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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
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RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
TENNECO AUTOMOTIVE INC.
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(Name of Registrant as Specified In Its Charter)
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SEC 1913 (02-02)
TENNECO AUTOMOTIVE INC.
500 NORTH FIELD DRIVE
LAKE FOREST, ILLINOIS 60045
(847) 482-5000 (TENNECO AUTOMOTIVE LOGO)
April 1, 2005
To the Stockholders of Tenneco Automotive Inc.:
The Annual Meeting of Stockholders of the Company will be held Tuesday, May
10, 2005, at 10:00 a.m., local time, at the Company's headquarters located at
500 North Field Drive, Lake Forest, Illinois 60045. A Notice of the meeting, a
Proxy and a Proxy Statement containing information about the matters to be acted
upon are enclosed.
Holders of common stock are entitled to vote at the Annual Meeting on the
basis of one vote for each share held.
A record of the Company's activities for the year 2004 is contained in the
Annual Report to Stockholders. We urge each stockholder who cannot attend the
Annual Meeting to please assist us in preparing for the meeting by either
completing, executing and returning your Proxy promptly or using our telephone
or Internet voting procedures.
Very truly yours,
/S/ MARK P. FRISSORA
MARK P. FRISSORA
Chairman, Chief Executive Officer
and President
TENNECO AUTOMOTIVE INC.
500 NORTH FIELD DRIVE
LAKE FOREST, ILLINOIS 60045
(847) 482-5000 (TENNECO AUTOMOTIVE LOGO)
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
MAY 10, 2005
The Annual Meeting of Stockholders of Tenneco Automotive Inc. will be held
at the Company's principal executive offices located at 500 North Field Drive,
Lake Forest, Illinois 60045 on Tuesday, May 10, 2005, at 10:00 a.m., local time.
The purposes of the meeting are:
1. To elect ten directors for a term to expire at the 2006 Annual Meeting
of Stockholders;
2. To consider and act upon a proposal to ratify the appointment of
Deloitte & Touche LLP as independent public accountants for 2005; and
3. To consider and act upon such other matters as may be properly brought
before the meeting, or any adjournment or postponement thereof.
The Board of Directors knows of no other matters at this time that may be
brought before the meeting. Holders of common stock of record at the close of
business on March 15, 2005 are entitled to vote at the meeting. A list of these
stockholders will be available for inspection for 10 days preceding the meeting
at the Company's principal executive offices located at 500 North Field Drive,
Lake Forest, Illinois 60045, and will also be available for inspection at the
meeting.
Each stockholder who does not expect to attend the meeting is urged to
either complete, date and sign the enclosed Proxy and return it to the Company
in the enclosed envelope, which requires no postage if mailed in the United
States, or utilize our telephone or Internet voting procedures.
By Order of the Board of Directors
KARL A. STEWART
Secretary
Lake Forest, Illinois
April 1, 2005
TENNECO AUTOMOTIVE INC. (TENNECO AUTOMOTIVE LOGO)
500 NORTH FIELD DRIVE
LAKE FOREST, ILLINOIS 60045
(847) 482-5000
April 1, 2005
PROXY STATEMENT
This statement is furnished in connection with the solicitation on behalf
of the Board of Directors of Tenneco Automotive Inc. (the "Company") of proxies
(the "Proxies") to be voted at the Annual Meeting of Stockholders on May 10,
2005, or at any adjournment or postponement thereof (the "Annual Meeting").
Holders of common stock of record at the close of business on March 15, 2005
will be entitled to vote at the Annual Meeting. Each share is entitled to one
vote. At March 15, 2005, there were 43,590,669 shares of common stock
outstanding and entitled to vote. This Proxy Statement is first being mailed to
stockholders on or about April 1, 2005.
BACKGROUND
During 1999, Tenneco Inc. separated its automotive, packaging and
administrative services operations. This completed a series of transactions
begun in December 1996, when the company then known as Tenneco Inc. ("Old
Tenneco") separated its automotive and packaging operations from its energy and
shipbuilding businesses.
The final separation was accomplished in November 1999 through the spin-off
of Pactiv Corporation (the "Spin-Off"), which at the time was known as Tenneco
Packaging Inc. and held Tenneco Inc.'s packaging and administrative services
businesses. Immediately following the Spin-Off, Tenneco Inc. changed its name to
"Tenneco Automotive Inc." to reflect the fact that the continuing operations are
its automotive business. In light of the form of this transaction, the Company
is the continuing legal entity which from December 1996 until the Spin-Off was
known as Tenneco Inc.
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ELECTION OF DIRECTORS
(ITEM 1)
The Company's Board of Directors currently comprises ten individuals, all
of whom are proposed to be elected at this Annual Meeting to serve for a term to
expire at the annual meeting of stockholders to be held in 2006 and until their
successors are chosen and have qualified.
The persons named as proxy voters in the accompanying Proxy card, or their
substitutes, will vote your Proxy for all the nominees, each of whom has been
designated as such by the Board of Directors, unless otherwise indicated in your
Proxy. In the event that any nominee for director withdraws or for any reason is
not able to serve as a director, the Company will vote your Proxy for the
remainder of those nominated for director (except as otherwise indicated in your
Proxy) and for any replacement nominee designated by the
Compensation/Nominating/Governance Committee of the Board of Directors.
You may vote for or withhold your vote from any or all of the director
nominees. Assuming a quorum is present, the affirmative vote of the plurality of
votes cast at the Annual Meeting (in person or by proxy) will be required for
the election of directors.
Brief statements setting forth the age (at March 15, 2005), the principal
occupation, the employment during at least the past five years, the year in
which first elected a director and other information concerning each nominee
appears below.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL OF THE NOMINEES
LISTED BELOW.
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NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR ONE-YEAR TERMS EXPIRING AT THE 2006 ANNUAL MEETING OF STOCKHOLDERS
CHARLES W. CRAMB -- Mr. Cramb has been Senior Vice President and Chief
Financial Officer of The Gillette Company, a global manufacturer and marketer of
a wide variety of consumer products, since 1997. He joined Gillette in 1970 and
served in a number of financial positions. From 1976 to 1981, he held several
key financial management positions in Gillette's European operations, including
Manager, Financial Services, Gillette Europe, and Financial Controller, Gillette
Industries Limited, UK. From 1981 to 1995, he held a series of senior financial
management positions in the United States, including Controller, International
Operations; Vice President, Finance and Strategic Planning, Gillette North
Atlantic Group; Assistant Controller, The Gillette Company; and Vice President,
Finance, Planning and Administration, Diversified Group. From 1995 to 1997, he
was Corporate Vice President and Corporate Controller. He is a director of the
Private Sector Council, where he is Vice Chairman, and is a member of the Board
of Visitors for Lawrence Academy and the College of Business Administration,
Northeastern University. He is also a director of Idenix Pharmaceuticals, Inc.,
where he is a member of the Audit Committee. He was elected to the Company's
Board of Directors in March 2003, is 58 years old and is Chairman of the Audit
Committee.
TIMOTHY R. DONOVAN, Executive Vice President, General Counsel and Managing
Director-Asia Pacific -- Mr. Donovan was named Managing Director of the
Company's International Group in May 2001 with responsibility for all of the
Company's operations in Asia and South America, as well as the Japanese original
equipment business worldwide. In October 2004, he was named Managing
Director-Asia Pacific, with responsibility for Australia, New Zealand, Asia and
the Japanese original equipment business. He was promoted to Executive Vice
President in December 2001 and was named Senior Vice President and General
Counsel in August 1999. Mr. Donovan also is in charge of the Company's worldwide
Environmental, Health and Safety Program. Mr. Donovan was a partner in the law
firm of Jenner & Block from 1989 until his resignation in September 1999, and
most recently served as the Chairman of Jenner & Block's Corporate and
Securities Department and as a member of its Executive Committee. He is also a
director of John B. Sanfilippo & Son, Inc., where he is a member of its
Compensation Committee and is the Chairman of its Audit Committee. Mr. Donovan
is 49 years old and became a director of the Company in March 2004.
M. KATHRYN EICKHOFF -- Ms. Eickhoff has been President and Chief Economist
of Eickhoff Economics, Inc., a consulting firm, since 1987. From 1985 to 1987,
she was Associate Director for Economic Policy for the U.S. Office of Management
and Budget. Prior to that, Ms. Eickhoff spent 23 years at Townsend Greenspan &
Co., Inc., an economic consulting firm, most recently as Executive Vice
President and Treasurer. She is also a director of AT&T Corp., where she is a
member of the Audit Committee and the Nominating and Governance Committee, and
The Moorings, Inc., a non-profit retirement community in Naples, Florida. Ms.
Eickhoff has been a director of the Company since 1996 (and prior to that was a
director of the former Tenneco Inc.
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since 1987). She also served as a member of Tenneco Inc.'s Board of Directors
from 1982 until her resignation to join the Office of Management and Budget in
1985. Ms. Eickhoff is 65 years old and a member of the Audit Committee and
Three-Year Independent Director Evaluation Committee.
MARK P. FRISSORA, Chairman of the Board, Chief Executive Officer and
President -- Mr. Frissora became the Company's Chief Executive Officer in
connection with the Spin-Off and has been serving as President of the automotive
operations since April 1999. In March 2000, he was also named the Company's
Chairman. From 1996 to April 1999, he held various positions within the
Company's automotive operations, including Senior Vice President and General
Manager of the worldwide original equipment business. Mr. Frissora joined the
Company in 1996 from AeroquipVickers Corporation, where he served since 1991 as
a Vice President. In the 15 years prior to joining AeroquipVickers, he served
for 10 years with General Electric and five years with Philips Lighting Company
in management roles focusing on product development and marketing. He is a
member of The Business Roundtable and the World Economic Forum's Automotive
Board of Governors. He is also a director of NCR Corporation, where he serves on
its Compensation Committee, and FMC Corporation, where he serves on its Audit
Committee. Mr. Frissora is 49 years old and became a director of the Company in
November 1999.
FRANK E. MACHER -- Mr. Macher served as Chief Executive Officer of Federal
Mogul Corporation, a manufacturer of motor vehicle parts and supplies, from
January 2001 to July 2003 and Chairman of Federal Mogul from October 2001 to his
retirement in January 2004. From June 1997 to his retirement in July 1999, Mr.
Macher served as President and Chief Executive Officer of ITT Automotive, a
supplier of automotive components. From 1966 to his retirement in 1996, Mr.
Macher was employed by Ford Motor Company, serving most recently as Vice
President and General Manager of the Automotive Components Division. Mr. Macher
is 64 years old and was named a director of the Company in July 2000. He is a
director of Federal Mogul Corporation, a director of Decoma International, Inc.,
where he serves on the Audit Committee, and a member of the Board of Trustees of
Kettering University and the Detroit Renaissance. Mr. Macher is a member of the
Audit Committee.
ROGER B. PORTER -- Mr. Porter is the IBM Professor of Business and
Government at Harvard University. Mr. Porter has served on the faculty at
Harvard University since 1977. Mr. Porter also held senior economic policy
positions in the Ford, Reagan and George H. W. Bush White Houses, serving as
special assistant to the President and executive secretary of the Economic
Policy Board from 1974 to 1977, as deputy assistant to the President and
director of the White House Office of Policy Development from 1981 to 1985, and
as assistant to the President for economic and domestic policy from 1989 to
1993. He is also a director of Zions Bancorporation (where he serves as the
Chairman of the Audit Committee and is a member of the Compensation Committee
and the Executive Committee), Pactiv Corporation (where he serves on the
Compensation/Nominating/Governance Committee) and Extra Space Storage Inc.
(where he serves as the Chairman of the Compensation, Nominating and Corporate
Governance Committee
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and is a member of the Audit Committee). Mr. Porter is 58 years old and has been
a director of the Company since January 1998. Mr. Porter is a member of the
Compensation/Nominating/ Governance Committee and the Three-Year Independent
Director Evaluation Committee.
DAVID B. PRICE, JR. -- Mr. Price has served as Chief Executive Officer and
President of Birdet Price, LLC, an investment and consulting firm, since July
2001. Previously, Mr. Price was President of Noveon Inc. from February 2001
until May 2001. Noveon, Inc. was formerly the Performance Materials segment of
BF Goodrich Company prior to its sale to an investor group in February 2001.
While with BF Goodrich Company from July 1997 to February 2001, Mr. Price served
as Executive Vice President of the BF Goodrich Company and President and Chief
Operating Officer of BF Goodrich Performance Materials. Prior to joining BF
Goodrich, Mr. Price held various executive positions over a 25-year span at
Monsanto Company, most recently serving as President of the Performance
Materials Division of Monsanto Company from 1995 to July 1997. From 1993 to
1995, he was Vice President and General Manager of commercial operations for the
Industrial Products Group and was also named to the management board of
Monsanto's Chemical Group. He is a director of the YMCA of Greater St. Louis,
where he is Vice Chairman. He is also a director of CH2M HILL. Mr. Price is 59
years old and was named a director of the Company in November 1999. Mr. Price is
the Chairman of the Compensation/Nominating/ Governance Committee and a member
of the Three-Year Independent Director Evaluation Committee.
DENNIS G. SEVERANCE -- Dr. Severance is the Accenture Professor of Computer
and Information Systems of the Stephen M. Ross Business School, University of
Michigan. Before joining the University of Michigan in 1978, Dr. Severance was
an Associate Professor and Principal Investigator in the Management Information
System Research Center at the University of Minnesota. Prior to that, he was an
Assistant Professor in the Department of Operations Research at Cornell
University. Dr. Severance is 61 years old and became a director in July 2000.
Dr. Severance is a member of the Audit Committee.
PAUL T. STECKO -- Mr. Stecko has served as the Chief Executive Officer of
Packaging Corporation of America since April 1999. From November 1998 to April
1999, Mr. Stecko served as President and Chief Operating Officer of Tenneco Inc.
From January 1997 to November 1998, Mr. Stecko served as Chief Operating Officer
of Tenneco Inc. From December 1993 through January 1997, Mr. Stecko served as
Chief Executive Officer of Tenneco Packaging Inc. Prior to joining Tenneco
Packaging Inc., Mr. Stecko spent 16 years with International Paper Company. Mr.
Stecko is 60 years old and has been a director of the Company since November
1998. He is also a director of State Farm Mutual Insurance Company, American
Forest and Paper Association and Cives Corporation and is the Chairman of the
Board of Packaging Corporation of America. Mr. Stecko is a member of the
Compensation/Nominating/Governance Committee and the Chairman of the Three-Year
Independent Director Evaluation Committee.
JANE L. WARNER -- Ms. Warner has served as President of Plexus Systems,
L.L.C., a provider of manufacturing information systems, since June 2004. From
2000 to June 2004,
5
Ms. Warner held various positions with Electronic Data Systems Corporation
("EDS"), including President of its Global Manufacturing Industry Solutions
Group and Managing Director of its Global Automotive Industry Group. Prior to
joining EDS, Ms. Warner served as President of Kautex Textron Inc. North America
from 1998 to 1999 and Executive Vice President for Textron Automotive Company
from 1994 to 1999. Previously, Ms. Warner held various positions over a 20-year
span at General Motors Corporation, including positions in engineering,
manufacturing and human resources. Ms. Warner is 58 years old and was named a
director of the Company in October 2004. Ms. Warner also is a board member of
MeadWestvaco Corporation, where she sits on the Audit and Safety, Health and
Environmental Committees, a board member of the Original Equipment Suppliers
Association and Chairman of the Board of Trustees for Kettering University. Ms.
Warner is a member of the Compensation/Nominating/Governance Committee.
CORPORATE GOVERNANCE OVERVIEW
The Company has established a comprehensive corporate governance plan for
the purpose of defining responsibilities, setting high standards of professional
and personal conduct and assuring compliance with such responsibilities and
standards. As part of its annual review process, the Board of Directors monitors
developments in the area of corporate governance. Listed below are some of the
key elements of the Company's corporate governance plan. Many of these matters
are described in more detail elsewhere in this Proxy Statement.
INDEPENDENCE OF DIRECTORS (SEE PP. 8-9)
- Eight of the Company's ten current directors are independent under the
New York Stock Exchange ("NYSE") listing standards.
- Independent directors are scheduled to meet separately in executive
session after every regularly scheduled Board of Directors meeting.
- The Company has a lead independent director, Mr. Paul T. Stecko.
AUDIT COMMITTEE (SEE PP. 10-11 AND 36)
- All members meet the independence standards for audit committee
membership under the NYSE listing standards and applicable Securities and
Exchange Commission ("SEC") rules.
- One member of the Audit Committee, Mr. Charles Cramb, qualifies as an
"audit committee financial expert," as defined in the SEC rules, and the
remaining members of the Audit Committee satisfy the NYSE's financial
literacy requirements.
- The Audit Committee operates under a written charter that governs its
duties and responsibilities, including its sole authority to appoint,
review, evaluate and replace the Company's independent auditors.
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- The Audit Committee has adopted policies and procedures governing the
pre-approval of all audit, audit-related, tax and other services provided
by the Company's independent auditors.
COMPENSATION/NOMINATING/GOVERNANCE COMMITTEE (SEE PP. 9-10 AND 25-33)
- All members meet the independence standards for compensation and
nominating committee membership under the NYSE listing standards.
- The Compensation/Nominating/Governance Committee operates under a written
charter that governs its duties and responsibilities, including the
responsibility for executive compensation.
CORPORATE GOVERNANCE PRINCIPLES
- The Company has adopted Corporate Governance Principles, including
qualification and independence standards for directors.
STOCK OWNERSHIP GUIDELINES
- The Company has adopted Stock Ownership Guidelines to align the interests
of its executives with the interests of stockholders and promote the
Company's commitment to sound corporate governance.
- The Stock Ownership Guidelines apply to the independent directors, the
Chairman and Chief Executive Officer, all Executive Vice-Presidents and
all Senior Vice Presidents. Ownership levels are determined as a multiple
of the participant's base salary or, in the case of an independent
director, his or her Board of Directors retainer fee and then converted
to a fixed number of shares.
COMMUNICATION WITH DIRECTORS (SEE PP. 12-13)
- The Audit Committee has established a process for confidential and
anonymous submissions by employees of the Company, as well as submissions
by other interested parties, regarding questionable accounting or
auditing matters.
- Additionally, the Board of Directors has established a process for
stockholders to communicate with the Board of Directors, as a whole, or
any independent director.
CODES OF BUSINESS CONDUCT AND ETHICS
- The Company has adopted a Code of Ethical Conduct for Financial Managers
that applies to the Company's Chief Executive Officer, Chief Financial
Officer, Controller and other key financial managers.
- The Company also operates under an omnibus Statement of Business
Principles that applies to all directors, officers and employees and
includes provisions ranging from restrictions on gifts to conflicts of
interests. All salaried employees are required to affirm in writing their
acceptance of these principles.
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PERSONAL LOANS TO EXECUTIVE OFFICERS AND DIRECTORS
- The Company complies with and will operate in a manner consistent with
the legislation outlawing extensions of credit in the form of a personal
loan to or for its directors or executive officers.
The Company's Audit Committee Charter, Compensation/Nominating/Governance
Committee Charter, Corporate Governance Principles, Stock Ownership Guidelines,
Audit Committee policy regarding accounting complaints, Code of Ethical Conduct
for Financial Managers, Statement of Business Principles, policy for
communicating with the Board of Directors and Audit Committee policy regarding
the pre-approval of audit, audit-related, tax and other services may be accessed
on the Company's website at www.tenneco-automotive.com. The contents of the
website are not, however, a part of this Proxy Statement. In addition, the
Company will make a copy of any of these documents available to any person,
without charge, upon written request to Tenneco Automotive Inc., 500 North Field
Drive, Lake Forest, Illinois 60045, Attn: General Counsel. The Company intends
to satisfy the disclosure requirements under Item 5.05 of Form 8-K and
applicable NYSE rules regarding amendments to or waivers of its Code of Ethical
Conduct for Financial Managers and Statement of Business Principles by posting
this information on its website at www.tenneco-automotive.com.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
GENERAL. The Board of Directors of the Company currently comprises ten
members, eight of whom are not officers of the Company (the "Outside Directors")
and two of whom are officers of the Company (the "Inside Directors"). The Board
of Directors believes that the Company's ratio of Outside Directors to Inside
Directors represents a commitment to the independence of the Board and a focus
on matters of importance to its stockholders.
The Board of Directors has determined that all eight of the Outside
Directors are "independent" as that term is defined under the listing standards
of the NYSE. As part of its analysis, the Board determined that none of the
Outside Directors has a direct or indirect material relationship with the
Company. Under written guidelines adopted by the Board, the following commercial
or charitable relationships are not considered to be material relationships that
would impair a director's independence: (i) the director is an executive officer
of another company that (directly or indirectly through its subsidiaries or
affiliates) does business with the Company and the annual sales to, or purchases
from, the Company are less than 1% of the annual consolidated revenues of both
the Company and the other company he or she serves as an executive officer; (ii)
the director is an executive officer of another company that (directly or
indirectly through its subsidiaries or affiliates) is indebted to the Company,
or to which the Company is indebted, and the total amount of either company's
consolidated indebtedness to the other is less than 1% of the total consolidated
assets of the indebted company; (iii) the director is an executive officer of
another company in which the Company owns a common equity interest, and the
amount of the Company's interest is less than 5% of the total voting power of
the other company; or (iv) the
8
director serves as an officer, director or trustee of a charitable organization,
and the Company's discretionary charitable contributions to the organization are
less than 1% of that organization's total annual charitable receipts. The
Outside Directors do not have relationships with the Company that are not within
these guidelines.
During 2004, the Board of Directors held eleven meetings. All of the
current directors attended at least 75% of the aggregate of all meetings of the
Board of Directors and all meetings of the committees of the Board held and on
which the director served during 2004. The Board of Directors is scheduled to
meet in executive session, without management, after every Board meeting that
the directors attend in person. Mr. Stecko acts as lead independent director to
chair these executive sessions and as primary spokesperson in communicating
matters arising out of these sessions to Company management.
All of the directors attended last year's annual meeting of the
stockholders. The Board of Directors has a policy that, absent unusual
circumstances, all directors attend the Company's annual stockholder meetings.
The Board of Directors has three standing committees. These committees have
the responsibilities and authority described below.
COMPENSATION/NOMINATING/GOVERNANCE COMMITTEE. The members of the
Compensation/Nominating/Governance Committee are Ms. Warner and Messrs. Porter,
Stecko and Price, who is the Chairman of the Committee. The
Compensation/Nominating/Governance Committee is comprised solely of Outside
Directors who meet the independence standards for compensation and nominating
committee members as set forth in the NYSE listing standards.
The Compensation/Nominating/Governance Committee has the responsibility,
among other things, to: (1) establish the salary rate of officers and employees
of the Company and its subsidiaries; (2) examine periodically the compensation
structure of the Company; (3) supervise the welfare and pension plans and
compensation plans of the Company; and (4) produce an annual report on executive
compensation for inclusion in the Company's proxy statement in accordance with
applicable rules and regulations of the SEC. It also has significant corporate
governance responsibilities including, among other things, to: (a) review and
determine the desirable balance of experience, qualifications and expertise
among members of the Board; (b) review possible candidates for membership on the
Board and recommend a slate of nominees for election as directors at each annual
meeting of stockholders; (c) review the function and composition of the other
committees of the Board and recommend membership on these committees; (d) review
the qualifications of and recommend candidates for election as officers of the
Company; and (e) develop, recommend to the Board of Directors for approval and,
as appropriate, recommend to the Board of Directors revisions to Corporate
Governance Principles applicable to the Company.
The Compensation/Nominating/Governance Committee operates pursuant to a
written charter, the current version of which was reaffirmed by the Board of
Directors in March 2005 as
9
part of its annual review process. The Compensation/Nominating/Governance
Committee held six meetings during 2004. A report of the
Compensation/Nominating/Governance Committee regarding executive compensation
appears elsewhere in this Proxy Statement.
THREE-YEAR INDEPENDENT DIRECTOR EVALUATION ("TIDE") COMMITTEE. The members
of the TIDE Committee are Ms. Eickhoff and Messrs. Porter, Price and Stecko, who
is the Chairman of the Committee. The TIDE Committee, comprised solely of
Outside Directors, has the responsibility, among other things, to review the
Company's stockholder rights plan at least every three years and, if it deems it
appropriate, recommend that the full Board modify or terminate that plan. The
TIDE Committee held no meetings in 2004.
AUDIT COMMITTEE. The members of the Audit Committee are Ms. Eickhoff and
Messrs. Macher, Severance and Cramb, who is the Chairman of the Committee. The
Audit Committee is comprised solely of directors who meet all of the
independence standards for audit committee membership as set forth in the
Sarbanes-Oxley Act of 2002, and the SEC rules adopted thereunder, and the NYSE
listing standards. The Board of Directors has determined that Mr. Cramb
qualifies as an "audit committee financial expert" as that term is defined in
the SEC rules adopted pursuant to the Sarbanes-Oxley Act of 2002.
Management is responsible for the Company's internal controls over the
financial reporting process. The independent public accounting firm is
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with generally accepted audit standards and
for issuing a report on its audit. The Audit Committee's duty is to oversee and
monitor these activities on behalf of the Board of the Directors. Specifically,
the Audit Committee has the responsibility, among other things, to: (1) select
and approve the compensation of the Company's independent public accountants;
(2) review and approve the scope of the independent public accountants' audit
activity and all non-audit services; (3) review with management and the
independent public accountants the adequacy of the Company's basic accounting
system and the effectiveness of the Company's internal audit plan and
activities; (4) review with management and the independent public accountants
the Company's certified financial statements and exercise general oversight over
the financial reporting process; (5) review with the Company litigation and
other legal matters that may affect the Company's financial condition and
monitor compliance with business ethics and other policies; (6) review the
independence, qualifications and performance of the Company's independent public
accountants; (7) provide an avenue of communication among the independent public
accountants, management, the internal auditors and the Board of Directors; and
(8) prepare the audit-related report required by the SEC to be included in the
Company's annual proxy statement.
In fulfilling its responsibilities, the Audit Committee reviewed with
management and the independent public accountants (a) significant issues, if
any, regarding accounting principles and financial statement presentations,
including any significant changes in the Company's selection or application of
accounting principles, and significant issues, if any, as to the
10
adequacy of the Company's internal controls and any special audit steps adopted
in view of material internal control deficiencies; (b) analyses prepared by
management and/or the independent public accountants setting forth significant
financial reporting issues and judgments made in connection with the preparation
of the financial statements, including analyses of the effects of alternative
generally accepted accounting principles methods on financial statements; (c)
the effect of regulatory and accounting initiatives, as well as off-balance
sheet structures, if any, on the financial statements of the Company; and (d)
the type and presentation of information to be included in earnings press
releases, as well as any financial information and earnings guidance provided to
analysts and rating agencies. In addition, the Audit Committee has discussed the
Company's major risk exposures and the steps that management has taken to
monitor and control such exposures. Management is required to advise the
Committee of any instances of fraud relating to employees who have a significant
role in the Company's internal controls. The Committee was advised that
management was not aware of any such instances of fraud.
The Audit Committee operates under a written charter, the current version
of which was reaffirmed by the Board of Directors in March 2005 as part of its
annual review process. The Audit Committee held eleven meetings in 2004. A
report of the Audit Committee appears elsewhere in this Proxy Statement.
CONSIDERATION OF DIRECTOR NOMINEES. The Compensation/Nomination/Governance
Committee regularly assesses the size of the Board of Directors, the need for
expertise on the Board of Directors and whether any vacancies are expected on
the Board of Directors due to retirement or otherwise. The Committee's process
for identifying and evaluating nominees is as follows: In the case of incumbent
directors whose terms of office are set to expire, the Committee reviews such
directors' overall service to the Company during their term, including the
number of meetings attended, level of participation, quality of performance and
any transactions of such directors with the Company during their term. In the
event that vacancies are anticipated, or otherwise arise, the
Compensation/Nomination/Governance Committee considers various potential
candidates for director which may come to its attention through a variety of
sources, including current Board members, stockholders or other persons. In
addition, from time to time the Committee will retain a professional search firm
to assist it in identifying director candidates, for which the firm generally
receives a fee. All candidates for director are evaluated at regular or special
meetings of the Compensation/Nomination/Governance Committee. In evaluating and
determining whether to recommend a person as a candidate for election as a
director, the Compensation/Nomination/Governance Committee considers the
qualification standards set forth in the Company's Corporate Governance
Principles, including: (1) personal and professional ethics, integrity and
values; (2) an ability and willingness to undertake the requisite time
commitment to Board functions; (3) independence pursuant to the guidelines set
forth in the Corporate Governance Principles and applicable rules and
regulations; (4) age, which must be less than 72; (5) the potential impact of
service on the board of directors of other public
11
companies, including competitors of the Company; and (6) an absence of
employment at a competitor of the Company.
The Compensation/Nominating/Governance Committee will consider director
candidates recommended by stockholders provided the procedures set forth below
are followed by stockholders in submitting recommendations. The committee does
not intend to alter the manner in which it evaluates candidates, including the
minimum criteria set forth above, based on whether the candidate was recommended
by a stockholder. A stockholder of the Company may nominate persons for election
to the Board of Directors at an annual meeting if the stockholder submits such
nomination, together with certain related information required by the Company's
By-laws, in writing to the Secretary of the Company at the principal executive
offices of the Company not later than the close of business on the 90th day nor
earlier than the close of business on the 120th day prior to the first
anniversary of the preceding year's annual meeting. In the event, however, that
the date of the annual meeting is more than thirty days before or more than
seventy days after that anniversary date, the notice must be delivered not
earlier than the close of business on the 120th day prior to such annual meeting
and not later than the close of business on the later of the 90th day prior to
such annual meeting or the tenth day following the day on which public
announcement of the date of the meeting is first made. Following verification of
the stockholder's status, the Compensation/Nomination/Governance Committee will
perform an initial analysis of the qualifications of the nominee pursuant to the
criteria listed above to determine whether the nominee is qualified for service
on the Company's Board of Directors before deciding to undertake a complete
evaluation of the nominee. Other than the verification of compliance with the
procedures set forth in the Company's By-laws and stockholder status, and the
initial analysis performed by the Compensation/Nomination/Governance Committee,
a person nominated by a stockholder for election to the Board of Directors is
treated like any other potential candidate during the review process by the
Compensation/Nomination/Governance Committee.
COMMUNICATIONS WITH THE DIRECTORS. Anyone who has a concern about the
Company's conduct, or about the Company's accounting, internal accounting
controls or auditing matters, may communicate that concern directly to the Board
of Directors, the Company's lead independent director (Mr. Stecko) or any other
non-employee director or the Audit Committee. All such concerns will be
forwarded to the appropriate directors for their review, and all concerns
related to audit or accounting matters will be forwarded to the Audit Committee.
All reported concerns will be simultaneously reviewed and addressed by the
Company's Chief Compliance Officer and General Counsel, or his designee (unless
he or she is alleged to be involved in the matter at issue). The status of all
outstanding concerns addressed to the Board, the non-employee directors or the
Audit Committee will be reported to the Board or the Audit Committee (as
applicable) on a quarterly basis. The Board or any committee may direct special
treatment, including the retention of outside advisors or counsel, for any
concern addressed to them. The
12
Company's corporate policies prohibit retaliatory action against any employee
who raises concerns or questions in good faith about these matters.
Stockholders wishing to communicate with the Board of Directors, any
non-employee director or the Audit Committee may do so by writing to the
Company's Corporate Secretary at 500 North Field Drive, Lake Forest, Illinois
60045. The Corporate Secretary will forward any communications as directed by
the stockholder. The Company maintains a separate, internal system for the
receipt of communications from employees.
COMPENSATION OF DIRECTORS
FEE STRUCTURE. In 2004, each Outside Director was paid an annual retainer
fee of $50,000 for service on the Board of Directors. In general, 100% of the
retainer fee is to be paid in the form of common stock equivalents (the
"directors' stock equivalents"), as described below. A director may elect,
however, to have up to 40%, or $20,000, of the fee paid in cash. The Outside
Directors also receive meeting attendance fees, committee chair and membership
fees, and reimbursement of their expenses for attending meetings of the Board of
Directors and its committees. The fees are generally paid in cash, but at the
option of the director may be paid in directors' stock equivalents. Outside
Directors receive $1,000 for each meeting of the Board of Directors attended.
Outside Directors who are members of the Audit Committee and
Compensation/Nominating/Governance Committee receive $1,000 for each in-person
meeting, and $500 for each telephonic meeting, of the respective committee
attended. In 2004, each Outside Director who served as a Chairman of the Audit
Committee or the Compensation/Nominating/ Governance Committee was paid a fee of
$8,000 per chairmanship. Also, the lead independent director was paid a $6,000
retainer fee for serving as the chairman and primary spokesman when the Board of
Directors meets in executive session. Outside Directors who serve as members of
the Audit Committee or Compensation/Nomination/Governance Committee are paid
$4,000 per committee membership. Members of the Three-year Independent Director
Evaluation Committee receive $1,000 plus expenses for each meeting of that
committee attended.
COMMON STOCK EQUIVALENTS/OPTIONS. As described above, all or a portion of
an Outside Director's retainer fee is generally paid in common stock equivalent
units. These directors' stock equivalents are payable in cash or, at the
Company's option, shares of common stock after an Outside Director ceases to
serve as a director. Final distribution of these amounts may be made either in a
lump sum or in installments over a period of years. The directors' stock
equivalents are issued at 100% of the fair market value on the date of the
grant.
In addition, each Outside Director generally receives an annual grant of an
option to purchase up to 5,000 shares of common stock in January. Directors'
options: (a) are granted with per share exercise prices equal to 100% of the
fair market value of a share of common stock on the day the option is granted;
(b) beginning in 2005, have terms of seven years (for prior periods, the terms
were ten years); and (c) generally, will fully vest six months from the grant
date. Once vested, the directors' options will be exercisable at any time during
the option term.
13
In early 2005, the Board granted options to purchase an additional 6,475 and
1,502 shares to Mr. Cramb and Ms. Warner, respectively. These grants were
designed to compensate these directors for the partial-year periods (from March
2003 through December 2003, in the case of Mr. Cramb, and from October 2004
through December 2004, in the case of Ms. Warner) during which these directors
served on the Board but had not yet received an annual option award.
DEFERRED COMPENSATION PLAN. The Company has a voluntary deferred
compensation plan for Outside Directors. Under the plan, an Outside Director may
elect, prior to commencement of the next calendar year, to have some or all of
the cash portion, that is, up to 40%, or $20,000, of his or her retainer fee and
some or all of his or her meeting fees credited to a deferred compensation
account. The plan provides these directors with various investment options. The
investment options include stock equivalent units of the Company's common stock,
which may be paid out in either cash or, at the Company's option, shares of
common stock.
RESTRICTED STOCK. In partial satisfaction of residual obligations under
the discontinued retirement plan for directors, Ms. Eickhoff receives an annual
grant of $15,400 in value of restricted shares of the Company's common stock.
The restricted shares may not be sold, transferred, assigned, pledged or
otherwise encumbered and are subject to forfeiture if the director ceases to
serve on the Board prior to the expiration of the restricted period. This
restricted period ends upon Ms. Eickhoff's normal retirement from the Board,
unless she is disabled or dies, or the Compensation/Nominating/Governance
Committee of the Board, at its discretion, determines otherwise. During the
restricted period, Ms. Eickhoff will be entitled to vote the shares and receive
dividends.
14
OWNERSHIP OF COMMON STOCK
MANAGEMENT
The following table shows, as of March 15, 2005, the number of shares of
the Company's common stock, par value $.01 per share (the only class of voting
securities outstanding), beneficially owned by: (1) each director and nominee
for director; (2) each person who is named in the Summary Compensation Table,
below; and (3) all directors and executive officers as a group.
SHARES OF
COMMON STOCK
(1)(2)(3)(4)
------------
DIRECTORS
---------
Charles W. Cramb............................................ 6,000
Timothy R. Donovan.......................................... 166,209
M. Kathryn Eickhoff......................................... 54,070
Mark P. Frissora............................................ 827,780
Frank E. Macher............................................. 30,804
Roger B. Porter............................................. 34,653
David B. Price, Jr. ........................................ 63,824
Dennis G. Severance......................................... 32,804
Paul T. Stecko.............................................. 38,796
Jane L. Warner.............................................. 1,000
NAMED EXECUTIVE OFFICERS
------------------------
Hari N. Nair................................................ 270,364
Kenneth R. Trammell......................................... 113,895
Richard P. Schneider........................................ 252,078
All executive officers and directors as a group (18
individuals).............................................. 2,471,279(5)
---------------
(1) Each director and executive officer has sole voting and investment power
over the shares beneficially owned (or has the right to acquire shares as
described in note (2) below) as set forth in this column, except for
restricted shares and, in the case of Mr. Frissora, 300 shares held by his
son (as to which Mr. Frissora disclaims beneficial ownership).
(2) Includes restricted shares. At March 15, 2005, Ms. Eickhoff and Messrs.
Donovan, Frissora, Nair, Trammell and Schneider held 17,399, 46,000,
175,000, 46,000, 27,250 and 29,500 restricted shares, respectively. Also
includes shares that are subject to options that are exercisable within 60
days of March 15, 2005 for Ms. Eickhoff, Ms. Warner and Messrs. Cramb,
Donovan, Frissora, Macher, Porter, Price, Severance, Stecko, Nair, Tram-
(Notes continued on following page.)
15
mell and Schneider to purchase 30,000, 0, 5,000, 96,000, 650,000, 27,500,
30,000, 30,000, 27,500, 30,000, 189,334, 76,250 and 174,000 shares,
respectively.
(3) Mr. Frissora beneficially owns approximately 1.9% of the outstanding common
stock. Each of the other individuals listed in the table owns less than 1%
of the outstanding shares of the Company's common stock, respectively,
except for all directors and executive officers as a group, who beneficially
own approximately 5.4% of the outstanding common stock.
(4) For Outside Directors, does not include common stock equivalents received in
payment of director fees. These common stock equivalents are payable in cash
or, at the Company's option, shares of common stock after an Outside
Director ceases to serve as a director. At March 15, 2005, the total number
of common stock equivalents held by Ms. Eickhoff, Ms. Warner and Messrs.
Cramb, Macher, Porter, Price, Severance and Stecko was 22,756, 2,370,
15,784, 27,462, 61,249, 40,554, 43,318 and 40,554, respectively.
(5) Includes 1,758,123 shares that are subject to options that are exercisable
within 60 days of March 15, 2005 by all executive officers and directors as
a group. Includes 461,982 restricted shares.
CERTAIN OTHER STOCKHOLDERS
The following table sets forth, as of March 15, 2005, certain information
regarding the persons known by the Company to be the beneficial owner of more
than 5% of the Company's outstanding common stock (the only class of voting
securities outstanding).
SHARES OF
NAME AND ADDRESS COMMON STOCK PERCENT OF COMMON
OF BENEFICIAL OWNER(1) OWNED(1) STOCK OUTSTANDING
---------------------- ------------ -----------------
Barclays Global Investors, NA and related
entities....................................... 4,205,682(2) 9.65%
c/o Barclays Global Investors, NA
45 Fremont Street
San Francisco, California 94105
---------------
(1) This information is based on information contained in filings made with the
SEC regarding the ownership of the Company's common stock.
(2) Barclays Global Investors, NA and various related entities (collectively,
"Barclays") have indicated that they have sole voting power over 3,940,076
shares and sole dispositive power over 4,205,682 shares in the aggregate.
Barclays has also advised the Company that all shares reflected above are
held in trust accounts on behalf of the beneficiaries of those accounts.
16
EXECUTIVE COMPENSATION
The following table shows the compensation paid by the Company, for the
periods indicated, to: (1) the Company's Chief Executive Officer; and (2) each
of the next four most highly compensated executive officers, other than the
Chief Executive Officer (collectively, the "Named Executives"). The table shows
amounts paid to the Named Executives for all services provided to the Company
and its subsidiaries.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------- ------------------------------------
AWARDS PAYOUTS
OTHER ----------------------- ----------
ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL POSITION SALARY(1) BONUS(2) SATION(3) AWARDS(4) OPTIONS PAYOUTS(5) SATION(6)
--------------------------- --------- -------- --------- ---------- ---------- ---------- ---------
Mark P. Frissora.................... 2004 $775,472 $980,750 $ 66,779 $660,000 75,000 $2,437,500 $ 9,464
Chairman, Chief Executive 2003 $753,117 $777,750 $ 91,173 $ 94,250 125,000 $2,427,750 $408,893
Officer and President 2002 $752,483 $762,500 $179,320 $ -- -- $ 771,289 $ 8,349
Timothy R. Donovan.................. 2004 $420,348 $402,675 $ 4,990 $158,400 18,000 $ 812,500 $ 7,986
Executive Vice President, 2003 $408,414 $348,075 $ 364 $ 37,700 55,000 $ 874,605 $ 7,579
General Counsel and Managing 2002 $408,914 $341,250 $ 1,127 $ -- -- $ 283,294 $ 7,079
Director -- Asia Pacific
Hari N. Nair........................ 2004 $363,353 $402,675 $218,436 $158,400 18,000 $ 812,500 $ 7,897
Executive Vice President and 2003 $342,920 $348,075 $192,263 $ 37,700 55,000 $ 874,605 $ 7,331
Managing Director -- Europe 2002 $343,419 $341,250 $385,446 $ -- -- $ 274,836 $ 6,810
Kenneth R. Trammell................. 2004 $336,920 $314,841 $ 4,899 $105,600 15,000 $ 731,250 $ 7,773
Senior Vice President and 2003 $233,296 $141,851 $ -- $ 14,398 18,750 $ 261,339 $ 6,902
Chief Financial Officer 2002 $214,641 $113,750 $ 1,069 $ -- -- $ 31,489 $ 6,335
Richard P. Schneider................ 2004 $368,511 $237,475 $ 59,770 $105,600 12,000 $ 650,000 $ 9,429
Senior Vice President -- 2003 $358,545 $205,275 $ -- $ 20,735 30,000 $ 482,022 $ 8,394
Global Administration 2002 $359,545 $201,250 $ 788 $ -- -- $ 199,701 $ 6,886
---------------
(1) Includes base salary plus amounts paid in lieu of matching contributions to
the Company's 401(k) plans.
(2) Represents amounts paid under the Tenneco Automotive Value Added Incentive
Compensation Plan to each Named Executive. Of the payments reflected above
for 2004, $76,250 for Mr. Frissora, $34,125 for Mr. Donovan, $34,125 for Mr.
Nair, $13,791 for Mr. Trammell and $20,125 for Mr. Schneider represents
payment of amounts held in the individual's bonus bank after giving effect
to prior year (2003) payments. After giving effect to the 2004 payments
reflected above, $420,500, $177,450, $177,450, $116,782 and $104,650
remained credited to the bonus bank of Messrs. Frissora, Donovan, Nair,
Trammell and Schneider, respectively.
(Notes continued on following page.)
17
(3) Includes amounts attributable to: (a) the value of personal benefits
provided by the Company to Named Executives, which have an aggregate value
in excess of $50,000 for the year, such as perquisite allowances and
relocation expenses; (b) reimbursement for taxes; and (c) amounts paid as
dividend equivalents on performance share equivalent units ("Dividend
Equivalents"). The amount of each personal benefit that exceeds 25% of the
estimated value of the total personal benefits reported for the Named
Executive, reimbursement for taxes and amounts paid as Dividend Equivalents
to the Named Executives were as follows:
NAME YEAR EXPLANATION
---- ---- -----------
Mr. Frissora............ 2004 $40,000 perquisite allowance; and $4,971 for
reimbursement of taxes.
2003 $40,000 perquisite allowance; and $37,334 for
reimbursement of taxes.
2002 $60,000 for club fees; $40,000 perquisite allowance; and
$41,199 for reimbursement of taxes.
Mr. Donovan............. 2004 $4,990 for reimbursement of taxes.
2003 $364 for reimbursement of taxes.
2002 $1,127 for reimbursement of taxes.
Mr. Nair................ 2004 $185,473 for reimbursements and costs related to
expatriate assignment; and $2,638 for reimbursement of
taxes.
2003 $167,915 for reimbursements and costs related to
expatriate assignment; and $6,790 for reimbursement of
taxes.
2002 $358,891 for reimbursements and costs related to
expatriate assignment; and $6,856 for reimbursement of
taxes.
Mr. Trammell............ 2004 $4,899 for reimbursement of taxes.
2002 $1,069 for reimbursement of taxes.
Mr. Schneider........... 2004 $30,000 perquisite allowance; and $4,793 for
reimbursement of taxes.
2002 $788 for reimbursement of taxes.
(4) Amounts for 2004 represent the dollar value of the restricted shares granted
on January 20, 2004 to each of the Named Executives, based upon the closing
price of the Company's common stock on the NYSE on January 20, 2004, of
$8.80 per share. At December 31, 2004, the total number of restricted shares
held by Messrs. Frissora, Donovan, Nair, Trammell and Schneider was 100,000,
28,000, 28,000, 15,250 and 17,500 respectively. The dollar value of these
restricted shares on that date was $1,724,000, $482,720, $482,720, $262,910
and $301,700, respectively, based upon the closing price of the Company's
common stock on the NYSE on December 31, 2004, of $17.24 per share. Holders
of restricted shares are entitled to receive dividends if the Company were
to declare and pay such dividends. The restricted shares granted on January
20, 2004 vest three years after the date of grant, subject to the officer's
continued employment.
(5) Represents cash settlement of stock equivalent units granted to the Named
Executives as described under"-- Long-Term Incentive Plans -- Awards for
2004" and "Tenneco Automotive Inc. Compensa-
(Notes continued on following page.)
18
tion/Nominating/Governance Committee Report on Executive Compensation." Cash
settlement equals the number of units earned based on the achievement of
performance measures multiplied by the Company's average common stock price
for the ten trading days immediately following the Company's public
announcement of its results of operations for the award year.
(6) Includes amounts attributable during 2004 as follows:
(a) The dollar values paid by the Company for insurance premiums under the
group life insurance plan for Messrs. Frissora, Donovan, Nair, Trammell
and Schneider were $2,964, $1,486, $1,397, $1,273 and $1,429,
respectively.
(b) For 2004, the amounts contributed pursuant to the Company's 401(k) plans
for the accounts of Messrs. Frissora, Donovan, Nair and Trammell were
$6,500 each and for the account of Mr. Schneider was $8,000.
OPTIONS GRANTED IN 2004
The following table shows the number of options to purchase the Company's
common stock granted during 2004 to the persons named in the Summary
Compensation Table above.
PERCENT OF
TOTAL OPTIONS
SHARES OF GRANTED TO
COMMON STOCK THE COMPANY'S GRANT DATE
UNDERLYING EMPLOYEES EXERCISE PRESENT
OPTIONS GRANTED IN 2004 PRICE(1) EXPIRATION DATE VALUE(2)
--------------- ------------- -------- --------------- ----------
Mr. Frissora......... 75,000 13.3% $8.68 1/20/2014 $395,250
Mr. Donovan.......... 18,000 3.2% $8.68 1/20/2014 $ 94,860
Mr. Nair............. 18,000 3.2% $8.68 1/20/2014 $ 94,860
Mr. Trammell......... 15,000 2.7% $8.68 1/20/2014 $ 79,050
Mr. Schneider........ 12,000 2.1% $8.68 1/20/2014 $ 63,240
---------------
(1) All options were granted with exercise prices equal to 100 percent of the
fair market value of a share of the Company's common stock on the date of
grant. All options vest one-third on each of the first, second and third
anniversaries of the grant date.
(2) The Black-Scholes valuation was performed using the following assumptions:
43.56% volatility, risk free interest rate of 4.08%, 0% expected dividend
rate and ten-year option life.
AGGREGATE OPTION EXERCISES IN 2004 AND 2004 YEAR-END OPTION VALUES
The following table shows the number of shares underlying options to
purchase the Company's common stock that were exercised in 2004 by the persons
named in the Summary Compensation Table above, as well as the value realized
therefrom. This table also shows the
19
number and the value of unexercised in-the-money options held at December 31,
2004 by the persons named in the Summary Compensation Table above.
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SECURITIES UNDERLYING OPTIONS UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
EXERCISED IN 2004 HELD AT HELD AT
---------------------------------- DECEMBER 31, 2004 DECEMBER 31, 2004(1)
VALUE --------------------------- ---------------------------
OPTIONS EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------- -------------- ----------- ------------- ----------- -------------
Mr. Frissora......... 83,333 $1,003,904 583,333 158,334 $6,427,913 $1,764,509
Mr. Donovan.......... 53,333 $ 696,620 190,000 54,667 $2,294,617 $ 647,984
Mr. Nair............. 73,333 $ 852,041 165,000 54,667 $2,117,267 $ 647,984
Mr. Trammell......... -- -- 66,250 27,500 $ 884,838 $ 290,075
Mr. Schneider........ -- -- 160,000 32,000 $1,856,100 $ 372,120
---------------
(1) Based on the closing sale price of a share of common stock on the New York
Stock Exchange on December 31, 2004.
LONG-TERM INCENTIVE PLANS -- AWARDS FOR 2004
The following table shows information concerning certain performance-based
awards made for 2004 to the persons named in the Summary Compensation Table
above.
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD
OR OTHER UNTIL MATURATION
NAME RIGHTS(1) OR PAYOUT
---- ------------- ----------------
Mr. Frissora..................................... 150,000 1 year
Mr. Donovan...................................... 150,000 3 years
Mr. Nair......................................... 150,000 3 years
Mr. Trammell..................................... 135,000 3 years
Mr. Schneider.................................... 120,000 3 years
---------------
(1) Represents award of stock equivalent units made in 2004 which, except in the
case of Mr. Frissora, were intended to represent three-year awards. Stock
equivalent units generally are earned and payable 1/3 each year, based on
the achievement of annual performance goals. The future payouts for 2004,
2005 and 2006 are based on the achievement of a performance goal based on
Economic Value Added (EVA(R), a registered trademark of Stern Stewart & Co.)
improvement and a performance goal based on stock price appreciation. To
earn any portion of the yearly scheduled vesting under the awards, the
Company must at least meet its EVA performance goal for that year. If that
goal is met, the stock equivalent
(Notes continued on following page.)
20
units are earned (up to a maximum of 100% of the units) based on the
Company's stock price appreciation over the year. Stock equivalent units are
payable yearly in cash in an amount equal to the number of units earned
multiplied by the value per share of the Company's common stock at the time
of payment (as determined in accordance with the terms of the grant). EVA is
generally defined as operating profits minus the annual cost of capital. Mr.
Frissora's stock equivalent units are earned and payable at the end of one
year, based on the EVA and stock price criteria described above, reflecting
the Compensation/ Nominating/Governance Committee's desire to re-evaluate
Mr. Frissora's awards on an annual basis. The number of stock equivalent
units listed in this column represents the maximum number of units that may
be earned under the award.
PENSION PLAN TABLE
The following table shows the aggregate estimated total annual benefits
payable upon normal retirement pursuant to the Tenneco Retirement Plan, the
Tenneco Automotive Retirement Plan for Salaried Employees and Tenneco
Automotive's supplemental executive retirement plan to persons in specified
remuneration and years of credited participation classifications. In connection
with the Spin-Off, Pactiv Corporation became the sponsor of the Tenneco
Retirement Plan. The Company adopted a salaried defined benefit pension plan
patterned after the Tenneco Retirement Plan. The plan counts service prior to
the Spin-Off for all purposes, including benefit accrual, but there will be an
offset for benefits accrued under the Tenneco Retirement Plan. Therefore, as to
the Company's continuing employees, the benefits described in the table will be
provided by a combination of payments from the Tenneco Retirement Plan and the
Tenneco Automotive plans. The Company also maintains a key executive pension
plan covering executive officers, which will provide benefits, commencing at age
55, of 4% of compensation (salary and bonus) per year of service up to a maximum
of 50%, reduced by payments under all other company sponsored qualified and
nonqualified defined benefit pension plans.
YEARS OF CREDITED PARTICIPATION
ANNUAL ---------------------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35
------------ - -- -- -- -- -- --
$ 250,000 $ 19,642.86 $ 39,285.71 $ 58,928.57 $ 78,571.43 $ 98,214.29 $ 117,857.14 $ 137,500.00
$ 300,000 $ 23,571.43 $ 47,142.86 $ 70,714.29 $ 94,285.71 $117,857.14 $ 141,428.57 $ 165,000.00
$ 350,000 $ 27,500.00 $ 55,000.00 $ 82,500.00 $110,000.00 $137,500.00 $ 165,000.00 $ 192,500.00
$ 400,000 $ 31,428.57 $ 62,857.14 $ 94,285.71 $125,714.29 $157,142.86 $ 188,571.43 $ 220,000.00
$ 450,000 $ 35,357.14 $ 70,714.29 $106,071.43 $141,428.57 $176,785.71 $ 212,142.86 $ 247,500.00
$ 500,000 $ 39,285.71 $ 78,571.43 $117,857.14 $157,142.86 $196,428.57 $ 235,714.29 $ 275,000.00
$ 550,000 $ 43,214.29 $ 86,428.57 $129,642.86 $172,857.14 $216,071.43 $ 259,285.71 $ 302,500.00
$ 600,000 $ 47,142.86 $ 94,285.71 $141,428.57 $188,571.43 $235,714.29 $ 282,857.14 $ 330,000.00
$ 650,000 $ 51,071.43 $102,142.86 $153,214.29 $204,285.71 $255,357.14 $ 306,428.57 $ 357,500.00
$ 700,000 $ 55,000.00 $110,000.00 $165,000.00 $220,000.00 $275,000.00 $ 330,000.00 $ 385,000.00
$ 750,000 $ 58,928.57 $117,857.14 $176,785.71 $235,714.29 $294,642.86 $ 353,571.43 $ 412,500.00
21
YEARS OF CREDITED PARTICIPATION
ANNUAL ---------------------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35
------------ - -- -- -- -- -- --
$ 800,000 $ 62,857.14 $125,714.29 $188,571.43 $251,428.57 $314,285.71 $ 377,142.86 $ 440,000.00
$ 850,000 $ 66,785.71 $133,571.43 $200,357.14 $267,142.86 $333,928.57 $ 400,714.29 $ 467,500.00
$ 900,000 $ 70,714.29 $141,428.57 $212,142.86 $282,857.14 $353,571.43 $ 424,285.71 $ 495,000.00
$ 950,000 $ 74,642.86 $149,285.71 $223,928.57 $298,571.43 $373,214.29 $ 447,857.14 $ 522,500.00
$1,000,000 $ 78,571.43 $157,142.86 $235,714.29 $314,285.71 $392,857.14 $ 471,428.57 $ 550,000.00
$1,050,000 $ 82,500.00 $165,000.00 $247,500.00 $330,000.00 $412,500.00 $ 495,000.00 $ 577,500.00
$1,100,000 $ 86,428.57 $172,857.14 $259,285.71 $345,714.29 $432,142.86 $ 518,571.43 $ 605,000.00
$1,150,000 $ 90,357.14 $180,714.29 $271,071.43 $361,428.57 $451,785.71 $ 542,142.86 $ 632,500.00
$1,200,000 $ 94,285.71 $188,571.43 $282,857.14 $377,142.86 $471,428.57 $ 565,714.29 $ 660,000.00
$1,250,000 $ 98,214.29 $196,428.57 $294,642.86 $392,857.14 $491,071.43 $ 589,285.71 $ 687,500.00
$1,300,000 $102,142.86 $204,285.71 $306,428.57 $408,571.43 $510,714.29 $ 612,857.14 $ 715,000.00
$1,350,000 $106,071.43 $212,142.86 $318,214.29 $424,285.71 $530,357.14 $ 636,428.57 $ 742,500.00
$1,400,000 $110,000.00 $220,000.00 $330,000.00 $440,000.00 $550,000.00 $ 660,000.00 $ 770,000.00
$1,450,000 $113,928.57 $227,857.14 $341,785.71 $455,714.29 $569,642.86 $ 683,571.43 $ 797,500.00
$1,500,000 $117,857.14 $235,714.29 $353,571.43 $471,428.57 $589,285.71 $ 707,142.86 $ 825,000.00
$1,550,000 $121,785.71 $243,571.43 $365,357.14 $487,142.86 $608,928.57 $ 730,714.29 $ 852,500.00
$1,600,000 $125,714.29 $251,428.57 $377,142.86 $502,857.14 $628,571.43 $ 754,285.71 $ 880,000.00
$1,650,000 $129,642.86 $259,285.71 $388,928.57 $518,571.43 $648,214.29 $ 777,857.14 $ 907,500.00
$1,700,000 $133,571.43 $267,142.86 $400,714.29 $534,285.71 $667,857.14 $ 801,428.57 $ 935,000.00
$1,750,000 $137,500.00 $275,000.00 $412,500.00 $550,000.00 $687,500.00 $ 825,000.00 $ 962,500.00
$1,800,000 $141,428.57 $282,857.14 $424,285.71 $565,714.29 $707,142.86 $ 848,571.43 $ 990,000.00
$1,850,000 $145,357.14 $290,714.29 $436,071.43 $581,428.57 $726,785.71 $ 872,142.86 $1,017,500.00
$1,900,000 $149,285.71 $298,571.43 $447,857.14 $597,142.86 $746,428.57 $ 895,714.29 $1,045,000.00
$1,950,000 $153,214.29 $306,428.57 $459,642.86 $612,857.14 $766,071.43 $ 919,285.71 $1,072,500.00
$2,000,000 $157,142.86 $314,285.71 $471,428.57 $628,571.43 $785,714.29 $ 942,857.14 $1,100,000.00
$2,050,000 $161,071.43 $322,142.86 $483,214.29 $644,285.71 $805,357.14 $ 966,428.57 $1,127,500.00
$2,100,000 $165,000.00 $330,000.00 $495,000.00 $660,000.00 $825,000.00 $ 990,000.00 $1,155,000.00
$2,150,000 $168,928.57 $337,857.14 $506,785.71 $675,714.29 $844,642.86 $1,013,571.43 $1,182,500.00
$2,200,000 $172,857.14 $345,714.29 $518,571.43 $691,428.57 $864,285.71 $1,037,142.86 $1,210,000.00
---------------
NOTES:
1. The benefits shown above are computed as a straight life annuity and are
based on years of credited participation and the employee's average
compensation, which is comprised of salary and bonus. These benefits are not
subject to any deduction for Social Security or other offset amounts. As of
December 31, 2004, the credited participation for Messrs. Frissora, Donovan,
Nair, Trammell and Schneider was 7 years/9 months, 4 years/5 months, 16
years/
(Notes continued on following page.)
22
9 months, 7 years/8 months and 9 years/5 months, respectively. See the
Summary Compensation Table above for salary and bonus information for these
individuals.
2. If Mr. Frissora completes 10 years of service in the period commencing
January 1, 1999, he will be entitled to benefits commencing at age 55 of at
least 40% of his average salary plus bonus determined over a three-year
period.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company maintains a key executive change-in-control severance benefit
plan. The purpose of the plan is to enable the Company to continue to attract,
retain and motivate highly qualified employees by eliminating, to the maximum
practicable extent, any concern on the part of such employees that their job
security or benefit entitlements will be jeopardized by a "change-in-control" of
the Company, as that term is defined in the plan. The plan is designed to
achieve this purpose through the provision of severance benefits for key
employees and officers whose positions are terminated following a
change-in-control as provided in the plan. Under the plan, a severed executive
would receive a cash payment equal to three or two times, depending on his or
her grouping under the plan, (1) his or her base salary plus, (2) the higher of
(a) his or her average bonuses for the prior three years (or such shorter period
as the executive had been employed by the Company) and (b) his or her targeted
annual bonus in effect immediately prior to the change in control. The Company
expects that Messrs. Frissora, Donovan, Nair, Trammell and Schneider would have
become entitled to receive payments from the Company in the amount of
$4,265,700, $2,050,287, $1,885,890, $1,659,633 and $1,569,093, respectively, had
their positions been terminated on December 31, 2004 following a
change-in-control. In addition, restricted shares held in the name of those
individuals under restricted stock plans would have automatically reverted to
the Company, and the Company would have been obliged to pay those individuals
the fair market value of those restricted shares. Their stock equivalent units
would also have been fully vested and paid and their stock options would have
been fully vested.
Each of the Named Executives, other than Mr. Trammell, is a party to an
agreement with the Company which sets forth certain terms and conditions of his
employment with the Company. Each of the employment agreements provides that,
under the Company's change-in-control severance benefit plan, the relevant Named
Executive's cash payment in connection with a change-in-control termination will
equal three times the total of his then current base salary plus the higher of
(i) his highest annual target bonus over the prior three years and (ii) his
average bonuses for the prior three years (or if shorter, his period of service
to the Company). Each of the employment agreements also provides that, other
than in connection with a change-in-control, if the relevant Named Executive's
employment is terminated by the Company other than for death, disability or
nonperformance of duties, he will be paid two times the total of his then
current salary and bonus for the immediately preceding year, all outstanding
stock-based awards would be vested, subject to Board approval, and his stock
options would remain exercisable for
23
at least 90 days. Pursuant to the terms of their employment agreements, certain
of the Named Executives are guaranteed a minimum annual base salary/minimum
annual target bonus as follows: Mr. Frissora, $640,000/$590,000; Mr. Donovan,
$301,600/$155,000; Mr. Nair, $305,000/$273,000; and Mr. Schneider,
$327,600/$155,000.
24
TENNECO AUTOMOTIVE INC. COMPENSATION/NOMINATING/GOVERNANCE
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The executive compensation philosophy, policies, plans and programs of the
Company are under the supervision of the Compensation/Nominating/Governance
Committee (the "Committee"), which is composed of the directors named below, all
of whom are independent for purposes of the rules of the NYSE. The Committee
operates under a written charter. The Committee has furnished the following
report on executive compensation:
COMPENSATION PHILOSOPHY
The basic philosophy underlying the Company's executive compensation
policies, plans and programs is that executive and stockholder financial
interests should be aligned as closely as possible, and the compensation package
should be based on delivering pay in line with performance.
Accordingly, the executive compensation program for the Company's Chief
Executive Officer ("CEO") and the other Named Executives, as well as other
executives of the Company, has been structured to:
-- Reinforce a results-oriented management culture with executive pay that
varies according to performance.
-- Focus executives on annual and long-term business results with the
overarching goal of enhancing stockholder value.
-- Align the interests of the Company's executives and stockholders
through equity-based compensation awards.
-- Provide executive compensation packages that attract, retain, and
motivate executives of the highest qualifications and ability.
Based on these objectives, the executive compensation program has been
designed to promote appropriate levels of compensation derived from several
sources: salaries; annual cash incentive awards; stock ownership opportunities;
and other benefits typically offered to executives by major corporations.
The Company's policy is to provide total compensation to its executives
based on performance that is competitive and at market levels, for comparable
companies, when financial and qualitative targets are met. In determining
competitive compensation for each of the components of executive compensation
described below, the Committee engages a nationally recognized, independent
compensation consulting firm which reports directly to the Committee.
In making its determinations, the Committee generally reviews data
regarding compensation practices at other companies that it determines to be
relevant to compensation matters affecting
25
the Company. Historically, this information has included data regarding
companies believed to be comparable to the Company in terms of industry (i.e.,
automotive parts manufacturing), total revenues, number of employees,
capitalization or other factors. For 2004, the Committee examined specific data
regarding a comparison group comprised of 22 manufacturing
companies -- including many automotive parts manufacturers -- selected to
reflect a balance of automotive sector and other traditional manufacturing
companies, as well as other data presented to the Committee from time to time by
the Committee's independent compensation consulting firm. The specific
comparison group was selected from survey data regarding several hundred
companies reviewed and reported to the Committee by the Committee's independent
compensation consulting firm. The data was weighted based on the size of
revenues of the comparison companies. The companies selected for compensation
survey purposes are not identical to the automotive industry peer group shown in
the stock Performance Graph appearing elsewhere in this Proxy Statement. The
Committee does not limit its review for compensation purposes to the automotive
peer group companies because it believes that individual employment
determinations are often driven by factors beyond those that are solely
industry-specific.
Salary levels are structured based upon reputable survey data for the
comparable companies. The Company's compensation plans provide that as an
executive's level of responsibility increases, (i) a greater portion of his/her
potential total compensation is based on performance (both individual and
corporate), and a lesser portion is comprised of salary, causing greater
potential variability in the individual's total compensation from year-to-year,
and (ii) the mix of compensation for that executive shifts to a greater portion
being derived from compensation plans where the executive's compensation level
varies in accordance with the market price of the Company's common stock.
In designing and administering the components of the executive compensation
program, the Committee strives to balance short- and long-term incentive
objectives and to employ prudent judgment when establishing performance
criteria, evaluating performance and determining actual incentive payments.
TOTAL EXECUTIVE COMPENSATION
Total executive compensation has two major components: (1) annual cash
compensation comprised of salary and bonus; and (2) long-term and stock-based
incentives comprised of some combination of stock options, performance-based
shares or share equivalents and restricted stock. The following is a description
of each of the components of the executive compensation program, along with a
discussion of the decisions of and action taken by the Committee with regard to
2004 compensation.
26
Salary and Bonus Compensation
An executive's annual cash compensation consists primarily of a base salary
plus amounts paid in lieu of Company matching contributions to the Company's
401(k) plans (when Internal Revenue Service maximums are reached) and bonuses
under the Company's executive incentive compensation plan, the Tenneco
Automotive Value Added Incentive Compensation Plan ("TAVA Plan"). Each year, the
Committee reviews with the CEO and the senior human resources executive of the
Company an annual salary and bonus target plan for the Company's executives and
other key management personnel (excluding the CEO), following which the
Committee approves that plan with changes that the Committee deems appropriate.
The salary and bonus target plan that is developed is based on competitive
market data and on assessments of past and anticipated future performance. The
Committee employs competitive market data for directional and guideline purposes
in combination with corporate, divisional and individual performance results.
The Committee also reviews (with the assistance of the senior human resources
executive and the nationally recognized, independent compensation consultant
engaged by the Committee) and sets the salary and bonus target of the CEO based
on similar information and criteria and the Committee's assessment of his past
performance with the Company and its expectations as to his future contribution
in leading the Company. For 2004, the Committee, based on the survey data,
awarded 3% increases in 2004 executive salaries over 2003. The 2004 salary
levels established for the Company's executives are designed to be, in general,
in the 50th percentile range when compared to the salaries set by the companies
in the compensation surveys reviewed by the Committee as described above. The
target bonus levels established for the Company's executives for 2004 were also
designed to be, in general, in the 50th percentile range when compared to target
bonus levels set by the companies in the compensation surveys reviewed by the
Committee.
Annual performance goals are established under the TAVA Plan at the
beginning of each year for purposes of determining incentive awards for that
year. The performance goals are generally developed, initially, by an
independent consulting firm with expertise in incentive programs. The firm's
recommended performance goals, after being reviewed by senior management, are
reviewed and approved by the Committee, with such changes as the Committee
determines appropriate. At the conclusion of each year, the Committee approves
incentive award payments to executives based on the degree of achievement of the
goals established at the beginning of that year and on judgments of individual
performance as follows: (i) 75% of an individual's bonus is tied to the
Company's achievement of EVA(R)(1) objectives, and (ii) 25% of an individual's
bonus is based on judgmental considerations.
---------------
(1) EVA is after-tax operating profit minus the annual cost of capital. EVA is a
registered trademark of Stern Stewart & Co.
27
The portion of an individual's bonus under the TAVA Plan that is tied to
EVA performance is calculated as follows: Each year, the individual's reserve
account under the TAVA Plan -- also known as the "bonus bank" -- is credited
with a bonus accrual (the "EVA-based bonus") equal to 75% of his or her total
bonus target (the "EVA-based target") multiplied by a Company performance factor
that is based upon the amount of improvement or deterioration in EVA. If the
annual EVA improvement is in excess of the targeted EVA improvement, the Company
performance factor will be a positive number in excess of one. If the annual EVA
improvement is less than the targeted EVA improvement, the Company performance
factor will be a number that is less than one or even less than zero. Because of
this, the EVA-based bonus for any year may be a positive or negative number. For
any year, an individual's payout is equal to the sum of: (i) his or her
EVA-based bonus for that year, if positive (but not exceeding 120% of his or her
EVA-based target), plus (ii) one-third of the individual's remaining bonus bank
as of the end of that year, if any. The value of an individual's bonus bank
reserve account may be positive or negative. The bonus bank functions to ensure
that any extraordinary EVA improvements are sustained before extraordinary bonus
awards are paid out. In addition, negative bonus bank balances are carried
forward to offset future bonuses to enhance accountability for sustained
positive performance over the long-term. Except for certain circumstances, such
as disability, death or retirement, any bonus bank is forfeited when an
individual terminates employment with the Company.
The portion of an individual's bonus that is discretionary under the TAVA
Plan (25%) is determined by the Committee based on factors which take into
account the relative performance of the Company versus its peers in key areas
such as improvements in working capital and SGA&E (selling, general and
administrative expenses) as a percentage of sales, technology leadership,
improvements in EBITDA (earnings before interest, income taxes, depreciation and
amortization) margins, performance of the Company's stock, management retention
goals, overall market and industry conditions, the degree of difficulty in
meeting targets, contribution to overall corporate performance, including
efforts to deleverage the Company's balance sheet, environmental and safety
performance, quality initiatives and equal employment and diversity performance.
For 2004, bonus awards under the TAVA Plan were declared at 175% of the
aggregate targeted bonus amount for each executive. Because the TAVA Plan has a
bonus bank feature, cash payouts for these 2004 bonuses were, on average, made
at 147.5% of the aggregate targeted bonus amount for each executive. For
example, if an average executive had an aggregate 2004 target bonus of $100,000,
he or she would have been awarded a declared bonus of $175,000 for 2004, but
would have received a cash payment of $147,500 for 2004. The difference would
remain in his or her bonus bank and, together with amounts remaining in the
bonus bank for prior years' bonus declarations, be subject to forfeiture or
payout in future periods.
28
As described above, the Company's performance against its EVA objectives
accounted for 75% of each executive's bonus. The Company achieved performance
goals commensurate with 200% payout of this portion of executives' bonuses based
on its 2004 EVA objectives. Based on this performance level, under the TAVA
Plan, only 120% of the executives' 2004 EVA-based target bonuses were eligible
for payout for 2004. An amount equal to 80% (200%-120%) of the executives' 2004
EVA-based target bonuses was credited to the bonus bank, with 1/3 of each
executive's aggregate remaining bonus bank (after giving effect to the 120%
payout) eligible for payout for 2004. Payout of the remaining 25% of each
executive's bonus amount is discretionary and was established by the Committee
based on the various subjective factors described above. Weighing these factors,
the Committee determined that the 25% discretionary portion of each executive's
bonus would be declared at 100% of the targeted bonus amount. After giving
effect to the 2004 payouts, an aggregate of approximately $11 million remained
credited to the bonus bank under the TAVA Plan.
In making its determinations, the Committee noted in particular that the
Company's stock price had improved approximately 158% during 2004, from a
closing price of $6.69 on December 31, 2003 to $17.24 on December 31, 2004. The
Committee also noted the Company's significant operational achievements for
2004, including achieving the highest revenues in the Company's history as a
stand-alone company of $4.2 billion, the successful refinancing of the Company's
senior subordinated debt in November 2004 (expected to generate $15 million in
annualized interest expense savings) and being awarded significant new business
expected to launch in 2005 and beyond. As a result of these achievements, the
total compensation paid to the Company's executives for 2004, including the
long-term and stock-based incentives described below, was at approximately the
75th percentile when compared to total compensation paid to executives by the
companies in the compensation surveys reviewed by the Committee.
Long-Term and Stock-Based Incentives
The Company's long-term and stock-based incentive plans have been designed
to align a significant portion of executive compensation with stockholder
interests. The current plan -- the 2002 Long-Term Incentive Plan as amended in
2003 -- permits the granting of a variety of awards including stock options,
restricted stock, stock equivalent units and performance units. The Company's
former plans were structured similarly.
These awards are based on an analysis of competitive levels of similar
awards and an assessment of individual performance. As an individual's level of
responsibility increases, a greater portion of variable performance-related
compensation will be in the form of long-term and stock-based awards.
Each year, the Committee reviews outstanding long-term and stock based
awards for the Company's executives, typically at its meeting held in January.
Based on this review, the
29
Committee determines whether and to what extent to make additional awards for
the ensuing year. For 2004, the Committee implemented a long-term and
stock-based compensation program for the Company's executives that is comprised
of (1) stock options which generally vest in 1/3 increments over three years,
(2) awards of restricted stock which vest at the end of three years, and (3)
cash-settled stock equivalent units which are (except in the case of Mr.
Frissora) payable in 1/3 increments at the end of each of 2004, 2005 and 2006
based on the achievement of EVA and stock price performance targets (see below
for a discussion of Mr. Frissora's stock equivalent unit awards). For 2005, the
Committee intends to discontinue its policy of awarding restricted stock that
vests in its entirety after three years and to replace this component of the
Company's long-term compensation with restricted stock that vests in 1/3
increments over three years.
For 2004, the Committee has granted long-term awards to the Company's
executives with values as of their grant dates, calculated based on the
Committee's assumptions regarding performance levels, interest rates and other
factors, that were designed to place the executives in the 50th percentile range
when compared to the value of similar awards granted by peer companies to their
executives.
At the beginning of 2004, the Committee made awards to the Company's
executives that included options, restricted stock and cash-settled stock
equivalent units as described above. The Committee made its determinations
consistent with the philosophy described above, specifically noting the amount
of outstanding stock option, stock equivalent unit, performance unit and
restricted stock awards that had been granted to Company executives. In making
its award determinations, the Committee also noted in particular the
achievements made by the Company during 2003, including stock price improvement
of approximately 62% during 2003, achieving $176 million of operating income,
reducing net debt by $105 million from the end of 2002 to the end of 2003 and
being awarded significant new business.
For 2004, the annually scheduled cash payout under the stock equivalent
unit awards described above was made in early 2005. Based on the Company's
achievement of EVA and stock price appreciation targets established for 2004,
award holders earned 100% of their targeted number of units for 2004, which is
the maximum number of units that could be earned for the year. The cash payouts
were equal to the number of units earned multiplied by the average of the
closing prices of the Company's common stock for the ten trading days
immediately following the Company's public announcement of its results of
operations for 2004 ($16.25). As a result of the Company's performance in 2004,
the total compensation paid to the Company's executives for 2004, including the
salary and bonus payments described above, was at approximately the 75th
percentile when compared to total compensation paid to executives by the
companies in the compensation surveys reviewed by the Committee.
30
CEO COMPENSATION
For 2004, Mr. Frissora's base salary and bonus target were set at $751,900
and $670,000, respectively, to reflect his leadership of Tenneco Automotive in
implementing and sustaining various restructuring plans, process improvement
programs and other strategic initiatives in a continuingly difficult economic
and automotive industry environment. His 2004 base salary reflected a 3%
increase over his 2003 base salary, consistent with the general Committee policy
regarding salary increases for Company executives in 2004. Mr. Frissora's 2004
base salary and bonus target were slightly below the 50th percentile of base
salaries and target bonuses set for chief executive officers of the comparable
companies surveyed. For 2004, the Committee approved the payment of $980,750 to
Mr. Frissora as his 2004 incentive award under the TAVA Plan. This amount was
based on a (1) a declared 2004 award of $1,005,000 under the EVA-based portion
of the TAVA Plan, of which, by the terms of the plan, $603,000 was automatically
paid to Mr. Frissora and $402,000 was credited to his bonus bank, (2) payment of
1/3 of Mr. Frissora's aggregate bonus bank, or $210,250, and (3) payment of
$167,500 under the discretionary portion of the TAVA Plan. The amount of Mr.
Frissora's incentive award was based on the same factors as described above with
respect to the 2004 bonuses paid to the Company's other executives, including
his overall leadership in driving the Company to the performance improvements
described above under "-- Salary and Bonus Compensation." In addition, the
Committee noted Mr. Frissora's strong individual performance against his
personal objectives in areas such as: improved business profitability,
incremental business growth, commercialization of new technologies, improvement
in the Company's productivity initiatives, improved customer and employee
satisfaction and the improvement in the Company's balance sheet. After giving
effect to this payment, $420,550 remained credited to Mr. Frissora's bonus bank
under the TAVA Plan. In January 2004, in recognition of the Company's
substantial operational improvements for 2003 (as described above under
"-- Long-Term and Stock-Based Incentives") and a desire to provide incentives
for further achievements, the Committee awarded stock options, restricted stock
and stock equivalent units to Mr. Frissora as reflected under "Executive
Compensation." Unlike the stock equivalent unit awards made to the Company's
other executives (which cover three years and vest in one year increments), the
award made to Mr. Frissora was for one year only, providing for yearly
re-evaluation by the Committee. In early 2005, Mr. Frissora's 2004 stock
equivalent unit award was paid at the earned level as described above for the
Company's other executives. As a result of the Company's strong performance in
2004 as described above, the total compensation paid to Mr. Frissora for 2004
was at approximately the 75th percentile of compensation paid to chief executive
officers of the comparable companies surveyed.
TAX LIMITATIONS ON THE DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a
$1 million limit on the amount that a publicly traded corporation may deduct for
compensation paid to the
31
CEO or a Named Executive who is employed on the last day of the year; provided,
however, non-discretionary "performance based compensation" is excluded from
this $1 million limitation.
The Committee has reviewed section 162(m) and its related regulations and
feels that the Company's current compensation program and policies are
appropriate. The Committee structures the Company's compensation programs to
support organizational goals and priorities and stockholder interests. The
Committee seeks to preserve the tax deductibility of executive compensation to
the extent practicable and consistent with this philosophy. Because the
Committee retains certain discretion under the executive incentive program to
account for individual performance in making bonus awards, amounts payable to
the designated officers under the program may not be fully deductible where the
section 162(m) $1 million deduction limitation is otherwise reached. The
Committee believes this ability to exercise discretion, considered with the fact
that the 2004 salary and bonus paid to the Company's most highly compensated
executive only slightly exceeded $1 million, is in the best interests of the
Company and its stockholders. The stock equivalent unit, performance unit and
stock option awards made under the Company's long-term incentive plans, however,
are generally designed to incorporate the applicable requirements for
"performance-based compensation" for purposes of section 162(m).
SUMMARY
In addition to its stated policies, the Committee's guidelines are evolving
to include compensation practices that:
-- Promote creativity, innovation and calculated risk-taking to achieve
outstanding business results.
-- Encourage reward systems that are simple, credible and common across
all segments of the organization.
-- Make the Company a great place to work that values diversity and
inclusiveness in order to attract world-class employees at all levels
around the globe.
The Committee believes that the caliber and motivation of management and
the leadership of its Chief Executive Officer are critical factors in the
ability of the Company to achieve sustainable competitive advantage, which
should result in maximum stockholder value. The
32
Committee will continue to emphasize long-term and stock-based incentives for
executives as the most important component of total compensation.
Compensation / Nominating / Governance Committee
David B. Price, Jr. -- Chairman
Roger B. Porter
Paul T. Stecko
Jane L. Warner
33
PERFORMANCE GRAPH
The performance graph presented below provides the cumulative total
stockholder return for Tenneco Automotive Inc. The performance graph compares
the cumulative total stockholder return on the Company's common stock from
December 31, 1999 through December 31, 2004 with the Standard & Poor's 500 Stock
Index and a peer group of companies chosen by the Company (the "Peer Group").
The companies comprising the Peer Group represent other participants in the
automotive industry. The performance graph assumes an investment of $100 in each
of the Company's common stock, the Standard & Poor's 500 Stock Index and the
Peer Group index at the beginning of the period described. The performance graph
is not intended to be indicative of future stock performance.
34
CUMULATIVE TOTAL RETURN
BASED UPON AN INITIAL INVESTMENT OF $100
ON DECEMBER 31, 1999 WITH DIVIDENDS REINVESTED
[PERFORMANCE GRAPH]
31-Dec-99 31-Dec-00 31-Dec-01 31-Dec-02 31-Dec-03 31-Dec-04
Tenneco Automotive Inc. $100 $33 $23 $45 $ 74 $191
S&P 500 $100 $91 $80 $62 $ 80 $ 89
Peer Group Index $100 $70 $91 $70 $111 $118
-------------------------
NOTES:
1. Cumulative total stockholder return is based on share price appreciation plus
the reinvestment of dividends.
2. Cumulative total stockholder return for the Peer Group is based on the market
capitalization weighted cumulative total stockholder return of the companies
comprising the Peer Group. The Peer Group is comprised of the following
companies: Arvin Industries Inc. (through the second quarter of 2000, when it
merged with Meritor Automotive), ArvinMeritor, Inc. (formerly known as
Meritor Automotive Inc.), BorgWarner Inc., Cummins Inc., Dana Corporation,
Delphi Corporation, Federal-Mogul Corporation, Lear Corporation, Magna
International Inc., Simpson Industries, Inc. (through the third quarter of
2000, when it merged with MascoTech, Inc.), and Tower Automotive Inc.
35
REPORT OF AUDIT COMMITTEE
GENERAL
The Audit Committee comprises four directors and operates under a written
charter for the Audit Committee. All of the members of the Audit Committee meet
the definition of independent for purposes of the NYSE listing standards. In
addition, the Board has determined that Mr. Cramb qualifies as an "audit
committee financial expert" under the applicable SEC rules and all of the
members of Audit Committee satisfy the NYSE's financial literacy requirements.
REPORT
The Audit Committee has furnished the following report:
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended December 31, 2004 with the
Company's management. In addition, the Audit Committee has discussed with
Deloitte & Touche LLP, the Company's independent auditors ("Deloitte & Touche"),
the matters required to be discussed by Statement on Auditing Standards No. 61,
"Communications with Audit Committees" (as amended by Statement on Auditing
Standards No. 90) and Regulation S-X Rule 2-07, "Communication with Audit
Committees."
The Audit Committee has also received the written disclosures and the
letter from Deloitte & Touche required by Independence Standards Board Standard
No. 1, "Independence Discussions with Audit Committees," and has discussed with
Deloitte & Touche its independence from the Company and its management.
The Audit Committee has considered whether the services rendered by the
Company's independent public accountants with respect to audit, audit-related,
tax and other non-audit fees are compatible with maintaining their independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements for
the Company for the fiscal year ended December 31, 2004 be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004
for filing with the SEC.
Audit Committee
Charles W. Cramb -- Chairman
M. Kathryn Eickhoff
Frank E. Macher
Dennis G. Severance
36
RATIFY APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 2)
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
Financial statements of the Company and its consolidated subsidiaries will
be included in the Company's Annual Report furnished to all stockholders. The
Audit Committee of the Board of Directors has appointed Deloitte & Touche LLP as
independent public accountants for the Company to examine its consolidated
financial statements for the year ending December 31, 2005, and has determined
that it would be desirable to request that the stockholders ratify the
appointment. You may vote for, vote against or abstain from voting with respect
to this proposal. Assuming the presence of a quorum, the affirmative vote of a
majority of the shares present, in person or by proxy, at the Annual Meeting and
entitled to vote is required to ratify the appointment. If the stockholders do
not ratify the appointment, the Audit Committee will reconsider the appointment.
Deloitte & Touche LLP was engaged as the Company's principal independent public
accountants for 2002 through 2004. Representatives of Deloitte & Touche LLP are
expected to be present at the Annual Meeting and will have the opportunity to
make a statement if they desire to do so and are also expected to be available
to respond to appropriate questions.
AUDIT, AUDIT-RELATED, TAX AND OTHER FEES
The following table summarizes the aggregate fees and expenses billed to
the Company for the fiscal years ended December 31, 2004 and 2003 by the
Company's principal accounting firm, Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu and their respective affiliates (collectively,
"Deloitte & Touche"):
2004 2003
---------- ----------
Audit fees(a).............................. $4,330,000 $2,971,000
Audit-related fees(b)...................... 244,000 233,000
---------- ----------
Total audit and audit-related fees......... 4,574,000 3,204,000
Tax fees:
Compliance and tax audit support(c)...... 1,758,000 2,138,000
Planning and consulting(d)............... 579,000 372,000
---------- ----------
Total tax fees............................. 2,337,000 2,510,000
All other fees............................. 10,000 --
---------- ----------
$6,921,000 $5,714,000
37
---------------
(a) Audit services in 2004 and 2003 consisted of:
- Audit of the Company's annual financial statements including audits of
subsidiary financial statements required by local country laws
- Audit of Management's assessment of the Company's internal control over
financial reporting in accordance with Section 404 of the Sarbanes-Oxley
Act of 2002
- Reviews of the Company's quarterly financial statements
- Comfort letters, consents and other services related to SEC matters
(b) Audit-related services in 2004 and 2003 consisted of:
- Employee benefit plan audits
(c) Tax compliance services are services rendered based upon facts already in
existence or transactions that have already occurred to document, compute,
support and obtain government approval for amounts to be included in tax
filings. Tax compliance services in 2004 and 2003 consisted of:
- Federal, state and local income tax return assistance
- Sales and use, property and other tax return assistance
- Transfer pricing documentation
- Requests for technical advice from taxing authorities
- Assistance with tax audits and appeals
(d) Tax planning and consulting services are services rendered with respect to
proposed transactions or that alter a transaction to obtain a particular
tax result. Tax planning and consulting services in 2004 and 2003 consisted
of:
- Tax advice related to intra-group transactions and restructurings
- Tax planning related to certain foreign operations
In considering the nature of the services provided by Deloitte & Touche,
the Audit Committee determined that such services are compatible with the
provision of independent audit services. The Audit Committee discussed these
services with Deloitte & Touche and Company management to determine that they
are permitted under the rules and regulations concerning auditor independence
promulgated by the SEC to implement the Sarbanes-Oxley Act of 2002, as well as
by the American Institute of Certified Public Accountants.
PRE-APPROVAL POLICY
At a meeting held in September 2002, shortly after the adoption of the
Sarbanes-Oxley Act of 2002 and its provisions regarding audit committee
pre-approval of non-audit services provided by a public company's independent
public accountants, the Audit Committee approved the
38
continued provision to the Company of audit, audit-related and tax services as
described above by Deloitte & Touche. In March 2003, after the SEC's adoption of
final rules regarding provision of non-audit services by a public company's
independent public accountants, the Audit Committee adopted a pre-approval
policy regarding these services. All of the services performed by Deloitte &
Touche in 2004 were pre-approved in accordance with the pre-approval policy
adopted by the Audit Committee at its March 2003 meeting.
The Audit Committee's pre-approval policy describes the permitted audit,
audit-related, tax and other services (collectively, the "Disclosure
Categories") that Deloitte & Touche may perform. The policy requires that, each
fiscal year, a description of the services (the "Service List") expected to be
performed by Deloitte & Touche in each of the Disclosure Categories, as well as
related budgeted fee amounts, be presented to the Audit Committee for approval.
Providing a range of fees for a service incorporates appropriate oversight and
control of the independent auditor relationship, while permitting the Company to
receive immediate assistance from the independent auditor when time is of the
essence.
Any requests for audit, audit-related, tax and other services not included
on the Service List must be submitted to the Audit Committee for specific
pre-approval and cannot commence until such approval has been granted. Normally,
pre-approval is provided at regularly scheduled meetings. However, the authority
to grant specific pre-approval between meetings, as necessary, has been
delegated to the Chairman of the Audit Committee. The Chairman must update the
Audit Committee at the next regularly scheduled meeting of any services that
were granted specific pre-approval. On a quarterly basis, the Audit Committee
reviews the status of services and fees incurred year-to-date against the
original Service List and the forecast of remaining services and fees for the
fiscal year. Any proposed service exceeding 120% of the pre-approved cost level
or budgeted amount requires specific additional pre-approval by the Audit
Committee.
OTHER MATTERS
The Board of Directors is not aware of any other matters that may properly
come before the Annual Meeting. However, should any such matters come before the
Annual Meeting, it is the intention of the persons named in the enclosed form of
Proxy card to vote all Proxies (unless otherwise directed by stockholders) in
accordance with their judgment on such matters.
SOLICITATION OF PROXIES AND VOTING
Stockholders may specify their choices by marking the appropriate boxes on
the enclosed Proxy card. Alternatively, in lieu of returning signed Proxy cards,
stockholders can submit a Proxy over the Internet or by calling a specially
designated telephone number which appears on the Proxy cards. These Internet and
telephone voting procedures are designed to authenticate stockholders'
identities, allow stockholders to provide their voting instructions and confirm
the
39
proper recording of those instructions. Specific instructions for stockholders
who wish to use the Internet or telephone voting procedures are set forth on the
enclosed Proxy card.
All properly completed, unrevoked Proxies, which are received prior to the
close of voting at the Annual Meeting, will be voted in accordance with the
specifications made. If a properly executed, unrevoked written Proxy card does
not specifically direct the voting of shares covered, the Proxy will be voted
(i) FOR the election of all nominees for election as director described in this
Proxy Statement, (ii) FOR the ratification of the appointment of Deloitte &
Touche LLP, and (iii) in accordance with the judgment of the persons named in
the Proxy as to such other matters as may properly come before the Annual
Meeting.
A Proxy may be revoked at any time prior to the voting at the Annual
Meeting by submitting a later-dated proxy (including a later-dated Proxy via the
Internet or telephone), giving timely written notice of such revocation to the
Secretary of the Company or by attending the Annual Meeting and voting in
person.
The presence at the Annual Meeting, in person or by proxy, of holders of a
majority of the issued and outstanding shares of common stock as of the record
date is considered a quorum for the transaction of business. If you submit a
properly completed Proxy or if you appear at the Annual Meeting to vote in
person, your shares of common stock will be considered part of the quorum.
Directions to withhold authority to vote for any director, abstentions and
broker non-votes (described below) will be counted to determine if a quorum for
the transaction of business is present. Once a quorum is present, voting on
specific proposals may proceed.
The cost of solicitation of Proxies will be borne by the Company.
Solicitation will be made by mail, and may be made by directors, officers, and
employees, personally or by telephone, telecopy or telegram. Proxy cards and
material also will be distributed to beneficial owners of stock through brokers,
custodians, nominees and other like parties, and the Company expects to
reimburse such parties for their charges and expenses. Georgeson Shareholder
Communications Inc., New York, New York, has been retained to assist the Company
in the solicitation of proxies at a fee estimated not to exceed $25,000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and
beneficial owners of 10 percent or more of a registered class of the Company's
equity securities (collectively, "Reporting Persons") to file with the SEC
initial reports of beneficial ownership (Form 3) and reports on changes in
beneficial ownership (Form 4 or 5). SEC rules adopted pursuant to Section 16(a)
require that Reporting Persons furnish the Company with copies of all such forms
they file with the SEC.
40
Based solely upon its review of such forms furnished to the Company during
2004, and upon the written representations received by the Company from certain
of the Company's directors and executive officers that no Forms 5 were required,
the Company has determined that no Reporting Persons known to it were delinquent
with respect to their reporting obligations as set forth in Section 16(a) of the
Exchange Act, other than the following: In January 2004, a Form 4 was filed on
behalf of Mark P. Frissora reporting the grant by the Company to him of an
option to purchase common stock. The Form 4 reported that the amount of common
stock subject to the option was 50,000 shares; it was subsequently determined
that the amount was 75,000 shares. This was discovered after Mr. Frissora's Form
4 was filed in January 2004 and has since been reported on an amended Form 4.
Also in early 2004, a Form 4 was filed for each of Frank E. Macher and David B.
Price, Jr., reporting the grant of stock equivalent units as payment of director
fees. These filings, the first required for these directors in electronic format
and filed by the Company on behalf of the directors, were prepared in a timely
fashion but were not timely filed because the directors' EDGAR codes in the
Company's possession were discovered to be non-functional upon submission of the
Forms 4 to the SEC. Corrected codes were obtained and the Forms 4 were promptly
filed. In October 2004, Jane L. Warner was appointed to the Board of Directors.
Her appointment was announced by the Company pursuant to a press release. Due to
a miscommunication regarding Ms. Warner's EDGAR codes, her Form 3, which showed
no beneficial ownership of Company stock, was filed four days late. The Company
believes that no other Reporting Persons failed to file on a timely basis the
reports required by Section 16(a) of the Exchange Act during, or with respect
to, 2004.
EFFECT OF ABSTENTIONS AND BROKER NON-VOTES
Directions to withhold authority, abstentions and "broker non-votes" (which
occur when a nominee holding shares for a beneficial owner does not vote on a
proposal because the nominee does not have discretionary voting power with
respect to that item and has not received instructions from the beneficial
owner) will be counted in determining the presence or absence of a quorum for
the transaction of business at the Annual Meeting.
Assuming the presence of a quorum, the affirmative vote of (1) a plurality
of the votes cast at the Annual Meeting (in person or by proxy) is required for
the election of directors and (2) holders of a majority of the common stock
present at the Annual Meeting (in person or by proxy) and entitled to vote is
required to ratify Deloitte & Touche LLP as the Company's independent public
accountants.
Because the election of directors is determined on the basis of a plurality
of the votes cast, directions to withhold authority have no effect on the
election of directors. Because the vote standard for the approval of Deloitte &
Touche LLP is a majority of shares present and entitled to vote, abstentions
have the effect of a vote against and broker non-votes would have no effect on
the proposal.
41
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement is incorporated by reference in any
other filing by the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, the information included or
incorporated in the sections of this Proxy Statement entitled "Executive
Compensation -- Tenneco Automotive Inc. Compensation/Nominating/Governance
Committee Report on Executive Compensation," "Performance Graph," and "Report of
Audit Committee" will not be deemed to be incorporated, unless specifically
provided otherwise in such filing.
42
SUBMISSION OF STOCKHOLDER PROPOSALS
STOCKHOLDER PROPOSALS -- INCLUSION IN COMPANY PROXY STATEMENT
For a stockholder proposal to be considered by the Company for inclusion in
the Company's proxy statement and form of proxy relating to the annual meeting
of stockholders to be held in 2006, the proposal must be received by the Company
by December 1, 2005.
OTHER STOCKHOLDERS PROPOSALS -- DISCRETIONARY VOTING AUTHORITY AND BY-LAWS
With respect to stockholder proposals not included in the Company's proxy
statement and form of proxy, the Company may utilize discretionary authority
conferred by proxy in voting on any such proposals if, among other situations,
the stockholder does not give timely notice of the matter to the Company by the
date determined under the Company's By-laws for the submission of business by
stockholders. This notice requirement and deadline are independent of the notice
requirement and deadline described above for a stockholder proposal to be
considered for inclusion in the Company's proxy statement. The Company's By-laws
state that, to be timely, notice and certain related information must be
received at the principal executive offices not later than the close of business
on the 90th day nor earlier than the close of business on the 120th day prior to
the first anniversary of the preceding year's annual meeting. However, in the
event that the date of the annual meeting is more than thirty days before or
more than seventy days after the anniversary date, the notice must be delivered
not earlier than the close of business on the 120th day prior to such annual
meeting and not later than the close of business on the later of the 90th day
prior to such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. Therefore, to be timely
under the Company's By-laws, a proposal for the 2006 annual meeting not included
by or at the direction of the Board must be received not earlier than January
10, 2006, nor later than February 9, 2006.
KARL A. STEWART
Secretary
------------------------
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS
AND SCHEDULES THERETO. REQUESTS FOR COPIES OF SUCH REPORT SHOULD BE DIRECTED TO
TIMOTHY R. DONOVAN, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND MANAGING
DIRECTOR-ASIA PACIFIC, 500 NORTH FIELD DRIVE, LAKE FOREST, ILLINOIS 60045.
43
NOTICE OF ANNUAL
MEETING AND
PROXY STATEMENT
-------------------------------------
ANNUAL MEETING
OF STOCKHOLDERS
MAY 10, 2005
TENNECO
AUTOMOTIVE INC.
500 NORTH FIELD DRIVE, LAKE FOREST,
ILLINOIS 60045
(TENNECO AUTOMOTIVE LOGO)
TENNECO AUTOMOTIVE INC.
500 NORTH FIELD DRIVE
LAKE FOREST, ILLINOIS 60045 [TENNECO AUTOMOTIVE LOGO]
April 1, 2005
Dear Benefit Plan Participant:
The Annual Meeting of the Stockholders of Tenneco Automotive Inc. is
scheduled to be held Tuesday, May 10, 2005, at 10:00 a.m., local time, at the
Company's headquarters located at 500 North Field Drive, Lake Forest, Illinois
60045. A Notice and Proxy Statement, which is being sent to all registered
stockholders in connection with the Annual Meeting, is enclosed for your
information.
Also enclosed with this letter is a form of proxy card, which designates
the number of shares held in your benefit plan account. By executing this proxy
card you instruct the benefit plan trustee (the "Trustee") how to vote the
shares of Tenneco Automotive Inc. stock in your account which you are entitled
to vote. The Trustee will vote all shares eligible to be voted by benefit plan
participants in accordance with their instructions.
If you return your form of proxy executed but without furnishing voting
instructions, the eligible shares in your account will be voted by the Trustee,
as holder of record of the shares in your account, FOR the election of the
nominees for director named in the Proxy Statement, FOR the approval of the
appointment of Deloitte & Touche LLP as independent public accountants for 2005,
and in the discretion of the proxies on all other matters as may be properly
brought before the Annual Meeting.
If you do not return your executed form of the proxy to the Trustee, then
your shares can be voted by the Trustee only in accordance with the requirements
of your benefit plan, which may or may not reflect your views.
Your vote is important. Please send your executed form of proxy card with
your voting instructions at your earliest opportunity. For your convenience, a
return envelope is enclosed.
YOUR BENEFITS COMMITTEE
[TENNECO AUTOMOTIVE LOGO]
TENNECO AUTOMOTIVE INC.
Annual Meeting of Stockholders
May 10, 2005
10:00 a.m., local time
Tenneco Automotive
500 North Field Drive
Lake Forest, Illinois 60045
Dear Stockholder:
Tenneco Automotive Inc. encourages you to take advantage of convenient ways by
which you can vote your shares. You can vote your shares electronically through
the Internet or the telephone. This eliminates the need to return the proxy
card.
To vote your shares electronically, please follow the instructions on the
opposite side of this card.
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
YOUR VOTE IS IMPORTANT: THANK YOU FOR VOTING.
-FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL-
--------------------------------------------------------------------------------
PROXY
[TENNECO AUTOMOTIVE LOGO]
TENNECO AUTOMOTIVE INC.
ANNUAL MEETING OF STOCKHOLDERS MAY 10, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby appoint Mark P. Frissora, Paul T. Stecko
and Karl A. Stewart, and any of them, with full power of substitution, as
Proxies to vote, as directed on the reverse side of this card, or, if not so
directed, in accordance with the Board of Directors' recommendations, all shares
of Tenneco Automotive Inc. held of record by the undersigned at the close of
business on March 15, 2005 and entitled to vote at the Annual Meeting of
Stockholders of Tenneco Automotive Inc. to be held at 10:00 a.m., local time,
May 10, 2005, at the Company's headquarters located at 500 North Field Drive,
Lake Forest, Illinois 60045 or at any adjournment or postponement thereof, and
to vote, in their discretion, upon such other matters as may properly come
before the Annual Meeting.
You are encouraged to specify your choices by marking the appropriate
boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxies cannot vote
your shares unless you sign and return this card.
----------------
SEE REVERSE SIDE
----------------
INSTRUCTIONS FOR VOTING YOUR PROXY
Tenneco Automotive Inc. offers shareholders three alternative ways of voting
their proxies:
o BY TELEPHONE (using a touch-tone telephone)
o THROUGH THE INTERNET (using a browser)
o BY MAIL (traditional method)
Your telephone or Internet vote authorizes the Proxies to vote your shares in
the same manner as if you had mailed your proxy card. We encourage you to use
these cost effective and convenient ways of voting, 24 hours a day, 7 days a
week.
TELEPHONE VOTING
o Available only until 3:00 p.m. Eastern Time May 9, 2005.
o Call toll free 1-866-361-3799 on any touch-tone telephone to authorize
the voting of your shares. You may call 24 hours a day, 7 days a week.
You will be prompted to follow simple instructions.
o Your vote will be confirmed and cast as you direct.
INTERNET VOTING
o Available only until 3:00 p.m. Eastern Time May 9, 2005.
o Access the website at HTTPS://WWW.PROXYVOTENOW.COM/TEN to authorize the
voting of your shares. You may access the site 24 hours a day, 7 days a
week. You will be prompted to follow simple instructions.
o You will incur only your usual Internet charges.
VOTING BY MAIL
o Simply sign and date your proxy card and return it in the postage-paid
envelope.
o IF YOU ARE VOTING BY TELEPHONE OR THE INTERNET, PLEASE DO NOT MAIL YOUR
PROXY CARD.
--------------------
CONTROL NUMBER
--------------------
--------------------
PIN NUMBER
--------------------
-FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL-
--------------------------------------------------------------------------------
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2.
1. ELECTION OF DIRECTORS FOR WITHHELD
01) CHARLES W. CRAMB 06) ROGER B. PORTER / / / /
02) TIMOTHY R. DONOVAN 07) DAVID B. PRICE, JR.
03) M. KATHRYN EICKHOFF 08) DENNIS G. SEVERANCE
04) MARK P. FRISSORA 09) PAUL T. STECKO
05) FRANK E. MACHER 10) JANE L. WARNER
For all nominees, except for nominees written below.
Nominee exception(s)
----------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approve appointment of Deloitte & Touche LLP / / / / / /
as independent public accountants for 2005
3. In the discretion of the Proxies named herein, the Proxies are authorized
to vote upon such other matters as may properly come before the meeting
(or any adjournment or postponement thereof).
Dated , 2005
------------------
---------------------------
Signature(s)
---------------------------
Signature(s)
Please sign exactly as name
appears hereon. Joint owners
should each sign. When
signing as attorney,
executor, administrator,
trustee, or guardian, please
give full title as such.