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EXHIBIT 10.8
TENNECO AUTOMOTIVE INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
PLAN DOCUMENT
Effective: November 4, 1999
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TENNECO AUTOMOTIVE INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
Section 1. Establishment and Purpose
1.1 Establishment of the Plan. Tenneco Inc., a Delaware corporation to
be renamed Tenneco Automotive Inc., hereby establishes the "TENNECO AUTOMOTIVE
INC. EXECUTIVE INCENTIVE COMPENSATION PLAN" (The "Plan"), set forth herein,
effective immediately following completion of the spin-off of Tenneco Packaging
Inc. (to be renamed Pactiv Corporation) to the stockholders of Tenneco Inc. on
November 4, 1999 (the "Effective Date").
1.2 Purpose. The objectives of the Plan are to:
(a) Reinforce a results-oriented management culture with executive pay
that varies according to corporate, division, and individual performance against
aggressive goals.
(b) Provide incentives, in the form of substantial reward potential,
for executives to remain employees of the Company.
(c) Focus on business results that include financial measures such as
net income, cash flow, working capital, and economic value added (EVA) with
improvement in quality, safety, environmental, risk management, effective
leadership and equal employment opportunities performance.
(d) De-emphasize fixed compensation in the form of base salary and
place greater emphasis on variable performance-based compensation.
(e) Provide key executives with competitive levels of total current
compensation and incentive earning opportunities commensurate with the results
achieved and individual performance.
(f) Provide plans that are simple and easy to describe and understand.
Section 2. Plan Definitions
(a) COMPANY means Tenneco Automotive Inc. and any successor employer
which adopts the Plan and any subsidiary corporation designated by the Board as
eligible to participate in the Plan; except that when used with reference to
authority under this Plan, Company shall mean Tenneco Automotive Inc.
exclusively.
(b) BOARD means the Board of Directors of the Company.
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(c) COMPENSATION/NOMINATING/GOVERNANCE COMMITTEE or COMMITTEE means
those members of the Compensation/Nominating/Governance Committee of the Board
who are not employees of the Company. This Committee is charged with the overall
responsibility for this Plan.
(d) CORPORATE means the entity which is responsible for the overall
management and staff support functions of the Company.
(e) DIVISION means each operating organizational entity which, through
the conduct of its business, produces revenues for the Company.
(f) EXECUTIVE means a regular, full-time salaried employee of the
Company who is in a position meeting the defined eligibility criteria for
participation in the Plan.
(g) PARTICIPANT means an executive who has been approved for
participation in the Plan.
(h) EFFECTIVE DATE has the meaning set forth in Section 1.1, above.
(i) PLAN YEAR means the calendar year.
(j) SALARY GRADE means the position classification assigned to the
Participant in accordance with the position evaluation system adopted by Tenneco
Automotive Inc. for Plan purposes.
(k) EICP Objectives means the "Target" (Budget) level of financial
objectives (e.g., net income, cash flow, and economic value added (EVA) or other
operating measurements for the Plan Year, assigned annually by the Company to
each Strategic Business Unit (SBU). This represents the expected level of
achievement for the Plan Year. The target goal (budget) for Corporate will be
the Company's consolidated operating measurements.
(l) INDIVIDUAL INCENTIVE TARGET AWARD means the anticipated individual
incentive award to be allocated to a Participant in the event EICP objectives
are met and his/her individual performance is fully satisfactory. The schedule
of individual incentive target awards applicable to the various salary grades
shall be determined by the Company.
Section 3. Eligibility and Participation
3.1 Eligibility and Participation. Eligibility for participation in the
Plan will be limited to those key executives who, by the nature and scope of
their positions, regularly and directly make or influence policy decisions which
significantly impact the overall results or success of the Company. The Company
will receive recommendations for participation from SBU senior leadership and
appropriate Corporate staff officers. Each such nominated executive shall become
a Participant upon being approved by the Company. All such executives approved
for participation shall be notified of their selection as soon as practical
following approval.
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3.2 Cessation of Participation. The Company may withdraw its approval
of an existing position at any time during the Plan Year. Participants whose
employment is terminated during the Plan Year for reasons other than disability,
death, or retirement under a Company retirement plan shall forfeit participation
in the Plan unless otherwise authorized by the Company. At the sole discretion
of the Company, participation may be prorated for participants who become
disabled, die, retire or are assigned to a non-eligible position during the Plan
Year.
Section 4. Fund Generation
4.1 SBU/Corporate Incentive Amounts. Annually, the Company shall
establish SBU and Corporate EICP Objectives (Target/Budget) applicable to each
participating Division. In addition, the Company shall determine for each
participating SBU a target incentive amount equal to the sum of individual
incentive targets. The Company may adjust the target incentive amount during the
Plan Year to accommodate the admission or elimination of Participants to the
Plan and to incorporate adjustments to individual incentive targets of
Participants whose salary grade changes during the Plan Year. SBU and Corporate
incentive funds will be determined based on the budgeted financial objectives
(e.g., net income, cash flow, and EVA) with each weighted to reflect appropriate
emphasis.
The size of the incentive fund applicable to each Division will be determined as
follows:
FINANCIAL OBJECTIVES
A preliminary fund will be established based on performance against
financial objectives from the Annual Operating Plan (AOP).
- Performance on AOP will generate a fund equal to the sum of
individual target awards.
- Performance below AOP will result in a pro-rated incentive fund
as determined by Tenneco Automotive Inc. taking into
consideration the reasons that AOP was not attained.
- Performance above AOP may result in a higher than target level
fund as determined by Tenneco Automotive Inc. taking into
consideration the reasons that AOP was exceeded.
NON-FINANCIAL OBJECTIVES
Quantitative Adjustments
Once the preliminary fund is established, the following
quantitative adjustment factors will be applied to determine a
final incentive fund:
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- Working Capital Performance
- Environmental Performance
- Safety & Health Performance
- Quality Performance
- EEO Performance
Each of these quantitative adjustment factors will be applied a
maximum of 5% for a total increase/decrease to the fund of as much as
25%.
Qualitative Adjustments
The following qualitative adjustment factors for overall leadership
will also be applied:
- Global Market Development
- Customer Satisfaction
- Employee Satisfaction
- Leadership Development (Recruiting/Staffing/Training)
- Operational Considerations (Quality of Earnings)
These qualitative factors will be applied a maximum of 2% for a total
increase/decrease to the fund as much as 10%.
4.2 Committee Authority. The Committee shall have the right at any time
in its sole discretion to modify, eliminate or withdraw for such period or
periods as it may determine, the incentive amounts, in part or in whole, to be
made available under this Section 4 for payment of awards to any or all
participating Corporate or SBU entities or any Participant or Participants
hereunder.
Section 5. Determination of Individual Awards
5.1 Determination of Individual Awards. Annually, the Committee shall
determine the Salary Grade applicable to the Chairman and CEO of the Company and
the Company shall determine the Salary Grade applicable to all other
Participants. Each Participant's individual incentive target award will be
determined by the Company.
5.2 Determination of Individual Incentive Awards. Actual individual
awards to be paid to Participants will vary above or below the assigned
individual incentive target awards dependent upon each individual's performance
in accordance with guidelines prescribed by the Company. The actual award to a
Participant must be approved by both the Company and the Committee (or only the
Committee for awards applicable to the Chairman and President of the Company)
and shall not exceed 100% of the Participant's annual base salary without
approval of the Committee.
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Section 6. Form of Timing of Awards
The actual awards to be paid to Participants in accordance with Section
5.2 shall be paid in cash as soon as practical once final operating performance
is available.
Section 7. Administration
This Plan shall be administered by the Company in accordance with rules
that may be established from time to time by the
Compensation/Nominating/Governance Committee. The determination of the Company
as to any disputed question arising under this Plan, including any question of
construction or interpretation, shall be final, binding, and conclusive upon all
persons.
Section 8. Amendment and Termination
The Committee, in its absolute discretion and without notice, may at
any time and from time to time modify or amend, in whole or in part, any or all
of the provisions of this Plan, or suspend or terminate it entirely.
Section 9. Applicable Laws
This Plan shall be construed, administered and governed in all respects
under and by the laws of the State of Illinois.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed on
its behalf by its respective officers thereunder duly authorized, on this day
and year set forth below.
TENNECO INC.
(TO BE RENAMED
TENNECO AUTOMOTIVE INC.)
Date: November 4, 1999 /s/ Richard P. Schneider
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By: Richard P. Schneider
Its: SVP-Global Administration
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