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EXHIBIT 10.12
TENNECO AUTOMOTIVE INC. DEFERRED COMPENSATION PLAN
1. PURPOSE
The purpose of the Plan is to provide to directors and a select group of
management or highly compensated employees of Tenneco Inc., a Delaware
corporation to be renamed Tenneco Automotive Inc., and its subsidiaries and
affiliates after giving effect to the "Spin-off" defined below (hereinafter
collectively referred to as the "Company") an opportunity to defer compensation
received by them from the Company in accordance with the terms and conditions
set forth herein.
2. ADOPTION AND ADMINISTRATION
The Plan shall be administered by the Compensation / Nominating / Governance
Committee of the Board of Directors of the Company (the "Committee"). The
Committee shall have sole and complete authority and discretion to interpret the
terms and provisions of the Plan and to adopt, alter and repeal such
administrative rules, regulations and practices governing the operation of the
Plan, and to determine facts under the Plan as it shall from time to time deem
advisable.
3. ELIGIBILITY
Directors and U.S. paid participants in the Company's Executive Incentive
Compensation Plan shall be eligible to participate in the Plan.
Any person who had an account balance in the Tenneco Inc. Deferred Compensation
Plan (or the Deferred Compensation Plan for Directors of Tenneco Inc.) as of the
date (the "Distribution Date") on which the stock of Tenneco Packaging Inc. was
distributed to the shareholders of the Company and whose account balance was
allocated to the Company under the Human Resources Agreement between the Company
and Tenneco Packaging Inc. (the "Agreement") shall participate in this Plan.
Persons eligible to participate in the Plan shall be referred to as
"Participant" or "Participants" as the case may be.
4. ELECTION TO DEFER
(a) A Participant may elect in writing to defer receipt of all or a
specified portion of his or her bonuses or incentive compensation
to be received during a calendar year ("Deferral Election");
provided, however, that any election by a Participant who is
subject to the reporting and short swing profits liability
provisions of Section 16 of the Securities and Exchange Act of
1934, as amended, including an election relating to the form of
distribution or to defer income into an "Automotive stock index
account" pursuant to Section 6 of the Plan, shall not be
effective until such election and the transactions contemplated
thereby shall have been specifically approved by the Committee to
the extent such approval is required to avoid liability under
Section 16 of the Securities and Exchange Act of 1934 and the
regulations thereunder. Amounts deferred under the Plan shall be
referred to as
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the "Deferred Amounts." Once received by the Committee, a
Deferral Election cannot be revoked.
(b) Directors who are not employees of the Company or its
subsidiaries (hereinafter referred to as "Outside Directors")
will receive as part of their compensation for service on the
Company's Board of Directors sixty (60) percent of their annual
retainer fee in the form of credits deferred subject to the terms
of this Plan in the Automotive stock index account with stock
settlement.
(c) Except as provided in this Section 4(c), a Deferral Election must
be made prior to September 30 of the calendar year in which the
bonus, incentive compensation or retainer fee will be awarded. A
Participant must make a separate Deferral Election with respect
to each calendar year of participation in the Plan. A new
Participant in the Plan shall have 30 days following his or her
notification by the Committee of his or her eligibility to
participate in the Plan to make a Deferral Election with respect
to bonus or incentive compensation to be awarded within that
calendar year.
(d) As specified by the Participant in a Deferral Election, the
period of deferral shall be until the Participant dies,
terminates employment with the Company, or until a specific date
selected by the Participant in the Deferral Election.
5. ESTABLISHMENT OF DEFERRED COMPENSATION ACCOUNT
At the time of a Participant's initial Deferral Election, the Company shall
establish a memorandum account (a "Deferred Compensation Account") for such
Participant on its books. The Deferred Amount shall be credited to the
Participant's Deferred Compensation Account as of the day on which the
Participant would otherwise be entitled to receive the bonus or incentive
compensation. Any required withholding for taxes (e.g. Social Security taxes) on
the Deferred Amount shall be made from other compensation of the Participant.
Adjustments as provided below, shall be made to the Participant's Deferred
Compensation Account.
6. ADJUSTMENTS TO DEFERRED AMOUNTS
The Committee shall credit the balance of the Participant's Deferred
Compensation Account with an earnings factor. The earnings factor will equal the
amount the Participant's Deferred Compensation Account would have earned if it
had been invested in the investment options listed below. The Participant is
permitted to select the investment option used to determine the earnings factor
and may change the selection at any time. The Participant may choose more than
one investment option in increments of at least one (1) percent. The Company
reserves the right to change or amend any of the investment options at any time.
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The investment options used to determine the earnings factor are:
(a) The prime rate of interest as reported by The Chase Manhattan
Bank at the first day of each calendar month.
(b) Automotive stock index account -- amount of deferral will be
invested in Tenneco Automotive Inc. stock equivalent unit
account. Any investment in this account will be measured
solely by the performance of the Company's common stock
(including dividends that will be reinvested). Cash settlement
or stock settlement.
(c) The return for selected Mutual Funds currently offered in the
Company's qualified thrift plan for salaried employees:
(1) Fidelity Growth Company Fund
(2) Barclays U.S. Debt Index Fund (Bond)
(3) Barclays Daily Equity Index Fund
The Company is under no obligation to acquire or provide any of the investments
designated by a Participant, and any investments actually made by the Company
will be made solely in its name and will remain its property.
The crediting of an earnings factor shall occur so long as there is a balance in
the Participant's Deferred Compensation Account regardless of whether the
Participant has terminated employment.
7. PAYMENT OF DEFERRED AMOUNTS
(a) Except as otherwise provided in subsection (b) or (c) below, a
Participant's Deferred Amount shall be paid, or commence to be
paid, to the Participant, or the Participant's beneficiary, as
soon as practicable after:
(i) the Participant's death,
(ii) the termination of the Participant's employment or
service as a director, or
(iii) the date specified in the applicable Deferral Election
made by the Participant.
In the event of the Participant's death, payment of the
balance in the Participant's Deferred Compensation Account
shall be made, either (i) in a lump sum or (ii) in a number of
annual installments, not to exceed five, as soon as
administratively feasible to the Participant's designated
beneficiary, or if none, to the Participant's estate.
(b) The Participant may elect to receive payment of the balance of
his or her Deferred Compensation Account either (i) in a lump
sum upon termination or (ii) in a single payment at a
specified date prior to termination or (iii) in a number of
post
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termination annual installments, not to exceed five, as the
Participant shall elect. The distribution election must be
made at least one year before the Deferred Amount is payable
and must be approved by the Committee. If no election is
made, a lump sum payment will be made upon the Participant's
termination.
(c) Anything contained in this Section 7 to the contrary
notwithstanding, in the event a Participant incurs a severe
financial hardship, the Committee, in its sole discretion and
upon written application of such Participant, may direct
immediate payment of all or a portion of the then current
value of such Participant's Deferred Compensation Account;
provided that such payment shall in no event exceed the amount
necessary to alleviate such financial hardship; and provided
further that in the case of such payment, the Participant's
Deferred Compensation Account shall be reduced by 110% of the
amount of such payment.
8. PARTICIPANT REPORTS
The Committee shall provide a statement to the Participant quarterly concerning
the status of his or her Deferred Compensation Account.
9. TRANSFERABILITY OF INTERESTS
During the period of deferral, all Deferred Amounts shall be considered as
general assets of the Company for use as it deems necessary and shall be subject
to the claims of its creditors.
The rights and interests of a Participant during the period of deferral shall be
those of a general unsecured creditor except that such Participant's rights and
interests may not be reached by the creditors of the Participant or the
Participant's beneficiary, or anticipated, assigned, pledged, transferred or
otherwise encumbered except in the event of the death of the Participant, and
then only by will or the laws of descent and distribution.
10. AMENDMENT, SUSPENSION AND TERMINATION
The Company at any time may amend, suspend or terminate the Plan or any portion
thereof in such manner and to such extent as it may deem advisable and in its
best interests. No amendment, suspension and termination shall reduce the amount
then credited to a Participant's Deferred Compensation Account.
11. UNFUNDED OBLIGATION
The Plan shall not be funded; no trust, escrow or other provisions shall be
established to secure payments due under the Plan; and the Plan shall be
regarded as unfunded for purposes of the Employee Retirement Income Security Act
of 1974, as amended, and the Internal Revenue Code. A Participant shall be
treated as a general, unsecured creditor at all times under the Plan, and shall
have no rights to any specific assets of the Company. All amounts credited to
the memorandum accounts of the Participants will remain general assets of the
Company and shall be payable solely from the general assets of the Company.
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12. NO RIGHT TO EMPLOYMENT OR OTHER BENEFITS
Nothing contained herein shall be construed as conferring upon any Participant
the right to continue in the employ of the Company. Any compensation deferred
and any payments made under this Plan shall not be included in creditable
compensation in computing benefits under any employee benefit plan of the
Company except to the extent expressly provided therein.
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13. DISPUTE RESOLUTION
By participating in the Plan, the Participant agrees that any dispute arising
under the Plan shall be resolved by binding arbitration in Lake Forest, Illinois
under the rules of the American Arbitration Association and that there will be
no remedy besides the disputed deferred compensation amount in issue.
14. EFFECTIVE DATE
The Plan shall be effective immediately following completion of the distribution
of the stock of Tenneco Packaging Inc. (to be renamed Pactiv Corporation) to the
Company's stockholders (the "Spin-off").
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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