Charges, Net and Asset Impairments for additional information on asset impairments and refer to Note 6, Goodwill and Other Intangible Assets, for additional information on the definite-lived intangible asset impairments.

Goodwill and Indefinite-Lived Intangible Assets
The Company evaluates the carrying value of its goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter of each year, or more frequently if events or circumstances indicate these assets might be impaired. During the first quarter of 2020, the Company concluded it was more likely than not that the fair values of certain of its reporting units and its indefinite-lived intangible assets had declined to below their carrying values as a result of the effects of the COVID-19 global pandemic on the Company's projected financial information. The Company completed analyses to estimate the fair values of these reporting units and its trade names and trademarks. These fair value measurements require the Company to make significant assumptions and estimates about the (i) projected operating margins, (ii) revenue growth rate, and (iii) discount rate, which is risk-adjusted based on the aforementioned items, as observable inputs are not available (level 3). The Company believes the assumptions and estimates used to determine the estimated fair value are reasonable; however, these estimates and assumptions are subject to a high degree of uncertainty. Due to the many variables inherent in estimating fair value, differences in assumptions could have a material effect on the results of the analyses.

During the first quarter of 2020, it was determined the carrying values of certain reporting units, and the Company's trade names and trademarks exceeded their fair values. As a result, the Company recognized $267 million in non-cash impairment charges related to its goodwill and $51 million in non-cash impairment charges related to its indefinite-lived intangible assets during the nine months ended September 30, 2020. Refer to Note 6, Goodwill and Other Intangible Assets, for additional information on the goodwill and indefinite-lived intangible asset impairments.

During the first quarter of 2019, the Company reorganized the reporting structure of its Aftermarket, Ride Performance, and Motorparts segments and the underlying reporting units within those segments. Refer to Note 6, Goodwill and Other Intangible Assets, for additional information on the goodwill impairment recognized in the nine months ended September 30, 2019.

28

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Financial Instruments Not Carried at Fair Value
The estimated fair value of the Company's outstanding debt is as follows:
  September 30, 2020 December 31, 2019
  Fair value
hierarchy
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Long-term debt (including current maturities):
Term loans and senior notes Level 2 $ 5,151  $ 4,788  $ 5,179  $ 5,113 

The fair value of the Company's public senior notes and private borrowings under its senior credit facility is based on observable inputs, and its borrowings on the revolving credit facility approximate fair value. The Company also had $181 million and $192 million at September 30, 2020 and December 31, 2019 in other debt whose carrying value approximates fair value, which consists primarily of foreign debt with maturities of one year or less.

10. Debt and Other Financing Arrangements

Long-Term Debt
A summary of the Company's long-term debt obligations at September 30, 2020 and December 31, 2019 is set forth in the following table:
September 30, 2020 December 31, 2019
Principal
Carrying Amount (a)
Principal
Carrying Amount (a)
Credit Facilities
Revolver Borrowings
Due 2023 $ 429  $ 429  $ 183  $ 183 
Term Loans
LIBOR plus 2.50% Term Loan A due 2019 through 2023(b)
1,552  1,541  1,615  1,608 
LIBOR plus 3.00% Term Loan B due 2019 through 2025
1,670  1,613  1,683  1,623 
Senior Unsecured Notes
$225 million of 5.375% Senior Notes due 2024
225  223  225  222 
$500 million of 5.000% Senior Notes due 2026
500  495  500  494 
Senior Secured Notes
€415 million of 4.875% Euro Fixed Rate Notes due 2022
486  496  465  479 
€300 million of Euribor plus 4.875% Euro Floating Rate Notes due 2024
352  355  336  340 
€350 million of 5.000% Euro Fixed Rate Notes due 2024
410  428  392  413 
Other debt, primarily foreign instruments 21  20  14  13 
5,600  5,375 
Less - maturities classified as current
Total long-term debt $ 5,596  $ 5,371 
(a)Carrying amount is net of unamortized debt issuance costs and debt discounts or premiums. Total unamortized debt issuance costs were $75 million and $76 million at September 30, 2020 and December 31, 2019. Total unamortized debt (premium) discount, net was $(30) million and $(37) million at September 30, 2020 and December 31, 2019.
(b)The interest rate on Term Loan A at December 31, 2019 was LIBOR plus 1.75%.

29

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Short-Term Debt
The Company's short-term debt at September 30, 2020 and December 31, 2019 consists of the following:
September 30, 2020 December 31, 2019
Maturities classified as current $ $
Short-term borrowings(a)
161  179 
Bank overdrafts 11 
Total short-term debt $ 176  $ 185 
(a) Includes borrowings under both committed credit facilities and uncommitted lines of credit and similar arrangements.

Amortization of debt issuance costs and original issue discounts (premiums)
Interest expense associated with the amortization of the debt issuance costs and original issue discounts (premiums) recognized in the Company's condensed consolidated statements of income (loss) for the three and nine months ended September 30, 2020 and 2019 is as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Amortization of debt issuance fees $ $ $ 16  $ 14 
Accretion of debt premium $ (2) $ (3) $ (8) $ (9)

Included in the table above is the amortization of debt issuance costs on the revolver of $1 million in each of the three months ended September 30, 2020 and 2019, and $3 million in each of the nine months ended September 30, 2020 and 2019. The unamortized debt issuance costs related to the revolver are included in other assets in the condensed consolidated balance sheets.

Credit Facilities
Financing Arrangements
The table below shows the Company's borrowing capacity on committed credit facilities at September 30, 2020:
  Committed Credit Facilities
at September 30, 2020
  Term
Available(b)
(in billions)
Tenneco Inc. revolving credit facility (a)
2023 $ 1.1 
Tenneco Inc. Term Loan A 2023 — 
Tenneco Inc. Term Loan B 2025 — 
Subsidiaries’ credit agreements 2020 - 2028 — 
$ 1.1 
(a)The Company is required to pay commitment fees under the revolving credit facility on the unused portion of the total commitment.
(b)Letters of credit reduce the available borrowings under the revolving credit facility.

The Company also had $74 million of outstanding letters of credit under uncommitted facilities at September 30, 2020.

At September 30, 2020, the Company had liquidity of $1.8 billion comprised of $721 million of cash and $1.1 billion undrawn on its revolving credit facility. During the three months ended September 30, 2020, the Company repaid $1.1 billion of its $1.5 billion revolving credit facility.

30

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Term Loans
On October 1, 2018, the Company entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and other lenders (the "New Credit Facility") in connection with the Federal-Mogul Acquisition, which has been amended by the first amendment, dated February 14, 2020 ("the "First Amendment"), by the second amendment, dated February 14, 2020 (the "Second Amendment"), and by the third amendment, dated May 5, 2020 (the "Third Amendment"). The New Credit Facility provides $4.9 billion of total debt financing, consisting of a five-year $1.5 billion revolving credit facility, a five-year $1.7 billion term loan A facility ("Term Loan A"), and a seven-year $1.7 billion term loan B facility ("Term Loan B"). The Company paid $8 million in one-time fees in connection with the First Amendment and Second Amendment, and $10 million in one-time fees in connection with the Third Amendment.

New Credit Facility — Interest Rates and Fees
The Third Amendment provides for an increase to the margin applicable to borrowings under the revolving credit facility and
the Term Loan A facility at certain leverage levels as set forth below as one of several conditions for obtaining the less restrictive financial maintenance covenants described below under New Credit Facility — Other Terms and Conditions:
Consolidated net leverage ratio Interest rate
greater than 6.0 to 1
LIBOR plus 2.50%
less than 6.0 to 1 and greater than 4.5 to 1
LIBOR plus 2.25%

Initially, and so long as the Company’s corporate family rating is Ba3 (with a stable outlook) or higher from Moody’s Investors Service, Inc. (“Moody’s”) and BB- (with a stable outlook) or higher from Standard & Poor’s Financial Services LLC (“S&P”), the interest rate on borrowings under the Term Loan B facility will be LIBOR plus 2.75%; at any time the foregoing conditions are not satisfied, the interest rate on the Term Loan B facility will be LIBOR plus 3.00%. When the Term Loan B facility is no longer outstanding and the Company and its subsidiaries have no other secured indebtedness (with certain exceptions set forth in the New Credit Facility), and upon the Company achieving and maintaining two or more corporate credit and/or corporate family ratings higher than or equal to BBB- from S&P, BBB- from Fitch Ratings Inc. (“Fitch”) and/or Baa3 from Moody’s (in each case, with a stable or positive outlook), the collateral under the New Credit Facility may be released. On June 3, 2019, Moody’s lowered our corporate family rating to B1 and the interest rate on borrowings under the term loan B was raised to LIBOR plus 3.00%.

New Credit Facility — Other Terms and Conditions After giving effect to the Third Amendment, the Company must comply with certain less restrictive financial maintenance covenants for the revolving credit facility and the Term Loan A facility. The financial maintenance covenants are subject to several covenant reset triggers (“Covenant Reset Triggers”) that limit certain activities of the Company by implementing more restrictive affirmative and negative covenants, as more fully described below. If a Covenant Reset Trigger occurs, the financial maintenance covenants revert back to the previous financial maintenance covenants in effect immediately prior to the Third Amendment (and described below) (the “Prior Financial Covenants”). The financial maintenance covenants include (i) a requirement to have a senior secured leverage ratio (as defined in the New Credit Facility), with step-downs, as detailed in the table below; (ii) a requirement to have a consolidated net leverage ratio (as defined in the New Credit Facility), with step-downs, as follows:
(i) Senior secured net leverage ratio (ii) Consolidated net leverage ratio
not greater than 6.75 to 1
at June 30, 2020
not greater than 4.50 to 1
at March 31, 2020
not greater than 9.50 to 1
at September 30, 2020
not greater than 5.25 to 1
at March 31, 2022
not greater than 8.75 to 1
at December 31, 2020
not greater than 4.75 to 1
at June 30, 2022
not greater than 8.25 to 1
at March 31, 2021
not greater than 4.25 to 1
at September 30, 2022
not greater than 4.50 to 1
at June 30, 2021
not greater than 3.75 to 1
thereafter
not greater than 4.25 to 1
at September 30, 2021
not greater than 4.00 to 1
at December 31, 2021
and (iii) a requirement to maintain a consolidated interest coverage ratio (as defined in the New Credit Facility) for any period of four consecutive fiscal quarters of not less than 2.00 to 1 as of June 30, 2020, 1.50 to 1 through March 31, 2021, and 2.75 to 1 thereafter.

The Company may make a one-time election to revert back to the Prior Financial Covenants and terminate the Covenant Reset Triggers upon delivery of a covenant reset certificate that attests to compliance with the Prior Financial Covenants as of the end of the relevant fiscal period (“Covenant Reset Certificate”).
31

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)

The Covenant Reset Triggers include certain limitations on the ability of the Company and its restricted subsidiaries to, among other things, (a) incur additional indebtedness, (b) enter into additional sales and leasebacks, (c) create additional liens over their assets, (d) pay dividends or distributions to Tenneco’s stockholders, (e) prepay certain unsecured indebtedness of the Company or its restricted subsidiaries (as more fully described below), (f) make additional investments, (g) dispose of material intellectual property, and (h) reinvest the proceeds of certain asset sales in the business in lieu of repaying indebtedness, each as more specifically described in the Third Amendment. These limitations are in addition to other affirmative and negative covenants (with customary exceptions, materiality qualifiers and limitations) in the New Credit Agreement, including with respect to: financial reporting; payment of taxes; maintenance of existence; compliance with law and material contractual obligations; maintenance of property and insurance; inspection of property, books and records; notices of certain events; compliance with environmental laws; provision and maintenance of collateral perfection; satisfaction of the financial maintenance covenants described above; incurrence of indebtedness; permitting liens over assets; mergers, consolidations, dispositions or other fundamental transactions; dispositions and asset sales; restricted payments; investments; compliance with limitations on certain transactions with nonconsolidated affiliates; sale and leaseback transactions; changes in fiscal periods; negative pledge clauses in certain contracts; changes to lines of business; prepayments and modifications of certain subordinated indebtedness (as more fully described below); use of proceeds; transactions involving special purpose finance subsidiaries; and transactions related to effectuating a spin-off (as defined in the New Credit Agreement), each as more specifically described in the New Credit Agreement.

The Covenant Reset Triggers in the Third Amendment generally prohibit the Company from repaying the Senior Unsecured Notes. After giving effect to the Third Amendment, so long as no default exists under its New Credit Facility, the Company would be permitted to (i) make regularly scheduled interest and principal payments as and when due in respect of the Senior Unsecured Notes, (ii) refinance the Senior Unsecured Notes with the net cash proceeds of permitted refinancing indebtedness (as defined in the New Credit Facility); (iii) make payments in respect of the Senior Unsecured Notes in an amount equal to the net cash proceeds of qualified capital stock (as defined in the New Credit Facility) issued after May 5, 2020; (iv) convert any Senior Unsecured Notes into qualified capital stock issued after May 5, 2020; and (v) make additional payments of the Senior Unsecured Notes provided that after giving effect to such additional payments the consolidated leverage ratio would be equal to or less than 2.00 to 1 after giving effect to such additional payments. The foregoing limitations regarding repayment and refinancing of the Senior Unsecured Notes apply from the effectiveness of the Third Amendment until delivery of a Covenant Reset Certificate.

The covenants in the New Credit Facility generally prohibit the Company from repaying certain subordinated indebtedness. So long as no default exists, the Company would, under its New Credit Facility, be permitted to repay or refinance its subordinated indebtedness (i) with the net cash proceeds of permitted refinancing indebtedness (as defined in the New Credit Facility); (ii) in an amount equal to the net cash proceeds of qualified capital stock (as defined in the New Credit Facility) issued after October 1, 2018; (iii) in exchange for qualified capital stock issued after October 1, 2018; and (iv) with additional payments provided that such additional payments are capped based on a pro forma consolidated leverage ratio after giving effect to such additional payments.

Such additional payments on subordinated indebtedness (x) will not be permitted at any time the pro forma consolidated leverage ratio is greater than 2.00 to 1 after giving effect to such additional payments and (y) will be permitted in an unlimited amount at any time the pro forma consolidated leverage ratio is equal to or less than 2.00 to 1 after giving effect to such additional payments.

The New Credit Facility contains customary representations and warranties, including, as a condition to future revolver borrowings, that all such representations and warranties are true and correct, in all material respects, on the date of borrowing, including representations (with customary exceptions, materiality qualifiers and limitations) as to: existence; compliance with law; power, authority and enforceability; no violation of law or material contracts; material litigation; no default under the New Credit Agreement and related documents; ownership of property, including material intellectual property; payment of material taxes; compliance with margin stock regulations; labor matters; ERISA; Investment Company Act matters; subsidiaries; use of loan proceeds; environmental matters; accuracy of information; security documents; solvency; anti-corruption laws and sanctions; and that since December 31, 2017 there has been no development or event that has had a material adverse effect on the business or financial condition of the Company and its subsidiaries, each as more specifically described in the New Credit Facility.

32

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
The New Credit Facility includes customary events of default and other provisions that could require all amounts due thereunder to become immediately due and payable, either automatically or at the option of the lenders, if the Company fails to comply with the terms of the New Credit Facility or if other customary events occur. These events of default (with customary exceptions, materiality qualifiers, limitations and grace periods) include (i) failure to pay obligations under the New Credit Agreement when due; (ii) material inaccuracy of representations and warranties; (iii) failure to comply with the covenants in the New Credit Facility and related documents (as summarized above); (iv) cross-default to material indebtedness; (v) commencement of bankruptcy or insolvency proceedings; (vi) ERISA events; (vii) certain material judgments; (viii) invalidity of unenforceability of security and guarantee documents; and (ix) change of control, each as more specifically described in the New Credit Facility.

Senior Notes
The Company has outstanding 5.375% senior unsecured notes due December 15, 2024 ("2024 Senior Notes") and 5.000% senior unsecured notes due July 15, 2026 ("2026 Senior Notes" and together with the 2024 Senior Notes, the "Senior Unsecured Notes"). The Company has outstanding 5.000% euro denominated fixed rate notes which are due July 15, 2024 ("5.000% Euro Fixed Rate Notes"), 4.875% euro denominated fixed rate notes due April 15, 2022 ("4.875% Euro Fixed Rate Notes"), and floating rate notes due April 15, 2024 ("Euro Floating Rate Notes", together with the 5.000% Euro Fixed Rate Notes and the 4.875% Euro Fixed Notes, the "Senior Secured Notes").

Senior Unsecured Notes and Senior Secured Notes — Other Terms and Conditions The Senior Unsecured Notes and Senior Secured Notes contain covenants that will, among other things, limit the Company's ability to create liens and enter into sale and leaseback transactions. In addition, the Senior Secured Notes and 2024 Senior Unsecured Notes also require that, as a condition precedent to incurring certain types of indebtedness not otherwise permitted, the Company's consolidated fixed charge coverage ratio, as calculated on a pro forma basis, be greater than 2.00, as well as containing restrictions on its operations, including limitations on: (i) incurring additional indebtedness; (ii) paying dividends; (iii) distributions and stock repurchases; (iv) investments; (v) asset sales and (vi) mergers and consolidations.

Subject to limited exceptions, all of the Company's existing and future material, domestic wholly owned subsidiaries fully and unconditionally guarantee its Senior Unsecured Notes and Senior Secured Notes on a joint and several basis. There are no significant restrictions on the ability of the subsidiaries that have guaranteed the Company's Senior Notes to make distributions to the Company.

At September 30, 2020, the Company was in compliance with all of its financial covenants.

Other Debt
Other debt consists primarily of subsidiary debt.

Accounts Receivable Securitization and Factoring
On-Balance Sheet Arrangements
The Company has securitization programs for some of its accounts receivable, with limited recourse provisions. Borrowings on these securitization programs, which are recorded in short-term debt, at September 30, 2020 and December 31, 2019 are as follows:
September 30, 2020 December 31, 2019
Borrowings on securitization programs $ $

Off-Balance Sheet Arrangements
In the Company's European and U.S. accounts receivable factoring programs, accounts receivables are transferred in their entirety to the acquiring entities and are accounted for as a sale. The fair value of assets received as proceeds in exchange for the transfer of accounts receivable under these factoring programs approximates the fair value of such receivables. Some of these programs have deferred purchase price arrangements with the banks.

The Company is the servicer of the receivables under some of these arrangements and is responsible for performing all accounts receivable administration functions. Where the Company receives a fee to service and monitor these transferred accounts receivables, such fees are sufficient to offset the costs and as such, a servicing asset or liability is not recorded as a result of such activities.

33

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
In the U.S and Canada, the Company participates in supply chain financing programs with certain of the Company's aftermarket customers through drafting programs.

The amount of accounts receivable outstanding and derecognized for these factoring and drafting arrangements was $0.9 billion and $1.0 billion at September 30, 2020 and December 31, 2019. In addition, the deferred purchase price receivable was $49 million and $33 million at September 30, 2020 and December 31, 2019.

Proceeds from the factoring of accounts receivable qualifying as sales and drafting programs was $1.1 billion for each of the three months ended September 30, 2020 and 2019 and was $3.0 billion and $3.6 billion for the nine months ended September 30, 2020 and 2019.

The following table represents the Company's expenses associated with these arrangements for the three and nine months ended September 30, 2020 and 2019:
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Loss on sale of receivables(a)
$ $ $ 15  $ 23 
(a) Amount is included in "Interest expense" in the condensed consolidated statements of income (loss).

These programs provide the Company with access to cash at costs that are generally favorable to alternative sources of financing.

11. Pension Plans, Postretirement and Other Employee Benefits

The Company sponsors several defined benefit pension plans ("Pension Benefits") and health care and life insurance benefits ("Other Postretirement Benefits" or "OPEB") for certain employees and retirees around the world.

In September 2020, the Company renegotiated one of its collective bargaining agreements in the U.S. which eliminated health care benefits in retirement if benefits are not commenced by September 24, 2021 for participants covered by the union agreement. This amendment resulted in a non-cash curtailment gain of $21 million for the three and nine months ended September 30, 2020.

During the three and nine months ended September 30, 2020, the Company paid lump sums out of certain pension plans in connection with a previously announced plant closure. These lump sums were paid out of the pension plan assets and resulted in a non-cash settlement charge of $5 million for the three and nine months ended September 30, 2020. The Company expects additional lump sums to be paid out of pension plan assets during the fourth quarter 2020.
34

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)

Components of net periodic benefit costs (credits) for the three and nine months ended September 30, 2020 and 2019 are as follows:
  Three Months Ended September 30,
  Pension Benefits Other Postretirement Benefits
  2020 2019
  U.S. Non-U.S. U.S. Non-U.S. 2020 2019
Service cost $ —  $ $ $ $ —  $ — 
Interest cost 11  13 
Expected return on plan assets (16) (5) (17) (5) —  — 
Settlement loss —  —  —  —  — 
Curtailment gain —  —  —  —  (21) — 
Net amortization:
Actuarial loss
Prior service cost (credit) —  —  —  (3) (2)
Net pension and postretirement costs (credits) $ (4) $ 14  $ (2) $ $ (21) $
Nine Months Ended September 30,
 Pension Benefits Other Postretirement Benefits
2020 2019
U.S. Non-U.S. U.S. Non-U.S. 2020 2019
Service cost $ $ 19  $ $ 18  $ —  $ — 
Interest cost 31  13  40  18  10 
Expected return on plan assets (48) (13) (51) (14) —  — 
Settlement loss —  —  —  —  — 
Curtailment gain —  —  —  —  (21) — 
Net amortization:
Actuarial loss
Prior service cost (credit) —  —  —  (7) (6)
Net pension and postretirement costs (credits) $ (12) $ 31  $ (6) $ 27  $ (19) $

12. Income Taxes

For interim tax reporting, the Company estimates its annual effective tax rate and applies it to year-to-date ordinary income. Jurisdictions where no tax benefit can be recognized due to a valuation allowance are excluded from the estimated annual effective tax rate. The effect of including these jurisdictions on the quarterly effective rate calculation could result in a higher or lower effective tax rate during a quarter due to the mix and timing of actual earnings versus annual projections. The tax effects of certain items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

For the three months ended September 30, 2020, the Company recorded income tax expense of $648 million on income from continuing operations before income taxes of $168 million. This compares to an income tax benefit of $9 million on income from continuing operations of $69 million in the three months ended September 30, 2019.

For the nine months ended September 30, 2020, the Company recorded income tax expense of $453 million on loss from continuing operations before income taxes of $1.2 billion. This compares to an income tax expense of $5 million on income from continuing operations before income taxes of $23 million in the nine months ended September 30, 2019.

35

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Income tax expense for the three months ended September 30, 2020 differs from the U.S. statutory rate due primarily to (i) a $369 million and $11 million non-cash charge relating to the establishment of valuation allowances on deferred tax assets recognized in prior years for the U.S. and France; (ii) a non-cash tax benefit of $2 million relating to the reversal of a valuation allowance in China; and (iii) a $145 million non-cash charge to adjust the estimated annual tax rate for the tax benefit that can no longer be recognized due to the change in positions for these respective entities.

Income tax benefit for the nine months ended September 30, 2020 differs from the U.S. statutory rate due primarily to $39 million of tax benefit recognized related to asset impairment charges of $883 million, the discrete items noted above, and pre-tax income taxed at rates higher than the U.S. statutory tax rate, and pre-tax losses with no tax benefit.

Income tax expense for the three and nine months ended September 30, 2019 differ from the U.S. statutory rate due primarily to $33 million of net tax benefit recognized relating to a valuation allowance release for an entity in Spain, pre-tax income taxed at rates higher than the U.S. statutory rate and pre-tax losses with no tax benefit.

The Company considers both positive and negative evidence and evaluates its deferred tax assets quarterly to determine if valuation allowances are required or should be adjusted. This assessment considers, among other matters, the nature, frequency and amount of recent losses, the duration of statutory carryforward periods, reversals of existing taxable temporary differences and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.

Due to the sudden and sharp decline in industry demand, and the temporary suspension of production at the Company's U.S. manufacturing facilities as a result of the COVID-19 global pandemic, it incurred a significant U.S. pre-tax loss for the second quarter of 2020. Based on the market research and financial forecast available at that time, the Company expected that its U.S. business operations would be recovered substantially in the third and fourth quarters of 2020. However, based on the updated analysis in the current quarter, the third quarter and expected fourth quarter results did not provide enough positive evidence of profitability of the U.S. operations, therefore, the realizability of the U.S. deferred tax assets was re-assessed. While the disruption to the Company's business is expected to be temporary, there is considerable uncertainty around the extent and duration of that disruption. Combined with restructuring, impairment and integration expenses incurred in the most recent three-years, the Company will have a cumulative loss in the three-year period ending December 31, 2020. The Company has concluded that it was no longer more likely than not that it will be able to utilize the U.S. deferred tax assets. Therefore, it established a $369 million full valuation allowance against the deferred tax assets in the U.S. during the three and nine months ended September 30, 2020. Under current tax laws, the valuation allowance will not limit the Company’s ability to utilize U.S. deferred tax assets provided it can generate sufficient future taxable income in the U.S. The Company anticipates it will continue to record a valuation allowance against the losses until such time as they are able to determine it is “more-likely-than-not” the deferred tax asset will be realized. This position is dependent on whether there will be sufficient future taxable income to realize such deferred tax assets.

Also, during the three months ended September 30, 2020, the Company evaluated its ability to realize deferred tax assets of its non-US jurisdictions with available positive and negative evidence with the Company’s assessment noted above. Based on the analysis performed, at September 30, 2020, the Company believed that it is more likely than not that the deferred tax assets will be realized in certain jurisdictions that have reported losses in 2020 and in some instances are reporting a projected three-year cumulative loss. While these entities have demonstrated a return to profit in the third quarter of 2020, if operational declines continue due to the COVID-19 pandemic in certain jurisdictions, the Company believes that there may be sufficient negative evidence for a valuation allowance to be recorded in the next twelve months in the amount of $69 million.

The Company believes it is reasonably possible up to $34 million in unrecognized tax benefits related to the expiration of foreign statute of limitations and the conclusion of income tax examinations may be recognized within the next twelve months.

36

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
13. Commitments and Contingencies

Environmental Matters
The Company is subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which it operates. The Company has been notified by the U.S. Environmental Protection Agency, other national environmental agencies, and various provincial and state agencies it may be a potentially responsible party (“PRP”) under such laws for the cost of remediating hazardous substances pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") and other national and state or provincial environmental laws. PRP designation typically requires the funding of site investigations and subsequent remedial activities. Many of the sites that are likely to be the costliest to remediate are often current or former commercial waste disposal facilities to which numerous companies sent wastes. Despite the potential joint and several liability which might be imposed on the Company under CERCLA and some of the other laws pertaining to these sites, its share of the total waste sent to these sites generally has been small. The Company believes its exposure for liability at these sites is not material.

On a global basis, the Company has also identified certain other present and former properties at which it may be responsible for cleaning up or addressing environmental contamination, in some cases as a result of contractual commitments and/or federal or state environmental laws. The Company is seeking to resolve its responsibilities for those sites for which a claim has been received.

The Company expenses or capitalizes, as appropriate, expenditures for ongoing compliance with environmental regulations. At September 30, 2020, the Company has an obligation to remediate or contribute towards the remediation of certain sites, including the sites discussed above at which it may be a PRP.

The Company's estimated share of environmental remediation costs for all these sites is recognized in the condensed consolidated balance sheets on a discounted basis and the amounts at September 30, 2020 and December 31, 2019 are as follows:
September 30, 2020 December 31, 2019
Accrued expenses and other current liabilities $ $
Deferred credits and other liabilities 26  28 
$ 35  $ 36 

For those locations where the liability was discounted, the weighted average discount rate used was 0.66% and 1.30% at September 30, 2020 and December 31, 2019.

The Company's expected payments for environmental remediation costs for non-indemnified locations are estimated to be approximately:
2020 2021 2022 2023 2024 2025 and thereafter
Expected payments $ $ $ $ $ $ 15 

Based on information known to the Company from site investigations and the professional judgment of consultants, the Company has established reserves it believes are adequate for these costs. Although the Company believes these estimates of remediation costs are reasonable and are based on the latest available information, the costs are estimates, difficult to quantify based on the complexity of the issues, and are subject to revision as more information becomes available about the extent of remediation required. At some sites, the Company expects other parties will contribute to the remediation costs. In addition, certain environmental statutes provide the Company's liability could be joint and several, meaning the Company could be required to pay amounts in excess of its share of remediation costs. The financial strength of the other PRPs at these sites has been considered, where appropriate, in the determination of the estimated liability. The Company does not believe any potential costs associated with its current status as a PRP, or as a liable party at the other locations referenced herein, will be material to its annual consolidated financial position, results of operations, or liquidity.

37

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Antitrust Investigations and Litigation
On March 25, 2014, representatives of the European Commission (EC) were at Tenneco GmbH's Edenkoben, Germany administrative facility to gather information in connection with a global antitrust investigation concerning multiple automotive suppliers. On the same date, the Company also received a related subpoena from the U.S. Department of Justice (“DOJ”).

On November 5, 2014, the DOJ granted conditional leniency to the Company, its subsidiaries, and its 50% affiliates as of such date ("2014 Tenneco Entities") pursuant to an agreement the Company entered into under the Antitrust Division's Corporate Leniency Policy. On October 22, 2020, the DOJ granted unconditional leniency to the 2014 Tenneco entities. Unconditional leniency means that the DOJ will not bring any criminal antitrust prosecution against the 2014 Tenneco Entities, nor seek any criminal fines or penalties, in connection with the matters the Company reported to the DOJ.

On April 27, 2017, the Company received notification from the EC that it has administratively closed its global antitrust inquiry regarding the production, assembly, and supply of complete exhaust systems. No charges against the Company or any other competitor were initiated at any time and the EC inquiry is now closed. Certain other competition agencies are also investigating possible violations of antitrust laws relating to products supplied by the Company and its subsidiaries, including Federal-Mogul. The Company has cooperated and continues to cooperate fully with all of these antitrust investigations and take other actions to minimize its potential exposure. The exposure to these investigations is not expected to be material to the Company.

The Company and certain of its competitors were also named as defendants in civil putative class action litigations in the United States and Canada. The opt-out deadline in these lawsuits has now passed. The Company has now reached a resolution with the parties in all pending claims in the United States and Canada and expects final judgment to be granted in these lawsuits before the calendar year-end or shortly thereafter. It remains possible that lawsuits alleging similar claims could be filed against the Company in these and other jurisdictions.

The Company established a reserve of $132 million in its second quarter 2017 financial results for settlement costs that were probable, reasonably estimable, and expected to be necessary to resolve its antitrust matters globally, which primarily involves the resolution of civil suits and related claims. Of the $132 million reserve that was established, $12 million remains at September 30, 2020 and is recorded in deferred credits and other liabilities in the Company's condensed consolidated balance sheets.

The Company's reserve for its antitrust matters is based upon all currently available information and an assessment of the probability of events for those matters where the Company can make a reasonable estimate of the costs to resolve such outstanding matters. The Company's estimate involves significant judgment, given the number, variety and potential outcomes of actual and potential claims, the uncertainty of future rulings and approvals by a court or other authority, the behavior or incentives of adverse parties or regulatory authorities, and other factors outside of its control. As a result, the Company's reserve may change from time to time, and actual costs may vary. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on current information, the Company does not expect any such change in the reserve will have a material adverse effect on the Company's annual consolidated financial position, results of operations or liquidity.

Other Legal Proceedings, Claims and Investigations
For many years, the Company has been and continues to be subject to lawsuits initiated by claimants alleging health problems as a result of exposure to asbestos. The Company's current docket of active and inactive cases is less than 500 cases in the United States and less than 50 in Europe.

With respect to the claims filed in the United States, the substantial majority of the claims are related to alleged exposure to asbestos in the Company's line of Walker® exhaust automotive products although a significant number of those claims appear also to involve occupational exposures sustained in industries other than automotive. A small number of claims have been asserted against one of the Company's subsidiaries by railroad workers alleging exposure to asbestos products in railroad cars. The Company believes, based on scientific and other evidence, it is unlikely that U.S. claimants were exposed to asbestos by the Company's former products and that, in any event, they would not be at increased risk of asbestos-related disease based on their work with these products. Further, many of these cases involve numerous defendants. Additionally, in many cases the plaintiffs either do not specify any, or specify the jurisdictional minimum, dollar amount for damages.

38

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
With respect to the claims filed in Europe, the substantial majority relate to occupational exposure claims brought by current and former employees of Federal-Mogul facilities in France and amounts paid out were not material. A small number of occupational exposure claims have also been asserted against Federal-Mogul entities in Italy and Spain.

As major asbestos manufacturers and/or users continue to go out of business or file for bankruptcy, the Company may experience an increased number of these claims. The Company vigorously defends itself against these claims as part of its ordinary course of business. In future periods, the Company could be subject to cash costs or charges to earnings if any of these matters are resolved unfavorably to the Company. To date, with respect to claims that have proceeded sufficiently through the judicial process, the Company has regularly achieved favorable resolutions. Accordingly, the Company presently believes that these asbestos-related claims will not have a material adverse effect on the Company's annual consolidated financial position, results of operations or liquidity.

The Company is also from time to time involved in other legal proceedings, claims or investigations. Some of these matters involve allegations of damages against the Company relating to environmental liabilities (including toxic tort, property damage and remediation), intellectual property matters (including patent, trademark and copyright infringement, and licensing disputes), personal injury claims (including injuries due to product failure, design or warning issues, and other product liability related matters), taxes, unclaimed property, employment matters, advertising matters, and commercial or contractual disputes, sometimes related to acquisitions or divestitures. Additionally, some of these matters involve allegations relating to legal compliance.

While the Company vigorously defends itself against all of these legal proceedings, claims and investigations and take other actions to minimize its potential exposure, in future periods, the Company could be subject to cash costs or charges to earnings if any of these matters are resolved on unfavorable terms. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on current information, including the Company's assessment of the merits of the particular claim, the Company does not expect the legal proceedings, claims or investigations currently pending against it will have any material adverse effect on its annual consolidated financial position, results of operations or liquidity.

Asset Retirement Obligations
The Company’s primary asset retirement obligations ("ARO") activities relate to the removal of hazardous building materials at its facilities. The Company records an ARO at fair value upon initial recognition when the amount is probable and can be reasonably estimated. ARO fair values are determined based on the Company’s determination of what a third party would charge to perform the remediation activities, generally using a present value technique.

The Company's ARO liabilities at September 30, 2020 and December 31, 2019 are as follows:
September 30, 2020 December 31, 2019
Accrued expenses and other current liabilities $ $
Deferred credits and other liabilities 12  13 
$ 16  $ 16 

Warranty Matters
The Company provides warranties on some of its products. The warranty terms vary but range from one year up to limited lifetime warranties on some of its premium aftermarket products. Provisions for estimated expenses related to product warranty are made at the time products are sold or when specific warranty issues are identified with the Company's products. These estimates are established using historical information about the nature, frequency, and average cost of warranty claims. The Company believes the warranty reserve is appropriate; however, actual claims incurred could differ from the original estimates, requiring adjustments to the reserve. The reserve is included in both current and long-term liabilities on the condensed consolidated balance sheets.

39

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
The following represents the changes in the Company's warranty accrual for the three and nine months ended September 30, 2020 and 2019:
  Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Balance at beginning of period $ 50  $ 53  $ 54  $ 45 
Accruals related to product warranties 10  14  23 
Reductions for payments made (1) (2) (8) (15)
Foreign currency (1) —  (1)
Balance at end of period $ 60  $ 52  $ 60  $ 52 

14. Share-Based Compensation

Share-based compensation expense is included in selling, general, and administrative expenses in the condensed consolidated statements of income (loss). Total share-based compensation expense (benefit) for the three and nine months ended September 30, 2020 and 2019 is as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Cash-settled share-based compensation expense (benefit) $ —  $ —  $ $ — 
Share-settled share-based compensation expense (benefit) 13  20 
$ $ $ 14  $ 20 

Cash-Settled Awards
The Company has granted restricted stock units ("RSUs") to certain key employees that are payable in cash. These awards are classified as liabilities, valued based on the fair value of the award at the grant date, and remeasured at each reporting date until settlement, with compensation expense being recognized in proportion to the completed requisite period up until date of settlement.

At September 30, 2020, approximately $4 million of total unrecognized compensation costs is expected to be recognized on the cash-settled RSU's over a weighted average period of approximately 2 years.

Share-Settled Awards
The Company has granted restricted stock, RSUs, and performance share units ("PSUs") to its directors and certain key employees that are payable in common stock. These awards are settled in shares upon vesting and recognized in equity based on their fair value.

The following table reflects the status of all nonvested restricted shares, share-settled RSUs, and PSUs for the nine months ended September 30, 2020:
  Restricted Stock Share-Settled RSUs PSUs
  Shares Weighted Avg.
Grant Date
Fair Value
Units Weighted Avg.
Grant Date
Fair Value
Units Weighted Avg.
Grant Date
Fair Value
Nonvested balance at beginning of period 35,630  $ 63.27  1,125,346  $ 37.91  806,233  $ 34.12 
Granted 174,347  9.10  1,511,628  7.86  6,654  12.26 
Vested (205,822) 40.64  (447,292) 41.39  —  — 
Forfeited (1,781) 58.01  (371,271) 35.11  (275,514) 28.75 
Nonvested balance at end of period 2,374  $ 61.36  1,818,411  $ 28.49  537,373  $ 36.33 

At September 30, 2020, approximately $21 million of total unrecognized compensation costs is expected to be recognized on the share-settled awards over a weighted average period of approximately 2 years.

40

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
15. Shareholders' Equity

Common Stock Outstanding
The Company has authorized 175,000,000 shares ($0.01 par value) of Class A Common Stock at September 30, 2020 and December 31, 2019. The Company has authorized 25,000,000 shares ($0.01 par value) of Class B Common Stock at September 30, 2020 and December 31, 2019.

Total common stock outstanding and changes in common stock issued are as follows:
Nine Months Ended September 30,
Class A Common Stock Class B Common Stock
2020 2019 2020 2019
Shares issued at beginning of period 71,727,061  71,675,379  23,793,669  23,793,669 
Issuance (repurchased) pursuant to benefit plans 605,163  98,716  —  — 
Restricted stock forfeited and withheld for taxes (124,667) (62,919) —  — 
Stock options exercised —  8,438  —  — 
Class B common stock converted to Class A common stock 3,485,215  —  (3,485,215) — 
Shares issued at end of period 75,692,772  71,719,614  20,308,454  23,793,669 
Treasury stock 14,592,888  14,592,888  —  — 
Total shares outstanding 61,099,884  57,126,726  20,308,454  23,793,669 

Class B Common Stock Conversion
Effective April 1, 2020, Icahn Enterprises L.P. ("IEP") exercised its right to convert 3,485,215 shares of the Company’s Class B Common Stock into 3,485,215 shares of the Company’s Class A Common Stock. As a result, IEP holds 9,136,392 shares, or approximately 14.99%, of the Company’s outstanding Class A Common Stock and 20,308,454 shares of the Company’s outstanding Class B Common Stock.

Preferred Stock
The Company had 50,000,000 shares of preferred stock ($0.01 par value) authorized at both September 30, 2020 and December 31, 2019. No shares of preferred stock were issued or outstanding at those dates.

Shareholder Rights Plan
On April 15, 2020, the Company's Board of Directors approved a Section 382 Rights Plan, which will expire on the earliest to occur of (i) the close of business on the day following the certification of the voting results of the Company’s 2021 annual meeting of stockholders, if at such stockholder meeting or any other meeting of stockholders of the Company duly held prior to such meeting, a proposal to ratify the Section 382 Rights Plan has not been passed by the requisite vote of the Company’s stockholders; (ii) the date on which the Board of Directors determines in its sole discretion that (x) the Section 382 Rights Plan is no longer necessary for the preservation of material valuable tax attributes or (y) the tax attributes have been fully utilized and may no longer be carried forward; and (iii) the close of business on October 2, 2021.

Pursuant to the Section 382 Rights Plan, our Board of Directors declared a dividend of (i) one preferred share purchase right (a “Class A Right”), payable on April 27, 2020, for each share of Class A Voting Common Stock and (ii) one preferred share purchase right (a “Class B Right” and, together with the Class A Rights, the “Rights”), payable on April 27, 2020, for each share of Class B Non-Voting Common Stock, in each case, outstanding on April 27, 2020 to the stockholders of record on that date. Each Right, which is exercisable only in the event that any person or group acquires 4.9% or more of the Company’s outstanding shares of Class A Voting Common Stock (with certain limited exceptions), would entitle any holder other than the person or group whose ownership position has exceeded the ownership limit to purchase common stock having a value equal to twice the exercise price of the Right, or, at the election of the Board of Directors, to exchange each Right for one share of Class A Common Stock per Class A Right or one share of Class B Non-Voting Common Stock per Class B Right.

41

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Accumulated Other Comprehensive Income (Loss)
The following represents the Company's changes in accumulated other comprehensive income (loss) by component, net of tax for the three and nine months ended September 30, 2020 and 2019:
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Foreign currency translation adjustments and other:
Balance at beginning of period $ (533) $ (383) $ (369) $ (395)
Other comprehensive income (loss) before reclassifications 33  (77) (132) (66)
Reclassification from other comprehensive income (loss) —  —  —  — 
Other comprehensive income (loss) 33  (77) (132) (66)
Income tax benefit (provision) — 
Balance at end of period (500) (458) (500) (458)
Pensions and other postretirement benefits:
Balance at beginning of period (343) (298) (342) (297)
Other comprehensive income (loss) before reclassifications —  —  —  — 
Reclassification from other comprehensive income (loss) (14) (10)
Other comprehensive income (loss) (14) (10)
Income tax benefit (provision) —  (5) (3)
Balance at end of period (357) (295) (357) (295)
Cash flow hedge instruments:
Balance at beginning of period —  — 
Other comprehensive income (loss) before reclassifications (1) — 
Reclassification from other comprehensive income (loss) —  — 
Other comprehensive income (loss) — 
Income tax benefit (provision) —  —  —  — 
Balance at end of period
Accumulated other comprehensive loss at end of period $ (854) $ (752) $ (854) $ (752)
Other comprehensive income (loss) attributable to noncontrolling interests $ 10  $ (22) $ (3) $ (17)

16. Segment Information

Tenneco consists of four operating segments: Powertrain, Clean Air, Ride Performance, and Motorparts. Costs related to other business activities, primarily corporate headquarter functions, are disclosed separately from the four operating segments as "Corporate."

Management uses EBITDA including noncontrolling interests as the key performance measure of segment profitability and uses the measure in its financial and operational decision-making processes, for internal reporting, and for planning and forecasting purposes to effectively allocate resources. EBITDA including noncontrolling interests is defined as earnings before interest expense, income taxes, noncontrolling interests, and depreciation and amortization. Segment assets are not presented as it is not a measure reviewed by the Chief Operating Decision Maker in allocating resources and assessing performance.

42

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
EBITDA including noncontrolling interests should not be considered a substitute for results prepared in accordance with U.S. GAAP and should not be considered an alternative to net income, which is the most directly comparable financial measure to EBITDA including noncontrolling interests that is in accordance with U.S. GAAP. EBITDA including noncontrolling interests, as determined and measured by the Company, should not be compared to similarly titled measures reported by other companies.

Segment results for the three and nine months ended September 30, 2020 and 2019 are as follows:
Reportable Segments
  Clean Air Powertrain Ride Performance Motorparts Total Reclass & Elims Total
For the Three Months Ended September 30, 2020
Revenues from external customers $ 1,919  $ 1,007  $ 600  $ 730  $ 4,256  $ —  $ 4,256 
Intersegment revenues $ $ 37  $ 28  $ $ 78  $ (78) $ — 
Equity in earnings of nonconsolidated affiliates, net of tax $ —  $ $ —  $ $ $ —  $
For the Three Months Ended September 30, 2019
Revenues from external customers $ 1,772  $ 1,082  $ 671  $ 794  $ 4,319  $ —  $ 4,319 
Intersegment revenues $ —  $ 38  $ 42  $ $ 89  $ (89) $ — 
Equity in earnings of nonconsolidated affiliates, net of tax $ —  $ (1) $ $ $ $ —  $
For the Nine Months Ended September 30, 2020
Revenues from external customers $ 4,604  $ 2,606  $ 1,524  $ 1,995  $ 10,729  $ —  $ 10,729 
Intersegment revenues $ 14  $ 96  $ 78  $ 23  $ 211  $ (211) $ — 
Equity in earnings of nonconsolidated affiliates, net of tax $ —  $ 20  $ $ $ 26  $ —  $ 26 
For the Nine Months Ended September 30, 2019
Revenues from external customers $ 5,378  $ 3,390  $ 2,113  $ 2,426  $ 13,307  $ —  $ 13,307 
Intersegment revenues $ —  $ 124  $ 126  $ 31  $ 281  $ (281) $ — 
Equity in earnings of nonconsolidated affiliates, net of tax $ —  $ 26  $ $ $ 34  $ —  $ 34 

Segment EBITDA including noncontrolling interests and the reconciliation to earnings (loss) before interest expense, income taxes, and noncontrolling interests are as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
EBITDA including noncontrolling interests by segment:
Clean Air $ 149  $ 169  $ 265  $ 452 
Powertrain 111  90  (21) 303 
Ride Performance 23  20  (624)
Motorparts 138  113  46  268 
Total reportable segments 421  392  (334) 1,024 
Corporate (34) (79) (169) (256)
Depreciation and amortization (151) (165) (481) (503)
Earnings (loss) before interest expense, income taxes, and noncontrolling interests 236  148  (984) 265 
Interest expense (68) (79) (209) (242)
Income tax (expense) benefit (648) (453) (5)
Net income (loss) $ (480) $ 78  $ (1,646) $ 18 

43

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Disaggregated Revenue
Original Equipment
Value-Added Sales
OE revenue is generated from providing original equipment manufacturers and servicers with products for automotive, heavy duty, and industrial applications. Supply relationships typically extend over the life of the related vehicle, subject to interim design and technical specification revisions, and do not require the customer to purchase a minimum quantity.

Substrate/Passthrough Sales
Generally, in connection with the sale of exhaust systems to certain OE manufacturers, the Company purchases catalytic converters and diesel particulate filters or components thereof including precious metals (“substrates”) on behalf of its customers which are used in the assembled system. These substrates are included in inventory and are “passed through” to the customer at cost, plus a small margin. Since the Company takes title to the substrate inventory and has responsibility for both the delivery and quality of the finished product including the substrates, the revenues and related expenses are recorded at gross amounts.

Aftermarket
Aftermarket revenue is generated from providing products for the global vehicle aftermarket to a wide range of warehouse distributors, retail parts stores, and mass merchants that distribute these products to customers ranging from professional service providers to “do-it-yourself” consumers.

Revenue from contracts with customers is disaggregated by customer type and geography, as it depicts the nature and amount of the Company’s revenue that is aligned with the Company's key growth strategies. Certain amounts in the prior period for the Ride Performance segment have been reclassified from OE - Value add to Aftermarket to conform with the current year presentation. This reclassification affected the three and nine months ended September 30, 2019 and has no effect on the previously reported totals. In the following tables, revenue is disaggregated accordingly:
Reportable Segments
By Customer Type Clean Air Powertrain Ride Performance Motorparts Total
Three Months Ended September 30, 2020
OE - Substrate $ 961  $ —  $ —  $ —  $ 961 
OE - Value add 958  1,007  586  —  2,551 
Aftermarket —  —  14  730  744 
Total $ 1,919  $ 1,007  $ 600  $ 730  $ 4,256 
Three Months Ended September 30, 2019
OE - Substrate $ 775  $ —  $ —  $ —  $ 775 
OE - Value add 997  1,082  658  —  2,737 
Aftermarket —  —  13  794  807 
Total $ 1,772  $ 1,082  $ 671  $ 794  $ 4,319 
Nine Months Ended September 30, 2020
OE - Substrate $ 2,284  $ —  $ —  $ —  $ 2,284 
OE - Value add 2,320  2,606  1,485  —  6,411 
Aftermarket —  —  39  1,995  2,034 
Total $ 4,604  $ 2,606  $ 1,524  $ 1,995  $ 10,729 
Nine Months Ended September 30, 2019
OE - Substrate $ 2,258  $ —  $ —  $ —  $ 2,258 
OE - Value add 3,120  3,390  2,072  —  8,582 
Aftermarket —  —  41  2,426  2,467 
Total $ 5,378  $ 3,390  $ 2,113  $ 2,426  $ 13,307 
44

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Reportable Segments
By Geography Clean Air Powertrain Ride Performance Motorparts Total
Three Months Ended September 30, 2020
North America $ 798  $ 337  $ 192  $ 475  $ 1,802 
Europe, Middle East and Africa 532  459  266  206  1,463 
Rest of world 589  211  142  49  991 
Total $ 1,919  $ 1,007  $ 600  $ 730  $ 4,256 
Three Months Ended September 30, 2019
North America $ 759  $ 386  $ 225  $ 513  $ 1,883 
Europe, Middle East and Africa 581  502  311  229  1,623 
Rest of world 432  194  135  52  813 
Total $ 1,772  $ 1,082  $ 671  $ 794  $ 4,319 
Nine Months Ended September 30, 2020
North America $ 1,837  $ 849  $ 471  $ 1,340  $ 4,497 
Europe, Middle East and Africa 1,345  1,214  724  538  3,821 
Rest of world 1,422  543  329  117  2,411 
Total $ 4,604  $ 2,606  $ 1,524  $ 1,995  $ 10,729 
Nine Months Ended September 30, 2019
North America $ 2,352  $ 1,189  $ 685  $ 1,556  $ 5,782 
Europe, Middle East and Africa 1,831  1,617  1,038  707  5,193 
Rest of world 1,195  584  390  163  2,332 
Total $ 5,378  $ 3,390  $ 2,113  $ 2,426  $ 13,307 

45

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
17. Related Party Transactions

The following table summarizes the net sales, purchases, and royalty and other income (expense) to and from related parties for the three and nine months ended September 30, 2020 and 2019:
Three Months Ended September 30,
2020 2019
Net Sales Purchases Royalty and Other Net Sales Purchases Royalty and Other
Anqing TP Goetze Piston Ring Company Limited $ $ 14  $ $ $ 14  $ — 
Anqing TP Powder Metallurgy Company Limited $ —  $ $ —  $ $ $ — 
Dongsuh Federal-Mogul Industrial Co., Ltd. $ —  $ $ (1) $ $ $ — 
Federal-Mogul Powertrain Otomotiv A.S. $ 13  $ 50  $ $ 11  $ 56  $
Federal-Mogul TP Liner Europe Otomotiv Ltd. Sti. $ —  $ $ —  $ —  $ $ — 
Federal-Mogul TP Liners, Inc. $ $ 12  $ $ $ —  $ — 
Icahn Automotive Group LLC $ 59  $ —  $ $ 48  $ —  $
Montagewerk Abgastechnik Emden GmbH $ $ —  $ —  $ $ —  $ — 
Nine Months Ended September 30,
2020 2019
Net Sales Purchases Royalty and Other Net Sales Purchases Royalty and Other
Anqing TP Goetze Piston Ring Company Limited $ 12  $ 40  $ $ $ 43  $
Anqing TP Powder Metallurgy Company Limited $ $ $ —  $ $ $ — 
Dongsuh Federal-Mogul Industrial Co., Ltd. $ $ $ (1) $ $ 10  $ — 
Federal-Mogul Powertrain Otomotiv A.S. $ 30  $ 126  $ 12  $ 55  $ 168  $
Federal-Mogul TP Liner Europe Otomotiv Ltd. Sti. $ —  $ $ —  $ —  $ $ — 
Federal-Mogul TP Liners, Inc. $ 10  $ 28  $ $ 12  $ —  $
Frenos Hidraulicos Autos $ —  $ —  $ —  $ $ —  $ — 
Icahn Automotive Group LLC $ 124  $ —  $ $ 138  $ —  $
Montagewerk Abgastechnik Emden GmbH $ $ —  $ —  $ $ —  $ — 
PSC Metals, Inc. $ $ —  $ —  $ $ —  $ — 

The following table is a summary of amounts due to and from the Company's related parties at September 30, 2020 and December 31, 2019:
September 30, 2020 December 31, 2019
Receivables Payables and Accruals Receivables Payables and Accruals
Anqing TP Goetze Piston Ring Company Limited $ $ 22  $ $ 26 
Anqing TP Powder Metallurgy Company Limited $ —  $ $ —  $
Dongsuh Federal-Mogul Industrial Co., Ltd. $ —  $ $ —  $
Farloc Argentina SAIC $ —  $ —  $ $ — 
Federal-Mogul Powertrain Otomotiv A.S. $ 17  $ 31  $ $ 31 
Federal-Mogul TP Liners, Inc. $ $ $ $
Icahn Automotive Group LLC $ 62  $ 11  $ 52  $ 10 
Montagewerk Abgastechnik Emden GmbH $ $ —  $ $ — 

Refer to Note 7, Investment in Nonconsolidated Affiliates, for further information for companies within the tables above that represent equity method investments.

46

TENNECO INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Amounts presented as Icahn Automotive Group LLC represent the Company's activities with Auto Plus and Pep Boys.

During the three and nine months ended September 30, 2020, the Company paid an amount owed to IEP of $3 million, related to the allocation of certain tax credits.

As part of the Federal-Mogul Acquisition, the Company acquired a redeemable noncontrolling interest related to a subsidiary in India. In accordance with local regulations, the Company initiated a process to make a tender offer of the shares it did not own due to the change in control triggered by the Federal-Mogul Acquisition. The Company entered into separate agreements with IEP subsequent to the purchase agreement whereby IEP agreed to fund and execute the tender offer for the shares on behalf of the Company. During the first quarter of 2020, the tender offer for the shares was completed. Since the transaction was funded and executed by IEP, the completion of the tender offer resulted in an adjustment to additional paid-in capital during the nine months ended September 30, 2020. Immediately following the completion of the tender offer, the shares of this noncontrolling interest not owned by the Company were no longer redeemable, or probable of becoming redeemable; therefore, the noncontrolling interest was reclassified from temporary equity to permanent equity during the nine months ended September 30, 2020. Refer to Note 2, Summary of Significant Accounting Policies, for further information on this noncontrolling interest.

47


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References herein to "Tenneco", the "Company", "we", "us", and "our" refer to Tenneco Inc. and its consolidated subsidiaries. Unless otherwise stated, all comparisons of September 30, 2020 financial results are to September 30, 2019 financial results.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the condensed consolidated financial statements and related notes included in Item 1 of this quarterly report on Form 10-Q and the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission ("SEC") on March 2, 2020 (the "2019 Form 10-K").

EXECUTIVE OVERVIEW
Our Business
We are one of the world's leading manufacturers of clean air, powertrain, and ride performance products and systems for light vehicle, commercial truck, off-highway, industrial, and aftermarket customers. Both original equipment ("OE") vehicle designers and manufacturers and the repair and replacement markets, or aftermarket, are served globally through leading brands, including Monroe®, Champion®, Öhlins®, MOOG®, Walker®, Fel-Pro®, Wagner®, Ferodo®, Rancho®, Thrush®, National®, and Sealed Power®, among others.

Tenneco consists of four operating segments, Clean Air, Powertrain, Ride Performance, and Motorparts:
The Clean Air segment designs, manufactures, and distributes a variety of products and systems designed to reduce pollution and optimize engine performance, acoustic tuning, and weight on a vehicle for OE customers;
The Powertrain segment focuses on original equipment powertrain products for automotive, heavy duty, and industrial applications;
The Ride Performance segment designs, manufactures, markets, and distributes a variety of ride performance solutions and systems to a global OE customer base, including noise, vibration, and harshness performance materials, advanced suspension technologies, ride control, and braking; and
The Motorparts segment engineers, manufactures, sources, and distributes a broad portfolio of products in the global vehicle aftermarket while also servicing the original equipment and original equipment servicers market with products, including vehicle braking systems and a wide variety of chassis, engine, sealing, wiper, filter, lighting, and other general maintenance applications.

The COVID-19 global pandemic has negatively affected the global economy, disrupted global supply chains, and created extreme volatility and disruptions to capital and credit markets in the global financial markets. We have responded quickly to protect our team members’ health and safety while taking aggressive actions to mitigate the financial effect of the pandemic on us. In response to the pandemic, we expanded on structural cost reductions, and implemented a range of temporary cost reductions including plant closures, deferment of discretionary spending, and the reduction of capital expenditures. In addition, on April 15, 2020, our Board of Directors adopted a shareholder rights plan designed to protect the availability of our tax assets in the current volatile market environment and, on May 5, 2020, we entered into a third amendment to our credit agreement to increase the maximum leverage ratio and decrease the minimum interest coverage ratio. There are many uncertainties related to COVID-19 that could negatively affect our results of operations, financial position, and cash flows. After considering the effect of COVID-19 on our 2020 forecast, we believe we will comply with our financial covenants, as required by our amended credit agreement and we believe our liquidity position continues to be adequate based on our current estimates and forecasts.

Other factors that we expect will continue to be critical to our success include winning new business awards, managing our overall global manufacturing footprint to ensure proper placement and workforce levels in line with business needs, maintaining competitive wages and benefits, maximizing efficiencies in manufacturing processes, and reducing overall costs. In addition, our ability to adapt to key industry trends, such as a shift in consumer preferences to other vehicles in response to higher fuel costs and other economic and social factors, increasing technologically sophisticated content, changing aftermarket distribution channels, increasing environmental standards, and extended product life of automotive parts, also play a critical role in our success. Other factors that are critical to our success include adjusting to economic challenges such as increases in the cost of raw materials and our ability to successfully reduce the effect of any such cost increases through material substitutions, cost reduction initiatives, and other methods.

48


Beginning in the second quarter of 2020, the Motorparts segment initiated a rationalization of its supply chain and distribution network to achieve supply chain efficiencies and improve throughput to its customers. As a result, certain assets including inventory, real estate, and personal property will no longer be utilized. As such, during the nine months ended September 30, 2020, the Motorparts segment recognized an $82 million non-cash charge to write-down inventory to its net realizable value, a $16 million impairment charge to write-down property, plant, and equipment to its fair value, and a $9 million impairment charge to its operating lease right-of-use assets. Additionally, the Motorparts segment recognized $4 million in restructuring charges related to cash severance expected to be paid in connection with this action.

Separation Transaction
We have previously announced our review of a full range of strategic options to enhance shareholder value creation, including a potential separation of the Company into an Aftermarket and Ride Performance company and a new Powertrain Technology company. Current end-market conditions and the effects of the ongoing COVID-19 pandemic are affecting our ability to complete a separation. In light of these ongoing conditions, we are pursuing additional options to optimize shareholder value creation, including a focus on operational improvements, reducing structural costs, lowering capital intensity, and reducing debt.

Financial Results for the Nine Months Ended September 30, 2020
Consolidated revenues were $10,729 million, a decrease of $2,578 million, or 19%, for the nine months ended September 30, 2020. The primary driver of the decrease is lower sales volume and unfavorable mix of $2,270 million, largely attributable to the effects of COVID-19. The remaining decrease is attributable to a decrease in revenues of $75 million, or less than 1%, related to the net effects of acquisitions and divestitures, the unfavorable effects of foreign currency exchange of $188 million, and the net unfavorable effects of other of $45 million.

Cost of sales were $9,447 million, a decrease of $1,884 million, or 17%, for the nine months ended September 30, 2020. The primary driver of the decrease is from lower sales volume of $1,597 million, largely attributable to the effects of COVID-19. The remaining decrease is attributable to the decrease in cost of sales of $66 million, or less than 1%, related to the net effects of acquisitions and divestitures, the favorable effects of materials sourcing of $40 million, the favorable effects of foreign currency exchange of $150 million, and the net favorable effects of other costs of $113 million. This was partially offset by a non-cash charge of $82 million related to the write-down of inventory in the Motorparts segment in connection with its initiative to rationalize its supply chain and distribution network. Included in other costs of $113 million, is $9 million of margin on discontinued product that was previously written-down.

Net loss increased by $1,664 million to a net loss of $1,646 million for the nine months ended September 30, 2020 as compared to a net income of $18 million for the nine months ended September 30, 2019. The increase was primarily driven by:
an increase in restructuring charges, net and asset impairments of $524 million primarily related to the impairment of long-lived asset groups triggered by the effects of the COVID-19 global pandemic on the Company's projected financial information, global headcount and cost reduction initiatives, and other actions to optimize our distribution footprint and warehousing locations;
an increase in goodwill and intangible impairment charges of $314 million, which was comprised of an increase in goodwill impairment charges of $198 million, $65 million of definite-lived intangible asset impairments, and $51 million of indefinite-lived intangible asset impairments; and
an increase in income tax expense of $448 million primarily attributable to (i) a non-cash charge of $369 million and $11 million relating to the establishment of valuation allowances on deferred tax assets recognized in prior years for the U.S. and France; (ii) a non-cash tax benefit of $2 million relating to the reversal of a valuation allowance in China; and (iii) a $145 million non-cash charge to adjust the estimated annual tax rate for the tax benefit that can no longer be recognized due to the change in positions for these respective entities.
These unfavorable effects were partially offset by:
a decrease in selling, general, and administrative costs of $204 million, primarily due to $64 million in lower acquisition and expected separation costs, and the favorable effects of cost reduction initiatives implemented in response to the effects of COVID-19, including unpaid furloughs, net pay decreases, temporary support programs, and other compensation related expenses;
a decrease in engineering, research, and development of $49 million primarily due to the effects of COVID-19 and cost reduction initiatives; and
a decrease in interest expense of $33 million primarily attributable to lower interest rates on variable rate debt, slightly offset by interest expense on higher borrowings on the revolver. This includes a decrease of $8 million in financing charges on sales of accounts receivable during the nine months ended September 30, 2020.

49


Recent Trends and Market Conditions
There is inherent uncertainty in the continuation of the trends discussed below. In addition, there may be other factors or trends that can have an effect on our business. Our business and operating results are affected by the relative strength of:

General economic conditions
Our OE business is directly related to automotive vehicle production by our customers. Automotive production levels depend on a number of factors, including global and regional economic conditions. Demand for aftermarket products is driven by three primary factors: the number of vehicles in operation; the average age of vehicles; and vehicle usage trends (primarily distance traveled).

In late 2019, a novel strain of coronavirus, COVID-19, was first detected in Wuhan, China. In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world have implemented measures to reduce the spread of COVID-19. COVID-19 has resulted in suspension or reduction of operations, supply chain disruptions, restrictions on domestic and international travel, and a decrease in consumer traffic. These measures have adversely affected workforces, customers, economies, and financial markets, and, along with decreased consumer spending, reductions in revenue, and delays in payments from customers and partners, have led to an economic downturn in many of our markets.

The decline in value-add revenue for the three and nine months ended September 30, 2020 was $249 million and $2,604 million which is largely attributable to the effects of the COVID-19 global pandemic. We expect the effects of the COVID-19 outbreak will likely continue during the fourth quarter of our fiscal year and, accordingly, we cannot predict the extent to which COVID-19 will ultimately affect our business, results of operations or financial condition. As customer demand increases, we expect to face periods where payments will become due to suppliers for our existing and additional inventories to support renewed production before we have generated new receivables from customers from that renewed production. It is our intent to maintain a consistent balance between our payables and receivables during this time.

Cost reductions and other responses to COVID-19
The Company has implemented a range of actions aimed at temporarily reducing costs and preserving liquidity in response to the effects and anticipated effects to our business resulting from COVID-19 as described under “Liquidity and Capital Resources - Liquidity and Financing Arrangements”. The Company will continue to evaluate further ways to manage costs in line with reduced revenue.

Global light vehicle production levels (According to IHS Markit, October, 2020)
For the three months ended September 30, 2020, global light vehicle production was flat compared to the same period in the prior year resulting from offsetting increases and decreases across the major markets in which we operate. Production levels in North America improved 1% and production in China increased 11%, while light vehicle production declined by 21% in South America, 8% in Europe, and 9% in India.

Global light vehicle production decreased by 23% overall for the first nine months of 2020 compared to the same period in the prior year. There were significant declines globally, including a 26% decline in North America, a 30% decline in Europe, a 41% decline in South America, a 38% decline in India, and a 9% decline in China.

Global commercial truck production levels (According to IHS Markit, August, 2020)
For the three months ended September 30, 2020, global commercial truck production was down across most major markets in which we operate and down 14% overall compared to the same period in the prior year. Production decreased by 40% in North America, 26% in Brazil, 23% in Europe, and 32% in India, while China was up 15%.

Global commercial truck production decreased by 25% overall for the first nine months of 2020 compared to the same period in the prior year. There were significant declines globally, including a 45% decline in North America, a 34% decline in Europe, a 32% decline in Brazil, and a 66% decline in India. Commercial truck production in China improved by 3% for the first nine months of 2020 compared to the same period in the prior year.

Part replacement trends
The strength of our aftermarket business is influenced by several key drivers. These include the vehicle population (or "VIO", vehicles in operation), average vehicle age, fuel prices, and vehicle distance traveled. The VIO is estimated to have expanded in most major markets, including the U.S., China, and Germany over recent years. Average vehicle ages also increased, despite growth in new vehicle sales, in most regions. Vehicle distance traveled varies by region and is sensitive to several factors, including fuel prices, and transportation alternatives.

50


Geopolitical risk
We conduct business globally, which subjects us to numerous risks and uncertainties including, without limitation, “Brexit” implications, joint ventures in unstable regions, and substantial new tariffs. For example, we have operations in the U.K. which may be materially affected by the U.K.'s referendum to leave the European Union, which has created uncertainty in both the U.K. and Europe. We also have an interest in a Turkish joint venture, which may be affected by recent turmoil in that region. In addition, we do business in Mexico and China where there could be potential changes in trade agreements (e.g., the North American Free Trade Agreement) and new or changed tariffs in the U.S. (such as those relating to China).

Foreign currencies
Given the global nature of our operations, we are subject to fluctuations in foreign exchange rates and there has been significant volatility in foreign currency rates.

Business Strategy
Many of the key components of our business strategy are described below. As we continue to monitor and respond to the COVID-19 global pandemic, we expect that certain of these business strategies will be secondary to our attention to the pandemic and our response and mitigation measures worldwide.

Continue to optimize operational performance by aggressively pursuing cost competitiveness in all business segments and continuing to drive cash flow generation and meet capital allocation objectives
As we continue to expand our distribution and service capabilities globally, we seek to continue optimizing our performance through enhanced efficiencies in order to meet the world-class delivery performance our customers increasingly require. We have made and will continue to make investments in our global distribution network to maximize our manufacturing footprint and manage complexities of our supply chain. By achieving efficiency gains and cost competitiveness, we strive to generate strong cash flow and meet our capital allocation objectives, including deleveraging our balance sheet.

From a design perspective, we will bring a lean mindset to our portfolio to ensure standardization, remove redundancies, reduce transit costs, leverage economies of scale, and optimize manufacturing productivity. We will also continually look for ways to innovate and leverage cross- and up-sell opportunities to the market through a customer-centric product development process. From a manufacturing perspective, we will maintain a continuous improvement philosophy by streamlining plant operations and our network, and executing projects to improve efficiency.

Serving our customers also requires that we compete effectively at the unit cost level, in particular with OE customers. We are making concerted and systematic efforts to continuously improve our position on the cost curve for each of our component part categories. In doing so, we will continue to be a preferred supplier to our customers.

We will be mindful of the changing market conditions that might necessitate adjustments to our resources and manufacturing capacity around the world. We will also remain committed to protecting the environment as well as the health and safety of our employees.

Pursue focused transactional opportunities, consistent with our capital allocation priorities, product line enhancements, technological advancements, geographic positioning, penetration of emerging markets and market share growth
Throughout our history, we have successfully identified and capitalized on acquisitions, alliances, and divestitures to achieve strategic growth and alignment. Through these transactions, we have (1) expanded our product portfolio with complementary technologies; (2) realized incremental business from existing customers; (3) gained access to new customers; (4) achieved leadership positions in geographic regions outside North America; and (5) re-focused on areas that will contribute to our profitable growth.

We intend to continue to explore strategic alliances, joint ventures, acquisitions, divestitures, and other transactions that complement, expand, enhance or realign our existing products, technology, systems development efforts, customer base and/or global presence. We are committed to developing a broader ecosystem-based approach that allows us to work with new and existing customers, suppliers, and entrants to provide timely and leading-edge solutions across the mobility market. We will align with companies that have proven products, proprietary technology, advanced research capabilities, broad geographic reach, and/or strong market positions to further strengthen our product leadership, technology position, global reach, and customer relationships.
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Adapt cost structure to economic realities
We aggressively respond to difficult economic environments, aligning our operations to any resulting reductions in production levels and replacement demand and executing comprehensive restructuring and cost-reduction initiatives. Suppliers must continually identify and implement product innovation and cost reduction activities to fund customer annual price concession expectations in order to retain current business as well as to be competitively positioned for future new business opportunities.

Original Equipment Specific Strategies
The converging forces of connectivity, autonomy, electrification, and shared mobility are spawning a new age of automotive autonomy and a unique opportunity to position our business for significant growth and profitability. We strive to strengthen our global position by designing, manufacturing, delivering, and marketing technologically innovative products and solutions for OE manufacturers. The key components of our OE strategy are described below:

Capitalize on our breadth of technology, differentiated products, and global reach to support and strengthen relationships with existing and emerging OE customers across the world
We conduct business with nearly all of the major automotive OE customers around the world. Within the highly competitive automotive parts industry, we seek to extend the significant advantages that come from our world-class global manufacturing, engineering and distribution footprint and global sourcing capabilities. This footprint enables the design, production and delivery of premium parts emphasizing quality, safety and reliability virtually anywhere in the world and also supports the continual innovation of new products, technologies, and solutions for new and existing OE customers.

Maintain technological leadership to drive further growth from secular market trends
In order to maintain our strong market positions, we are focused on meeting changing performance requirements and keeping up with emerging OE trends such as connectivity, autonomy, shared mobility, and electrification. In pursuit of delivering the ideal ride characteristics for any application, our ride performance division will leverage its innovative technology, NVH performance materials, differentiated products, and advanced system capabilities to provide innovative solutions. Aligning product lines and technical capabilities creates an ideal foundation to meet changing performance requirements for comfort and safety and again ultimately reinventing the ride of the future. The addition of Öhlins to the portfolio will accelerate the development of advanced technology suspension solutions, while also fast-tracking time to market. That acquisition is yet another example of our strategy to leverage key technologies that will better position us to take advantage of secular trends. It also enhances our portfolio in broader mobility markets through the addition of Öhlins’ range of premium OE and aftermarket automotive and motorsports performance products. In addition, our suite of mobility solutions under development represents an opportunity to drive greater partnership with OE manufacturers and broader mobility ecosystem players, creating and capturing value, and growth with higher value content per vehicle.

OE manufacturers are responding to changing end customer trends and preferences alongside their own challenging cost structures by reducing design and production complexities and investing in advanced technologies that enable vehicle electrification and autonomy. We anticipate that OE suppliers with high technology capabilities in vehicle system integration will be able to enable a more seamless transition to next-generation electric vehicles and become preferred suppliers to OE manufacturers. Though many vehicle and customer requirements will evolve, we believe one of the remaining characteristics that will continue to provide differentiated experience and value in the future of mobility is the ride experience. By leveraging our deep component level expertise as well as working with partners across the broader mobility ecosystem, our intent is to lead in the next generation development of motion management products, systems and solutions to engineer the ideal ride for any customer.

Penetrate adjacent market segments
We seek to penetrate a variety of adjacent sales opportunities and achieve growth in higher-margin businesses by applying our design, engineering and manufacturing capabilities. For example, we aggressively leverage our technology and engineering leadership in powertrain, clean air, ride performance and aftermarket into adjacent sales opportunities for heavy-duty trucks, buses, agricultural equipment, construction machinery, and other vehicles in other regions around the world.

We design and launch clean air products for commercial vehicle customers such as Caterpillar, for whom we are their global diesel clean air system integrator, John Deere, Navistar, Deutz, Daimler Trucks, Scania, Weichai Power, FAW Group, and Kubota. We also engineer and build modular NOx-reduction systems for large engines that meet standards of the International Maritime Organization, among others.
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Aftermarket Specific Strategies
Our aftermarket business strategy incorporates a go-to-market model that we believe differentiates us from our competitors and creates structural support for sustained revenue growth. The model is designed to drive revenue growth by capitalizing on three of the company’s key competitive strengths: a leading portfolio of products and brands; extensive global manufacturing, distribution and service capabilities; and market intelligence gathered from the company’s distributors, installers and consumers.

We expect this distinctive go-to-market model will result in a sustainable competitive advantage, particularly as the industry trends previously mentioned disrupt the traditional aftermarket landscape and business practices. We expect the demand for replacement parts to increase as a result of the increase in the average age of VIO and the increase in the average miles driven per year. The characteristics of aftermarket sales and distribution are defined regionally, which require regionally focused strategies to address the key success factors of our customers. The key components of our aftermarket strategy are described below:

Leverage the strength of our global aftermarket leading brands positions, product portfolio and range, marketing and selling expertise, and distribution and logistics capabilities
Our aftermarket business includes multiple leading brands with strong product offerings. Our portfolio includes the industry’s most well-respected and enduring brands.

We will leverage our go-to-market model to build upon our brand strengths and grow our global aftermarket business by consistently delivering differentiated benefits, by growing our brand equity among our target end-customers, and by leveraging our broad product coverage and extensive distribution network. We are in an outstanding position to capitalize on aftermarket trends and expand in mature markets (e.g., North America, Europe, and Australia) as well as high-growth regions (i.e. China, South America, India, and Southeast and Northeast Asia). Important focus areas are enhancing our presence in high-growth markets; leveraging our portfolio and strong presence in suspension to expand our business globally; and diversifying outside of chassis with our sealing, engine and underhood products, as well as other components.

Continue to strengthen our aftermarket capabilities and product offerings in mature markets, including North America and Europe
The scale of our aftermarket business allows for strong distribution channels that significantly enhance our go-to-market capabilities across mature markets in North America and Europe. We continually rationalize our already strong distribution networks with the goal of improved customer service at a lower cost. This is achieved by continually harnessing and leveraging market intelligence and sharing information with our channel partners to drive best practices in go-to-market, manufacturing and distribution processes.

The North America and Europe go-to-market capabilities will be defined by positioning our distribution and installer partners for success. We believe this will require maintaining an extensive catalog of products to provide the ability to address customer requirements quickly and easily. Managing a large and complex catalog of products requires an understanding of the composition of the car parc within the regions including wear patterns, typical replacement rates based on weather, road quality, and average miles driven annually. These compositions differ significantly by region, which will affect the range and frequency of replacement part requirements. The understanding of these regional dynamics will help us provide the right parts when they are needed and achieve the industry’s best “Order to Delivery” times. We will continue to innovate product solutions that will be cost competitive and reliable, reduce install time, reduce the number of unique parts that installers need to inventory on-site, reduce the number of unique installer tools and equipment required, and improve installer safety.

In addition to having a comprehensive product offering, we also strive to maintain very close relationships with our customers and help position them for success. We have launched a series of “Tech First” initiatives to provide online, on demand, and onsite technical training and support to vehicle repair technicians who use and install our products in North America, Europe, and China and plan to expand into South America. This initiative included Garage Gurus™, a network of technical support centers that provide some of the most comprehensive training programs in the industry to educate our partners and customers with emerging vehicle technologies and vehicle repair operational skills. We believe it is key to our strategy to provide aftermarket parts that are simple to install and to make sure our customers have the resources to know how to install these parts properly. In having the right products and resources for our customers, we believe we will continue to be a preferred aftermarket supplier and continue to drive growth in the Americas and emerging economic areas.
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Increase aftermarket position in high-growth regions, notably in Asia Pacific
The Asia Pacific region, particularly the high-growth markets of China and India, presents a significant opportunity for us to expand our business. We have made investments in distribution and in our sales force in both China and the rest of Asia to help drive growth in this increasingly important region. We must take into account the different operational requirements in Asia Pacific in order to drive aftermarket growth in this region.

The Asia Pacific light vehicle and commercial vehicle aftermarket industry is fragmented with a large number of small distributors and installers that require different strategies and solutions than more mature consolidated markets. Distribution in smaller volumes will require us to have a hub and spoke warehousing approach to compete on the basis of optimal “Order to Delivery” timeliness while maintaining a broad range of products.

Additionally, buying online is the preferred purchase method for many smaller distribution and installer partners. The sophistication of the existing online marketplaces in Asia Pacific will require us to develop adaptive and flexible omnichannel tools in order to compete effectively. We believe that developing a competitive online platform for our Asia Pacific customers will be the foundation for us to build a digital platform that will improve our competitiveness globally.

Critical Accounting Estimates
Refer to our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on March 2, 2020.

Non-GAAP Measures
We use EBITDA including noncontrolling interests as the key performance measure of segment profitability and use the measure in our financial and operational decision-making processes, for internal reporting, and for planning and forecasting purposes to effectively allocate resources. EBITDA including noncontrolling interests is defined as earnings before interest expense, income taxes, noncontrolling interests, and depreciation and amortization. EBITDA including noncontrolling interests should not be considered a substitute for results prepared in accordance with U.S. GAAP and should not be considered an alternative to net income. EBITDA including noncontrolling interests, as determined and measured by us, should not be compared to similarly titled measures reported by other companies.
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RESULTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2020 compared to the Three and Nine Months Ended September 30, 2019
Consolidated Results of Operations
The following table presents our condensed consolidated results of operations. The amounts for the three and nine months ended September 30, 2019 below reflect the reclassifications to the prior period as discussed in Part I, Item I.
  Three Months Ended September 30, Increase / (Decrease) Nine Months Ended September 30, Increase / (Decrease)
  2020 2019 $ Change
% Change (1)
2020 2019 $ Change
% Change (1)
(millions, except percent, share, and per share amounts)
Revenues
Net sales and operating revenues $ 4,256  $ 4,319  $ (63) (1) % $ 10,729  $ 13,307  $ (2,578) (19) %
Costs and expenses
Cost of sales (exclusive of depreciation and amortization) 3,610  3,660  (50) (1) % 9,447  11,331  (1,884) (17) %
Selling, general, and administrative 214  252  (38) (15) % 658  862  (204) (24) %
Depreciation and amortization 151  165  (14) (8) % 481  503  (22) (4) %
Engineering, research, and development 67  78  (11) (14) % 199  248  (49) (20) %
Restructuring charges, net and asset impairments 17  33  (16) (48) % 622  98  524  n/m
Goodwill and intangible impairment charges —  (9) (100) % 383  69  314  n/m
4,059  4,197  (138) (3) % 11,790  13,111  (1,321) (10) %
Other income (expense)
Non-service pension and other postretirement benefit (costs) credits 18  (2) 20  n/m 20  (8) 28  n/m
Equity in earnings (losses) of nonconsolidated affiliates, net of tax n/m 26  34  (8) (24) %
Other income (expense), net 12  27  (15) (56) % 31  43  (12) (28) %
39  26  13  50  % 77  69  12  %
Earnings (loss) before interest expense, income taxes, and noncontrolling interests 236  148  88  59  % (984) 265  (1,249) n/m
Interest expense (68) (79) (11) (14) % (209) (242) (33) (14) %
Earnings (loss) before income taxes and noncontrolling interests 168  69  99  143  % (1,193) 23  (1,216) n/m
Income tax (expense) benefit (648) 657  n/m (453) (5) 448  n/m
Net income (loss) (480) 78  (558) n/m (1,646) 18  (1,664) n/m
Less: Net income (loss) attributable to noncontrolling interests 19  11  138  % 42  39  %
Net income (loss) attributable to Tenneco Inc. $ (499) $ 70  $ (569) n/m $ (1,688) $ (21) $ (1,667) n/m
Earnings (loss) per share
Basic earnings (loss) per share:
Earnings (loss) per share $ (6.12) $ 0.87  $ (20.75) $ (0.25)
Weighted average shares outstanding 81,456,821  80,916,676  81,325,385  80,903,967 
Diluted earnings (loss) per share:
Earnings (loss) per share $ (6.12) $ 0.87  $ (20.75) $ (0.25)
Weighted average shares outstanding 81,456,821  80,916,676  81,325,385  80,903,967 
(1) Percentages above denoted as "n/m" are not meaningful to present in the table.

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Revenues
Three-months ended: Revenues decreased by $63 million, or 1%, as compared to the three months ended September 30, 2019. The primarily driver of the decrease is lower sales volume and unfavorable mix of $41 million, largely attributable to the effects of COVID-19. The remaining decrease is attributable to a decrease in revenues of $15 million, or less than 1%, related to the net effects of acquisitions and divestitures and the net unfavorable effects of other of $24 million, partially offset by the favorable effects of foreign currency exchange of $17 million.

The table below reflects consolidated revenues for the three months ended September 30, 2020 and 2019 (amounts in millions):
Three months ended September 30, 2019 $ 4,319 
Acquisitions and divestitures, net (15)
Drivers in the change of organic revenues:
Volume and mix (41)
Currency exchange rates 17 
Others (24)
Three months ended September 30, 2020 $ 4,256 

Nine-months ended: Revenues decreased by $2,578 million, or 19%, as compared to the nine months ended September 30, 2019. The primary driver of the decrease is lower sales volume and unfavorable mix of $2,270 million, largely attributable to the effects of COVID-19. The remaining decrease is attributable to a decrease in revenues of $75 million, or less than 1%, related to the net effects of acquisitions and divestitures, the unfavorable effects of foreign currency exchange of $188 million, and the net unfavorable effects of other of $45 million.

The table below reflects consolidated revenues for the nine months ended September 30, 2020 and 2019 (amounts in millions):
Nine months ended September 30, 2019 $ 13,307 
Acquisitions and divestitures, net (75)
Drivers in the change of organic revenues:
Volume and mix (2,270)
Currency exchange rates (188)
Others (45)
Nine months ended September 30, 2020 $ 10,729 

Cost of sales
Three-months ended: Cost of sales decreased by $50 million, or 1%, as compared to the three months ended September 30, 2019. The primary driver of the decrease, included in net favorable effects of other costs of $73 million, is improved operating performance. Also contributing to the decrease in cost of sales is $11 million, or less than 1%, related to the net effects of acquisitions and divestitures and the favorable effects of materials sourcing of $18 million. These decreases were largely offset by the unfavorable effects of foreign currency exchange of $31 million and higher costs resulting from unfavorable mix amid lower volumes for a net of $21 million. Included in other costs of $73 million, is $9 million of margin on discontinued product that was previously written-down.

The table below reflects consolidated cost of sales for the three months ended September 30, 2020 and 2019 (amounts in millions):
Three months ended September 30, 2019 $ 3,660 
Acquisitions and divestitures, net (11)
Drivers in the change of organic cost of sales:
Volume and mix 21 
Materials sourcing (18)
Currency exchange rates 31 
Others (73)
Three months ended September 30, 2020 $ 3,610 

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Nine-months ended: Cost of sales decreased by $1,884 million, or 17%, as compared to the nine months ended September 30, 2019. The primary driver of the decrease is from lower sales volume of $1,597 million, largely attributable to the effects of COVID-19. The remaining decrease is attributable to a decrease in cost of sales of $66 million, or less than 1%, related to the net effects of acquisitions and divestitures, the favorable effects of materials sourcing of $40 million, the favorable effects of foreign currency exchange of $150 million, and the net favorable effects of other costs of $113 million. This was partially offset by a non-cash charge of $82 million related to the write-down of inventory in the Motorparts segment in connection with its initiative to rationalize its supply chain and distribution network. Included in other costs of $113 million, is $9 million of margin on discontinued product that was previously written-down.

The table below reflects consolidated cost of sales for the nine months ended September 30, 2020 and 2019 (amounts in millions):
Nine months ended September 30, 2019 $ 11,331 
Acquisitions and divestitures, net (66)
Drivers in the change of organic cost of sales:
Volume and mix (1,597)
Materials sourcing (40)
Currency exchange rates (150)
Inventory write-down 82 
Others (113)
Nine months ended September 30, 2020 $ 9,447 

Selling, general, and administrative (SG&A)
Three-months ended: SG&A decreased by $38 million to $214 million compared to $252 million for the three months ended September 30, 2019. The decrease was primarily due to $22 million in lower acquisition and expected separation costs, and the favorable effects of cost reduction initiatives implemented in response to the effects of COVID-19, including unpaid furloughs, net pay decreases, temporary support programs, and other compensation related expenses during the three months ended September 30, 2020. In addition, SG&A includes a reduction of $9 million recognized for a non-income tax refund received in the three months ended September 30, 2020.

Nine-months ended: SG&A decreased by $204 million to $658 million compared to $862 million for the nine months ended September 30, 2019. The decrease was primarily due to $64 million in lower acquisition and expected separation costs, and the favorable effects of cost reduction initiatives implemented in response to the effects of COVID-19, including unpaid furloughs, net pay decreases, temporary support programs, and other compensation related expenses during the nine months ended September 30, 2020. In addition, SG&A includes a reduction of $9 million recognized for a non-income tax refund received in the nine months ended September 30, 2020.

Depreciation and amortization
Three-months ended: Depreciation and amortization decreased by $14 million to $151 million as compared to $165 million for the three months ended September 30, 2019, primarily attributable to the effects of the impairments on property, plant, and equipment recognized in the first quarter of 2020.

Nine-months ended: Depreciation and amortization decreased by $22 million to $481 million as compared to $503 million for the nine months ended September 30, 2019, primarily attributable to the effects of the impairments on property, plant, and equipment recognized in the first quarter of 2020.

Engineering, research, and development
Three-months ended: Engineering, research, and development decreased by $11 million to $67 million as compared to $78 million for the three months ended September 30, 2019. The decrease was due primarily to the effects of COVID-19 and the favorable effects of cost reduction initiatives.

Nine-months ended: Engineering, research, and development decreased by $49 million to $199 million as compared to $248 million for the nine months ended September 30, 2019. The decrease was due primarily to the effects of COVID-19 and the favorable effects of cost reduction initiatives.

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Restructuring charges, net and asset impairments
Three-months ended: Restructuring charges, net and asset impairments decreased by $16 million to $17 million as compared to $33 million for the three months ended September 30, 2019. The decrease is primarily attributable to a decrease of $11 million for cash severance costs expected to be paid as part of global headcount and cost reduction actions across all segments and regions, including plant closures, during the three months ended September 30, 2020. In addition, there was a decrease of $5 million in other asset impairments, primarily related to assets held for sale for a non-core business, for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019.

Nine-months ended: Restructuring charges, net and asset impairments increased by $524 million to $622 million as compared to $98 million for the nine months ended September 30, 2019. The increase is primarily attributable to property, plant, and equipment asset impairments in the Ride Performance segment of $455 million; an increase of $31 million for cash severance costs expected to be paid as part of global headcount and cost reduction actions across all segments and regions, including plant closures; asset impairment charges in the Motorparts segment of $25 million related to its initiative to rationalize its supply chain and distribution network; asset impairment charges of $3 million in the Powertrain segment in connection with certain plant relocations and closures; and an asset impairment charge of $17 million for operating lease right-of-use assets in the corporate component during the nine months ended September 30, 2020. In addition, there was a decrease of $7 million in other asset impairments, primarily related to assets held for sale for a non-core business, for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.

Goodwill and intangible impairment charges
Three-months ended: There was no goodwill and intangible impairment charge for the three months ended September 30, 2020 as compared to a $9 million goodwill impairment charge recorded in the three months ended September 30, 2019. Purchase accounting was completed for the Federal-Mogul Acquisition during the third quarter of 2019 and the allocation of goodwill was finalized. As a result, the final goodwill allocation was reassigned to the reorganized segments and reporting unit structure that occurred in the first quarter of 2019 and an incremental $9 million of goodwill was impaired for one reporting unit in the Ride Performance segment.

Nine-months ended: Goodwill and intangible impairment charges increased by $314 million to $383 million as compared to $69 million for the nine months ended September 30, 2019. The increase is primarily attributable to $267 million of goodwill impairment charges, $65 million of definite-lived intangible asset impairments, and $51 million of indefinite-lived intangible asset impairments during the nine months ended September 30, 2020, which was the result of the effects of COVID-19 on the projected financial information during the first quarter 2020. This compared to a $69 million goodwill impairment charge for the nine months ended September 30, 2019, which was the result of a reorganization of reporting units within the Motorparts and Ride Performance segments.

Non-service pension and postretirement benefit (costs) credits
Three-months ended: Non-service pension and postretirement benefit (costs) credits increased by $20 million to a net credit of $18 million as compared to a net cost of $2 million for the three months ended September 30, 2019. The change was primarily attributable to a renegotiated collective bargaining agreement in the U.S., which eliminated health care benefits in retirement if benefits are not commenced by September 24, 2021 for participants covered by the union agreement and resulted in a non-cash curtailment gain of $21 million. This was partially offset by a non-cash settlement charge of $5 million attributable to a partial settlement of certain pension plans where paid lump sums were paid out of pension plan assets in connection with a plant closure.

Nine-months ended: Non-service pension and postretirement benefit (costs) credits increased by $28 million to a net credit of $20 million as compared to a net cost of $8 million for the nine months ended September 30, 2019. The change was primarily attributable to a renegotiated collective bargaining agreement in the U.S., which eliminated health care benefits in retirement if benefits are not commenced by September 24, 2021 for participants covered by the union agreement and resulted in a non-cash curtailment gain of $21 million. This was partially offset by a non-cash settlement charge of $5 million attributable to a partial settlement of certain pension plans where paid lump sums were paid out of pension plan assets in connection with a plant closure. The remaining change was attributable to a decrease in the discount rate and lower amortization, which was partially offset by a decrease in the long-term rate of return.

Equity in earnings (losses) of nonconsolidated affiliates, net of tax
Three-months ended: Equity in earnings (losses) of nonconsolidated affiliates, net of tax increased by $8 million as compared to the three months ended September 30, 2019. The increase is primarily attributable to a $10 million reduction to equity in earnings recognized in the three months ended September 30, 2019. The non-cash reduction in equity earnings was to recognize the basis difference between the fair value and book value of certain assets, including inventory, property, plant, and equipment, and intangible assets.
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Nine-months ended: Equity in earnings (losses) of nonconsolidated affiliates, net of tax decreased by $8 million as compared to the nine months ended September 30, 2019. The decrease is primarily attributable to the effects of the COVID-19 global pandemic on the equity in earnings (losses) of our nonconsolidated affiliates located in Turkey, Korea, and the U.S., partially offset by the $10 million reduction to equity in earnings related to the basis difference between the fair value and book value of certain assets, including inventory, property, plant, and equipment, and intangible assets.

Other income (expense), net
Three-months ended: Other income (expense), net decreased by $15 million as compared to the three months ended September 30, 2019. This is primarily attributable to a recovery of value-added tax in a foreign jurisdiction recognized in the three months ended September 30, 2019.

Nine-months ended: Other income (expense), net decreased by $12 million as compared to the nine months ended September 30, 2019. This is primarily attributable to a recovery of value-added tax in a foreign jurisdiction recognized in the nine months ended September 30, 2019.

Interest expense
Three-months ended: Interest expense decreased by $11 million as compared to the three months ended September 30, 2019. The decrease was primarily attributable to lower interest rates on variable rate debt, slightly offset by interest expense on higher borrowings on the revolver. This includes a decrease of $4 million related to financing charges on sales of accounts receivable as compared to the three months ended September 30, 2019.

Nine-months ended: Interest expense decreased by $33 million as compared to the nine months ended September 30, 2019. The decrease was primarily attributable to lower interest rates on our variable rate debt, slightly offset by interest expense on higher borrowings on the revolver. This includes a decrease of $8 million related to financing charges on sales of accounts receivable as compared to the nine months ended September 30, 2019.

Income tax (expense) benefit
Three-months ended: Income tax expense increased by $657 million to an income tax expense of $648 million as compared to an income tax benefit of $9 million in the three months ended September 30, 2019. This is primarily the result of (i) a non-cash charge of $369 million and $11 million relating to the establishment of valuation allowances on deferred tax assets recognized in prior years for the U.S. and France; (ii) a non-cash tax benefit of $2 million relating to the reversal of a valuation allowance in China; and (iii) a $145 million non-cash charge to adjust the estimated annual tax rate for the tax benefit that can no longer be recognized due to the change in positions for these respective entities during the three months ended September 30, 2020.

Nine-months ended: Income tax expense increased by $448 million to $453 million as compared to $5 million in the nine months ended September 30, 2019. This is primarily the result of (i) a $39 million tax benefit recognized related to asset impairment charges of $883 million, (ii) a $369 million and $11 million non-cash charge relating to the establishment of valuation allowances on deferred tax assets recognized in prior years for the U.S. and France; (iii) a non-cash tax benefit of $2 million relating to the reversal of a valuation allowance in China; and (iv) a $145 million non-cash charge to adjust the estimated annual tax rate for the tax benefit that can no longer be recognized due to the change in positions for these respective entities during the nine months ended September 30, 2020.

Net income (loss)
Three-months ended: Net loss increased by $558 million to a net loss of $480 million as compared to a net income of $78 million for the three months ended September 30, 2019 as a result of the aforementioned items.

Nine-months ended: Net loss increased by $1,664 million to a net loss of $1,646 million as compared to a net income of $18 million for the nine months ended September 30, 2019 as a result of the aforementioned items.

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Earnings (loss) before interest expense, income taxes, noncontrolling interests, and depreciation and amortization (“EBITDA including noncontrolling interests”)
The following table presents the reconciliation from EBITDA including noncontrolling interests to net income (loss) for the three and nine months ended September 30, 2020 and 2019 (amounts in millions):
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
EBITDA including noncontrolling interests:
Clean Air $ 149  $ 169  $ 265  $ 452 
Powertrain 111  90  (21) 303 
Ride Performance 23  20  (624)
Motorparts 138  113  46  268 
Corporate (34) (79) (169) (256)
Depreciation and amortization (151) (165) (481) (503)
Earnings (loss) before interest expense, income taxes, and noncontrolling interests 236  148  (984) 265 
Interest expense (68) (79) (209) (242)
Income tax (expense) benefit (648) (453) (5)
Net income (loss) $ (480) $ 78  $ (1,646) $ 18 

See "Segment Results of Operations" for further information on EBITDA including noncontrolling interests.

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Segment Results of Operations

Overview of Net Sales and Operating Revenues
Our Clean Air segment has substrate sales. Substrates are porous ceramic filters coated with a catalyst - typically, precious metals such as platinum, palladium and rhodium. We do not manufacture substrates, as they are supplied to us by Tier 2 suppliers generally as directed by our OE customers. We generally earn a small margin on these components of the system. These substrate components have been increasing as a percentage of our revenue as the need for more sophisticated emission control solutions increases to meet more stringent environmental regulations, and as we capture more diesel aftertreatment business. While these substrates dilute our gross margin percentage, they are a necessary component of an emission control system.

Our value-add content in an emission control system includes designing the system to meet environmental regulations through integration of the substrates into the system, maximizing use of thermal energy to heat up the catalyst quickly, efficiently managing airflow to reduce back pressure as the exhaust stream moves past the catalyst, managing the expansion and contraction of the emission control system components due to temperature extremes experienced by an emission control system, using advanced acoustic engineering tools to design the desired exhaust sound, minimizing the opportunity for the fragile components of the substrate to be damaged when we integrate it into the emission control system and reducing unwanted noise, vibration and harshness transmitted through the emission control system.

We disclose substrate sales amounts because we believe investors utilize this information to understand the effect of this portion of our revenues on our overall business and because it removes the effect of potentially volatile precious metals pricing from our revenues. While our OE customers generally assume the risk of precious metals pricing volatility, it affects our reported revenues.

The table below reflects our segment revenues for the three months ended September 30, 2020 and 2019 (amounts in millions):
Segments
Clean Air Powertrain Ride Performance Motorparts Total Revenues
For the Three Months Ended September 30, 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Revenues $ 1,919  $ 1,772  $ 1,007  $ 1,082  $ 600  $ 671  $ 730  $ 794  $ 4,256  $ 4,319 
Value-add revenues $ 958  $ 997  $ 1,007  $ 1,082  $ 600  $ 671  $ 730  $ 794  $ 3,295  $ 3,544 
Currency effect on value-add revenue —  12  —  —  (10) —  18  — 
Value-add revenue excluding currency $ 950  $ 997  $ 995  $ 1,082  $ 592  $ 671  $ 740  $ 794  $ 3,277  $ 3,544 
Substrate sales $ 961  $ 775  $ —  $ —  $ —  $ —  $ —  $ —  $ 961  $ 775 

The table below reflects our segment revenues for the nine months ended September 30, 2020 and 2019 (amounts in millions):
Segments
Clean Air Powertrain Ride Performance Motorparts Total Revenues
For the Nine Months Ended September 30, 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Revenues $ 4,604  $ 5,378  $ 2,606  $ 3,390  $ 1,524  $ 2,113  $ 1,995  $ 2,426  $ 10,729  $ 13,307 
Value-add revenues $ 2,320  $ 3,120  $ 2,606  $ 3,390  $ 1,524  $ 2,113  $ 1,995  $ 2,426  $ 8,445  $ 11,049 
Currency effect on value-add revenue (27) —  (49) —  (24) —  (56) —  (156) — 
Value-add revenue excluding currency $ 2,347  $ 3,120  $ 2,655  $ 3,390  $ 1,548  $ 2,113  $ 2,051  $ 2,426  $ 8,601  $ 11,049 
Substrate sales $ 2,284  $ 2,258  $ —  $ —  $ —  $ —  $ —  $ —  $ 2,284  $ 2,258 

Segment Revenue
Clean Air
Three-months ended: Clean Air revenue increased $147 million, or 8%, as compared to the three months ended September 30, 2019. Higher sales volumes in North America and Asia Pacific resulted in revenue growth, partially offset by lower sales volumes in South America and Europe contributing net $159 million to the increase. Overall for the Clean Air segment, light vehicle and commercial truck revenues improved while off-highway and other revenues declined when compared to the same three month period in the prior year. In addition, foreign currency exchange had a $7 million favorable effect on Clean Air revenue while other unfavorable effects decreased revenue by $19 million.
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Nine-months ended: Clean Air revenue decreased $774 million, or 14%, as compared to the nine months ended September 30, 2019. While higher sales volumes in Asia Pacific resulted in revenue growth, this improvement was more than offset by lower sales volumes primarily in North America, South America, and Europe contributing a net $675 million to the decrease. Overall for the Clean Air segment, lower light vehicle and off-highway and other revenues were the main drivers of the revenue decline while commercial truck improved when compared to the same nine month period in the prior year. In addition, foreign currency exchange had a $59 million unfavorable effect on Clean Air revenue while other unfavorable effects decreased revenue by $40 million.

Powertrain
Three-months ended: Powertrain revenue decreased $75 million, or 7%, as compared to the three months ended September 30, 2019. Lower light vehicle, commercial truck, industrial, and off-highway and other vehicle revenue contributed $75 million to the decrease, foreign currency exchange had a $12 million favorable effect on Powertrain revenue, while other unfavorable effects decreased revenue by $12 million.

Nine-months ended: Powertrain revenue decreased $784 million, or 23%, as compared to the nine months ended September 30, 2019. Lower light vehicle, commercial truck, industrial, and off-highway and other vehicle revenue contributed $709 million to the decrease, foreign currency exchange had a $49 million unfavorable effect on Powertrain revenue, while other unfavorable effects decreased revenue by $26 million.

Ride Performance
Three-months ended: Ride Performance revenue decreased $71 million, or 11%, as compared to the three months ended September 30, 2019. Lower light vehicle, commercial truck, and off-highway and other vehicle revenues contributed $72 million to the decrease, as well as a decrease in revenues from divestitures of $2 million, foreign currency exchange had an $8 million favorable effect on Ride Performance revenue, while other unfavorable effects decreased revenue by $5 million.

Nine-months ended: Ride performance revenue decreased $589 million, or 28%, as compared to the nine months ended September 30, 2019. Lower light vehicle, commercial truck, and off-highway and other vehicle revenues contributed $532 million to the decrease, as well as a decrease in revenues from divestitures of $23 million, foreign currency exchange had a $24 million unfavorable effect on Ride Performance revenue, while other unfavorable effects decreased revenue by $10 million.

Motorparts
Three-months ended: Motorparts revenue decreased $64 million, or 8%, as compared to the three months ended September 30, 2019. Lower volume contributed $53 million to the decrease, as well as a decrease in revenues from divestitures of $13 million, and foreign currency exchange had a $10 million unfavorable effect on Motorparts revenues. The unfavorable effects were partially offset by other net favorable effects of $12 million.

Nine-months ended: Motorparts revenue decreased $431 million, or 18%, as compared to the nine months ended September 30, 2019. Lower volume contributed $354 million to the decrease, as well as a decrease in revenues from divestitures of $52 million, and foreign currency exchange had a $56 million unfavorable effect on Motorparts revenues. The unfavorable effects were partially offset by other net favorable effects of $31 million.

EBITDA including noncontrolling interests
The following table presents the EBITDA including noncontrolling interests by segment for the three and nine months ended September 30, 2020 and 2019 (amounts in millions):
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019 2020 vs 2019 Change 2020 vs 2019 Change
EBITDA including noncontrolling interests by segment:
Clean Air $ 149  $ 169  $ 265  $ 452  $ (20) $ (187)
Powertrain $ 111  $ 90  $ (21) $ 303  $ 21  $ (324)
Ride Performance $ 23  $ 20  $ (624) $ $ $ (625)
Motorparts $ 138  $ 113  $ 46  $ 268  $ 25  $ (222)

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Clean Air
Three-months ended: Clean Air EBITDA including noncontrolling interests decreased $20 million as compared to the three months ended September 30, 2019. The decrease is primarily attributable to lower sales volume and unfavorable mix, partially offset by lower SG&A costs during the three months ended September 30, 2020 as compared to the three months ended September 30, 2019.

Nine-months ended: Clean Air EBITDA including noncontrolling interests decreased $187 million as compared to the nine months ended September 30, 2019. The decrease is primarily attributable to lower sales volume and unfavorable mix, partially offset by favorable operating performance and lower SG&A costs during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.

Powertrain
Three-months ended: Powertrain EBITDA including noncontrolling interests increased $21 million as compared to the three months ended September 30, 2019. The increase is primarily attributable to favorable operating performance and lower SG&A and engineering, research, and development costs, partially offset by lower sales volume and unfavorable mix for three months ended September 30, 2020 as compared to the three months ended September 30, 2019. This included a reduction of $9 million to SG&A for a non-income tax refund received in the three months ended September 30, 2020.

Nine-months ended: Powertrain EBITDA including noncontrolling interests decreased $324 million as compared to the nine months ended September 30, 2019. The decrease is primarily attributable to lower sales volume and unfavorable mix, an increase in cash severance charges expected to be paid of $21 million, and a goodwill impairment charge in the amount of $160 million recognized during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019. These unfavorable factors were partially offset by favorable operating performance and lower SG&A and engineering, research, and development costs. Included in the lower SG&A costs is a reduction of $9 million for a non-income tax refund received in the nine months ended September 30, 2020.

Ride Performance
Three-months ended: Ride Performance EBITDA including noncontrolling interests increased $3 million as compared to the three months ended September 30, 2019. The increase is primarily attributable to favorable operating performance and lower SG&A and engineering, research, and development costs, partially offset by lower sales volumes.

Nine-months ended: Ride Performance EBITDA including noncontrolling interests decreased $625 million as compared to the nine months ended September 30, 2019. The decrease is primarily attributable to asset impairment charges of $455 million and goodwill and intangible impairment charges of $113 million recognized during the nine months ended September 30, 2020 as compared to a goodwill impairment charge of $69 million recognized during the nine months ended September 30, 2019. Also contributing to the decrease is lower sales volume, partially offset by lower SG&A and engineering, research, and development costs.

Motorparts
Three-months ended: Motorparts EBITDA including noncontrolling interests increased $25 million as compared to the three months ended September 30, 2019. The increase is primarily attributable to favorable operating performance and lower SG&A costs, partially offset by lower sales volumes and unfavorable mix during the three months ended September 30, 2020 as compared to the three months ended September 30, 2019.

Nine-months ended: Motorparts EBITDA including noncontrolling interests decreased $222 million as compared to the nine months ended September 30, 2019. The decrease is primarily attributable to lower sales volumes and unfavorable mix, goodwill and intangible impairment charges of $110 million, and a non-cash charge to cost of sales of $82 million related to the write-down of inventory recognized in connection with its initiative to rationalize its supply chain and distribution network as compared to the nine months ended September 30, 2019. These unfavorable factors were partially offset by favorable operating performance and lower SG&A costs.

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The EBITDA including noncontrolling interests results shown in the preceding table include the following items, certain of which may have an effect on the comparability of EBITDA including noncontrolling interests results between periods (amounts in millions):
Reportable Segments
  Clean Air Powertrain Ride Performance Motorparts Total Corporate Total
Three Months Ended September 30, 2020
Restructuring charges, net $ $ 13  $ —  $ —  $ 14  $ —  $ 14 
Restructuring related costs —  —  11  (1) 10  —  10 
Inventory write-down (1)
—  —  —  (9) (9) —  (9)
Asset impairments restructuring related —  —  —  — 
Other non-restructuring asset impairments —  —  —  — 
Acquisition and expected separation costs (2)
(1) —  (2) —  (3)
OPEB curtailment (3)
—  —  —  —  —  (21) (21)
Total adjustments $ —  $ 13  $ $ (7) $ 15  $ (14) $
(1) Margin on discontinued product that was previously written-down in connection with the initiative in the Motorparts segment to rationalize its supply chain and distribution network.
(2) Costs related to acquisitions and costs related to expected separation.
(3) OPEB curtailment as a result of an amended union agreement that eliminates healthcare benefits for future retirees.
Reportable Segments
Clean Air Powertrain Ride Performance Motorparts Total Corporate Total
Three Months Ended September 30, 2019
Restructuring and related expenses $ $ 11  $ 15  $ $ 34  $ $ 35 
Other non-restructuring asset impairments —  —  —  — 
Cost reduction initiatives(1)
—  —  —  —  — 
Acquisition and expected separation costs (2)
—  —  —  —  —  30  30 
Purchase accounting adjustments (3)
—  (1) 11  —  11 
Brazil tax credit (4)
(9) —  (6) (7) (22) —  (22)
Antitrust reserve charge in estimate (5)
(9) —  —  —  (9) —  (9)
Out of period adjustment (6)
—  —  —  — 
Warranty charge (7)
—  —  —  — 
Goodwill impairment charge (8)
—  —  —  — 
Total adjustments $ (12) $ 19  $ 22  $ $ 37  $ 37  $ 74 
(1) Costs related to cost reduction initiatives.
(2) Costs related to acquisitions and costs related to expected separation.
(3) This primarily relates to non-cash charge to cost of goods sold for the amortization of the inventory fair value step-up recorded as part of the Acquisitions.
(4) Recovery of value-added tax in a foreign jurisdiction.
(5) Reduction in estimated antitrust accrual.
(6) Inventory losses attributable to prior periods.
(7) Charge related to warranty. Although we regularly incur warranty costs, this specific charge is of an unusual nature in the period incurred.
(8) Post segment reorganization impairment of goodwill.
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Reportable Segments
Clean Air Powertrain Ride Performance Motorparts Total Corporate Total
Nine Months Ended September 30, 2020
Restructuring charges, net $ 23  $ 50  $ 24  $ 17  $ 114  $ $ 119 
Restructuring related costs —  —  41  43  44 
Inventory write-down (1)
—  —  —  73  73  —  73 
Asset impairments restructuring related —  —  26  29  —  29 
Other non-restructuring asset impairments —  455  457  17  474 
Acquisition and expected separation costs (2)
—  (2) —  36  37 
OPEB curtailment (3)
—  —  —  —  —  (21) (21)
Goodwill and intangibles impairment charges —  160  113  110  383  —  383 
Total adjustments $ 26  $ 214  $ 631  $ 229  $ 1,100  $ 38  $ 1,138 
(1) Non-cash charge of $82 million to write-down inventory in the Motorparts segment in connection with its initiative to rationalize its supply chain and distribution network, partially offset by $9 million margin on discontinued product that was previously written-down.
(2) Costs related to acquisitions and costs related to expected separation.
(3) OPEB curtailment as a result of an amended union agreement that eliminates healthcare benefits for future retirees.

Reportable Segments
  Clean Air Powertrain Ride Performance Motorparts Total Corporate Total
Nine Months Ended September 30, 2019
Costs to achieve synergies (1)
$ —  $ $ —  $ —  $ $ $
Restructuring and related expenses 25  29  50  12  116  118 
Other non-restructuring asset impairments —  —  10  —  10 
Cost reduction initiatives (2)
—  —  —  —  —  16  16 
Acquisition and expected separation costs (3)
—  —  —  96  97 
Process harmonization (4)
—  —  10  —  10 
Purchase accounting charges (5)
—  10  41  55  —  55 
Brazil tax credit (6)
(9) —  (6) (7) (22) —  (22)
Antitrust reserve change in estimate (7)
(9) —  —  —  (9) —  (9)
Out of period adjustment (8)
—  —  —  — 
Goodwill impairment charge (9)
—  —  69  —  69  —  69 
Warranty charge (10)
—  —  —  — 
Total adjustments $ 13  $ 40  $ 122  $ 69  $ 244  $ 116  $ 360 
(1) Cost to achieve synergies related to the Acquisitions.
(2) Costs related to cost reduction initiatives.
(3) Costs related to acquisitions and costs related to expected separation.
(4) Charge due to process harmonization.
(5) This primarily relates to non-cash charge to cost of goods sold for the amortization of the inventory fair value step-up recorded as part of the Acquisitions.
(6) Recovery of value-added tax in a foreign jurisdiction.
(7) Reduction in estimated antitrust accrual.
(8) Inventory losses attributable to prior periods.
(9) Post segment reorganization impairment of goodwill.
(10) Charge related to warranty. Although we regularly incur warranty costs, this specific charge is of an unusual nature in the period incurred.

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Liquidity and Capital Resources

Liquidity and Financing Arrangements
The COVID-19 global pandemic has negatively affected the global economy, disrupted global supply chains, and created extreme volatility and disruptions to capital and credit markets in the global financial markets. We believe our liquidity position continues to be adequate. However, with the recent economic downturn related to COVID-19, we expect to see lower revenue and lower earnings, putting pressure on our liquidity position. As customer demand increases, we expect to face periods where payments will become due to our suppliers for our existing and additional inventories needed to support renewed production before we have generated new receivables from customers from that renewed production. It is our intent to maintain a consistent balance between our payables and receivables during this time.

We have implemented a range of actions aimed at temporarily reducing costs and preserving liquidity in response to the effects and anticipated effects to our business resulting from COVID-19. These measures include:
Temporarily suspending or reducing operations;
As discussed in more detail in Note 10, Debt and Other Financing Arrangements and below, we entered into an amendment to our senior credit facility to increase the maximum leverage ratio and decrease the minimum interest coverage ratio;
At September 30, 2020, we had liquidity of $1.8 billion comprised of $721 million of cash and $1.1 billion undrawn on our revolving credit facility. During the third quarter of 2020, we repaid $1.1 billion of our $1.5 billion revolving credit facility;
For the third quarter of 2020, overall salary costs were reduced at least 10% through a combination of unpaid furloughs, net pay decreases, and available temporary support programs in all regions Tenneco does business. Additionally, the executive leadership team (the CEO and direct staff) had reduced their salaries by 20%. Employee salaries were restored to their prior levels effective October 1, 2020;
We reduced our headcount globally, and plan further reductions subject to negotiation with works councils in certain jurisdictions, beginning in the second quarter of 2020 and expect these actions to be completed during 2020;
Capital expenditures in 2020 are expected to approximate $380 million. This is a reduction from previous guidance of 2020 expenditures between $610 to $650 million and 2019 expenditures of more than $700 million;
Utilizing applicable and appropriate provisions under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) including deferral of our portion of the 2020 FICA payroll taxes which will be repaid in 2021 and 2022, payroll tax credits, and deferral of our U.S. qualified pension plan contributions; and
The Tenneco Board of Directors annual retainer fees were reduced by 25% effective for the third quarter of 2020 and will be reduced for the remainder of the year.

On May 5, 2020, we entered into a third amendment to our credit agreement to increase the maximum leverage ratio and decrease the minimum interest coverage ratio. At September 30, 2020, we are in compliance with all financial covenants under the credit agreement. There are many uncertainties related to COVID-19 that could negatively affect our results of operations, financial position, and cash flows. After considering the effect of COVID-19 on our 2020 forecast, we believe we will comply with these financial covenants, as required by our amended credit agreement. The amendment is discussed in more detail below.

We believe cash flows from operations, combined with our cash on hand, will be sufficient to meet our future capital requirements, including debt amortization, capital expenditures, pension contributions, and other operational requirements, for the following year based on our current estimates and forecasts. We believe we will maintain compliance with the new financial ratios set forth in the amended credit agreement. However, our ability to meet the financial covenants depends upon a number of operational and economic factors, including the effects of COVID-19, many of which are beyond our control. In the event we are unable to meet these financial covenants, we would consider several options to meet our cash flow needs. Such actions include additional restructuring initiatives and other cost reductions, sales of assets, reductions to working capital and capital spending, issuance of equity, and other alternatives to enhance our financial and operating position. We also continue to actively monitor credit market conditions for the right opportunity to replace and extend maturity.

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Credit Facilities
The table below shows our borrowing capacity on committed credit facilities at September 30, 2020 (amounts in billions):
  Committed Credit Facilities
at September 30, 2020
  Term
Available(b)
Tenneco Inc. revolving credit facility (a)
2023 $ 1.1 
Tenneco Inc. Term Loan A 2023 — 
Tenneco Inc. Term Loan B 2025 — 
Subsidiaries’ credit agreements 2020 - 2028 — 
$ 1.1 
(a)We are required to pay commitment fees under the revolving credit facility on the unused portion of the total commitment.
(b)Letters of credit reduce the available borrowings under the revolving credit facility.

We also have $74 million of outstanding letters of credit under our uncommitted facilities at September 30, 2020.

At September 30, 2020, we had liquidity of $1.8 billion comprised of $721 million of cash and $1.1 billion undrawn on our revolving credit facility. During the third quarter of 2020, we repaid $1.1 billion of our $1.5 billion revolving credit facility.

Term Loans
We entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and other lenders (the "New Credit Facility") in connection with the Federal-Mogul Acquisition, which has been amended by the first amendment, dated February 14, 2020 (the “First Amendment”), by the second amendment, dated February 14, 2020 (the “Second Amendment”), and by the third amendment, dated May 5, 2020 (the "Third Amendment"). The New Credit Facility consists of $4.9 billion of total debt financing, consisting of a five-year $1.5 billion revolving credit facility, a five-year $1.7 billion term loan A facility ("Term Loan A") and a seven-year $1.7 billion term loan B facility ("Term Loan B"). We paid $8 million in one-time fees in connection with the First Amendment and Second Amendment, and $10 million in one-time fees in connection with the Third Amendment.

New Credit Facility — Interest Rates and Fees
The Third Amendment provides for an increase to the margin applicable to borrowings under the revolving credit facility and the Term Loan A facility at certain leverage levels as set forth below as one of several conditions for obtaining less restrictive financial maintenance covenants described below under New Credit Facility — Other Terms and Conditions:
Consolidated net leverage ratio Interest rate
greater than 6.0 to 1 LIBOR plus 2.50%
less than 6.0 to 1 and greater than 4.5 to 1 LIBOR plus 2.25%

Initially, and so long as our corporate family rating is Ba3 (with a stable outlook) or higher from Moody’s Investors Service, Inc. (“Moody’s”) and BB- (with a stable outlook) or higher from Standard & Poor’s Financial Services LLC (“S&P”), the interest rate on borrowings under the Term Loan B facility will be LIBOR plus 2.75%; at any time the foregoing conditions are not satisfied, the interest rate on the Term Loan B facility will be LIBOR plus 3.00%. When the Term Loan B facility is no longer outstanding and we, and our subsidiaries, have no other secured indebtedness (with certain exceptions set forth in the New Credit Facility), and upon us achieving and maintaining two or more corporate credit and/or corporate family ratings higher than or equal to BBB- from S&P, BBB- from Fitch Ratings Inc. (“Fitch”) and/or Baa3 from Moody’s (in each case, with a stable or positive outlook), the collateral under the New Credit Facility may be released. On June 3, 2019, Moody’s lowered our corporate family rating to B1 and the interest rate on borrowings under the term loan B was raised to LIBOR plus 3.00%.

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New Credit Facility — Other Terms and Conditions After giving effect to the Third Amendment, we must comply with certain less restrictive financial maintenance covenants for the revolving credit facility and the Term Loan A facility. The financial maintenance covenants are subject to several covenant reset triggers (“Covenant Reset Triggers”) that limit certain activities of ours by implementing more restrictive affirmative and negative covenants. If a Covenant Reset Trigger occurs, the financial maintenance covenants revert back to the financial maintenance covenants in effect immediately prior to the Third Amendment (and described above) (the “Prior Financial Covenants”). The financial maintenance covenants include (i) a requirement to have a senior secured leverage ratio (as defined in the New Credit Facility), with step-downs, as detailed in the table below; (ii) a requirement to have a consolidated net leverage ratio (as defined in the New Credit Facility), with step-downs, as follows:
(i) Senior secured net leverage ratio (ii) Consolidated net leverage ratio
not greater than 6.75 to 1 at June 30, 2020 not greater than 4.50 to 1 at March 31, 2020
not greater than 9.50 to 1 at September 30, 2020 not greater than 5.25 to 1 at March 31, 2022
not greater than 8.75 to 1 at December 31, 2020 not greater than 4.75 to 1 at June 30, 2022
not greater than 8.25 to 1 at March 31, 2021 not greater than 4.25 to 1 at September 30, 2022
not greater than 4.50 to 1 at June 30, 2021 not greater than 3.75 to 1 thereafter
not greater than 4.25 to 1 at September 30, 2021
not greater than 4.00 to 1 at December 31, 2021
and (iii) a requirement to maintain a consolidated interest coverage ratio (as defined in the New Credit Facility) for any period of four consecutive fiscal quarters of not less than 2.00 to 1 as of June 30, 2020, 1.50 to 1 through March 31, 2021, and 2.75 to 1 thereafter.

We may make a one-time election to revert back to the Prior Financial Covenants and terminate the Covenant Reset Triggers upon delivery of a covenant reset certificate that attests to compliance with the Prior Financial Covenants as of the end of the relevant fiscal period (“Covenant Reset Certificate”). Refer to Note 10, Debt and Other Financing Arrangements included in Part I, Item I for additional details.

The Covenant Reset Triggers in the Third Amendment generally prohibit us from repaying the Senior Unsecured Notes. After giving effect to the Third Amendment, so long as no default exists under its New Credit Facility, we would be permitted to (i) make regularly scheduled interest and principal payments as and when due in respect of the Senior Unsecured Notes, (ii) refinance the Senior Unsecured Notes with the net cash proceeds of permitted refinancing indebtedness (as defined in the New Credit Facility); (iii) make payments in respect of the Senior Unsecured Notes in an amount equal to the net cash proceeds of qualified capital stock (as defined in the New Credit Facility) issued after May 5, 2020; (iv) convert any Senior Unsecured Notes into qualified capital stock issued after May 5, 2020; and (v) make additional payments of the Senior Unsecured Notes provided that after giving effect to such additional payments the consolidated leverage ratio would be equal to or less than 2.00 to 1 after giving effect to such additional payments. The foregoing limitations regarding repayment and refinancing of the Senior Unsecured Notes apply from the effectiveness of the Third Amendment until delivery of a Covenant Reset Certificate.

The covenants in the New Credit Facility generally prohibit us from repaying certain subordinated indebtedness. So long as no default exists, we would, under our New Credit Facility, be permitted to repay or refinance our subordinated indebtedness (i) with the net cash proceeds of permitted refinancing indebtedness (as defined in the New Credit Facility); (ii) in an amount equal to the net cash proceeds of qualified capital stock (as defined in the New Credit Facility) issued after October 1, 2018; (iii) in exchange for qualified capital stock issued after October 1, 2018; and (iv) with additional payments provided that such additional payments are capped based on a pro forma consolidated leverage ratio after giving effect to such additional payments.

Such additional payments on subordinated indebtedness (x) will not be permitted at any time the pro forma consolidated leverage ratio is greater than 2.00 to 1 after giving effect to such additional payments and (y) will be permitted in an unlimited amount at any time the pro forma consolidated leverage ratio is equal to or less than 2.00 to 1 after giving effect to such additional payments.

The New Credit Facility includes customary events of default and other provisions that could require all amounts due thereunder to become immediately due and payable, either automatically or at the option of the lenders, if we fail to comply with the terms of the New Credit Facility or if other customary events occur.

The financial ratios required under the New Credit Facility and the actual ratios we calculated as of September 30, 2020 for the third quarter of 2020, are as follows: leverage ratio of 3.72 actual versus 9.50 (maximum) required; and interest coverage ratio of 4.36 actual versus 1.50 (minimum) required.
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Senior Notes
We have outstanding 5.375% senior unsecured notes due December 15, 2024 ("2024 Senior Notes") and 5.000% senior unsecured notes due July 15, 2026 ("2026 Senior Notes" and together with the 2024 Senior Notes, the "Senior Unsecured Notes"). We have outstanding 5.000% euro denominated fixed rate notes which are due July 15, 2024 ("5.000% Euro Fixed Rate Notes"), 4.875% euro denominated fixed rate notes due April 15, 2022 ("4.875% Euro Fixed Rate Notes"), and floating rate notes due April 15, 2024 ("Euro Floating Rate Notes", together with the 5.000% Euro Fixed Rate Notes and the 4.875% Euro Fixed Notes, the "Senior Secured Notes").

Senior Unsecured Notes and Senior Secured Notes — Other Terms and Conditions The Senior Unsecured Notes and Senior Secured Notes contain covenants that will, among other things, limit our ability to create liens and enter into sale and leaseback transactions. In addition, the Senior Secured Notes and 2024 Senior Unsecured Notes also require that, as a condition precedent to incurring certain types of indebtedness not otherwise permitted, our consolidated fixed charge coverage ratio, as calculated on a pro forma basis, be greater than 2.00, as well as containing restrictions on our operations, including limitations on: (i) incurring additional indebtedness; (ii) paying dividends; (iii) distributions and stock repurchases; (iv) investments; (v) asset sales and (vi) mergers and consolidations.

Subject to limited exceptions, all of our existing and future material, domestic wholly owned subsidiaries fully and unconditionally guarantee our Senior Unsecured Notes and Senior Secured Notes on a joint and several basis. There are no significant restrictions on the ability of the subsidiaries that have guaranteed our Senior Notes to make distributions to us.

Accounts Receivable Securitization and Factoring
On-Balance Sheet Arrangements
We have securitization programs for some of our accounts receivable, with limited recourse provisions. Borrowings on these securitization programs, which are recorded in short-term debt, at September 30, 2020 and December 31, 2019 are as follows (amounts in millions):
September 30, 2020 December 31, 2019
Borrowings on securitization programs $ $

Off-Balance Sheet Arrangements
We have an accounts receivable factoring program in the U.S. with a commercial bank. Under this program we sell receivables from certain of our U.S. OE customers at a rate that is favorable versus our senior credit facility. This arrangement is uncommitted and provides for cancellation by the commercial bank with no less than 30 days prior written notice. In addition, we have two other receivable factoring programs in the U.S. with commercial banks under which we sell receivables from certain of our aftermarket customers to whom we have extended payment terms. Both arrangements are uncommitted and may be terminated with 10 days prior notice for one program and 30 days prior notice for the other program.

We also have subsidiaries in several countries in Europe that are parties to accounts receivable factoring facilities. The commitments for these arrangements are generally for one year, but some may be canceled with notice 90 days prior to renewal. In some instances, the arrangement provides for cancellation by the applicable financial institution at any time upon notification.

Certain of these programs have deferred purchase price arrangements with the banks. These programs provide us with access to cash at costs that are generally favorable to alternative sources of financing.

In the U.S and Canada, we participate in supply chain financing programs with certain of our aftermarket customers to whom we have extended payment terms whereby the accounts receivable are satisfied through the early receipt of negotiable financial instruments that are payable at a later date when payments from our customers are due. We sell these financial instruments before their maturity date to various financial institutions at a discount.

The accounts receivables under the programs described above are transferred in their entirety to the acquiring entities and are accounted for as a sale. The fair value of assets received as proceeds in exchange for the transfer of accounts receivable under these factoring programs approximates the fair value of such receivables. We are the servicer of the receivables under some of these arrangements and are responsible for performing all accounts receivable administration functions. Where we receive a fee to service and monitor these transferred accounts receivables, such fees are sufficient to offset the costs and as such, a servicing asset or liability is not recorded as a result of such activities.

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The amount of accounts receivable outstanding and derecognized for these factoring and drafting arrangements was $0.9 billion and $1.0 billion at September 30, 2020 and December 31, 2019. In addition, the deferred purchase price receivable was $49 million and $33 million at September 30, 2020 and December 31, 2019.

Proceeds from the factoring of accounts receivable qualifying as sales and drafting programs was $1.1 billion and $1.1 billion for the three months ended September 30, 2020 and 2019 and was $3.0 billion and $3.6 billion for the nine months ended September 30, 2020 and 2019.

Financing charges associated with the factoring of receivables are as follows (amounts in millions):
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Loss on sale of receivables(a)
$ $ $ 15  $ 23 
(a) Amount is included in "Interest expense" in the condensed consolidated statements of income (loss).

Supply Chain Financing
Certain of our suppliers participate in supply chain financing programs under which they securitize their accounts receivables from us. Financial institutions participate in the supply chain financing program on an uncommitted basis and can cease purchasing receivables or drafts from our suppliers at any time. We began to wind down these programs in 2019 and ended them in the third quarter of 2020.

Cash Flows
Operating Activities
Operating activities for the nine months ended September 30, 2020 and 2019 were as follows (amounts in millions):
Nine Months Ended September 30,
2020 2019
Operational cash flow before changes in operating assets and liabilities $ $ 469 
Changes in operating assets and liabilities:
Receivables (429) (457)
Inventories 303  112 
Payables and accrued expenses 242  99 
Accrued interest and accrued income taxes 23  (12)
Other assets and liabilities 10  (147)
Total change in operating assets and liabilities 149  (405)
Net cash (used) provided by operating activities $ 155  $ 64 

Net cash provided by operating activities for the nine months ended September 30, 2020 was $155 million, an increase of $91 million compared to the nine months ended September 30, 2019. The activity was the result of:
a net increase of $554 million in net cash provided by operating activities due to favorable changes in working capital items; and
a decrease in net cash provided by operating activities before operating assets and liabilities of $463 million.

The favorable working capital changes can be attributed primarily to inventory efficiency gains resulting from higher inventory turns and lower days of inventory on hand. Net cash provided by operating activities was also benefited by the deferral of pension contributions and payroll taxes under the CARES Act, and the expansion and utilization of certain factoring arrangements.

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Investing Activities
Investing activities for the nine months ended September 30, 2020 and 2019 were as follows (amounts in millions):
Nine Months Ended September 30,
2020 2019
Proceeds from sale of assets $ $
Net proceeds from sale of business 22 
Cash payments for property, plant, and equipment (308) (541)
Acquisitions, net of cash acquired —  (158)
Proceeds from deferred purchase price of factored receivables 176  203 
Other — 
Net cash (used) provided by investing activities $ (118) $ (466)

Net cash used by investing activities for the nine months ended September 30, 2020 decreased primarily due to a decrease in cash payments for property, plant, and equipment of $233 million and decrease in acquisitions, net of cash acquired of $158 million due to no cash payments for acquisitions for the nine months ended September 30, 2020, partially offset by a decrease in net proceeds from sale of business of $19 million, and a decrease in proceeds from deferred purchase price of factored receivables of $27 million.

Cash payments for property, plant, and equipment were $308 million and $541 million for the nine months ended September 30, 2020 and 2019.

Financing Activities
Financing activities for the nine months ended September 30, 2020 and 2019 were as follows (amounts in millions):
Nine Months Ended September 30,
2020 2019
Proceeds from term loans and notes $ 143  $ 171 
Repayments of term loans and notes (196) (278)
Debt issuance costs of long-term debt (16) — 
Borrowings on revolving lines of credit 4,852  6,804 
Payments on revolving lines of credit (4,647) (6,548)
Issuance (repurchase) of common shares (1) (2)
Cash dividends —  (20)
Net increase (decrease) in bank overdrafts (12)
Other 10  (2)
Distributions to noncontrolling interest partners (18) (20)
Net cash (used) provided by financing activities $ 136  $ 93 

Net cash provided by financing activities was $136 million for the nine months ended September 30, 2020. This included net repayments on term loans of $53 million and net borrowings on revolving lines of credit of $205 million.

Net cash provided by financing activities was $93 million for the nine months ended September 30, 2019. This included net repayments on term loans of $107 million and net borrowings on revolving lines of credit of $256 million.

Dividends on Common Stock
We did not pay dividends during the nine months ended September 30, 2020 as compared to $20 million of cash dividends paid during the nine months ended September 30, 2019, due to the suspension of the dividend program in the second quarter 2019.

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Supplemental Guarantor Financial Information
Basis of Presentation
Substantially all of the Company's existing and future material domestic 100% owned subsidiaries (which are referred to as the "Guarantor Subsidiaries") fully and unconditionally guarantee its senior notes on a joint and several basis. However, a subsidiary’s guarantee may be released in certain customary circumstances such as a sale of the subsidiary or all or substantially all of its assets in accordance with the indenture applicable to the notes. The Guarantor Subsidiaries are combined in the presentation below.

Summarized Financial Information
The following tables present summarized financial information for the Parent and the Guarantors on a combined basis after the elimination of (a) intercompany transactions and balances among the Parent and the Guarantors and (b) the equity in earnings from and investments in any subsidiary that is a Nonguarantor:

Income Statements
Nine Months Ended September 30, Year Ended December 31,
2020 2019
   Net sales and operating revenues $ 4,423  $ 7,299 
Operating expenses $ 5,142  $ 7,662 
Net income (loss) $ (1,292) $ (498)
Net income (loss) attributable to Tenneco Inc. $ (1,292) $ (498)

Balance Sheets
September 30,
2020
December 31,
2019
ASSETS
Current assets $ 1,650  $ 1,947 
Non-current assets $ 2,072  $ 3,089 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities $ 1,472  $ 1,347 
Non-current liabilities $ 6,304  $ 6,102 
Intercompany due to (due from) $ 118  $ 107 

Environmental Matters, Legal Proceedings and Product Warranties
Note 13, Commitments and Contingencies in our condensed consolidated financial statements located in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain global market risks, including foreign currency exchange rate risk, commodity price risk, interest rate risk associated with our debt, and equity price risk associated with our share-based compensation awards.

Foreign Currency Exchange Rate Risk
We manufacture and sell our products in North America, South America, Asia, Europe, and Africa. As a result, our financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets in which we manufacture and sell our products. We generally try to use natural hedges within our foreign currency activities, including the matching of revenues and costs, to minimize foreign currency exchange rate risk. Where natural hedges are not in place, we consider managing certain aspects of our foreign currency activities and larger transactions through the use of foreign currency options or forward contracts. Principal currencies hedged have historically included the U.S. dollar, euro, British pound, Polish zloty, Singapore dollar, Thailand bhat, South African rand, Mexican peso, and Canadian dollar.

Foreign Currency Forward Contracts
We enter into foreign currency forward purchase and sale contracts to mitigate our exposure to changes in exchange rates on certain intercompany and third-party trade receivables and payables. In managing our foreign currency exposures, we identify and aggregate existing offsetting positions and then hedge residual exposures through third-party derivative contracts. The gains or losses on these contracts are recognized as foreign currency gains (losses) within cost of sales in the condensed consolidated statements of income (loss). The fair value of foreign currency forward contracts is recorded in prepayments and other current assets or accrued expenses and other current liabilities in the condensed consolidated balance sheets. The fair value of these derivative instruments is not considered material to the condensed consolidated financial statements.

The following table summarizes by position the notional amounts for foreign currency forward contracts at September 30, 2020 (all of which mature in 2020):
  Notional Amount
Long positions $ 43 
Short positions $ (43)

Interest Rate Risk
Our financial instruments that are sensitive to market risk for changes in interest rates are primarily our debt securities. We use our revolving credit facility to finance our short-term and long-term capital requirements. We pay a current market rate of interest on these borrowings. Our long-term capital requirements have been financed with long-term debt with original maturity dates ranging from five to ten years. At September 30, 2020, we had $1.6 billion par value of fixed rate debt and $3.6 billion par value of floating rate debt. In addition, borrowings on our revolving credit facility of $0.4 billion at September 30, 2020 are subject to variable rates. Of the fixed rate debt, $486 million is fixed through 2022, $635 million is fixed through 2024, and $500 million is fixed through 2026. For more detailed explanations on our debt structure and senior credit facility, refer to “Liquidity and Capital Resources” earlier in this Management’s Discussion and Analysis and Note 10, Debt and Other Financing Arrangements in our condensed consolidated financial statements located in Part I, Item 1 of this Form 10-Q.

We estimate the fair value of our long-term debt at September 30, 2020 was approximately 93% percent of its book value. A one percentage point increase or decrease in interest rates related to our variable interest rate debt would increase or decrease the annual interest expense we recognize in the condensed consolidated statements of income (loss) and the cash we pay for interest expense by approximately $50 million.

Equity Prices
We selectively use swaps to reduce market risk associated with our deferred compensation liabilities, which increase as our stock price increases and decrease as our stock price decreases. We have entered into a cash-settled share swap agreement that moves in the opposite direction of these liabilities, allowing us to fix a portion of the liabilities at a stated amount. At September 30, 2020, we hedged our deferred compensation liability related to approximately 1,700,000 common share equivalents. We also have an S&P 500 index fund ETF swap agreement to further reduce our market risk, which will act as a natural hedge offsetting an equivalent amount of indexed investments in our deferred compensation plans. The fair value of these swap agreements is recorded in prepayments and other current assets or accrued expenses and other current liabilities in the condensed consolidated balance sheets. The fair value of these derivative instruments is not considered material to the condensed consolidated financial statements.

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ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officers and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), as the end of the quarter covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the material weakness in our internal control over financial reporting previously identified and described more fully under Item 9A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the Company’s disclosure controls and procedures were not effective as of September 30, 2020 to ensure information required to be disclosed by our Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.

Internal Controls Surrounding the North America Motorparts Business
A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement in our annual or interim financial statements will not be prevented or detected on a timely basis.

As previously identified and described more fully under Item 9A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the Company identified a deficiency within its North America Motorparts business that constitutes a material weakness, as it did not maintain a sufficient complement of resources in the North America Motorparts business to ensure that appropriate controls were designed, maintained and executed, including controls over account reconciliations and manual journal entries, related to the integration of a previously acquired entity within the North America Motorparts business. The material weakness continued to exist as of the end of the period covered by this Quarterly Report.

The material weakness did not result in any material misstatements of the Company’s financial statements or disclosures but did result in out-of-period adjustments during the quarter ended December 31, 2019. Additionally, this material weakness could result in the misstatement of relevant account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Remediation Plan for Material Weakness in Internal Control over Financial Reporting
The Company continues to take action on the remediation plan more fully described under Item 9A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. While the Company is moving forward with these remediation activities, additional work needs to be done in this area. Accordingly, we concluded that this material weakness had not yet been remediated as of September 30, 2020.

We will continue to monitor the effectiveness of these and other processes, procedures and controls and make any further changes management determines appropriate.

Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
Note 13, Commitments and Contingencies, in our condensed consolidated financial statements located in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.
ITEM 1A.RISK FACTORS
We are exposed to certain risks and uncertainties that could have a material adverse effect on our business, financial condition and operating results. Except as set forth below, there have been no material changes to the Risk Factors described in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. The risks described herein or in our Annual Report on Form 10-K are not the only risks facing us. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor to assess the effect such risk factors might have on our business, financial condition and operating results, or the extent to which any such risk factor or combination of risk factors may affect our business, financial condition and operating results.

The novel coronavirus (COVID-19) global pandemic has had and is expected to continue to have an adverse effect on our business and results of operations.
In late 2019, a novel strain of coronavirus, COVID-19, was first detected in Wuhan, China. In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world have implemented measures to reduce the spread of COVID-19. These measures have adversely affected workforces, customers, consumer sentiment, economies, and financial markets, and, along with decreased consumer spending, reductions in revenue, and delays in payments from customers and partners, have led to an economic downturn in many of our markets. As a result of COVID-19, and in response to government mandates or recommendations, as well as decisions made to protect the health and safety of employees, consumers and communities, we and our customers have experienced significant closures and instances of reduced operations. Additionally, we have limited access at many of our corporate office and other facilities and have implemented a work from home policy for many corporate employees which may negatively impact productivity and cause other disruptions to our business.

The uncertainties created by the COVID-19 global pandemic, including the severity and duration of the outbreak and additional actions that may be taken by governmental authorities make it difficult to forecast the effects of the virus on the Company’s future results, including our ability to execute our near-term and long-term business strategies and initiatives in the expected time frame. Additionally, it is possible that we may experience supply chain disruptions as well as labor shortages as a result of COVID-19, further disrupting operations and impacting revenues negatively.

To the extent the COVID-19 global pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this ‘‘Risk Factors’’ section or to the “Risk Factors” described in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, such as those relating to our high level of indebtedness, our need to generate sufficient cash flows to service our indebtedness, our ability to comply with the covenants contained in the agreements that govern our indebtedness and to have access to sufficient liquidity through the COVID-19 pandemic, decreased revenue from loss of customer market share, and working capital requirements.

We may not be able to fully utilize our net operating loss and other tax carryforwards.
Under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of state law, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. A corporation generally experiences an “ownership change” if the percentage of its shares of stock owned by its “5-percent shareholders,” as such term is defined in Section 382 of the Code, increases by more than 50 percentage points over a rolling three-year period. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our tax attributes is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.

75


In April 2020, our Board of Directors approved a Section 382 Rights Agreement (the “Section 382 Rights Plan”), which may cause substantial dilution to a person or group that attempts to acquire 4.9% or more of the Company’s Class A Voting Common Stock on terms not approved by our Board of Directors. The purpose of the Rights Plan is to protect value by preserving the Company’s ability to use certain of its tax attributes to offset potential future income taxes. Although the Section 382 Rights Plan is intended to reduce the likelihood of an “ownership change” that could adversely affect utilization of our tax assets, there is no assurance that the Section 382 Rights Plan will prevent all transfers that could result in such an “ownership change.” The Section 382 Rights Plan could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, a large block of our Class A Voting Common Stock. A third party that acquires in excess of 4.9% or more of our Class A Voting Common Stock could suffer substantial dilution of its ownership interest under the terms of the Section 382 Rights Plan. This may adversely affect the marketability of our Class A Voting Common Stock by discouraging existing or potential investors from acquiring our stock or additional shares of our stock.

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ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) None.
(b) Not applicable.
(c) Purchase of equity securities by the issuer and affiliated purchasers. The following table provides information relating to our purchase of shares of our common stock in the third quarter of 2020. These purchases reflect shares withheld upon vesting of restricted stock for tax withholding obligations. We generally intend to continue to satisfy tax withholding obligations in connection with the vesting of outstanding restricted stock through the withholding of shares.
Period Total Number of
Shares Purchased (1)
Average
Price Paid
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
Maximum Value of
Shares That
May Yet be
Purchased
Under
These Plans
or Programs
(Millions)
July 2020 13  $ 8.14  —  $ — 
August 2020 191  10.47  —  — 
September 2020 4,736  7.07  —  — 
Total 4,940  $ 7.21  —  $ — 
(1)     Shares withheld upon vesting of share settled restricted stock units in the third quarter of 2020.

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ITEM 5.    OTHER INFORMATION
2006 Tenneco Inc. Long-Term Incentive Plan
On November 5, 2020 (the “Effective Date”), the Board of Directors of the Company (the “Board”) adopted an amendment and restatement of the 2006 Tenneco Inc. Long-Term Incentive Plan (the “2006 Plan”). The amendment and restatement modifies the definition of a Change in Control under the 2006 Plan such that a Change in Control is deemed to occur upon the acquisition by any person of 30% or more of the Company’s outstanding voting securities or 40% or more of the Company’s outstanding class A voting common stock and class B non-voting common stock in the aggregate (in each case without regard to whether the Board approves the acquisition).

Prior to the Effective Date, awards were subject to “single-trigger” accelerated vesting upon a Change in Control. The amendment and restatement of the 2006 Plan modifies this treatment for awards granted on or after the Effective Date to generally provide for “double-trigger” accelerated vesting, whereby awards will vest if a participant’s employment is terminated by the Company without Cause (as defined in the amended and restated 2006 Plan) or by the participant for Good Reason (as defined in the amended and restated 2006 Plan, which definition is consistent with the amended definition of Constructive Discharge under the CIC Plan, described below) upon or within the twenty-four (24) months following a Change in Control. Performance awards will vest at target.

In addition, upon a Change in Control where outstanding awards are continued, assumed or replaced, unless the Compensation Committee determines that Company performance can be determined with respect to any performance period in effect on the date of the Change in Control, the performance conditions for outstanding performance-based awards will be deemed to be achieved at the target level for such performance period and will thereafter not be subject to any performance conditions, and any applicable service-based conditions will continue to apply as if the Change in Control had not occurred.

Tenneco Inc. Change in Control Severance Plan
On the Effective Date, the Board also adopted an amendment and restatement of the Tenneco Inc. Change in Control Severance Benefit Plan for Key Executives (the “CIC Plan”) to modify the definition of a Change in Control to be the same as the definition under the 2006 Plan.

The amended and restated CIC Plan also modifies the definition of Constructive Termination to provide that a Constructive Termination will occur when there has been a material reduction in an executive’s Total Compensation, defined to include the executive’s target annual long-term incentive awards for the calendar year ended immediately prior to a Change in Control. Prior to the Effective Date, a Constructive Termination was only deemed to occur when an executive’s annual base salary and annual cash incentive awards were materially reduced.
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ITEM 6.EXHIBITS
INDEX TO EXHIBITS
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 2020
Exhibit
Number
  Description
*+10.1
Offer Letter to Kevin W. Baird dated July 6, 2020.
*+10.2
Restricted Stock Unit Inducement Grant Award Agreements, effective as of August 3, 2020, by and
between Tenneco Inc. and Kevin W. Baird (2-year vesting).
*+10.3
Restricted Stock Unit Inducement Grant Award Agreement, effective as of August 3, 2020, by and between Tenneco Inc. and Kevin W. Baird (3-year vesting).
*+10.4
Offer Letter to Matti Masanovich dated July 6, 2020.
*+10.5
Restricted Stock Unit Inducement Grant Award Agreements, effective as of August 10, 2020, by and
between Tenneco Inc. and Matti Masanovich.
*+10.6
Tenneco Inc. 2006 Long-Term Incentive Plan, as amended and restated effective November 5, 2020.
*+10.7
Tenneco Inc. Change in Control Severance Benefit Plan for Key Executives, as Amended and Restated effective November 5, 2020.
*+10.8
Form of amended and Restated Cash-Settled Long-Term Performance Share Unit Award Agreement under the Tenneco Inc. 2006 Long-Term Incentive Plan (for periods commencing after January 1, 2020).
*31.1
Certification of Brian J. Kesseler under Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2
Certification of Matti Masanovich under Section 302 of the Sarbanes-Oxley Act of 2002.


*32.1
Certification of Brian J. Kesseler and Matti Masanovich under Section 906 of the Sarbanes-Oxley Act of 2002.
*101.INS Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
*101.SCH Inline XBRL Taxonomy Extension Schema Document.
*101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
*101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
*101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
*101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Filed herewith.
+ Indicates a management contract or compensatory plan or arrangement

79


SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Tenneco Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
TENNECO INC.
By: /s/ MATTI MASANOVICH
Matti Masanovich
Executive Vice President and Chief Financial
Officer (on behalf of the Registrant)
                        
TENNECO INC.
By: /s/ JOHN S. PATOUHAS
John S. Patouhas
Vice President and Chief Accounting Officer (principal accounting officer)
Dated: November 5, 2020
80
Exhibit 10.1
                
                    REVISED
July 6, 2020

[Redacted]

Dear Kevin:

I am pleased to provide for your consideration this letter offering you employment to be Tenneco’s Executive Vice President and Chief Operating Officer.

The key terms of Tenneco’s offer of employment are described below.

Outline of Employment Offer

1.Position: As an executive officer of Tenneco Inc., your position will be Executive Vice President and Chief Operating Officer, reporting directly to Brian Kesseler, Chief Executive Officer. Your work location will be Southfield, Michigan with an expected hire date of August 3, 2020.

2.Base Salary: Your initial base salary will be $850,000 per year ($32,692.31 every two weeks) less appropriate taxes and withholding, paid in accordance with the company’s normal payroll practices. Beginning in 2021 and each year thereafter, your base salary will be reviewed and, in turn, may be adjusted, subject to approval by the Compensation Committee of Tenneco Inc.’s Board of Directors (the “Compensation Committee”).

3.Annual Incentive Compensation: You will be eligible to participate in Tenneco’s annual incentive plan in a manner consistent with other Tenneco executives assigned to the Enterprise. The terms of the annual incentive plan are currently set forth in the Tenneco Inc. Annual Incentive Plan (“AIP” – copy attached). Your initial target bonus opportunity for the 2020 calendar year performance period under the AIP will be 100% of your annual base salary (or $850,000 based on the offered salary), provided that your bonus for the 2020 calendar year, if any, will be pro-rated based on your hire date. The payment of annual bonuses under the AIP are subject to achievement of pre-defined performance goals, the approval by the Compensation Committee, and the terms of the AIP.















Exhibit 10.1

Mr. Kevin Baird
July 6, 2020
Page 2


4.Sign-on Bonus: This offer includes a $600,000 (six hundred thousand dollar) signing bonus, which is subject to regular withholding taxes and deductions, with the full amount paid on or as soon as practicable after February 28, 2021 (but in no event later than March 15, 2021) provided that you remain employed by the company through February 28, 2021. If your employment is involuntarily terminated by the company (other than for cause) before February 28, 2021, this amount will be paid at the time of termination.

In addition, the signing bonus is subject to the terms described below:

REPAYMENT AGREEMENT – SIGNING BONUS

A.The offered signing bonus is subject to state and federal income tax laws and is collectively reported by the company to the Internal Revenue Service via form W-2 as taxable wages subject to withholding.

B.If you voluntarily resign your employment with the company at any time during the two-year period immediately following your date of employment, you hereby agree to repay to the company the net amount of the signing bonus paid to you prior to your termination. This payment must be made within thirty (30) days after the termination of your employment. Further you authorize the company to withhold any and all monies due to you from the company to recover this amount, including earnings, as follows:

1.If your resignation occurs within twelve months of your date of employment, you will repay 100% of the net amount of the signing bonus paid to you by the company.
2.If your resignation occurs more than twelve months following your date of employment, but prior to the end of the two year period described above, you agree to repay half (1/2) of the net amount of the signing bonus paid to you.


3.Long-Term Incentive Compensation: You will be eligible to participate in Tenneco’s long-term incentive plan in a manner consistent with other similarly-situated Tenneco executives. The terms of the long-term incentive plan are currently set forth in the Tenneco Inc. 2006 Long-Term Incentive Plan, as amended (“LTIP”), a copy of which has been attached.

Each year the Compensation Committee will determine and approve the mix of long-term incentive (LTI) awards that will be granted to you and the aggregate target value of these awards. Your first eligibility for a full LTI award will be in February 2021. The final award size, award type, performance conditions and other terms of this award will be approved by the Compensation Committee at the same time the terms of these awards are established for other similarly-situated executives of the company. Your 2021 LTI award is currently estimated to have a $2,000,000 value.


Exhibit 10.1
Mr. Kevin Baird
July 6, 2020
Page 3


For 2020, you will be eligible to participate in the full 2020–2022 LTPU award cycle with a targeted LTPU award of $1,200,000 and assigned to the Enterprise, subject to the performance goals and other criteria that have been established under the LTIP for the performance cycle. The LTPU award will be subject to the terms of the LTIP and the applicable award agreement.

4.Inducement Awards: To replace the value of foregone compensation from your previous employer and to provide additional incentives to you, you will receive the following awards:

i.Tenneco will grant you a Restricted Stock Unit award with a value of $1,000,000, with one-half of the award vesting on August 3, 2021 and the remaining one-half of the award vesting on August 3, 2022. When vested, the restricted stock units (RSUs) will settle in Tenneco shares. The number of shares subject to the award will be based on a 10-trading day stock price average of Tenneco Inc. as of market close on July 2, 2020. If you are involuntarily separated by the company (other than for cause) before August 3, 2022, the unvested RSUs will vest at the time of separation. The award will also be subject to the terms and conditions of the applicable award agreement.

ii.Tenneco will grant you a Restricted Stock Unit Award with a value of $800,000, which will vest ratably over 3 years from the date of grant, subject to the terms and conditions of the award agreement (which generally will contain terms and conditions that are consistent with the RSU awards granted to other executives of the company as part of their 2020 LTI awards). The number of shares subject to the award will be based on a 10-trading day stock price average of Tenneco Inc. as of market close on July 2, 2020. When vested, the RSUs will settle in Tenneco shares.

5.Retirement Plans: You will be eligible to participate in the Tenneco 401(k) Plan that currently provides a 100% company match on your first 3%, and 50% of your next 2%, of base pay contributions subject to Plan and IRS maximums and provides a base pay. The plan also generally provides a company retirement contribution of between 2.5% and 4% of salary (depending on your age at the relevant time and after you have completed a year of service, subject to 401(k) Plan and IRS maximums).

You will also be eligible to participate in the Tenneco Excess Benefit Plan that will provide you with a benefit of between 2.5% and 4% of your annual incentive compensation and matching contributions and company retirement contributions at the rate applicable under the 401(k) plan on your compensation in excess of the IRS limitation on compensation under section 401(a)(17) of the Internal Revenue Code. All benefits are subject to the terms of the Tenneco Excess Benefit Plan.




Exhibit 10.1
Mr. Kevin Baird
July 6, 2020
Page 4


6.Change-In-Control (CIC) Protection: You will be eligible to participate in Tenneco’s Change-In-Control Severance Benefit Plan for Key Executives (the “CIC Plan”) at the Executive Group II level. Benefits under the CIC Plan are payable if you are discharged (either actually or constructively) within two years after a change-in-control. The CIC Plan generally provides a lump-sum payment equal to two times base salary and targeted annual bonus in effect immediately prior to the change-in-control for Executive Group II level participants. Continuing participation in certain insurance plans and outplacement services are also provided. All benefits are subject to the terms of the CIC Plan.
7.Severance (not related to CIC): You will be eligible to participate in the Tenneco Automotive Operating Company Inc. Severance Benefit Plan, as amended (the “Severance Plan”) as a member of Group 1. Benefits are payable under the Severance Plan if you are discharged by the company other than for Cause or if you terminate due to Constructive Termination (and, in any case, other than under circumstances which would entitle you to benefits under the CIC Plan). For Group 1 participants, the Severance Plan currently generally provides a one times annual base salary severance, payable in substantially equal installments in accordance with the normal payroll practices continuing during the severance period, and your targeted annual bonus for the year in which the termination occurs, subject to your execution of a general release and such other documents as the company may reasonably request. The Severance Plan also provides a medical coverage subsidy in certain cases and outplacement benefits. “Cause” and “Constructive Termination” have the meanings specified in the Severance Plan and all benefits under the Severance Plan are subject to the terms and conditions of the Severance Plan.
8.Benefits Generally: The company reserves the right to modify or terminate its benefit plans and arrangements at any time. Your participation in the plans will be subject to the terms and conditions thereof as in effect at the relevant time.
9.Stock Ownership Guidelines: Upon employment, you will be subject to Tenneco’s stock ownership guideline policy, requiring that you hold qualifying shares of Tenneco equal to four times base salary, to be attained by the first month of January following five years of employment.
10.Insider Trading Policy: Upon employment, you will be subject to Tenneco’s Insider Trading Policy, which, among other things, limits the timing and types of transactions you may make with respect to Tenneco securities and related derivatives.
11.Health and Welfare Benefits: You will be eligible to participate in Tenneco’s broad-based health and welfare plans in a manner consistent with other similarly-situated Tenneco employees. Please refer to benefit plan documents for specific terms and eligibility. Attached for your convenience is the Tenneco 2020 Benefits Summary for Salaried Employees.




Exhibit 10.1
Mr. Kevin Baird
July 6, 2020
Page 5


12.Vacation and Holiday Paid Time Off: You will be entitled to a total of four weeks of paid vacation per year: two weeks in accordance with the provisions of the company’s vacation policy and two additional negotiated weeks. Your vacation accrual will thereafter increase only in accordance with the vacation schedule in the policy (i.e., you will accrue five weeks of vacation upon reaching 25 years of service). In addition, the company is typically closed during the week between Christmas and New Year’s Day holidays. You will also be eligible for paid holidays and personal floating holidays in accordance with the company’s policies. When you leave employment with the company, you will receive a payment for any vacation you have accrued and not used. Vacation is prorated to your date of employment and accrued on a monthly basis.

13.Relocation: A copy of the Renter Relocation Summary, Renter Addendum and Repayment Agreement are enclosed for your review. This benefit will be made available to you for one year from employment date. Use of a Company provided T&E credit card for any relocation assignment related expenses is prohibited.

14.Employment at Will: This offer does not constitute a contract of employment for any specific period of time, but will create an employment at-will relationship that may be terminated at any time by you or the company, with or without cause.


In addition, your offer is contingent upon the verification of the information you have provided to the company, successful completion of employment paperwork, the completion of a Combined Disclosure Notice & Authorization Regarding Background Consumer Reports and background authorization forms and execution of the Tenneco Confidentiality Agreement (this will be part of your “on-boarding” process).

On or before your first day of employment, you must provide documentation that you have authorization to work in the United States. The offer is contingent upon you providing appropriate I-9 documentation (see enclosed). Two copies of this offer letter have been provided. Please sign the offer letter and return it to me as soon as possible. The second copy should be retained for your personal records.





Exhibit 10.1
Mr. Kevin Baird
July 6, 2020
Page 6


Kevin, we look forward to you joining Tenneco and are excited for you to contribute and share in its future success. Please contact me to acknowledge your acceptance or with any other questions or concerns.


Sincerely,


/s/ Kaled Awada


Kaled Awada
Senior Vice President and Chief Human Resources Officer
Tenneco Inc.


______________________________________________________________________________



I have read, understood and accept this offer of employment at a subsidiary of Tenneco Inc.


By: /s/ Kevin W. Baird             Date: July 6, 2020


Print Name: Kevin W. Baird

Exhibit 10.2
2 year vesting
RESTRICTED STOCK UNIT INDUCEMENT GRANT AWARD AGREEMENT

Kevin Baird (“Executive”)

Division Allocation as of Grant Date:    New Tenneco

As a material inducement for the Executive to commence employment as the Executive Vice President and Chief Operating Officer of Tenneco Inc. (the “Company”) effective as of August 3, 2020 in accordance with the New York Stock Exchange Listing Company Manual Rule 303A.08, effective as of August 3, 2020, the Executive is hereby granted an award of restricted stock units (“Restricted Stock Units”) with respect to 133,156 shares of the Company’s class A voting common stock, par value $0.01 per share (“Common Stock”). The Award is subject to the following terms and conditions (sometimes referred to as this “Award Agreement”). Terms used in this Award Agreement are defined elsewhere in this Award Agreement; provided, however, that, solely for convenience, capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Tenneco Inc. 2006 Long-Term Incentive Plan (the “Incentive Plan”). Notwithstanding any provision of this Award Agreement, this Award is not granted under the Incentive Plan.
1.Dividend Cash Amounts.  This Award contains the right to receive cash credits to a hypothetical bookkeeping account (a “Dividend Cash Account”) in respect of dividends paid with respect to shares of Common Stock in accordance with the following:
(a)If a dividend with respect to shares of Common Stock is payable in cash, then, as of the applicable dividend payment date, the Executive’s Dividend Cash Account shall be credited with an amount (a “Dividend Cash Amount”) equal to (i) the cash dividend payable with respect to a share of Common Stock, multiplied by (ii) the number of Restricted Stock Units outstanding on the applicable dividend record date.
(b)If a dividend with respect to shares of Common Stock is payable in shares of Common Stock, then, as of the applicable dividend payment date, the Executive’s Dividend Cash Account shall be credited with a Dividend Cash Amount in an amount equal to (i) the number of shares of Common Stock distributed in the dividend with respect to a share of Common Stock, divided by (ii) the Fair Market Value of a share of Common Stock on the dividend payment date, multiplied by (iii) the number of Restricted Stock Units outstanding on the applicable dividend record date.
The Dividend Cash Amounts credited to the Executive’s Dividend Cash Account shall be subject to the same vesting provisions as the Restricted Stock Units to which the Dividend Cash Amounts relate and shall be settled in accordance with Paragraph 3.  No Dividend Cash Amounts with respect to a Restricted Stock Unit shall be credited under this Award Agreement for any period after the Vesting Date (as defined in Paragraph 2) applicable to such Restricted Stock Unit.  Amounts credited to the Executive’s Dividend Cash Account shall not be credited with any investment earnings.



2.Vesting and Forfeiture of Restricted Stock Units and Dividend Cash Amounts
(a)All Restricted Stock Units and Dividend Cash Amounts credited to the Executive’s Dividend Cash Account shall be unvested unless and until they become vested and nonforfeitable in accordance with this Paragraph 2.  Subject to the terms and conditions of this Award Agreement, fifty percent (50%) of the Restricted Stock Units and associated Dividend Cash Amounts awarded hereunder shall vest on August 3, 2021 and fifty percent (50%) of the Restricted Stock Units and associated Dividend Cash Amounts will vest on August 3, 2022 (each of such dates being referred to as a “Vesting Date”), provided, in either case, that the Executive is continuously employed by the Company or a Subsidiary through the applicable Vesting Date.  Notwithstanding the foregoing, if the Executive’s Termination Date occurs by reason of termination by the Company other than for Cause (as defined below), any unvested Restricted Stock Units that are outstanding on the Termination Date (and associated Dividend Cash Amounts) shall immediately vest on the Termination Date and the Termination Date shall be the “Vesting Date” for purposes of this Award Agreement. All Restricted Stock Units and associated Dividend Cash Amounts that are not vested upon the Executive’s Termination Date shall immediately expire and shall be forfeited and the Executive shall have no further rights thereto.  In the event of forfeiture for any reason, the balance in the Executive’s Dividend Cash Account shall be reduced by the amount of any Dividend Cash Amounts that are forfeited.
(b)For purposes of this Award Agreement, “Cause” means, with respect to the Executive, (i) fraud, embezzlement, or theft in connection with his or her employment, (ii) gross negligence in the performance of his or her duties, (iii) his or her conviction, guilty plea, or plea of nolo contendere with respect to a felony, (iv) the willful and continued failure to substantially perform his or her duties for the Company or any of its Subsidiaries (except where the failure results from incapacity due to disability), (v) the failure to meet the obligations required by his or her position, as determined in the reasonable discretion of the Committee, or (vi) the willful or negligent engagement in conduct which is, or could reasonably be expected to be, materially injurious to any of the Company or any of its Subsidiaries, monetarily or otherwise. For purposes of the foregoing, no act, or failure to act, on the part of the Executive shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that his or her act, or failure to act, was in the best interest of the Company and its Subsidiaries.
3.Settlement and Payment.  Subject to the terms and conditions of this Award Agreement, Restricted Stock Units and associated Dividend Cash Amounts that have become vested in accordance with Paragraph 2 shall be paid and settled as of the applicable Vesting Date.  The date on which payment and settlement occurs is referred to as the “Settlement Date.” Unless otherwise determined by the Committee, (a) settlement of the vested Restricted Stock Units on a Settlement Date shall be made in the form of shares of Common Stock with one share
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of Common Stock being issued in settlement of each Restricted Stock Unit, plus an amount of cash equal to the Fair Market Value of any fractional Restricted Stock Unit being settled as of such Settlement Date and (b) settlement of the vested Dividend Cash Amounts on a Settlement Date shall be paid in a cash lump sum payment. Upon the settlement of any vested Restricted Stock Units such Restricted Stock Units shall be cancelled and upon payment of any Dividend Cash Amounts the balance in the Executive’s Dividend Cash Account shall be reduced by the amount paid to the Executive pursuant to subparagraph 3(b).
4.Withholding.  This Award and any distribution in respect of this Award, are subject to withholding of all applicable taxes, and the delivery of any cash or other benefits under this Award is conditioned on satisfaction of the applicable tax withholding obligations. Such withholding obligations may be satisfied, at the Executive’s election, (a) through cash payment by the Executive or (b) through the surrender of cash or shares of Common Stock to which the Executive is otherwise entitled under this Award; provided, however, that any withholding obligations with respect to any Executive shall be satisfied by the method set forth in subparagraph 4(b) (through the withholding of shares otherwise payable pursuant to this Award) unless the Executive otherwise elects in accordance with this Paragraph 4; and provided further that any withholding with respect to payments of Dividend Cash Amounts shall be satisfied by the method set forth in subparagraph 4(a). The amount withheld in the form of shares of Common Stock under this Paragraph 4 may not exceed the minimum statutory withholding obligation (based on the minimum statutory withholding rates for Federal and state purposes, including, without limitation, payroll taxes) unless otherwise elected by the Executive, in no event shall the Executive be permitted to elect less than the minimum statutory withholding obligation, and in no event shall the Executive be permitted to elect to have an amount withheld in the form of shares of Common Stock pursuant to this Paragraph 4 that exceeds the maximum individual tax rate for the employee in applicable jurisdictions.
5.Transferability.  This Award is not transferable except as designated by the Executive by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order.
6.Heirs and Successors.  If any benefits deliverable to the Executive under this Award Agreement have not been delivered at the time of the Executive’s death, such benefits shall be delivered to the Executive’s Designated Beneficiary, in accordance with the provisions of this Award Agreement. The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Executive in a writing filed with the Company in such form and at such time as the Company shall require and in accordance with such rules and procedures established by the Company. If a deceased Executive fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Executive, any rights that would have been exercisable by the Executive and any benefits distributable to the Executive shall be distributed to the legal representative of the estate of the Executive.
7.Administration.  The authority to administer and interpret this Award and this Award Agreement shall be vested in the Committee, and the Committee shall have all powers with respect to this Award and this Award Agreement as it would have if the Award was made
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under the Incentive Plan. Any interpretation of this Award or this Award Agreement by the Committee and any decision made by it with respect to this Award or this Award Agreement is final and binding on all persons.
8.Adjustment of Award. The number of Restricted Stock Units awarded pursuant to this Award may be adjusted by the Committee in a manner consistent with Section 5.2 of the Incentive Plan to reflect certain corporate transactions which affect the number, type or value of the Restricted Stock Units.
9.Notices.  Any notice required or permitted under this Award Agreement shall be deemed given when delivered personally, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Committee or the Company at the Company’s principal offices, to the Executive at the Executive’s address as last known by the Company or, in any case, such other address as one party may designate in writing to the other.
10.Amendments.  The Committee may amend this Award Agreement, provided that, no amendment or termination may, in the absence of written consent to the change by the affected Executive (or, if the Executive is not then living, the affected beneficiary), adversely affect the rights of any Executive or beneficiary under this Award Agreement prior to the date such amendment or termination is adopted by the Committee. Adjustments described in Paragraph 8 shall not be subject to the terms of this Paragraph 10.
11.Unfunded Obligation. The Award shall not be funded, no trust, escrow or other provisions shall be established to secure payments and distributions due hereunder and this Award shall be regarded as unfunded for purposes of the Employee Retirement Income Security Act of 1974, as amended, and the Code. The Executive shall be treated as a general, unsecured creditor of the Company with respect to amounts payable hereunder, and shall have no rights to any specific assets of the Company. Without limiting the generality of the foregoing, any amounts credited to the Dividend Cash Account will remain general assets of the Company and shall be payable solely from the general assets of the Company.
12.Severability.  If a provision of this Award Agreement is held invalid by a court of competent jurisdiction, the remaining provisions shall nonetheless be enforceable according to their terms.  Further, if any provision is held to be overbroad as written, that provision shall be amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and enforced as amended.
13.Other Terms
(a)The Award does not constitute a contract of employment or continued service, and the grant of the Award shall not give the Executive the right to be retained in the employ or service of the Company or any Subsidiary, nor any right or claim to any benefit under this Award Agreement, unless such right or claim has specifically accrued under the terms of this Award Agreement.
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(b)Notwithstanding any other provision of this Award Agreement, (i) this Award is subject to the Company’s recoupment or clawback policies as applicable and as in effect from time to time and (ii) if the Committee determines, in its sole discretion, that the Executive at any time has willfully engaged in any activity that the Committee determines was or is harmful to the Company or any of its Subsidiaries, any unpaid portion of the Award shall be forfeited and the Executive shall have no rights with respect thereto.
(c)If the Committee determines that the Executive has (i) used for profit or disclosed to unauthorized persons, confidential or trade secrets of the Company or any Subsidiary; (ii) breached any contract with or violated any fiduciary obligation to the Company or any Subsidiary; or (iii) engaged in any conduct which the Committee determines is injurious to the Company or its Subsidiaries, the Committee may cause the Executive to forfeit this Award; provided, however, that following the occurrence a Change in Control, the Award will not be subject to forfeiture pursuant to the provisions of this subparagraph 13(c).
(d)The Executive shall not, by reason of this Award, 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 this Award. The Executive shall have only a contractual right to the shares of Common Stock or amounts, if any, payable under this Award, unsecured by any assets of the Company or any Subsidiary, and nothing contained in this Award Agreement shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
(e)The validity, construction and effect of this Award Agreement shall be determined in accordance with the laws of the State of Illinois and applicable federal law.
14.Counterparts. This Award Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.
15.Special Section 409A Rules.  It is intended that any amounts payable under this Award Agreement shall either be exempt from or comply with section 409A of the Code. The provisions of this Award shall be construed and interpreted in accordance with section 409A of the Code. Notwithstanding any other provision of this Award Agreement to the contrary, if any payment or benefit hereunder is subject to section 409A of the Code, and if such payment or benefit is to be paid or provided on account of the Executive’s termination of employment (or other separation from service):
(a)and if the Executive is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code) and if any such payment or benefit is required to be
5



made or provided prior to the first day of the seventh month following the Executive’s separation from service or termination of employment, such payment or benefit shall be delayed until the first day of the seventh month following the Executive’s termination of employment or separation from service; and
(b)the determination as to whether the Executive has had a termination of employment (or separation from service) shall be made in accordance with the provisions of section 409A of the Code and the guidance issued thereunder without application of any alternative levels of reductions of bona fide services permitted thereunder.
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EXECUTIVE:                        TENNECO INC.:
                            
/s/ Kevin W. Baird                    /s/ Kaled Awada
Electronic Signature    Senior Vice President and Chief Human Resources Officer
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Exhibit 10.3
3 year vesting
RESTRICTED STOCK UNIT INDUCEMENT GRANT AWARD AGREEMENT

Kevin Baird (“Executive”)

Division Allocation as of Grant Date:    New Tenneco

As a material inducement for the Executive to commence employment as the Executive Vice President and Chief Operating Officer of Tenneco Inc. (the “Company”) effective as of August 3, 2020 in accordance with the New York Stock Exchange Listing Company Manual Rule 303A.08, effective as of August 3, 2020 (the “Grant Date”), the Executive is hereby granted an award of restricted stock units (“Restricted Stock Units”) with respect to 106,524 shares of the Company’s class A voting common stock, par value $0.01 per share (“Common Stock”). The Award is subject to the following terms and conditions (sometimes referred to as this “Award Agreement”). Terms used in this Award Agreement are defined elsewhere in this Award Agreement; provided, however, that, solely for convenience, capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Tenneco Inc. 2006 Long-Term Incentive Plan (the “Incentive Plan”). Notwithstanding any provision of this Award Agreement, this Award is not granted under the Incentive Plan.
1.Dividend Cash Amounts.  This Award contains the right to receive cash credits to a hypothetical bookkeeping account (a “Dividend Cash Account”) in respect of dividends paid with respect to shares of Common Stock in accordance with the following:
(a)If a dividend with respect to shares of Common Stock is payable in cash, then, as of the applicable dividend payment date, the Executive’s Dividend Cash Account shall be credited with an amount (a “Dividend Cash Amount”) equal to (i) the cash dividend payable with respect to a share of Common Stock, multiplied by (ii) the number of Restricted Stock Units outstanding on the applicable dividend record date.
(b)If a dividend with respect to shares of Common Stock is payable in shares of Common Stock, then, as of the applicable dividend payment date, the Executive’s Dividend Cash Account shall be credited with a Dividend Cash Amount in an amount equal to (i) the number of shares of Common Stock distributed in the dividend with respect to a share of Common Stock, divided by (ii) the Fair Market Value of a share of Common Stock on the dividend payment date, multiplied by (iii) the number of Restricted Stock Units outstanding on the applicable dividend record date.
The Dividend Cash Amounts credited to the Executive’s Dividend Cash Account shall be subject to the same vesting provisions as the Restricted Stock Units to which the Dividend Cash Amounts relate and shall be settled in accordance with Paragraph 4.  No Dividend Cash Amounts with respect to a Restricted Stock Unit shall be credited under this Award Agreement for any period after the Vesting Date (as defined in Paragraph 2) applicable to such Restricted Stock Unit.  Amounts credited to the Executive’s Dividend Cash Account shall not be credited with any investment earnings.



2.Vesting and Forfeiture of Restricted Stock Units and Dividend Cash Amounts.  All Restricted Stock Units and Dividend Cash Amounts credited to the Executive’s Dividend Cash Account shall be unvested unless and until they become vested and nonforfeitable in accordance with this Paragraph 2.  Subject to the terms and conditions of this Award Agreement, one third (1/3) of the Restricted Stock Units and associated Dividend Cash Amounts awarded hereunder shall vest on each of the first, second and third anniversaries of the Grant Date (each a “Vesting Date”), provided, in any case, that the Executive is continuously employed by the Company or a Subsidiary through the applicable Vesting Date.  Notwithstanding the foregoing:
(a)if the Executive’s Termination Date occurs by reason of Total Disability (as defined in Paragraph 3) or death, any unvested Restricted Stock Units that are outstanding on the Termination Date (and any associated Dividend Cash Amounts) shall immediately vest on the Termination Date and the Termination Date shall be the “Vesting Date” for purposes of this Award Agreement;
(b)if the Executive’s Termination Date occurs by reason of Retirement (as defined in Paragraph 3) after the first anniversary of the Grant Date, any unvested Restricted Stock Units that are outstanding on the Termination Date (and associated Dividend Cash Amounts) shall immediately vest on the Termination Date and the Termination Date shall be the “Vesting Date” for purposes of this Award Agreement;
(c)in the event of a Change in Control other than a New Tenneco Transaction or a DRiV Transaction (each as defined in Paragraph 3), any outstanding unvested RSUs shall immediately vest on the date of the Change in Control and the date of the Change in Control shall be the “Vesting Date” for purposes of this Award Agreement;
(d)If a New Tenneco Transaction occurs, any unvested Restricted Stock Units that are outstanding on the date of the New Tenneco Transaction (and any associated Dividend Cash Amounts) shall immediately vest on the date of the New Tenneco Transaction and the date of the New Tenneco Transaction shall be the “Vesting Date” for purposes of this Award Agreement, and
(e)If a DRiV Transaction that is a sale of DRiV occurs, any outstanding unvested Restricted Stock Units (and associated Dividend Cash Amounts) shall be paid and settled as of the Settlement Date (determined in accordance with Paragraph 4) provided that the Executive’s Termination Date does not occur prior to the Settlement Date; provided, however, that if the Executive’s Termination Date occurs prior to the Settlement Date as a result of death, Total Disability or a termination by the Company or a Subsidiary for reasons other than Cause, any unvested Restricted Stock Units that are outstanding on the Termination Date (and associated Dividend Cash Amounts) shall immediately vest on the Termination Date and the Termination Date shall be the “Vesting Date” for purposes of this Award Agreement; and
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(f)If a DRiV Transaction occurs that is a spin-off of DRiV, the provisions of this Agreement shall continue to apply without regard to the DRiV Transaction.  
All Restricted Stock Units and associated Dividend Cash Amounts that are not vested upon the Executive’s Termination Date shall immediately expire and shall be forfeited and the Executive shall have no further rights thereto.  In the event of forfeiture for any reason, the balance in the Executive’s Dividend Cash Account shall be reduced by the amount of any Dividend Cash Amounts that are forfeited.
3.Special Definitions. For purposes of this Award Agreement, the following terms shall have the meaning specified:
(a)“Cause” means, with respect to the Executive, (i) fraud, embezzlement, or theft in connection with his or her employment, (ii) gross negligence in the performance of his or her duties, (iii) his or her conviction, guilty plea, or plea of nolo contendere with respect to a felony, (iv) the willful and continued failure to substantially perform his or her duties for the Company or any of its Subsidiaries (except where the failure results from incapacity due to disability), (v) the failure to meet the obligations required by his or her position, as determined in the reasonable discretion of the Committee, or (vi) the willful or negligent engagement in conduct which is, or could reasonably be expected to be, materially injurious to any of the Company or any of its Subsidiaries, monetarily or otherwise. For purposes of the foregoing, no act, or failure to act, on the part of the Executive shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that his or her act, or failure to act, was in the best interest of the Company and its Subsidiaries.
(b)“DRiV Transaction” means (i) a sale or (ii) spin-off, in each case of the Company’s DRiV Division (consisting primarily of the Company’s Global Motorparts business group and Global Ride Performance business group and applicable reporting lines thereunder as determined from time to time by the Company); provided, however, that a sale of the DRiV Division shall not constitute a DRiV Transaction unless the sale constitutes a sale of all or substantially all of the DRiV Division. A DRiV Transaction shall not constitute a Change in Control for purposes of this Award Agreement even if it otherwise constitutes a Change in Control as defined in the Incentive Plan.
(c)“New Tenneco Transaction” means a sale of the Company’s New Tenneco Division (consisting primarily of the Company’s Global Clean Air business group and Global Powertrain business group and applicable reporting lines thereunder as determined from time to time by the Company); provided, however, that a sale of the New Tenneco Division shall not constitute a New Tenneco Transaction unless the sale constitutes a sale of all or substantially all of the New Tenneco Division. A New Tenneco Transaction shall not constitute a Change in Control for purposes of this Award Agreement even if it otherwise constitutes a Change in Control as defined in the Incentive Plan.
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(d)“Retirement” means the Executive’s termination of employment with the Company and its Subsidiaries after the date on which the Executive attains (i) age 65 or (i) age 55 and has completed at least 10 years of service with the Company and its Subsidiaries and is not for any other reason, including voluntary resignation, termination by the Company or a Subsidiary for cause, which shall include the failure of the Executive to meet the obligations required by his or her position (as determined in the reasonable discretion of the Company), or termination by the Executive for good reason or constructive discharge.
(e)“Total Disability” means an event that results in the Executive being (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company or its Subsidiaries.
4.Settlement and Payment.  Subject to the terms and conditions of this Award Agreement, Restricted Stock Units and associated Dividend Cash Amounts that have become vested in accordance with Paragraph 2 shall be paid and settled as of the applicable Vesting Date.  The date on which payment and settlement occurs is referred to as the “Settlement Date.” Unless otherwise determined by the Committee, (a) settlement of the vested Restricted Stock Units on a Settlement Date shall be made in the form of shares of Common Stock with one share of Common Stock being issued in settlement of each Restricted Stock Unit, plus an amount of cash equal to the Fair Market Value of any fractional Restricted Stock Unit being settled as of such Settlement Date and (b) settlement of the vested Dividend Cash Amounts on a Settlement Date shall be paid in a cash lump sum payment. Upon the settlement of any vested Restricted Stock Units such Restricted Stock Units shall be cancelled and upon payment of any Dividend Cash Amounts the balance in the Executive’s Dividend Cash Account shall be reduced by the amount paid to the Executive pursuant to subparagraph 4(b).
5.Withholding.  This Award and any distribution in respect of this Award, are subject to withholding of all applicable taxes, and the delivery of any cash or other benefits under this Award is conditioned on satisfaction of the applicable tax withholding obligations. Such withholding obligations may be satisfied, at the Executive’s election, (a) through cash payment by the Executive or (b) through the surrender of cash or shares of Common Stock to which the Executive is otherwise entitled under this Award; provided, however, that any withholding obligations with respect to any Executive shall be satisfied by the method set forth in subparagraph 5(b) (through the withholding of shares otherwise payable pursuant to this Award) unless the Executive otherwise elects in accordance with this Paragraph 5; and provided further that any withholding with respect to payments of Dividend Cash Amounts shall be satisfied by the method set forth in subparagraph 5(a). The amount withheld in the form of shares of Common Stock under this Paragraph 5 may not exceed the minimum statutory withholding
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obligation (based on the minimum statutory withholding rates for Federal and state purposes, including, without limitation, payroll taxes) unless otherwise elected by the Executive, in no event shall the Executive be permitted to elect less than the minimum statutory withholding obligation, and in no event shall the Executive be permitted to elect to have an amount withheld in the form of shares of Common Stock pursuant to this Paragraph 5 that exceeds the maximum individual tax rate for the employee in applicable jurisdictions.
6.Transferability.  This Award is not transferable except as designated by the Executive by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order.
7.Heirs and Successors.  If any benefits deliverable to the Executive under this Award Agreement have not been delivered at the time of the Executive’s death, such benefits shall be delivered to the Executive’s Designated Beneficiary, in accordance with the provisions of this Award Agreement. The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Executive in a writing filed with the Company in such form and at such time as the Company shall require and in accordance with such rules and procedures established by the Company. If a deceased Executive fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Executive, any rights that would have been exercisable by the Executive and any benefits distributable to the Executive shall be distributed to the legal representative of the estate of the Executive.
8.Administration.  The authority to administer and interpret this Award and this Award Agreement shall be vested in the Committee, and the Committee shall have all powers with respect to this Award and this Award Agreement as it would have if the Award was made under the Incentive Plan. Any interpretation of this Award or this Award Agreement by the Committee and any decision made by it with respect to this Award or this Award Agreement is final and binding on all persons.
9.Adjustment of Award. The number of Restricted Stock Units awarded pursuant to this Award may be adjusted by the Committee in a manner consistent with Section 5.2 of the Incentive Plan to reflect certain corporate transactions which affect the number, type or value of the Restricted Stock Units.
10.Notices.  Any notice required or permitted under this Award Agreement shall be deemed given when delivered personally, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Committee or the Company at the Company’s principal offices, to the Executive at the Executive’s address as last known by the Company or, in any case, such other address as one party may designate in writing to the other.
11.Amendments.  The Committee may amend this Award Agreement, provided that, no amendment or termination may, in the absence of written consent to the change by the affected Executive (or, if the Executive is not then living, the affected beneficiary), adversely affect the rights of any Executive or beneficiary under this Award Agreement prior to the date such amendment or termination is adopted by the Committee. Adjustments described in Paragraph 9 shall not be subject to the terms of this Paragraph 11.
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12.Unfunded Obligation. The Award shall not be funded, no trust, escrow or other provisions shall be established to secure payments and distributions due hereunder and this Award shall be regarded as unfunded for purposes of the Employee Retirement Income Security Act of 1974, as amended, and the Code. The Executive shall be treated as a general, unsecured creditor of the Company with respect to amounts payable hereunder, and shall have no rights to any specific assets of the Company. Without limiting the generality of the foregoing, any amounts credited to the Dividend Cash Account will remain general assets of the Company and shall be payable solely from the general assets of the Company.
13.Severability.  If a provision of this Award Agreement is held invalid by a court of competent jurisdiction, the remaining provisions shall nonetheless be enforceable according to their terms.  Further, if any provision is held to be overbroad as written, that provision shall be amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and enforced as amended.
14.Other Terms
(a)The Award does not constitute a contract of employment or continued service, and the grant of the Award shall not give the Executive the right to be retained in the employ or service of the Company or any Subsidiary, nor any right or claim to any benefit under this Award Agreement, unless such right or claim has specifically accrued under the terms of this Award Agreement.
(b)Notwithstanding any other provision of this Award Agreement, (i) this Award is subject to the Company’s recoupment or clawback policies as applicable and as in effect from time to time and (ii) if the Committee determines, in its sole discretion, that the Executive at any time has willfully engaged in any activity that the Committee determines was or is harmful to the Company or any of its Subsidiaries, any unpaid portion of the Award shall be forfeited and the Executive shall have no rights with respect thereto.
(c)If the Committee determines that the Executive has (i) used for profit or disclosed to unauthorized persons, confidential or trade secrets of the Company or any Subsidiary; (ii) breached any contract with or violated any fiduciary obligation to the Company or any Subsidiary; or (iii) engaged in any conduct which the Committee determines is injurious to the Company or its Subsidiaries, the Committee may cause the Executive to forfeit this Award; provided, however, that following the occurrence a Change in Control, the Award will not be subject to forfeiture pursuant to the provisions of this subparagraph 14(c).
(d)The Executive shall not, by reason of this Award, 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 this Award. The Executive shall have only a contractual right to the shares of Common Stock or amounts, if any, payable
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under this Award, unsecured by any assets of the Company or any Subsidiary, and nothing contained in this Award Agreement shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
(e)The validity, construction and effect of this Award Agreement shall be determined in accordance with the laws of the State of Illinois and applicable federal law.
15.Counterparts. This Award Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.
16.Special Section 409A Rules.  It is intended that any amounts payable under this Award Agreement shall either be exempt from or comply with section 409A of the Code. The provisions of this Award shall be construed and interpreted in accordance with section 409A of the Code. Notwithstanding any other provision of this Award Agreement to the contrary, if any payment or benefit hereunder is subject to section 409A of the Code, and if such payment or benefit is to be paid or provided on account of the Executive’s termination of employment (or other separation from service):
(a)and if the Executive is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code) and if any such payment or benefit is required to be made or provided prior to the first day of the seventh month following the Executive’s separation from service or termination of employment, such payment or benefit shall be delayed until the first day of the seventh month following the Executive’s termination of employment or separation from service; and
(b)the determination as to whether the Executive has had a termination of employment (or separation from service) shall be made in accordance with the provisions of section 409A of the Code and the guidance issued thereunder without application of any alternative levels of reductions of bona fide services permitted thereunder.
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EXECUTIVE:                        TENNECO INC.:
                            
/s/ Kevin W. Baird                    /s/ Kaled Awada
Electronic Signature                    Senior Vice President and Chief Human Resources Officer
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Exhibit 10.4
                

                    REVISED
July 6, 2020


[Redacted]

Dear Matti:

I am pleased to provide for your consideration this letter offering you employment to be Tenneco’s Executive Vice President and Chief Financial Officer.

The key terms of Tenneco’s offer of employment are described below.

Outline of Employment Offer

1.Position: As an executive officer of Tenneco Inc., your position will be Executive Vice President and Chief Financial Officer, reporting directly to Brian Kesseler, Chief Executive Officer. Your work location will be Lake Forest, Illinois with an expected hire date of August 10, 2020.

2.Base Salary: Your initial base salary will be $775,000 per year ($64,583.33 per month) less appropriate taxes and withholding, paid in accordance with the company’s normal payroll practices. Beginning in 2021 and each year thereafter, your base salary will be reviewed and, in turn, may be adjusted, subject to approval by the Compensation Committee of Tenneco Inc.’s Board of Directors (the “Compensation Committee”).

3.Annual Incentive Compensation: You will be eligible to participate in Tenneco’s annual incentive plan in a manner consistent with other Tenneco executives assigned to the Enterprise. The terms of the annual incentive plan are currently set forth in the Tenneco Inc. Annual Incentive Plan (“AIP” – copy attached). Your initial target bonus opportunity for the 2020 calendar year performance period under the AIP will be 85% of your annual base salary (or $658,750 based on the offered salary), provided that your bonus for the 2020 calendar year, if any, will be pro-rated based on your hire date. The payment of annual bonuses under the AIP are subject to achievement of pre-defined performance goals, the approval by the Compensation Committee, and the terms of the AIP.

4.Sign-on Bonus: This offer includes a $220,000 (two hundred and twenty thousand dollar) signing bonus, which is subject to regular withholding taxes and deductions, with the full amount paid on or as soon as practicable after February 28, 2021 (but in no event later than March 15, 2021) provided that you remain employed by the company through February 28, 2021. If your employment is involuntarily terminated by the company (other than for cause) before February 28, 2021, this amount will be paid at the time of termination.

In addition, the signing bonus is subject to the terms described below:


Matti Masanovich
July 6, 2020
Page 2



REPAYMENT AGREEMENT – SIGNING BONUS

A.The offered signing bonus is subject to state and federal income tax laws and is collectively reported by the company to the Internal Revenue Service via form W-2 as taxable wages subject to withholding.

B.If you voluntarily resign your employment with the company at any time during the two-year period immediately following your date of employment, you hereby agree to repay to the company the gross amount of the signing bonus paid to you prior to your termination. This payment must be made within thirty (30) days after the termination of your employment. Further you authorize the company to withhold any and all monies due to you from the company to recover this amount, including earnings, as follows:

1.If your resignation occurs within twelve months of your date of employment, you will repay 100% of the gross amount of the signing bonus paid to you by the company.
2.If your resignation occurs more than twelve months following your date of employment, but prior to the end of the two year period described above, you agree to repay half (1/2) of the gross amount of the signing bonus paid to you.


3.Long-Term Incentive Compensation: You will be eligible to participate in Tenneco’s long-term incentive plan in a manner consistent with other similarly-situated Tenneco executives. The terms of the long-term incentive plan are currently set forth in the Tenneco Inc. 2006 Long-Term Incentive Plan, as amended (“LTIP”), a copy of which has been attached.

Each year the Compensation Committee will determine and approve the mix of long-term incentive (LTI) awards that will be granted to you and the aggregate target value of these awards. Your first eligibility for a full LTI award will be in February 2021. The final award size, award type, performance conditions and other terms of this award will be approved by the Compensation Committee at the same time the terms of these awards are established for other similarly-situated executives of the company. Your 2021 LTI award is currently estimated to have a $1,800,000 value.

For 2020, you will be eligible to participate in the 2020–2022 LTPU award cycle with a targeted LTPU award of $1,100,000 and assigned to the Enterprise, subject to the performance goals and other criteria that have been established under the LTIP for the performance cycle. The LTPU award will be subject to the terms of the LTIP and the applicable award agreement.

4.Inducement Award: To replace the value of foregone compensation from your previous employer and to provide additional incentives to you, you will receive the following awards:

Tenneco will grant you a Restricted Stock Unit award with a value of $1,100,000 granted on your start date of August 10, 2020, with 27% of the award vesting on


Matti Masanovich
July 6, 2020
Page 3

August 10, 2021, 27% of the award vesting on August 10, 2022 and the remaining shares vesting on August 10, 2023. When vested, the restricted stock units (RSUs) will settle in Tenneco shares. The number of shares subject to the award will be based on a 10-trading day stock price average of Tenneco Inc. as of market close on July 2, 2020. If you are involuntarily separated by the company (other than for cause) before August 10, 2023, the unvested RSUs will vest at the time of separation. The award will also be subject to the terms and conditions of the applicable award agreement.

5.Retirement Plans: You will be eligible to participate in the Tenneco 401(k) Plan that currently provides a 100% company match on your first 3%, and 50% of your next 2%, of base pay contributions subject to Plan and IRS maximums and provides a base pay. The plan also generally provides a company retirement contribution of between 2.5% and 4% of salary (depending on your age at the relevant time and after you have completed a year of service, subject to 401(k) Plan and IRS maximums).

You will also be eligible to participate in the Tenneco Excess Benefit Plan that will provide you with a benefit of between 2.5% and 4% of your annual incentive compensation and matching contributions and company retirement contributions at the rate applicable under the 401(k) plan on your compensation in excess of the IRS limitation on compensation under section 401(a)(17) of the Internal Revenue Code. All benefits are subject to the terms of the Tenneco Excess Benefit Plan.

6.Change-In-Control (CIC) Protection: You will be eligible to participate in Tenneco’s Change-In-Control Severance Benefit Plan for Key Executives (the “CIC Plan”) at the Executive Group II level. Benefits under the CIC Plan are payable if you are discharged (either actually or constructively) within two years after a change-in-control. The CIC Plan generally provides a lump-sum payment equal to two times base salary and targeted annual bonus in effect immediately prior to the change-in-control for Executive Group II level participants. Continuing participation in certain insurance plans and outplacement services are also provided. All benefits are subject to the terms of the CIC Plan.
7.Severance (not related to CIC): You will be eligible to participate in the Tenneco Automotive Operating Company Inc. Severance Benefit Plan, as amended (the “Severance Plan”) as a member of Group 1. Benefits are payable under the Severance Plan if you are discharged by the company other than for Cause or if you terminate due to Constructive Termination (and, in any case, other than under circumstances which would entitle you to benefits under the CIC Plan). For Group 1 participants, the Severance Plan currently generally provides a one times annual base salary severance, payable in substantially equal installments in accordance with the normal payroll practices continuing during the severance period, and your targeted annual bonus for the year in which the termination occurs, subject to your execution of a general release and such other documents as the company may reasonably request. The Severance Plan also provides a medical coverage subsidy in certain cases and outplacement benefits. “Cause” and “Constructive Termination” have the meanings specified in the Severance Plan and all benefits under the Severance Plan are subject to the terms and conditions of the Severance Plan.


Matti Masanovich
July 6, 2020
Page 4

8.Benefits Generally: The company reserves the right to modify or terminate its benefit plans and arrangements at any time. Your participation in the plans will be subject to the terms and conditions thereof as in effect at the relevant time.
9.Stock Ownership Guidelines: Upon employment, you will be subject to Tenneco’s stock ownership guideline policy, requiring that you hold qualifying shares of Tenneco equal to four times base salary, to be attained by the first month of January following five years of employment.
10.Insider Trading Policy: Upon employment, you will be subject to Tenneco’s Insider Trading Policy, which, among other things, limits the timing and types of transactions you may make with respect to Tenneco securities and related derivatives.
11.Health and Welfare Benefits: You will be eligible to participate in Tenneco’s broad-based health and welfare plans in a manner consistent with other similarly-situated Tenneco employees. Please refer to benefit plan documents for specific terms and eligibility. Attached for your convenience is the Tenneco 2020 Benefits At A Glance for Salaried Employees.

12.Vacation and Holiday Paid Time Off: You will be entitled to a total of four weeks of paid vacation per year: two weeks in accordance with the provisions of the company’s vacation policy and two additional negotiated weeks. Your vacation accrual will thereafter increase only in accordance with the vacation schedule in the policy (i.e., you will accrue five weeks of vacation upon reaching 25 years of service). In addition, the company is typically closed during the week between Christmas and New Year’s Day holidays. You will also be eligible for paid holidays and personal floating holidays in accordance with the company’s policies. When you leave employment with the company, you will receive a payment for any vacation you have accrued and not used. Vacation is prorated to your date of employment and accrued on a monthly basis.

13.Relocation: A copy of the Renter Relocation Policy, Renter Addendum and Repayment Agreement are enclosed for your review. This benefit will be made available to you for one year from employment date. Use of a Company provided T&E credit card for any relocation assignment related expenses is prohibited.

14.Employment at Will: This offer does not constitute a contract of employment for any specific period of time, but will create an employment at-will relationship that may be terminated at any time by you or the company, with or without cause.


In addition, your offer is contingent upon the verification of the information you have provided to the company, successful completion of employment paperwork, the completion of a Combined Disclosure Notice & Authorization Regarding Background Consumer Reports and background authorization forms and execution of the Tenneco Confidentiality Agreement (this will be part of your “on-boarding” process).

On or before your first day of employment, you must provide documentation that you have authorization to work in the United States. The offer is contingent upon you providing appropriate I-9 documentation (see enclosed). Two copies of this offer letter have been provided.


Matti Masanovich
July 6, 2020
Page 5

Please sign the offer letter and return it to me as soon as possible. The second copy should be retained for your personal records.

Matti, we look forward to you joining Tenneco and are excited for you to contribute and share in its future success. Please contact me to acknowledge your acceptance or with any other questions or concerns.


Sincerely,


/s/ Kaled Awada


Kaled Awada
Senior Vice President and Chief Human Resources Officer
Tenneco Inc.


______________________________________________________________________________



I have read, understood and accept this offer of employment at a subsidiary of Tenneco Inc.


By: /s/ Matti Masanovich         Date: July 6, 2020


Print Name: Matti Masanovich

Exhibit 10.5
3 year vesting
RESTRICTED STOCK UNIT INDUCEMENT GRANT AWARD AGREEMENT

Matti Masanovich (“Executive”)

As a material inducement for the Executive to commence employment as the Executive Vice President and Chief Financial Officer of Tenneco Inc. (the “Company”) effective as of August 10, 2020 in accordance with the New York Stock Exchange Listing Company Manual Rule 303A.08, effective as of August 10, 2020, the Executive is hereby granted an award of restricted stock units (“Restricted Stock Units”) with respect to 146,472 shares of the Company’s class A voting common stock, par value $0.01 per share (“Common Stock”). The Award is subject to the following terms and conditions (sometimes referred to as this “Award Agreement”). Terms used in this Award Agreement are defined elsewhere in this Award Agreement; provided, however, that, solely for convenience, capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Tenneco Inc. 2006 Long-Term Incentive Plan (the “Incentive Plan”). Notwithstanding any provision of this Award Agreement, this Award is not granted under the Incentive Plan.
1.Dividend Cash Amounts.  This Award contains the right to receive cash credits to a hypothetical bookkeeping account (a “Dividend Cash Account”) in respect of dividends paid with respect to shares of Common Stock in accordance with the following:
(a)If a dividend with respect to shares of Common Stock is payable in cash, then, as of the applicable dividend payment date, the Executive’s Dividend Cash Account shall be credited with an amount (a “Dividend Cash Amount”) equal to (i) the cash dividend payable with respect to a share of Common Stock, multiplied by (ii) the number of Restricted Stock Units outstanding on the applicable dividend record date.
(b)If a dividend with respect to shares of Common Stock is payable in shares of Common Stock, then, as of the applicable dividend payment date, the Executive’s Dividend Cash Account shall be credited with a Dividend Cash Amount in an amount equal to (i) the number of shares of Common Stock distributed in the dividend with respect to a share of Common Stock, divided by (ii) the Fair Market Value of a share of Common Stock on the dividend payment date, multiplied by (iii) the number of Restricted Stock Units outstanding on the applicable dividend record date.
The Dividend Cash Amounts credited to the Executive’s Dividend Cash Account shall be subject to the same vesting provisions as the Restricted Stock Units to which the Dividend Cash Amounts relate and shall be settled in accordance with Paragraph 3.  No Dividend Cash Amounts with respect to a Restricted Stock Unit shall be credited under this Award Agreement for any period after the Vesting Date (as defined in Paragraph 2) applicable to such Restricted Stock Unit.  Amounts credited to the Executive’s Dividend Cash Account shall not be credited with any investment earnings.



2.Vesting and Forfeiture of Restricted Stock Units and Dividend Cash Amounts
(a)All Restricted Stock Units and Dividend Cash Amounts credited to the Executive’s Dividend Cash Account shall be unvested unless and until they become vested and nonforfeitable in accordance with this Paragraph 2.  Subject to the terms and conditions of this Award Agreement, twenty seven percent (27%) of the Restricted Stock Units and associated Dividend Cash Amounts awarded hereunder shall vest on August 10, 2021, twenty seven percent (27%) of the Restricted Stock Units and associated Dividend Cash Amounts will vest on August 10, 2022 and forty six percent (46%) of the Restricted Stock Units and associated Dividend Cash Amounts will vest on August 10, 2023 (each of such dates being referred to as a “Vesting Date”), provided, in either case, that the Executive is continuously employed by the Company or a Subsidiary through the applicable Vesting Date.  Notwithstanding the foregoing, if the Executive’s Termination Date occurs by reason of termination by the Company other than for Cause (as defined below), any unvested Restricted Stock Units that are outstanding on the Termination Date (and associated Dividend Cash Amounts) shall immediately vest on the Termination Date and the Termination Date shall be the “Vesting Date” for purposes of this Award Agreement. All Restricted Stock Units and associated Dividend Cash Amounts that are not vested upon the Executive’s Termination Date shall immediately expire and shall be forfeited and the Executive shall have no further rights thereto.  In the event of forfeiture for any reason, the balance in the Executive’s Dividend Cash Account shall be reduced by the amount of any Dividend Cash Amounts that are forfeited.
(b)For purposes of this Award Agreement, “Cause” means, with respect to the Executive, (i) fraud, embezzlement, or theft in connection with his or her employment, (ii) gross negligence in the performance of his or her duties, (iii) his or her conviction, guilty plea, or plea of nolo contendere with respect to a felony, (iv) the willful and continued failure to substantially perform his or her duties for the Company or any of its Subsidiaries (except where the failure results from incapacity due to disability), (v) the failure to meet the obligations required by his or her position, as determined in the reasonable discretion of the Committee, or (vi) the willful or negligent engagement in conduct which is, or could reasonably be expected to be, materially injurious to any of the Company or any of its Subsidiaries, monetarily or otherwise. For purposes of the foregoing, no act, or failure to act, on the part of the Executive shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that his or her act, or failure to act, was in the best interest of the Company and its Subsidiaries.
3.Settlement and Payment.  Subject to the terms and conditions of this Award Agreement, Restricted Stock Units and associated Dividend Cash Amounts that have become vested in accordance with Paragraph 2 shall be paid and settled as of the applicable Vesting Date.  The date on which payment and settlement occurs is referred to as the “Settlement Date.”
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Unless otherwise determined by the Committee, (a) settlement of the vested Restricted Stock Units on a Settlement Date shall be made in the form of shares of Common Stock with one share of Common Stock being issued in settlement of each Restricted Stock Unit, plus an amount of cash equal to the Fair Market Value of any fractional Restricted Stock Unit being settled as of such Settlement Date and (b) settlement of the vested Dividend Cash Amounts on a Settlement Date shall be paid in a cash lump sum payment. Upon the settlement of any vested Restricted Stock Units such Restricted Stock Units shall be cancelled and upon payment of any Dividend Cash Amounts the balance in the Executive’s Dividend Cash Account shall be reduced by the amount paid to the Executive pursuant to subparagraph 3(b).
4.Withholding.  This Award and any distribution in respect of this Award, are subject to withholding of all applicable taxes, and the delivery of any cash or other benefits under this Award is conditioned on satisfaction of the applicable tax withholding obligations. Such withholding obligations may be satisfied, at the Executive’s election, (a) through cash payment by the Executive or (b) through the surrender of cash or shares of Common Stock to which the Executive is otherwise entitled under this Award; provided, however, that any withholding obligations with respect to any Executive shall be satisfied by the method set forth in subparagraph 4(b) (through the withholding of shares otherwise payable pursuant to this Award) unless the Executive otherwise elects in accordance with this Paragraph 4; and provided further that any withholding with respect to payments of Dividend Cash Amounts shall be satisfied by the method set forth in subparagraph 4(a). The amount withheld in the form of shares of Common Stock under this Paragraph 4 may not exceed the minimum statutory withholding obligation (based on the minimum statutory withholding rates for Federal and state purposes, including, without limitation, payroll taxes) unless otherwise elected by the Executive, in no event shall the Executive be permitted to elect less than the minimum statutory withholding obligation, and in no event shall the Executive be permitted to elect to have an amount withheld in the form of shares of Common Stock pursuant to this Paragraph 4 that exceeds the maximum individual tax rate for the employee in applicable jurisdictions.
5.Transferability.  This Award is not transferable except as designated by the Executive by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order.
6.Heirs and Successors.  If any benefits deliverable to the Executive under this Award Agreement have not been delivered at the time of the Executive’s death, such benefits shall be delivered to the Executive’s Designated Beneficiary, in accordance with the provisions of this Award Agreement. The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Executive in a writing filed with the Company in such form and at such time as the Company shall require and in accordance with such rules and procedures established by the Company. If a deceased Executive fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Executive, any rights that would have been exercisable by the Executive and any benefits distributable to the Executive shall be distributed to the legal representative of the estate of the Executive.
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7.Administration.  The authority to administer and interpret this Award and this Award Agreement shall be vested in the Committee, and the Committee shall have all powers with respect to this Award and this Award Agreement as it would have if the Award was made under the Incentive Plan. Any interpretation of this Award or this Award Agreement by the Committee and any decision made by it with respect to this Award or this Award Agreement is final and binding on all persons.
8.Adjustment of Award. The number of Restricted Stock Units awarded pursuant to this Award may be adjusted by the Committee in a manner consistent with Section 5.2 of the Incentive Plan to reflect certain corporate transactions which affect the number, type or value of the Restricted Stock Units.
9.Notices.  Any notice required or permitted under this Award Agreement shall be deemed given when delivered personally, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Committee or the Company at the Company’s principal offices, to the Executive at the Executive’s address as last known by the Company or, in any case, such other address as one party may designate in writing to the other.
10.Amendments.  The Committee may amend this Award Agreement, provided that, no amendment or termination may, in the absence of written consent to the change by the affected Executive (or, if the Executive is not then living, the affected beneficiary), adversely affect the rights of any Executive or beneficiary under this Award Agreement prior to the date such amendment or termination is adopted by the Committee. Adjustments described in Paragraph 8 shall not be subject to the terms of this Paragraph 10.
11.Unfunded Obligation. The Award shall not be funded, no trust, escrow or other provisions shall be established to secure payments and distributions due hereunder and this Award shall be regarded as unfunded for purposes of the Employee Retirement Income Security Act of 1974, as amended, and the Code. The Executive shall be treated as a general, unsecured creditor of the Company with respect to amounts payable hereunder, and shall have no rights to any specific assets of the Company. Without limiting the generality of the foregoing, any amounts credited to the Dividend Cash Account will remain general assets of the Company and shall be payable solely from the general assets of the Company.
12.Severability.  If a provision of this Award Agreement is held invalid by a court of competent jurisdiction, the remaining provisions shall nonetheless be enforceable according to their terms.  Further, if any provision is held to be overbroad as written, that provision shall be amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and enforced as amended.
13.Other Terms
(a)The Award does not constitute a contract of employment or continued service, and the grant of the Award shall not give the Executive the right to be retained in the employ or service of the Company or any Subsidiary, nor any right or claim to
4



any benefit under this Award Agreement, unless such right or claim has specifically accrued under the terms of this Award Agreement.
(b)Notwithstanding any other provision of this Award Agreement, (i) this Award is subject to the Company’s recoupment or clawback policies as applicable and as in effect from time to time and (ii) if the Committee determines, in its sole discretion, that the Executive at any time has willfully engaged in any activity that the Committee determines was or is harmful to the Company or any of its Subsidiaries, any unpaid portion of the Award shall be forfeited and the Executive shall have no rights with respect thereto.
(c)If the Committee determines that the Executive has (i) used for profit or disclosed to unauthorized persons, confidential or trade secrets of the Company or any Subsidiary; (ii) breached any contract with or violated any fiduciary obligation to the Company or any Subsidiary; or (iii) engaged in any conduct which the Committee determines is injurious to the Company or its Subsidiaries, the Committee may cause the Executive to forfeit this Award; provided, however, that following the occurrence a Change in Control, the Award will not be subject to forfeiture pursuant to the provisions of this subparagraph 13(c).
(d)The Executive shall not, by reason of this Award, 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 this Award. The Executive shall have only a contractual right to the shares of Common Stock or amounts, if any, payable under this Award, unsecured by any assets of the Company or any Subsidiary, and nothing contained in this Award Agreement shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
(e)The validity, construction and effect of this Award Agreement shall be determined in accordance with the laws of the State of Illinois and applicable federal law.
14.Counterparts. This Award Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.
15.Special Section 409A Rules.  It is intended that any amounts payable under this Award Agreement shall either be exempt from or comply with section 409A of the Code. The provisions of this Award shall be construed and interpreted in accordance with section 409A of the Code. Notwithstanding any other provision of this Award Agreement to the contrary, if any payment or benefit hereunder is subject to section 409A of the Code, and if such payment or benefit is to be paid or provided on account of the Executive’s termination of employment (or other separation from service):
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(a)and if the Executive is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code) and if any such payment or benefit is required to be made or provided prior to the first day of the seventh month following the Executive’s separation from service or termination of employment, such payment or benefit shall be delayed until the first day of the seventh month following the Executive’s termination of employment or separation from service; and
(b)the determination as to whether the Executive has had a termination of employment (or separation from service) shall be made in accordance with the provisions of section 409A of the Code and the guidance issued thereunder without application of any alternative levels of reductions of bona fide services permitted thereunder.

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EXECUTIVE:                        TENNECO INC.:
                            
/s/ Matti Masanovich                     /s/ Kaled Awada
Electronic Signature                    Senior Vice President and Chief Human Resources Officer
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Exhibit 10.6
TENNECO INC.
2006 LONG-TERM INCENTIVE PLAN
(As Amended and Restated Effective November 5, 2020)

ARTICLE 1
GENERAL
1.1.History, Purpose and Effective Date. The Tenneco Inc. 2006 Long-Term Incentive Plan (the “Plan”) was established by Tenneco Inc. (the “Company”) to: (a) promote the long-term success of the Company and its Subsidiaries (as defined herein); (b) attract and retain persons eligible to participate in the Plan; (c) motivate Participants (as defined herein), by means of appropriate incentives, to achieve long-range goals; (d) provide incentive compensation opportunities that are competitive with those of other similar companies; (e) further identify Participants’ interests with those of the Company’s other stockholders through compensation that is based on the Company’s common stock; and (f) thereby promote the growth in value of the Company’s equity and enhancement of long-term stockholder return. The Plan has been amended from time to time and the following provisions constitute an amendment, restatement and continuation of the Plan as of the date on which the Board adopts the amendment and restatement, the “Effective Date” of the Plan as set forth herein, which date is November 5, 2020.
1.2.Operation, Administration, and Definitions. The operation and administration of the Plan shall be vested in the Committee, as described in Article 7. Capitalized terms in the Plan shall be defined as set forth in the Plan (including the provisions of Article 2 hereof).
1.3.Participation. Subject to the terms and conditions of the Plan, the Committee shall determine and designate, from time to time, from among the Eligible Individuals, including without limitation transferees of Eligible Individuals to the extent the transfer is permitted by the Plan and the applicable Award Agreement, those persons who will be granted one or more Awards under the Plan, and thereby become “Participants” in the Plan.
ARTICLE 2
DEFINED TERMS
As used in this Plan, the following capitalized terms shall have the meanings set forth or referenced below.
(a)Approval Date. The term “Approval Date” means May 12, 2020.
(b)Award. The term “Award” means any award or benefit granted under the Plan.
(c)Award Agreement. The term “Award Agreement” shall have the meaning set forth in Section 8.9.



(d)Board. The term “Board” means the Board of Directors of the Company.
(e)Cash Incentive Award. The term “Cash Incentive Award” shall have the meaning set forth in Section 4.2.
(f)Cause. The term “Cause” means, with respect to the Participant, (i) fraud, embezzlement, or theft in connection with his or her employment, (ii) gross negligence in the performance of his or her duties, (iii) his or her conviction, guilty plea, or plea of nolo contendere with respect to a felony, (iv) the willful and continued failure to substantially perform his or her duties for the Company or any of its Subsidiaries (except where the failure results from incapacity due to disability), (v) the failure to meet the obligations required by his or her position, as determined in the reasonable discretion of the Committee, or (vi) the willful or negligent engagement in conduct which is, or could reasonably be expected to be, materially injurious to any of the Company or any of its Subsidiaries, monetarily or otherwise. For purposes of the foregoing, no act, or failure to act, on the part of the Participant shall be deemed “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her act, or failure to act, was in the best interest of the Company and its Subsidiaries. Notwithstanding the foregoing, in the case of a Participant who is a Key Executive under, and as defined in, the Change in Control Severance Plan, the Participant’s Termination Date shall not be deemed to have been terminated for Cause unless a written notice has been delivered to the Participant stating that the Company has terminated the Participant’s employment, which notice shall include a resolution, adopted by at least a three-quarter’s vote of the Incumbent Board (after the Participant has been provided with reasonable notice and an opportunity, together with counsel, for a hearing before the entire Incumbent Board), finding that the Participant has engaged in the conduct that would otherwise constitute Cause.
(g)Change in Control. The term “Change in Control” means any of the following events (but no event other than one of the following events):
(i)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) thirty percent (30%) or more of the combined voting power of the Company’s then outstanding securities having general voting rights, or (B) forty percent (40%) or more of the Company’s then outstanding shares of Class A Common Stock and Class B Common Stock in the aggregate; provided, however, that, notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to this paragraph (i) solely because the requisite percentage 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 is acquired by one or more employee benefit plans maintained by the Company or any of its subsidiaries; or
(ii)members of the Incumbent Board cease to constitute a majority of the Board; or



(iii)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 (“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
(iv)the Company’s stockholders approve a plan of complete liquidation or dissolution of the Company.
(h)Change in Control Severance Plan. The term “Change in Control Severance Plan means the Tenneco Inc. Change in Control Severance Benefit Plan for Key Executives, as in effect from time to time.
(i)Code. The term “Code” means the Internal Revenue Code of 1986, as amended. A reference to any provision shall include reference to any successor provision.
(j)Committee. The term “Committee” has the meaning set forth in Section 7.1.
(k)Common Stock. The term “Common Stock” means the Company’s class A voting common stock, par value $0.01 per share.
(l)Company. The term “Company” has the meaning set forth in Section 1.1.
(m)Continuing Award. The term “Continuing Award” has the meaning set forth in Section 6.2.
(n)Director. The term “Director” means a member of the Board who is not an employee of the Company or any Subsidiary.



(o)Effective Date. The term “Effective Date” has the meaning set forth in Section 1.1.
(p)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 ISO may only be granted to an employee of the Company or a Subsidiary.
(q)Exchange Act. The term “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(r)Exercise Price. The term “Exercise Price” has the meaning set forth in Section 3.3.
(s)Expiration Date. The term “Expiration Date” has the meaning set forth in Section 3.8.
(t)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 Common Stock is at the time listed or admitted to trading on any securities exchange, then the Fair Market Value 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 immediately 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 Common Stock is not at the time listed or admitted to trading on a securities exchange, 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 immediately preceding business day) as reported in the over-the-counter market or as such price is reported in a publication of general circulation selected by the Committee and regularly reporting the market price of Common Stock in such market.
(iii)If paragraphs (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.
(u)Full Value Award. The term “Full Value Award” has the meaning set forth in Section 4.1.
(v)Good Reason. The term “Good Reason” means, with respect to a Participant, any of the following events that occur on or after a Change in Control without the written consent of the Participant:



(i)a material diminution of the Participant’s status, position, duties or responsibilities with the Company and its Subsidiaries from those in effect immediately prior to the Change in Control (without limiting the generality of the foregoing, for purposes of this paragraph (i) a material diminution will be deemed to have occurred if the Participant does not maintain the same or greater status, position, duties and responsibilities with the ultimate parent corporation of a controlled group of corporations of which the Company is a member upon consummation of the transaction or transactions constituting the Change in Control);
(ii)a material reduction in (A) the Participant’s annual rate of salary or wages as in effect immediately prior to the Change in Control, (B) the Participant’s targeted annual cash incentive compensation under the Company’s annual incentive bonus plan for the calendar year completed immediately prior to the Change in Control, and/or (C) the value of the Participant’s targeted annual long-term incentive award (including the material terms thereof, including vesting) for the calendar year completed immediately prior to the Change in Control (the components of compensation described in subparagraphs (A), (B) and (C) together “Total Compensation”); provided, however, that a material reduction for purposes of this paragraph (ii) shall not be deemed to have occurred if (1) there is a material reduction in the components of compensation described in subparagraph (B) and/or (C) as applied to the Participant but the Participant’s annual rate of salary or wages is not reduced and the Participant’s Total Compensation is not materially reduced, or (2) the Participant’s Total Compensation (or any component thereof) is reduced as part of an overall cost reduction program that affects all similarly-situated employees of the Company and its Subsidiaries and does not disproportionately affect the Participant (either as to amount or the components of Total Compensation that are reduced);
(iii)a material reduction in (A) the level of aggregate employer-paid medical benefit, life insurance and disability plan coverages; or (B) the aggregate rate of employer-paid thrift/savings plan contributions and of defined benefit retirement plan benefit accruals, from those coverages and rates in effect immediately prior to the Change in Control; provided, however, a material reduction for purposes of this paragraph (iii) shall not be deemed to have occurred if a reduction as described in subparagraph (A) or (B) occurs as part of an overall cost reduction program that affects all similarly-situated employees of the Company and its Subsidiaries and does not disproportionately affect the Participant;
(iv)relocation of the Participant’s primary work location to a location that is more than fifty (50) miles from his or her work location as in effect immediately prior to the Change in Control (except for required travel on the Company’s business to an extent substantially consistent with the Participant’s business travel obligations immediately prior to the Change in Control); or



(v)a material breach of any provision of the Plan with respect to the Participant or an applicable Award Agreement.
Notwithstanding anything herein to the contrary, a Participant’s Termination Date shall not be considered to have occurred on account of Good Reason unless the Participant delivers to the Company a written notice of the existence of one of the foregoing events or conditions, within ninety (90) days after the Participant has actual knowledge of the existence of such condition, the Participant does not terminate his or her employment until the Participant has given the Company at least thirty (30) days in which to cure the condition set forth in the written notice, and if such condition is not cured by the thirtieth (30th) day, the Participant’s terminates his or her employment for Good Reason as of the expiration of the thirty (30) day cure period.
(w)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, (A) upon the death or disability or retirement of, and as the successor to or replacement for, a member of the Board or (B) 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 subparagraph (B).
(x)ISO. An “ISO” is an Option that is intended to satisfy the requirements applicable to an “incentive stock option” described in Code Section 422(b).
(y)NQO. 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).
(z)Option. The term “Option” has the meaning set forth in subsection 3.1(a).
(aa)Outside Director. “Outside Director” means a director of the Company who is not an officer or employee of the Company or any of its Subsidiaries.
(bb)    Participant. The term “Participant” has the meaning set forth in Section 1.3.
(cc)    Plan. The term “Plan” has the meaning set forth in Section 1.1.
(dd) Prior Approval Date. The term “Prior Approval Date” means May 15, 2013.



(ee)    Prior Plan. The term “Prior Plan” means the Tenneco 2006 Long-Term Incentive Plan as in effect at the relevant time prior to the Effective Date.
(ff)    Qualifying Termination. The term “Qualifying Termination” means a Participant’s Termination Date that occurs by reason of (i) termination by the Company without Cause or (ii) termination by the Participant for Good Reason.
(gg)    “Replacement Awards”. The term “Replacement Awards” has the meaning set forth in Section 6.3.
(hh)    Recycled Shares. The term “Recycled Shares” has the meaning set forth in subsection 5.1(b)(ii).
(ii)    SAR. The term “SAR” has the meaning set forth in subsection 3.1(b).
(jj)    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 ISOs, the term “Subsidiary” means a subsidiary corporation within the meaning of Code Section 424(f).
(kk)    Substitute Award. The term “Substitute Award” means an Award granted or shares of Common Stock issued by the Company in assumption of, or in substitution or exchange for, an award previously granted, or the right or obligation to make a future award, in all cases by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. In no event shall the issuance of Substitute Awards change the terms of such previously granted awards such that the change, if applied to a current Award, would be prohibited under the provisions of Section 3.6.
(ll)    Termination Date. The term “Termination Date” means the date on which a Participant both ceases to be an employee of the Company and its Subsidiaries and ceases to perform material services for the Company and its Subsidiaries (whether as a director or otherwise), regardless of the reason for the cessation; provided, however, that a Participant’s “Termination Date” shall not be considered to have occurred during the period in which the reason for the cessation of services is a leave of absence approved by the Company or a Subsidiary which was the recipient of the Participant’s services; and provided, further that, with respect to a Director, “Termination Date” means date on which the Director’s service as an Director terminates for any reason. Notwithstanding the foregoing and for the avoidance of doubt, in the event of a Change in Control, the “Termination Date” of any Participant who becomes employed by (if the



Participant was an employee immediately prior to the Change in Control) the successor to the Company or an affiliate of such successor or a board member of (if the Participant was an Outside Director immediately prior to the Change in Control) the successor to the Company or an affiliate of such successor shall not occur until the Participant both ceases to be an employee and ceases to perform material services for the successor and its affiliates on or after the Change in Control.
(mm)    2006 Plan. The term “2006 Plan” means the Tenneco Inc. 2006 Long-Term Incentive Plan as in effect immediately prior to the Effective Date.
ARTICLE 3
OPTIONS AND SARS
3.1.Certain Definitions.
(a)The grant of an “Option” under the Plan entitles the Participant to purchase shares of Common Stock at an Exercise Price established by the Committee. Any Option granted under this Article 3 may be either an ISO or an NQO, as determined in the discretion of the Committee. Notwithstanding the foregoing, an Option will be deemed to be an NQO unless it is specifically designated by the Committee as an ISO and/or to the extent that it does not otherwise satisfy the requirements for an ISO.
(b)A stock appreciation right (an “SAR”) entitles the Participant to receive, in cash or shares of Common Stock, value equal to 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.Eligibility. The Committee shall designate the Participants to whom Options or SARs are to be granted under this Article 3 and shall determine the number of shares of Common Stock subject to each such Option or SAR and the other terms and conditions thereof, not inconsistent with the Plan.
3.3.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).
3.4.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 not inconsistent with the Plan; provided, however, that no Option or SAR shall be exercisable after the Expiration Date with respect thereto.



3.5.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 3.5, 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 subsection 3.5(c), payment may be made as soon as practicable after the exercise).
(b)Subject to applicable law, 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; (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; provided, however, that shares of Common Stock may not be used to pay any portion of the Exercise Price unless the holder thereof has good title, free and clear of all liens and encumbrances.
(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.
As soon as practicable following exercise, including payment of the Exercise Price, certificates representing the shares of Common Stock so purchased shall be delivered to the person entitled thereto or shares of Common Stock so purchased shall otherwise be registered in the name of the Participant on the records of the Company’s transfer agent and credited to the Participant’s account.
3.6.No Repricing. Except for either adjustments pursuant to Section 5.2 (relating to the adjustment of shares), or reductions of the Exercise Price approved by the Company’s stockholders, the Exercise Price for any outstanding Option or SAR may not be decreased after the date of grant nor may an outstanding Option or SAR granted under the Plan be surrendered to the Company as consideration for the grant of a replacement Option or SAR with a lower exercise price or a Full Value Award. Except as approved by the Company’s stockholders, in no event shall any Option or SAR granted under the Plan be surrendered to the Company in consideration for a cash payment if, at the time of such surrender, the Exercise Price of the Option or SAR is greater than the then current Fair Market Value of a share of Common Stock.
3.7.Tandem Grants of Options and SARs. An Option may but need not be in tandem with an SAR, and an SAR may but need not be in tandem with an Option (in either case, regardless of whether the original award was granted under this Plan or another plan or arrangement). If an Option is in tandem with an SAR, the exercise price of both the Option and



SAR shall be the same, and the exercise of the corresponding tandem SAR or Option shall cancel the corresponding tandem SAR or Option with respect to such share. If an SAR is in tandem with an Option but is granted after the grant of the Option, or if an Option is in tandem with an SAR but is granted after the grant of the SAR, the later granted tandem Award shall have the same exercise price as the earlier granted Award, but in no event less than the Fair Market Value of a share of Common Stock at the time of such grant.
3.8.Expiration Date. The “Expiration Date” with respect to an Option or SAR means the date established as the Expiration Date by the Committee at the time of the grant (as the same may be modified in accordance with the terms of the Plan); provided, however, that the Expiration Date with respect to any Option or SAR shall not be later than the earliest to occur of the ten-year anniversary of the date on which the Option or SAR is granted or the following dates, unless the following dates are determined otherwise by the Committee:
(a)if the Participant’s Termination Date occurs by reason of death, disability or retirement, the three-year anniversary of such Termination Date;
(b)if the Participant’s Termination Date occurs for reasons other than retirement, death, disability or cause, the Termination Date; or
(c)if the Participant’s Termination Date occurs for reasons of cause, the day preceding the Participant’s Termination Date.
In no event shall the Expiration Date of an Option or SAR be later than the ten-year anniversary of the date on which the Option or SAR is granted (or such shorter period required by law or the rules of any securities exchange on which the Common Stock is listed).
ARTICLE 4
FULL VALUE AWARDS AND CASH INCENTIVE AWARDS

4.1.Full Value Awards. A “Full Value Award” is a grant of one or more shares of Common Stock or a right to receive one or more shares of Common Stock in the future (including restricted stock, restricted stock units, performance shares, and performance units) which is contingent on continuing service, the achievement of performance objectives during a specified period performance, or other restrictions as determined by the Committee or in consideration of a Participant’s previously performed services or surrender or other compensation that may be due. The grant of Full Value Awards may also be subject to such other conditions, restrictions and contingencies, as determined by the Committee, including provisions relating to dividend or dividend equivalent rights and deferred payment or settlement. Notwithstanding the foregoing, no dividends or dividend equivalent rights will be paid or settled on Full Value Awards that have not been earned or vested.
4.2.A “Cash Incentive Award” is the grant of a right to receive a payment of cash (or in the discretion of the Committee, shares of Common Stock having value equivalent to the cash otherwise payable) that is contingent on continuing service, the achievement of performance



objectives during a specified period performance, or other restrictions as determined by the Committee or in consideration of a Participant’s previously performed services or surrender or other compensation that may be due. The grant of Cash Incentive Awards may also be subject to such other conditions, restrictions and contingencies, as determined by the Committee, including provisions relating to deferred payment.
ARTICLE 5
SHARES RESERVED AND LIMITATIONS
5.1.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)Subject to the provisions of Section 5.2, the maximum number of shares of Common Stock that may be issued with respect to Awards under the Plan from and after the Approval Date shall be equal to 7,150,000. Notwithstanding the foregoing:
(i)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 Full Value Awards granted under the Plan on and after the Prior Approval Date shall reduce the total number of shares of Common Stock available for issuance under the Plan by 1.49.
(ii)Any shares of Common Stock (A) that are subject to Awards granted under the Plan or (B) that are subject to awards granted under the Prior Plan that are outstanding on the Approval Date, in any case that terminate by reason of expiration, forfeiture, cancellation, or otherwise, without the issuance of such shares, or that are settled in cash, shall be again available for grant under the Plan (the shares described in subparagraphs (A) and (B), collectively, “Recycled Shares”).
(iii)The following shares of Common Stock may not be treated as Recycled Shares and may not again be made available for issuance as Awards under the Plan pursuant to this subsection 5.2(b): (A) shares of Common Stock not issued or delivered as a result of the net settlement of an outstanding Option or SAR; (B) shares of Common Stock used to pay the Exercise Price or withholding taxes relating to an outstanding Award; (C) shares of Common Stock repurchased



on the open market with the proceeds of the Exercise Price, and (D) shares subject to Substitute Awards.
(iv)Recycled Shares shall be added to the number of shares reserved on a one for one basis; provided, however, that (A) Recycled Shares attributable to any Full Value Award granted under the Prior Plan after May 13, 2009 and prior to the Prior Approval Date shall be added back on a 1.25 for one basis and (B) Recycled Shares attributable to any Full Value Award granted under the Prior Plan on and after the Prior Approval Date and any Full Value Award granted under the Plan on and after the Prior Approval Date shall be added back on a 1.49 for one basis.
(c)Except as expressly provided by the terms of this Plan, the issuance by the Company of stock of any class, or securities convertible into shares of stock of any class, for cash or property or for labor or services, either upon direct sale, upon the exercise of rights or warrants to subscribe therefor or upon conversion of stock or obligations of the Company convertible into such stock or other securities, shall not affect, and no adjustment by reason thereof, shall be made with respect to Awards then outstanding hereunder.
(d)Substitute awards shall not reduce the number of share of Common Stock that may be issued under the Plan or that may be covered by Awards granted to any one Participant during any period pursuant to subsection 5.1(g).
(e)To the extent provided by the Committee, any Award may be settled in cash rather than shares of Common Stock.
(f)The maximum number of shares of Common Stock that may be delivered to Participants pursuant to ISOs is 7,150,000; provided, however, that to the extent that shares not delivered must be counted against this limit as a condition of satisfying the rules applicable to ISOs, such rules shall apply to the limit on ISOs granted under the Plan.
(g)Subject to Section 5.2, the following additional maximums are imposed under the Plan:
(i)No more than 350,000 shares of Common Stock may be subject to Options and SARs granted to any one individual during any one calendar year. For purposes of this subsection 5.1(g), 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 subsection 5.1(g).



(ii)No more than 200,000 shares of Common Stock may be subject to Full Value 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).
(iii)The maximum amount payable to any Participant with respect to any twelve month performance period under a Cash Incentive Award shall equal $8,000,000 (prorated for performance periods that are greater or lesser than twelve months).
(iv)The sum of any cash compensation or other compensation and the value of any Awards granted to an Outside Director as compensation for services as an Outside Director during the period beginning on the date of one regular annual meeting of our stockholders until the date of the next regular annual meeting of our stockholders may not exceed $700,000. The Committee may make exceptions to this limit for individual Outside Directors in exceptional circumstances, as the Committee may determine in its sole discretion, provided that the Outside Director receiving such additional compensation may not participate in the decision to award such compensation.
If the Awards are denominated in Common Stock but an equivalent amount of cash is delivered in lieu of delivery of shares of Common Stock, the limits of this subsection 5.1(g) shall be applied based on the methodology used by the Committee to convert the number of shares of Common Stock into cash. If the Awards are denominated in cash but an equivalent amount of stock is delivered in lieu of delivery of cash, the limits of this subsection 5.1(g) shall be applied based on the methodology used by the Committee to convert the amount of cash into shares of shares of Common Stock If the delivery of Common Stock or cash is deferred until after the Common Stock has been earned, any adjustment in the amount delivered to reflect actual or deemed earnings or other investment experience during the deferral period shall be disregarded.
5.2.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 under this Section 5.2 may include, in its sole discretion: (a) 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); (b) adjustment of the number and kind of shares subject to outstanding Awards; (c) adjustment of the Exercise Price of outstanding Options and SARs; and (d) 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).
5.3.Special Vesting Rules. Except for (a) Awards granted under the Plan with respect to shares of Common Stock which do not exceed, in the aggregate, five percent of the total number of shares of Common Stock reserved for issuance pursuant to Section 3.1, (b) Awards granted in lieu of other compensation, (c) Awards that are a form of payment of earned performance awards or other incentive compensation provided that the performance period relating to such performance or incentive awards was at least one year, and (d) new hire awards, if a Participant’s right to become vested in an Award is conditioned on the completion of a specified period of service with the Company or any Subsidiaries being required, then the required period of service shall be at least one year, except if accelerated in the event of the participant’s death or disability, retirement, involuntary termination, or change in control.
ARTICLE 6
CHANGE IN CONTROL
6.1.Generally. Subject to the provisions of Section 5.2 and unless otherwise specifically prohibited under applicable laws or by the rules and regulations of any applicable governmental agencies or national securities exchange, or unless otherwise provided by the Committee in the Award Agreement or in an individual severance, employment or other agreement between the Company (or Subsidiary) and a Participant, the provisions of this Article 6 shall apply in the event of a Change in Control.
6.2.Performance Awards. Upon a Change in Control, (a) any performance conditions applicable to Full Value Awards or Cash Incentive Awards outstanding under the Plan as of the date of the Change in Control shall be deemed to have been achieved at the target level of performance for the performance period in effect on the date of the Change in Control and such Awards shall thereafter not be subject to any performance conditions, and (b) subject to the terms and conditions of this Article 6, any service-based conditions applicable to such Awards shall continue to apply as if the Change in Control had not occurred. Notwithstanding the foregoing, the foregoing provisions shall not apply with respect to any Award (a “Continuing Award”) if the Committee reasonably determines that, from and after the Change in Control, performance applicable to Full Value Awards and Cash Incentive Awards can be determined with respect to the performance period in effect on the date of the Change in Control on substantially the same basis as applied immediately prior to the Change in Control. The provisions of this Section 6.2 shall apply prior to the application of Section 6.3 or 6.4, as applicable.
6.3.Continuation, Assumption, and/or Replacement of Awards. If, upon a Change in Control, then outstanding Awards under the Plan are continued under the Plan or are assumed by a successor to the Company and/or awards in other shares or securities are substituted for then



outstanding Awards under the Plan pursuant to Section 5.2 or otherwise (which continued, assumed, and/or substituted awards are referred to collectively herein as “Replacement Awards”) then:
(a)each Participant’s Replacement Awards will continue in accordance with their terms; and
(b)with respect to any Participant whose Termination Date has not occurred as of the Change in Control, if the Participant’s Termination Date occurs by reason of a Qualifying Termination on or within twenty four (24) months following the Change in Control, then (i) all of the Participant’s outstanding Replacement Awards that are Full Value Awards or Cash Incentive Awards will be fully vested upon his or her Termination Date and will be settled or paid within thirty (30) days after the Termination Date or, if required by Code Section 409A, on the date that settlement or payment would have otherwise occurred under the terms of the Award and (ii) in the case of any Replacement Awards that are Options or SARs, the Replacement Award will be fully vested and exercisable as of the Termination Date and the exercise period will extend for twenty four (24) months following the Termination Date or, if earlier, the expiration date of the Option or SAR.
Any Replacement Award that is substituted for an Award under the Plan shall be an award of the same type and of substantially equivalent value as the Award for which the Replacement Award is substituted. If the provisions of Section 6.3(b) apply with respect to any Continuing Award, any Replacement Award applicable to such Continuing Award shall be deemed to have been achieved at the target level of performance for the performance period in effect on the Termination Date.
6.4.Termination/Acceleration. If, upon a Change in Control, the provisions of Section 6.3 do not apply, all then outstanding Awards will become fully vested and will be cancelled in exchange for a cash payment or other consideration generally provided to stockholders in the Change in Control equal to the then current value of the Award, determined as though the Award was fully vested and exercisable (as applicable) and any restrictions applicable to such Award had lapsed immediately prior to the Change in Control; provided, however, that in the case of an Option or SAR, the amount of such payment may be equal to the excess of the aggregate per share consideration to be paid with respect to the cancellation of the Option or SAR over the aggregate Exercise Price of the Option or SAR (but not less than zero). For the avoidance of doubt, in the case of any Option or SAR with an Exercise Price that is greater than the per share consideration to be paid with respect to the cancellation of the Option or SAR pursuant to this Section 6.4, the consideration to be paid with respect to cancellation of the Option or SAR may be zero. Any payment or settlement pursuant to this Section 6.4 will be made within thirty (30) days after the Change in Control or, if required by Code Section 409A, on the date that payment or settlement would have otherwise occurred under the terms of the Award.
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. So long as the Company is subject to Section 16 of the Exchange Act, the Committee shall be selected by the Board and shall consist of not fewer than two members of the Board or such greater number as may be required for compliance with Rule 16b-3 issued under the Exchange Act and shall be comprised of persons who are independent for purposes of applicable securities exchange listing requirements. Unless removed by the Board or unless said committee no longer exists or does not satisfy the foregoing requirements or for other reasons determined by the Board, the Company’s Compensation Committee shall be the Committee for purposes of 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; provided, however, that in the event that there is no Committee, only members of the Board who are independent directors shall take action pursuant to this sentence with respect to grants to employees.
7.2.Powers of Committee. The Committee’s administration of the Plan shall be subject to the following:
(a)Subject to the terms and conditions 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 of Awards, 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 measures and targets, restrictions and other provisions of such Awards, to cancel or suspend Awards modify the terms of, reissue or repurchase Awards, and accelerate the exercisability or vesting of any Award.
(b)Subject to the terms and conditions of the Plan, 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 made pursuant to the Plan and to make all other determinations that may be necessary or advisable for the administration of the Plan.
(c)Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.
(d)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.
Without limiting the generality of the foregoing, it is the intention of the Company that, to the extent that any provisions of this Plan or any Awards granted hereunder are subject to Code Section 409A, the Plan and the Awards comply with the requirements of Code Section 409A and that the Plan and Awards be administered in accordance with such requirements and the



Committee shall have the authority to amend any outstanding Awards to conform to the requirements of Code Section 409A.
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.
7.5.Limitation on Liability and Indemnification of Committee. No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his own fraud or willful misconduct; nor shall the Company or any Subsidiary be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a director or employee of the Company or Subsidiary. The Committee, the individual members thereof, and persons acting as the authorized delegates of the Committee under the Plan, shall be indemnified by the Company against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized delegates by reason of the performance of a Committee function if the Committee or its members or authorized delegates did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable insurance.
ARTICLE 8
MISCELLANEOUS

8.1.Effective Date, Effect on Prior Plan, and Duration. The Plan, as amended and restated shall be effective as of 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 10, 2030. Any awards made under the Prior Plan shall continue to be subject to the terms of the Prior Plan; provided, however, that no awards may be granted under the Prior Plan after the Approval Date.



8.2.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)In the case of a Participant who is subject to Section 16(a) and 16(b) of the Exchange Act, the Committee may, at any time, add such conditions and limitations to any Award to such Participant, or any feature of any such Award, as the Committee, in its sole discretion, deems necessary or desirable to comply with Section 16(a) or 16(b) and the rules and regulations thereunder or to obtain any exemption therefrom.
(c)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.
8.3.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 (i) the amount withheld in the form of shares of Common Stock under this Section 8.3 may not exceed the minimum statutory withholding obligation (based on the minimum statutory withholding rates for Federal and state purposes, including, without limitation, payroll taxes) unless otherwise elected by the Participant, (ii) in no event shall the Participant be permitted to elect less than the minimum statutory withholding obligation, and (iii) in no event shall the Participant be permitted to elect to have an amount withheld in the form of shares of Common Stock pursuant to this Section 8.3 that exceeds the maximum individual tax rate for the employee in applicable jurisdictions.
8.4.Grant and Use of Awards. Subject to the terms and conditions of the Plan, 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.



8.5.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. Notwithstanding the foregoing, no dividends or dividend equivalent rights will be paid or settled on Awards that have not been earned or vested.
8.6.Settlement and Payments. Awards may be settled through cash payments, the delivery of shares of Common Stock, the granting of replacement Awards, or combination thereof as the Committee shall determine. Any Award settlement, including payment deferrals, may be subject to such conditions, restrictions and contingencies as the Committee shall determine. The Committee may permit or require the deferral of any Award payment (other than Option or SAR and to the extent permitted by Code Section 409A), subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest, or dividend equivalents, including converting such credits into deferred Common Stock equivalents. 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.
8.7.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.
8.8.Form and Time of Elections; Notices. 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. Any notice or document required to be filed with the Committee under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Committee, in care of the Company at its principal executive offices. The Committee may, by advance written notice to affected persons, revise such notice procedure from time to time. Any notice required under the Plan (other than a notice of election) may be waived by the person entitled to notice.
8.9.Agreement With Company. At the time of an Award to a Participant under the Plan, the Committee may require a Participant to enter into an agreement with the Company or a Subsidiary (as applicable the “Award Agreement”), in a form specified by the Committee, agreeing to the terms and conditions of the Plan and to such additional terms and conditions, not



inconsistent with the Plan, as the Committee may, in its sole discretion, prescribe. Any such document is an “Award Agreement” regardless of whether any Participant signature is required.
8.10.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 securities exchange) by a duly authorized officer of such company.
8.11.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.
8.12.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 and shares of Common Stock are registered in his name.
8.13.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.
8.14.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; provided, however, that any issues relating to the issuance of Common Stock shall be governed by the laws of the State of Delaware.



8.15. 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.
8.16.Foreign Individuals. Notwithstanding any other provision of the Plan to the contrary, the Committee may grant Awards to eligible persons who are foreign nationals on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan. In furtherance of such purposes, the Committee may make such modifications, amendments, procedures and subplans as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which the Company or a Subsidiary operates or has employees. The foregoing provisions of this Section 8.16 shall not be applied to increase the share limitations of Article 5 or to otherwise change any provision of the Plan that would otherwise require the approval of the Company’s stockholders.
8.17.Code Section 409A. 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 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.
8.18.Restrictions on Shares and Awards. The Committee, in its discretion, may impose such restrictions on shares of Common Stock or cash acquired pursuant to the Plan, whether pursuant to the exercise of an Option or SAR, settlement of a Full Value Award or otherwise, as it determines to be desirable, including, without limitation, restrictions relating to disposition of the shares or cash and forfeiture restrictions based on service, performance, Common Stock ownership by the Participant, conformity with the Company’s recoupment, compensation recovery, or clawback policies and such other factors as the Committee determines to be appropriate. Without limiting the generality of the foregoing, unless otherwise specified by the Committee, any awards under the Plan and any shares of Common Stock or cash issued pursuant to the Plan shall be subject to the Company’s compensation recovery, clawback, and recoupment policies as in effect from time to time.



8.19.Misconduct. If the Committee determines that a present or former employee has (a) used for profit or disclosed to unauthorized persons, confidential or trade secrets of the Company or any Subsidiary; (b) breached any contract with or violated any fiduciary obligation to the Company or any Subsidiary; or (c) engaged in any conduct which the Committee determines is injurious to the Company or its Subsidiaries, the Committee may cause that employee to forfeit his or her outstanding awards under the Plan; provided, however, that following the occurrence a Change in Control, no outstanding awards under the Plan shall be subject to forfeiture pursuant to this Section 8.19.
ARTICLE 9
AMENDMENT AND TERMINATION

The Board may, at any time, amend or terminate the Plan, and the Board or Committee may amend any Award Agreement; provided, however, that no amendment or termination of the Plan or amendment of any Award Agreement 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 (or Committee, as applicable). Notwithstanding the foregoing, (a) adjustments pursuant to Section 5.2 shall not be subject to the foregoing limitations of this Article 9, and (b) amendments (i) expanding the group of Eligible Individuals, (ii) to the provisions of Section 3.6 (relating to Option and SAR repricing), (iii) increasing the number of shares reserved under the Plan, (iv) increasing the number of shares reserved for the issuance of ISOs, and (iv) amendments for which approval of the Company’s stockholders is required by law or the rules of any stock exchange on which the Common Stock is listed, in any case, will not be effective unless approved by the Company’s stockholders. It is the intention of the Company that, to the extent that any provisions of this Plan or any Awards granted hereunder are subject to Code Section 409A, the Plan and the Awards comply with the requirements of Code Section 409A and that the Board shall have the authority to amend the Plan as it deems necessary or desirable to conform to Code Section 409A. Notwithstanding the foregoing, neither the Company nor the Subsidiaries guarantee that Awards under the Plan will comply with Code Section 409A and the Committee is under no obligation to make any changes to any Award to cause such compliance.




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.

    By: /s/ ______________
    Its: _________________

Date: As of ___________________, 2020



Exhibit 10.7
TENNECO INC. CHANGE IN CONTROL
SEVERANCE BENEFIT PLAN FOR KEY EXECUTIVES
As Amended and Restated Effective November 5, 2020
(the “Plan”)

The Plan was established by Tenneco Inc. (the “Company”) to induce key executives of the Company and its affiliates to enter into, or continue their services or employment with, and to steadfastly serve the Company and its affiliates if and when a Change in Control (as defined herein) is threatened, despite attendant career uncertainties, by committing the Company to provide severance benefits in the event their employment terminates as a result of a Change in Control. The Plan was established effective on November 4, 1999, was amended and restated and renamed effective December 12, 2007, and has been amended from time to time thereafter. The following provisions constitute an amendment, restatement and continuation of the Plan as of the date on which the Company Board (as defined herein) adopts the amendment and restatement, which date shall be the “Effective Date” of the Plan as set forth herein, which date is November 5, 2020.
1.Definitions. In addition to other terms defined herein, the following terms shall have the meaning specified below.
A.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) thirty percent (30%) or more of the combined voting power of the Company’s then outstanding securities having general voting rights, or (B) forty percent (40%) or more of the Company’s then outstanding shares of Class A Common Stock and Class B Common Stock in the aggregate; 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 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 any of the Tenneco Companies; or
(2)members of the Incumbent Board cease to constitute a majority of the Company 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.]
B.“COBRA” means covered required by Section 4980B of the Internal Revenue Code or Sections 601 et. seq. of ERISA.
C.Committee means the Compensation Committee of the Company Board or any successor thereto.
D.Company means Tenneco Inc., a Delaware corporation, and any successors thereto as provided in Section 10.
E.Company Board means the Board of Directors of the Company.
F.Confidential Information means Trade Secrets as well as information acquired by the Key Executive in the course and scope of his or her activities during such Key Executive’s employment with the Tenneco Companies, including information acquired from third parties, that:
(1)is not generally known or disseminated outside the Tenneco Companies (such as non-public information);
(2)is designated or marked by any Tenneco Company as “confidential” or reasonably should be considered confidential or proprietary; or
(3)any Tenneco Company indicates through its policies, procedures, or other instructions should not be disclosed to anyone outside the Tenneco Companies.
Without limiting the foregoing definitions, some examples of Confidential Information under the Plan include:
(1)    matters of a technical nature, such as scientific, trade or engineering secrets, “know-how”, formulae, secret processes, inventions, and research and
2



development plans or projects regarding existing and prospective customers and products or services;
(2)    information about costs, profits, markets, sales, customer lists, customer needs, customer preferences and customer purchasing histories, supplier lists, internal financial data, personnel evaluations, non-public information about automotive devices or products of any Tenneco Company (including future plans about them), information and material provided by third parties in confidence and/or with nondisclosure restrictions, computer access passwords, and internal market studies or surveys; and
(3)    any other information or matters of a similar nature.
G.Constructive Termination will be deemed to have occurred if, upon or following the Change in Control, a Key Executive separates from service with all Tenneco Companies after the Tenneco Companies, by action or inaction, and without the Key Executive’s express prior written consent:
(1)materially diminish in any manner the Key Executive’s status, position, duties or responsibilities with the Tenneco Companies from those in effect immediately prior to the Change in Control (without limiting the generality of the foregoing, for purposes of this clause (1) a material diminution will be deemed to have occurred if the Key Executive does not maintain the same or greater status, position, duties and responsibilities with the ultimate parent corporation of a controlled group of corporations of which the Company is a member upon consummation of the transaction or transactions constituting the Change in Control);
(2)a material reduction in (i) the Key Executive’s annual rate of salary or wages as in effect immediately prior to the Change in Control, (ii) the Key Executive’s targeted annual cash incentive compensation under the Company’s annual incentive bonus plan for the calendar year completed immediately prior to the Change in Control, and/or (iii) the value of the Key Executive’s targeted annual long-term incentive award (including the material terms thereof, including vesting) for the calendar year completed immediately prior to the Change in Control (the components of compensation described in subparagraphs (i), (ii) and (iii) together “Total Compensation”); provided, however, that a material reduction for purposes of this clause (2) shall not be deemed to have occurred if (A) there is a material reduction in the components of compensation described in subparagraph (ii) and/or (iii) as applied to the Key Executive but the Key Executive’s annual rate of salary or wages is not reduced and the Key Executive’s Total Compensation is not materially reduced, or (B) the Key Executive’s Total Compensation (or any component thereof) is reduced as part of an overall cost reduction program that affects all similarly-situated employees of the Tenneco Companies and does not disproportionately affect the Key Executive (either as to amount or the components of Total Compensation that are reduced);
3



(3)cause a material reduction in (a) the level of aggregate Tenneco Companies-paid medical benefit, life insurance and disability plan coverages; or (b) the aggregate rate of Tenneco Companies-paid thrift/savings plan contributions and of Tenneco Companies-paid defined benefit retirement plan benefit accrual, from those coverages and rates in effect immediately prior to the Change in Control; provided, however, a material reduction for purposes of this clause (3) shall not be deemed to have occurred if a reduction as described in subclause (a) or (b) occurs as part of an overall cost reduction program that affects all senior executives of the Tenneco Company and does not disproportionately affect the Key Executive;
(4)effectively require the Key Executive to relocate because of a transfer of the Key Executive’s place of employment with the Tenneco Companies from the place where the Key Executive was employed immediately prior to the Change in Control (for purposes of the foregoing, a transfer of place of employment shall be deemed to require a Key Executive to relocate if such transfer is greater than 50 miles from the place where the Key Executive was employed immediately prior to the Change in Control); or
(5)materially breach any provision of the Plan.
Notwithstanding anything to the contrary in this Section 1(G), a Constructive Termination will not be deemed to have occurred unless the Key Executive delivers to the Company a written notice of the existence of a condition described in this Section 1(G) within 90 days after the Key Executive has actual knowledge of the existence of such condition, the Key Executive does not terminate his employment until the Key Executive has given the Company at least 30 days in which to cure the condition set forth in the written notice, and if such condition is not cured by the 30th day, the Key Executive’s terminates his or her employment for Constructive Discharge as of the expiration of the 30 day cure period.
In addition, a determination that a Key Executive has been Constructively Terminated for purposes of eligibility for benefits under this Plan shall be based solely on the criteria set forth in this Section 1(G) and the Key Executive’s eligibility or application for, or receipt of, any retirement benefits from any Tenneco Company following separation from service shall have no bearing on such determination.
H.Disability shall mean the permanent and total disability as determined under the rules and guidelines established by a Tenneco Company in order to qualify for long-term disability coverage under the Tenneco Company’s long-term disability plan in effect at the time.
I.Discharge for Cause shall be deemed to have occurred only if, on or following the Change in Control, a Key Executive is discharged by any of the Tenneco Companies from employment because:
(1)the Key Executive has engaged in serious misconduct or willfully or materially violated, or willfully or materially failed to comply with, the
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Company’s Corporate Compliance Policies or Statement of Business Principles in his or her capacity as an employee of any of the Tenneco Companies; or
(2)the Key Executive has willfully and continually failed (unless due to incapacity resulting from physical or mental illness) to substantially perform the duties of his or her employment by any of the Tenneco Companies after written demand for substantial performance is delivered to the Key Executive by any of the Tenneco Companies specifically identifying the manner in which the Key Executive has not substantially performed such duties.
Notwithstanding the foregoing, a Key Executive shall not be deemed to have been Discharged for Cause unless a written notice has been delivered to the Key Executive stating that the Tenneco Companies have terminated the Key Executive’s employment, which notice shall include a resolution, adopted by at least a three-quarter’s vote of the Incumbent Board (after the Key Executive has been provided with reasonable notice and an opportunity, together with counsel, for a hearing before the entire Incumbent Board), finding that the Key Executive has engaged in the conduct set forth in clause (1) or (2) above.
J.“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any regulations promulgated thereunder.
K.“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any regulations promulgated thereunder.
L.Executive Group I” shall consist of the Chief Executive Officer of the Company.
M.“Executive Group II” shall consist of each individual,
(1)who is not a member of Executive Group I, and
(2)who, immediately prior to the Change in Control, is an employee of a Tenneco Company who is an executive assigned to the salary grade MKT;
N.“Executive Group III” shall consist of each individual,
(1)who is not a member of Executive Group I or II, and
(2)who, immediately prior to the Change in Control, is an employee of a Tenneco Company who is critical to the negotiation or consummation of a corporate transaction and who has been designated by the Chief Executive Officer of the Company, in writing before the Change in Control, with the approval of the Committee, as a member of Executive Group III. In no event shall Executive Group III contain more than ten (10) members.
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O.Executive Incentive Compensation Plan means the Company’s annual bonus plan as in effect from time to time. As of the Effective Date, the Executive Incentive Compensation Plan is the “Tenneco Inc. Annual Incentive Plan”.
P.Incumbent Board means
(1)the members of the Company Board on the Effective Date, to the extent that they continue to serve as members of the Company Board; and
(2)any individual who becomes a member of the Company Board after the Effective Date, (a) upon the death or disability or retirement of, and as the successor to or replacement for, a member of the Company Board or (b) 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 subclause (b).
Q.Internal Revenue Code means the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder.
R.Key Executive means an individual who, immediately prior to the Change in Control, is a member of Executive Group I, Executive Group II, or Executive Group III.
S.“Payments” means any payments or benefits provided hereunder and/or any other payments no matter the source, in any case that are paid or payable or distributed or distributable to a Key Executive in connection with a Change in Control as determined in accordance with Section 280G of the Internal Revenue Code.
T.“Restricted Covenant Agreement” means an agreement relating to noncompetition, nonsolicitation, and/or such other restrictive covenants in the Company’s standard form as in effect immediately prior to a Change in Control.
U.Section 409A means Section 409A of the Internal Revenue Code and regulations, guidance of general applicability and other interpretive authority issued thereunder.
V.Stock Plans means the Tenneco Inc. 2006 Long-Term Incentive Plan, as amended from time to time, and any other equity-based or stock-based plan, program or arrangement of a Tenneco Company, and any successors thereto.
W.Tenneco Company and Tenneco Companies mean the Company and any other trade or business of which a majority of the voting stock or equity interests are owned directly or indirectly by the Company (or their applicable successors).
X.Threatened Change in Control means (1) any publicly disclosed proposal, offer, actual or proposed purchase of stock or other action which, if consummated, would, in the
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opinion of the Incumbent Board, constitute a Change in Control, including the Company entering into an agreement, the consummation of which would result in a Change in Control or (2) the adoption of a resolution by the Incumbent Board that a Threatened Change in Control has occurred.
Y.Threatened Change in Control Period means the period beginning on the date a Threatened Change in Control occurs and ending on the earlier of (1) the date the proposal, offer, actual or proposed purchase of stock or other action is formally withdrawn or the Incumbent Board has determined that the circumstances which constituted the Threatened Change in Control no longer exist or (2) the date a Change in Control occurs.
Z.Trade Secrets mean information of special value, not generally known to the public that any Tenneco Company has taken steps to maintain as secret from persons other than those selected by any Tenneco Company.
For purposes of the definitions in Section 1 and the Plan, the terms “associate,” “affiliate,” “person,” and “beneficial owner” shall have the respective meanings set forth in Sections 3(a) and 13(d) Exchange Act and the regulations promulgated under Section 12 of the Exchange Act. For purposes of the Plan, the terms “separation,” “separation from service,” “termination,” “termination of employment,” and “discharge” and variations thereof, as used in the Plan, are intended to mean a separation from service or termination of employment that constitutes a “separation from service” under Section 409A.
2.Eligibility for Benefits. If (A) upon or within two years after a Change in Control, a Key Executive is separated from service as an employee with the Tenneco Companies (1) because the Key Executive is discharged by the Tenneco Companies, provided that such discharge is not a Discharge for Cause nor a discharge due to the death or Disability of the Key Executive, or (2) because of Constructive Termination, and (B) throughout the period beginning with the Change in Control and ending with such separation from service with the Tenneco Companies, the Key Executive remains an employee of the Tenneco Companies, such Key Executive shall be entitled to receive the benefits described in Section 3, payable in accordance with Section 4 below, to the extent applicable and subject to the terms and conditions of the Plan.
3.Severance Benefits. If a Key Executive becomes entitled to benefits pursuant to Section 2, the Key Executive shall be entitled to receive the following:
A.Executive Group I Cash Severance. If the Key Executive is a member of Executive Group I immediately prior to the Change in Control, a payment of a cash amount equal to three (3) times the sum of (1) the Key Executive’s annual base salary in effect immediately prior to the Change in Control, plus (2) the Key Executive’s targeted annual award under the Executive Incentive Compensation Plan as in effect immediately prior to the Change in Control.
B.Executive Group II Cash Severance. If the Key Executive is a member of Executive Group II immediately prior to the Change in Control, a cash amount equal to two (2) times the sum of (1) the Key Executive’s annual base salary in effect immediately prior to the
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Change in Control, plus (2) the Key Executive’s targeted annual award under the Executive Incentive Compensation Plan as in effect immediately prior to the Change in Control.
C.Executive Group I Cash Severance. If the Key Executive is a member of Executive Group III immediately prior to the Change in Control a cash amount equal to one (1) times the sum of (1) the Key Executive’s annual base salary in effect immediately prior to the Change in Control, plus (2) the Key Executive’s targeted annual award under the Executive Incentive Compensation Plan as in effect immediately prior to the Change in Control.
D.Deferred Compensation. All deferred compensation (and earnings accrued thereon) credited to the account of a Key Executive under any deferred compensation plan, program or arrangement of the Tenneco Companies shall be paid to such Key Executive pursuant to and in accordance with the terms of such plan, program or arrangement.
E.Executive Incentive Compensation Plan. A cash amount equal to the sum of (1) any incentive compensation which has been allocated or awarded to such Key Executive under the Executive Incentive Compensation Plan for a completed calendar year or other measuring period preceding the Key Executive’s separation from service but has not yet been paid and (2) a pro rata portion to the date of the Key Executive’s separation from service with the Tenneco Companies of the aggregate value of all incentive compensation awards to such Key Executive under the Executive Incentive Compensation Plan for the current calendar year or other measuring period, calculated as if all conditions for receiving the targeted annual award amount with respect to all such awards had been met at the target level of performance as of the date of termination, notwithstanding any provision of the Executive Incentive Compensation Plan to the contrary.
F.Stock Plans. Any outstanding awards under the Stock Plans held by the Key Executive shall continue to be subject to the terms and conditions of the applicable Stock Plan and award agreement.
G.Benefits. The Key Executive and his or her eligible dependents, if any, shall continue to be covered by the health, life and disability plans applicable to similarly-situated active employees as in effect from time to time and subject to the rules thereof for the period described below. For persons entitled to Executive Group I benefits, and their eligible dependents, the period is three (3) years from his or her separation from service. For persons entitled to Executive Group II benefits, and their eligible dependents, the period is two (2) years from his or her separation from service. For persons entitled to Executive Group III benefits, and their eligible dependents, the period is one (1) year from his or her separation from service. This period of coverage will not count against the minimum period of health coverage required by COBRA and persons covered by this provision will be afforded their applicable COBRA rights at the end of the health coverage provided herein.
H.Outplacement. The Company shall provide each Key Executive with reasonable outplacement services at a cost not to exceed $25,000 during the twelve (12) months following his or her separation from service.
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4.Time and Method of Payment. Subject to the terms and conditions of the Plan, the Company shall pay, or cause to be paid, the cash severance benefits under the Plan to the Key Executive in a single cash sum within 30 days following the Key Executive’s separation from service with the Tenneco Companies. Except for withholdings required by law to satisfy local, state, federal and foreign tax withholding requirements, no offset nor any other reduction shall be taken in paying such benefit.
5.Parachute Payments.
A.Reduction of Payments. If any portion of the Payments made to a Key Executive is subject to an excise tax under Section 4999 of the Internal Revenue Code (the “Excise Tax”), then the Payments shall be reduced by the Company to the extent necessary so that no portion of the Payments to the Key Executive is subject to the Excise Tax; provided, however, that such reduction shall apply only if such reduction would result in the Key Executive retaining an amount, determined after application of the Excise Tax on the Payments, that is greater than the amount the Key Executive would retain if the Payments were made without such reduction. Any reduction in the Payments shall be made in compliance with Section 409A.
B.Determination of Payments. The independent public accounting firm serving as the Company’s auditing firm, or such other accounting firm, law firm or professional consulting services provider of national reputation and experience reasonably acceptable to the Company and the Key Executive (the “Accountants”) shall make in writing in good faith all calculations and determinations under this Section 5, including the determination of the Payments and the assumptions to be used in arriving at any calculations. For purposes of making the calculations and determinations under this Section 5, the Accountants may make reasonable assumptions and approximations concerning the application of Internal Revenue Code Sections 280G and 4999. The Company and each affected Key Executive shall furnish to the Accountants and each other such information and documents as the Accountants and each other may reasonably request to make the calculations and determinations under this Section 5. The Company shall bear all costs the Accountants incur in connection with any calculations contemplated hereby.
6.Restrictive Covenant Agreement. As a condition of participation in the Plan or receiving benefits under the Plan, a Key Executive shall enter into a Restricted Covenant Agreement and shall agree to be bound by all of the applicable terms and conditions thereof. A Key Executive agrees to sign any updated or amended Restricted Covenant Agreement from time to time as requested by the Company.
7.Confidential Information.
A.Generally. During the period of a Key Executive’s employment with the Tenneco Companies and at all times thereafter, the Key Executive shall hold in secrecy for the Company all Confidential Information that may come to his or her knowledge, may have come to his or her attention or may have come into his or her possession or control while employed by a Tenneco Company (or otherwise performing services for any Tenneco Company). Notwithstanding the preceding sentence, the Key Executive shall not be required to maintain the confidentiality of any Confidential Information which (1) is or becomes available to the public or others in the
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industry generally (other than as a result of disclosure or inappropriate use, or caused, by the Key Executive in violation of this Section 7) or (2) the Key Executive is compelled to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena. Except as expressly required in the performance of his or her duties to the Tenneco Companies, the Key Executive shall not use for his or her own benefit or disclose (or permit or cause the disclosure of) to any person, directly or indirectly, any Confidential Information unless such use or disclosure has been specifically authorized in writing by the Company in advance. During the Key Executive’s employment and as necessary to perform his or her duties, the Company will provide and grant the Key Executive access to the Confidential Information. The Key Executive recognizes that any Confidential Information is of a highly competitive value and that the Confidential Information could be used to the competitive and financial detriment of any Tenneco Company if misused or disclosed by the Key Executive. Nothing in this Agreement prohibits a Key Executive from reporting possible violations of federal, state or other law to any governmental agency or entity or making other disclosures that are protected under whistleblower provisions of federal, state or other law.
B.Defend Trade Secrets. In compliance with 18 U.S.C. § 1833(b), as established by the Defend Trade Secrets Act of 2016, each Key Executive is given notice of the following: (A) that an individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (1) is made (a) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (b) solely for the purpose of reporting or investigating a suspected violation of law; or (2) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; and (B) that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of said individual and use the trade secret information in the court proceeding, if the individual (I) files any document containing the trade secret under seal; and (II) does not disclose the trade secret, except pursuant to court order.
8.Reasonableness; Remedies; . The Key Executive acknowledges, by accepting participation in the Plan, that each of the restrictions set forth in Section 7 is reasonable and necessary for the protection of the Company’s business and opportunities (and those of the Tenneco Companies) and that a breach of any of the covenants contained in Section 7, would result in material irreparable injury to the Tenneco Companies for which there is no adequate remedy at law and that it will not be possible to measure damages for such injuries precisely. Accordingly, each Tenneco Company shall be entitled to the remedies of injunction and specific performance, or either of such remedies, as well as all other remedies to which any Tenneco Company may be entitled, at law, in equity or otherwise, without the need for the posting of a bond or by the posting of the minimum bond that may otherwise be required by law or court order. .
9.Extension; Survival. By acceptance of participation in the Plan, the Key Executive agrees that the Company’s obligation to make any payments or provide any benefits under the Plan shall be suspended during the period of any breach or violation by the Key Executive of the covenants contained in Section 7 or the provisions of the Restricted Covenant Agreement. Each
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of the provisions of Section 7 and the Restricted Covenant Agreement is fundamental to the Company’s willingness to enter into this Plan and for it to provide for the severance and other benefits described in the Plan, none of which the Company was required to do prior to the date hereof. Further, it is the express intent and desire of the Company that each provision of Section 7 and the Restricted Covenant Agreement be enforced to the fullest extent permitted by law. If any part of Section 7, any provision of the Restricted Covenant Agreement, or any provision hereof, is deemed illegal, void, unenforceable or overly broad (including as to time, scope and geography), such provision shall be reformed to the fullest extent possible to ensure its enforceability or if such reformation is deemed impossible then such provision shall be severed from the Plan, but the remainder of the Plan and the Restricted Covenant Agreement (expressly including any other provision of Section 7 hereof) shall remain in full force and effect.
10.Successors and Assigns. No Key Executive may assign, transfer, convey, mortgage, hypothecate, or in any way encumber any benefit payable under the Plan, nor shall the Key Executive have any right to receive any benefit under the Plan except at the time, in the amount and in the manner provided in the Plan, provided that the rights of a Key Executive under the Plan may be enforced by the Key Executive’s heirs, dependents, beneficiaries and legal representatives. This Plan may and shall be assigned or transferred to, and shall be binding upon and shall inure to the benefit of, any successor of the Company, and any such successor shall be deemed substituted for all purposes of the “Company” under the provisions of the Plan. As used in the preceding sentence, the term “successor” shall mean any person, firm, corporation, or business entity which at any time, whether by merger, purchase or otherwise, acquires all, or substantially all, of the assets or business of the Company. Notwithstanding such assignment, the Company shall remain, with such successor, jointly and severally liable for all obligations under the Plan, which, except as herein provided, may not be assigned by the Company.
11.No Mitigation. It will be difficult, and may be impossible, for the Key Executive to find reasonably comparable employment following the termination of the Key Executive’s employment, and the protective provisions under Section 7 and the Restricted Covenant Agreement will further limit the employment opportunities for the Key Executive. The Key Executive shall not be required to seek other employment, or otherwise, to mitigate any payment provided under the Plan.
12.Plan Amendment and Termination. The Plan may be terminated or amended at any time by the Company Board provided that during a Threatened Change in Control Period, the Plan may not be terminated or amended in any manner that reduces the benefits to a Key Executives or adversely affects the rights of a Key Executive under the Plan. In the event of a Change in Control, no amendment, or termination, made on or after the date of the Change in Control shall apply to any Key Executive until the expiration of two years and thirty-one days from the date of the Change in Control.
13.Funding. The Company shall pay, or cause to be paid, any severance benefit under the Plan out of the general assets of the Tenneco Companies. Nothing contained herein shall preclude the Company from establishing a grantor trust through which assets to satisfy obligations under the Plan may be set aside to provide for benefit payments to Key Executives
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and their dependents or beneficiaries. Any assets or property held by such trust shall be subject to the claims of general creditors of the Company, but only upon the insolvency or bankruptcy of the Company and only to the extent that the assets or property held by such trust are attributable to contributions made by the Company. No person other than the Company shall, by virtue of the provisions of the Plan, have any interest in such funds.
14.Controlling Law. The Plan shall be interpreted under the laws of the State of Illinois, without regard to its conflicts of laws provisions, except to the extent that federal law preempts the laws of the State of Illinois.
15.Plan Administrator. The Board is the Plan Administrator, and it shall have the authority to control and manage the operation of this Plan with the authority to construe and interpret the Plan, and to conclusively determine all questions of eligibility to participate in the Plan and benefits payable hereunder, in its sole discretion. Notwithstanding the foregoing, the Company Board may delegate its duties hereunder to the Committee or to any other committee or individual as it determines appropriate.
16.Claims Procedures.
A.Claim Not Generally Required. Generally, it is not expected that a Key Executive will need to make a claim for benefits under the Plan. If, however, a Key Executive believes that he or she is entitled to payments and benefits under the Plan that are not provided to him or her, then the Key Executive may submit a claim to the Plan Administrator in writing.
B.Filing a Claim. If a Key Executive files a claim for benefits, the Key Executive will be notified of the Plan Administrator’s decision with respect to the claim within 90 days (which may be extended to 180 days, if required) of the date the claim is received. If the Plan Administrator requires an extension of time to respond to a claim, the Plan Administrator will provide the Key Executive with notice of the reason for the extension within the initial 90-day period and a date by which the Key Executive can expect a decision. A claim will be deemed denied if the Plan Administrator fails to notify the Key Executive within 90 days after receipt of the claim, plus any extension of time for processing the claim not to exceed 90 additional days, as special circumstances require.
C.Denial of Claim. If a claim for benefits is denied (or deemed to be denied), in whole or in part, the Plan Administrator will furnish the Key Executive with a written notice stating the specific reasons for the denial, specific reference to pertinent Plan provisions upon which the denial was based, a description of any additional information or material necessary to perfect the claim, an explanation of why such information or material is necessary and appropriate information concerning steps to take if the Key Executive wishes to submit the claim for review.
D.Review of Denied Claim. Within 60 days after the date of written notice denying any benefits, the Key Executive may request, in writing, a review of that decision. Such request for review may contain such issues and comments as the Key Executive wants considered in the
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review. The Key Executive may also review pertinent documents in the Plan Administrator’s possession.
E.Decision on Review of Denied Claim. The Key Executive will be notified of the Plan Administrator’s decision with respect to the appeal of a denied claim within 60 days (which may be extended to 120 days, if required) of the date the request for review of the denied claim is received. If the Plan Administrator requires an extension of time to review the appeal, the Plan Administrator will provide the Key Executive with notice of the reason for the extension within the initial 60-day period and a date by which the Key Executive can expect a decision. A claim will be deemed denied on appeal if the Plan Administrator fails to notify the Key Executive within 60 days after receipt of the claim, plus any extension of time for processing the claim not to exceed 60 additional days, as special circumstances require. This notice of denial will include the reasons for the denial and the specific provision(s) on which the denial is based. Any decision on final appeal will be final, conclusive and binding upon all parties.
17.Legal Fees and Costs. In the event a Key Executive initiates legal action to enforce his or her right to any benefit under this Plan, the Company shall pay all reasonable legal fees and costs incurred by the Key Executive in connection with such legal action, provided that the Key Executive prevails on any material issue that is the subject of the legal action. If the prevailing party is the Key Executive, the payment or reimbursement of legal fees and costs shall be made no later than two and one-half months after the end of the calendar year in which the right to such payment or reimbursement is no longer subject to a “substantial risk of forfeiture” (as such term is described under Section 409A).
18.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.
19.Notices. Any notice required or permitted under the Plan shall be given in writing and shall be deemed to have been effectively made or given if personally delivered, or if sent via U.S. mail or recognized overnight delivery service or sent via confirmed e-mail or facsimile to the other party at its address set forth below in this Section 19, or at such other address as such party may designate by written notice to the other party hereto. Any effective notice hereunder shall be deemed given on the date personally delivered, three business days after mailed via U.S. mail or one business day after it is sent via overnight delivery service or via confirmed e-mail or facsimile, as the case may be, to the following address:
If to the Company, the Company Board, any Tenneco Company or the Committee:
Tenneco Inc.
500 North Field Drive
Lake Forest, IL 60045
Attn. General Counsel

If to the Executive:
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At the most recent address on file with the Company.

20.Nonduplication. A Key Executive shall be entitled to receive any greater, or otherwise more favorable, payments or benefits under any other plan, program or arrangement with a Tenneco Company under circumstances that would entitle the Key Executive to payments or benefits under the Plan, the benefits and payments under the other plan, program, or arrangement shall be reduced to the extent that payments and benefits are provided under Section 3 of the Plan; provided, however, that any such reduction shall be in done in a manner that does not result in an impermissible substitution or acceleration or further deferral of payments under Section 409A.
21.Section 409A Compliance. Notwithstanding any other provision of the Plan to the contrary:
A.Intent to Comply with Section 409A. It is intended that any amounts payable under this Plan shall either be exempt from or comply with Section 409A. The provisions of this Plan shall be construed and interpreted to in accordance with such intent.
B.Reimbursement of Expenses. To the extent that the reimbursement of any expenses or the provision of any in-kind benefits under this Plan is subject to Section 409A, (a) the amount of such expenses eligible for reimbursement, or in-kind benefits to be provided, during any one calendar year shall not affect the amount of such expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; (b) reimbursement of any such expense shall be made by no later than December 31 of the year following the calendar year in which such expense is incurred; and (c) Executive’s right to receive such reimbursements or in-kind benefits shall not be subject to liquidation or exchange for another benefit.
C.Separation from Service. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Plan providing for the payment of any amounts or benefits that the Company determines may be considered nonqualified deferred compensation under Section 409A upon or following a termination of employment unless such termination is also a separation from service or termination from employment within the meaning of Section 409A.
D.Specified Employees. If a Key Executive is a “specified employee” within the meaning of Section 409A as of the date of the Key Executive’s separation from service, then any payment or benefit pursuant to the terms of this Plan that is subject to Code Section 409A (and not subject to an exception from Section 409A) shall not be made until the first business day after (i) the expiration of six (6) months from the date of Key Executive’s separation from service, or (ii) if earlier, the date of Executive’s death (the “Delayed Payment Date”).



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IN WITNESS WHEREOF, the Company has caused the Plan to be executed on its behalf by its officer duly authorized, on the day and year set forth below.

TENNECO INC.
By             ___________
Its ___________________________
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Exhibit 10.8
[AMENDED AND RESTATED]1
TENNECO INC.
CASH-SETTLED
LONG-TERM PERFORMANCE SHARE UNIT AWARD AGREEMENT
([2020-2022] Performance Period)

______________________
Participant

[FOR AMENDED AND RESTATED 2020-2022 AWARDS: Effective as of [Grant Date] (the “Grant Date”), the Participant was granted a Cash Incentive Award (the “Award”) under the Tenneco Inc. 2006 Long-Term Incentive Plan (the “Plan”) which was evidenced by an agreement setting forth the terms and conditions of the Award (the “Prior Agreement”). Pursuant to the authority reserved under the terms of the Plan and the Prior Agreement, effective as of November 4, 2020 (the “Amendment Date”), the Prior Agreement is hereby amended and restated in the form of this agreement (sometimes referred to as the “Award Agreement”), the Award is converted to a Full Value Award under the Plan in the form of performance share units (“PSUs”) with respect to the number of shares of Common Stock set forth herein (“Target PSUs”), and the Award shall be subject to the terms and conditions set forth herein and the terms and conditions of the Plan as the same has been and may be amended from time to time. Pursuant to the authority reserved under the Plan and the Prior Agreement, the Prior Agreement is hereby superseded and replaced in its entirety.] [FOR NEW AWARDS: Effective as of [Grant Date] (the “Grant Date”), the Participant has been granted a Full Value Award (the “Award”) under the Tenneco Inc. 2006 Long-Term Incentive Plan (the “Plan”) in the form of performance share units (“PSUs”) with respect to the number of shares of Common Stock set forth herein (“Target PSUs”). The Award is subject to the following terms and conditions (sometimes referred to as this “Award Agreement”) and the terms and conditions of the Plan as the same has been and may be amended from time to time.] Terms used in this Award Agreement are defined elsewhere in this Award Agreement; provided, however, that, capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Plan.
1.General Terms of the Award. The following terms and conditions apply to the Award:
Performance Period:        [January 1, 2020 to December 31, 2022]

Performance Years:        [January 1, 2021 to December 31, 2022]

Target PSUs:            ______________________

Performance Targets:            [50% based on Free Cash Flow
                    50% based on EBITDA]

Appendix A of this Award Agreement, which is incorporated herein and forms a part of this Award Agreement, sets forth the manner in which the Performance Targets are calculated and applied for purposes of this Award Agreement.

1     Unless otherwise indicated, bracketed language reflects language to be included for amended and restated awards only.




2.Determination of Amount of Award. The number of Target PSUs that shall become vested pursuant to this Award shall be based on satisfaction of the Performance Targets for the Performance Years and continuing employment as described in this Award Agreement. The number of Target PSUs that shall become vested pursuant to this Award based on the satisfaction of the Performance Targets shall be determined in accordance with the following:
(a)[Free Cash Flow Target PSUs. For purposes hereof, the Participant’s “Free Cash Flow Target PSUs” are equal to 50% of his or her total Target PSUs. The maximum number of the Free Cash Flow Target PSUs (expressed as a percentage, the “Free Cash Flow Vesting Percentage”) that may become vested hereunder (subject to the terms and conditions of the Plan and this Award Agreement) is based on average of the Free Cash Flow (calculated as described in Appendix A) achieved for each of the Performance Years against the Free Cash Flow Performance Target established by the Committee for the Performance Period, based on the following chart:
Free Cash Flow Performance Target 2021 Performance Year/Free Cash Flow Performance Target 2022 Performance Year Free Cash Flow Vesting Percentage
* 200% (maximum)
* 100% (target)
* 50% (threshold)
* 0%
*As established by the Committee (as adjusted in accordance with the Plan and this Award Agreement).]
(b)[EBITDA Target PSUs. For purposes hereof, the Participant’s “EBITDA Target PSUs” are equal to 50% of his or her total Target PSUs. The maximum number of the EBITDA Target PSUs (expressed as a percentage, the “EBITDA Vesting Percentage”) that may become vested hereunder (subject to the terms and conditions of the Plan and this Award Agreement) is based on the average of the EBITDA (calculated as described in Appendix A) achieved for each of the Performance Years against the EBITDA Performance Target established by the Committee for the Performance Period, based on the following chart:
EBITDA Performance Target 2021 Performance Year/EBITDA Performance Target 2022 Performance Year EBITDA Vesting Percentage
* 200% (maximum)
* 100% (target)
* 50% (threshold)
* 0%
*As established by the Committee (as adjusted in accordance with the Plan and this Award Agreement).]
(c)Interpolation. Linear interpolation shall be used to determine the [Free Cash Flow Vesting Percentage] and [EBITDA Vesting Percentage], as applicable, under subparagraphs 2(a) and (b) and in the event [Free Cash Flow] or [EBITDA], as applicable, does not fall directly on one of the targets, as applicable, listed in the above charts.
(d)Determination of Performance and Number of Vested Target PSUs. As soon as practicable after the end of the Performance Period, the Committee shall determine whether and the extent to which the Performance Targets have been satisfied for the Performance Period and the number of the Participant’s Target PSUs that become vested
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based on such performance, subject to the terms and conditions of Paragraph 3 and the other terms and conditions of this Award Agreement.
(e)Adjustment of Performance Targets in Certain Circumstances. Without limiting the generality of the Committee’s authority to adjust any aspect of this Award in accordance with the terms hereof or the provisions of the Plan, in the event that the determination as to whether and the extent to which the Performance Targets are met occurs other than as of the last date of the Performance Period in accordance with this subparagraph 3(e), the Performance Targets shall be pro-rated or otherwise adjusted for the portion of the Performance Period elapsed as of the date the determination is to be made as described in Appendix A. In the event of a Business Transaction (defined below), the Performance Targets shall be adjusted to remove the future portion of the applicable Performance Target that is attributable to the business divested in connection with the Business Transaction. For purposes of the Award Agreement, a “Business Transaction” means a corporate transaction involving the Company that constitutes a spin-off, sale of assets, sale of a subsidiary, combination, split-up, or other similar material transaction as determined by the Committee.
3.Payment and Settlement of Award.
(a)Unvested Award. Except as otherwise specifically provided herein, the Participant shall have no right with respect to any payments or other amounts in respect of this Award until the Award is actually paid and settled on the Settlement Date (as defined below) and if the Participant’s Termination Date occurs before the Settlement Date, this Award shall immediately expire and shall be forfeited and the Participant shall have no further rights with respect thereto.
(b)Payment and Settlement Generally. Except as otherwise provided in this Paragraph 3, payment and settlement of this Award shall be made following the end of the Performance Period as of a date determined by the Committee and no later than two and one-half months after the end of the Performance Period (such date, the “Settlement Date”). [Amended Awards: The Award will be paid and settled in cash in an amount equal to (i) the Fair Market Value of a share of Common Stock (determined as of the applicable Settlement Date), multiplied by (ii) the number of vested Target PSUs with respect to which payment and settlement is being made.] [New Awards: The Award will be paid and settled in cash in an amount equal to (i) the Fair Market Value of a share of Common Stock (determined as of the applicable Settlement Date), multiplied by (ii) the number of vested Target PSUs with respect to which payment and settlement is being made; provided, however, that if there are sufficient shares of Common Stock available for issuance under the Plan as of the Settlement Date, payment and settlement of the Award may be made in the form of shares of Common Stock with one share of Common Stock being issued for each vested Target PSU with respect to payment and settlement is being made.] Upon the payment and settlement of the Award, the Award shall be cancelled.
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(c)Termination for Death, Total Disability or Retirement. Notwithstanding the provisions of subparagraphs 3(a) and (b), if the Participant’s Termination Date occurs on or before the Settlement Date (as determined under subparagraph 3(b)):
(i)    as a result of the Participant’s death or Total Disability (as defined below), the Participant (or, in the event of his or her death, his or her beneficiary) shall be entitled to payment and settlement with respect to that number of Target PSUs equal to the product of (A) 100% of the Target PSUs subject to this Award for the Performance Period, multiplied by (B) the Termination Multiplier (as defined below), which Target PSUs shall be paid and settled within sixty (60) days after the Participant’s Termination Date (and such date shall be the “Settlement Date” for purposes of this Award Agreement); or
(ii)    as a result of Retirement (as defined below), the Participant shall be entitled to payment and settlement of that number of Target PSUs equal to the product of (A) the number of Target PSUs with respect to which the Participant would otherwise have been entitled to payment and settlement pursuant to Paragraph 2 for the Performance Period had the Participant’s Termination Date not occurred prior to the end of the Performance Period, multiplied by (B) the Termination Multiplier, which Target PSUs shall be paid and settled on the Settlement Date (as determined under subparagraph 3(b)).
If the Participant’s Termination Date occurs after the end of the Performance Period and prior to the Settlement Date (as determined under subparagraph 3(b)) for the Performance Period as a result of the Participant’s death, Total Disability or Retirement, the Participant (or, in the event of his or her death, his or her beneficiary) shall be entitled to payment and settlement on the Settlement Date (as determined under paragraph 3(b)) of that number of Target PSUs to which the Participant would have been entitled for the Performance Period had his or her Termination Date not occurred prior to the Settlement Date.
(d)Special Vesting Rules for Special Projects. In the event that the Participant is assigned to a special project with a limited scope (as approved by the Committee or in accordance with guidelines established by the Committee) and if the Participant’s Termination Date occurs prior to the Settlement Date (as determined under subparagraph 3(b)) as a result of termination by the Company or a Subsidiary for reasons other than for Cause (as defined below), the Participant shall be entitled to payment and settlement with respect to 100% of his or her Target PSUs, which Target PSUs shall be paid and settled within sixty (60) days after the Participant’s Termination Date (and such date shall be the “Settlement Date” for purposes of this Award Agreement.)
(e)Change in Control. In the event of a Change in Control, the provisions of Article 6 of the Plan shall apply.
(f)Certain Definitions. For purposes of this Award Agreement, the following terms shall have the meaning specified:
4



(i)[“Cause” means, with respect to the Participant, (A) fraud, embezzlement, or theft in connection with his or her employment (B) gross negligence in the performance of his or her duties, (C) his or her conviction, guilty plea, or plea of nolo contendere with respect to a felony, (D) the willful and continued failure to substantially perform his or her duties for the Company or any of its Subsidiaries (except where the failure results from incapacity due to disability), (E) the failure to meet the obligations required by his or her position, as determined in the reasonable discretion of the Committee, or (F) the willful or negligent engagement in conduct which is, or could reasonably be expected to be, materially injurious to any of the Company or any of its Subsidiaries, monetarily or otherwise. For purposes of the foregoing, no act, or failure to act, on the part of the Participant shall be deemed “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her act, or failure to act, was in the best interest of the Company and its Subsidiaries.]
(ii)“Retirement” means the Participant’s termination of employment with the Company and its Subsidiaries after the date on which the Participant attains (A) age 65 or (B) age 55 and has completed at least 10 years of service with the Company and its Subsidiaries and is not for any other reason, including voluntary resignation, termination by the Company or a Subsidiary for cause, which shall include the failure of the Participant to meet the obligations required by his or her position (as determined in the reasonable discretion of the company), or termination by the Participant for good reason or constructive discharge.
(iii)“Termination Multiplier” means a fraction, the numerator of which is the number of full months of the Participant’s employment during the Performance Period prior to his or her Termination Date and the denominator of which is thirty six (36).
(iv)“Total Disability” means an event that results in the Participant being (A) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (B) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company or its Subsidiaries.
(g)Effect of Contrary Terms in Employment Agreement. In the event that the Company (or any of its Subsidiaries) is a party to a written employment agreement with the Participant, and if the employment agreement is inconsistent with the provisions of this Paragraph 3, the terms of the employment agreement will take precedence over the foregoing provisions, as applicable.
(h)Section 409A. It is the intent that none of the payments provided pursuant to this Paragraph 3 or otherwise under this Award Agreement be subject to Section 409A of the Code. In the event that any of the payments are subject to Section 409A of the Code and the payment is to be made other than on the Settlement Date (as determined under
5



subparagraph 3(b)), such payment shall be made at a time other than the Settlement Date determined under subparagraph 3(b) only if permitted under Section 409A of the Code and otherwise shall be made as of the Settlement Date determined under subparagraph 3(b).
4.[Payment in Certain Cases. If the Participant is entitled to receive payment for the fair market value of this Award pursuant to Article 6 of the Plan (relating to Change in Control), that payment shall be equal to the amount the Participant would have received hereunder as if (a) his or her service had continued through the end of the Performance Period and (b) he or she had earned 100% of his or her Target PSUs.]
5.Withholding.  All Awards and distributions under the Plan, including this Award and any distribution in respect of this Award, are subject to withholding of all applicable taxes, and the delivery of any cash or other benefits under the Plan or this Award is conditioned on satisfaction of the applicable tax withholding obligations. Such withholding obligations may be satisfied, at the Participant’s election, (a) through cash payment by the Participant, (b) through the surrender of shares of Common Stock that the Participant already owns, or (c) through the surrender of cash or Common Stock to which the Participant is otherwise entitled under the Plan (including this Award); provided, however, that any withholding obligations with respect to any Participant shall be satisfied by the method set forth in subparagraph (c) of this Paragraph 5 (through the withholding of cash or Common Stock otherwise payable pursuant to this Award) unless the Participant otherwise elects in accordance with this Paragraph 5. The amount withheld in the form of shares of Common Stock under this Paragraph 5 may not exceed the minimum statutory withholding obligation (based on the minimum statutory withholding rates for Federal and state purposes, including, without limitation, payroll taxes) unless otherwise elected by the Participant, in no event shall the Participant be permitted to elect less than the minimum statutory withholding obligation, and in no event shall the Participant be permitted to elect to have an amount withheld in the form of shares of Common Stock pursuant to this Paragraph 5 that exceeds the maximum individual tax rate for the employee in applicable jurisdictions.
6.Transferability.  This Award is not transferable except as designated by the Participant by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order.
7.Heirs and Successors.  If any benefits deliverable to the Participant under this Award Agreement have not been delivered at the time of the Participant’s death, such benefits shall be delivered to the Participant’s Designated Beneficiary, in accordance with the provisions of this Award Agreement. The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Company in such form and at such time as the Company shall require and in accordance with such rules and procedures established by the Company. If a deceased Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any rights that would have been exercisable by the Participant and any benefits distributable to the Participant shall be distributed to the legal representative of the estate of the Participant.
8.Administration.  The authority to administer and interpret this Award and this Award Agreement shall be vested in the Committee, and the Committee shall have all powers with respect to this Award and this Award Agreement as it has with respect to the Plan.  Any interpretation of this Award or this Award Agreement by the Committee and any decision made by it with respect to the Award or the Award Agreement is final and binding on all persons.
6



9.Addendum to Award Agreement. Notwithstanding any provision of this Award Agreement, if the Participant resides and/or works outside the United States of America (the “United States”, “U.S.” or “U.S.A.”), this Award shall be subject to the special terms and conditions set forth in Appendix B hereto (the “Addendum”) hereto for the Participant’s country. Further, if the Participant transfers residence and/or employment to another country reflected in the Addendum, the special terms and conditions for such country will apply to the Participant to the extent the Company determines, in its sole discretion, that the application of such special terms and conditions is necessary or advisable for legal or administrative reasons (or the Company may establish alternative terms and conditions as may be necessary or advisable to accommodate Participant’s transfer). The Addendum shall constitute part of this Award Agreement.
10.Notices.  Any notice required or permitted under this Award Agreement shall be deemed given when delivered personally, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Committee or the Company at the Company’s principal offices, to the Participant at the Participant’s address as last known by the Company or, in any case, such other address as one party may designate in writing to the other.
11.Governing Law.  The validity, construction and effect of this Award Agreement shall be determined in accordance with the laws of the State of Illinois and applicable federal law.
12.Amendments.  The Board may, at any time, amend or terminate the Plan, and the Committee may amend this Award Agreement, provided that, except as provided in the Plan, 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 this Award Agreement prior to the date such amendment or termination is adopted by the Board or the Committee, as the case may be. Without limiting the generality of the foregoing or of Paragraph 16, the Committee may amend or terminate this Award at any time prior to the Settlement Date in its sole discretion to exercise downward discretion in the amount payable under this Award if the Committee determines that the payout yielded or that would be yielded by this Award for the Performance Period does not accurately reflect the applicable performance for the Performance Period.
13.Award Not Contract of Employment.  The Award does not constitute a contract of employment or continued service, and the grant of the Award shall not give the Participant the right to be retained in the employ or service of the Company or any Subsidiary, nor any right or claim to any benefit under the Plan or this Award Agreement, unless such right or claim has specifically accrued under the terms of the Plan and this Award Agreement. 
14.Unfunded Obligation. The Award shall not be funded, no trust, escrow or other provisions shall be established to secure payments and distributions due hereunder and this Award shall be regarded as unfunded for purposes of the Employee Retirement Income Security Act of 1974, as amended, and the Code. The Participant shall be treated as a general, unsecured creditor of the Company with respect to amounts payable hereunder and shall have no rights to any specific assets of the Company.
15.Severability.  If a provision of this Award Agreement is held invalid by a court of competent jurisdiction, the remaining provisions shall nonetheless be enforceable according to their terms.  Further, if any provision is held to be overbroad as written, that provision shall be amended to
7



narrow its application to the extent necessary to make the provision enforceable according to applicable law and enforced as amended.
16.Plan Governs/Other Terms.  The Award evidenced by this Award Agreement is granted pursuant to the Plan, and this Award and this Award Agreement are in all respects governed by the Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Award Agreement by reference or are expressly cited. Notwithstanding any other provision of the Plan or this Award Agreement, (a) all Awards are subject to the Company’s recoupment or clawback policies as applicable and as in effect from time to time, (b) if the Committee determines, in its sole discretion, that the Participant at any time has willfully engaged in any activity that the Committee determines was or is harmful to the Company or any of its Subsidiaries, any unpaid portion of the Award shall be forfeited and the Participant shall have no rights with respect thereto, (c) the Committee may, in its sole and absolute discretion, adjust any Performance Target or the calculation thereof, and (d) nothing in this Agreement supersedes or limits the Committee’s authority under the Plan. The Participant may be required to agree to such additional terms and conditions as may be presented upon acceptance of the Award. [Amended Awards: This Award, as amended, is subject to forfeiture if the Participant fails to accept the Award within the first twelve (12) months following the Amendment Date in accordance with procedures established by the Company. The Participant shall continue to be subject to the terms of any restrictive covenant agreement which the Participant was required to enter into as a condition of accepting the Prior Agreement.] [New Awards: This Award is subject to forfeiture if the Participant fails to accept the Award within the first twelve (12) months following the Grant Date in accordance with procedures established by the Company.]
17.Counterparts. This Award Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.
18.Special Section 409A Rules.  It is intended that any amounts payable under this Award Agreement shall either be exempt from or comply with section 409A of the Code. The provisions of this Award shall be construed and interpreted in accordance with section 409A of the Code. Notwithstanding any other provision of this Award Agreement to the contrary, if any payment or benefit hereunder is subject to section 409A of the Code, and if such payment or benefit is to be paid or provided on account of the Participant’s termination of employment (or other separation from service):
(a)and if the Participant is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code) and if any such payment or benefit is required to be made or provided prior to the first day of the seventh month following the Participant’s separation from service or termination of employment, such payment or benefit shall be delayed until the first day of the seventh month following the Participant’s termination of employment or separation from service; and
(b)the determination as to whether the Participant has had a termination of employment (or separation from service) shall be made in accordance with the provisions of section 409A of the Code and the guidance issued thereunder without application of any alternative levels of reductions of bona fide services permitted thereunder.
                                
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TENNECO INC.

______________________________
Senior Vice President and Chief Human Resources Officer
ACCEPTED:

______________________________________________
Type or Print Legal Name             (Date)     

_______________________________________________
Signature

________________________________________________
Social Security Number or National ID

________________________________________________
Street Address

________________________________________________
City/State/Zip/Country
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APPENDIX A
DEFINITIONS AND CALCULATION METHODOLOGIES

Free Cash Flow

“Free Cash Flow” means the Cash for each Performance Year or portion thereof for which Free Cash Flow is to be determined.

“Cash” means, for any calendar year, the reported EBITDA for the Company for the calendar year, (i) plus (gain)/loss on asset sales, (ii) plus the expense of stock-based compensation, (iii) minus the increase/(decrease) in operating working capital, (iv) plus other operating cash flows, (v) minus cash paid for property, plant and equipment, (vi) minus cash paid for software-related intangibles, (vii) plus proceeds from asset sales, (viii) minus payments for net assets purchased, (ix) plus changes in other long-term operating assets and liabilities, (x) plus adjustments to exclude the impact of acquisitions and divestitures, (xi) plus adjustments to exclude the impact of litigation or claim judgments and settlements, and (xii) other significant adjustments approved by the Committee. This definition is in line with management’s internal reporting of what is termed “cash flow”.

“EBITDA” means earnings before interest expense, income taxes and non-controlling interests, and depreciation and amortization expenses, as determined in accordance with normal business practices.

In the event that Free Cash Flow for a Performance Year is to be determined based on a period other than a full calendar year, Free Cash Flow shall be calculated on a pro rata basis to reflect the portion of the Performance Year elapsed through the date of the applicable determination.
EBITDA
“EBITDA” means the EBITDA for each Performance Year or portion thereof for which EBITDA is to be determined.
“EBITDA” means, for any calendar year, the reported EBITDA for such calendar year, adjusted, if material, for (i) gains or losses on sales of assets, (ii) restructuring charges, (iii) asset impairments, (iv) asset write-downs, (v) litigation or claim judgments or settlements, (vi) the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results, (vii) accruals for reorganization and restructuring programs, (viii) gains and losses that are treated as unusual in nature or that occur infrequently as defined under Accounting Standards Codification Topic 225 and/or in management’s discussion and analysis of financial condition and results of operations for appearing in the Company’s annual report to stockholders for the applicable year, (ix) acquisitions or divestitures, and (x) other significant adjustments approved by the Committee.
In the event that EBITDA is to be determined based on a period other than a full calendar year, EBITDA shall be calculated on a pro rata basis to reflect the portion of the Performance Year elapsed through the date of the applicable determination.
Averaging
The average of Free Cash Flow or EBITDA, as applicable, for the Performance Period, will be determined by dividing (A) the sum of the Free Cash Flow or EBITDA, as applicable, for each of the Performance Years in the Performance Period by (B) two (2).


EXHIBIT 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT
I, Brian J. Kesseler, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Tenneco Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the registrant’s internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


 
/s/ BRIAN J. KESSELER 
Brian J. Kesseler
Chief Executive Officer
Dated: November 5, 2020



EXHIBIT 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT
I, Matti Masanovich, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Tenneco Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the registrant’s internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 
/s/ MATTI MASANOVICH
Matti Masanovich
Executive Vice President and Chief Financial Officer
Dated: November 5, 2020



EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
    In connection with the accompanying Quarterly Report on Form 10-Q of Tenneco Inc. (the “Company”) for the period ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Brian J. Kesseler as Chief Executive Officer of the Company and Matti Masanovich, as Executive Vice President and Chief Financial Officer of the Company, hereby certify that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ BRIAN J. KESSELER 
Brian J. Kesseler
Chief Executive Officer
/s/ MATTI MASANOVICH
Matti Masanovich
Executive Vice President and Chief Financial Officer
Dated: November 5, 2020
    
This certification shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934. In addition, this certification shall not be deemed to be incorporated by reference into any filing under the Securities Exchange Act of 1933 or the Securities Exchange Act of 1934.
    A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.