1
Exhibit 10.4
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 Automotive Inc. (formerly
known as Tenneco Inc.) and its subsidiaries and affiliates (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 the "Deferred Amounts." Once received by the Committee,
a Deferral Election cannot be revoked.
(b) Directors who are not employees of Automotive 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
2
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 Automotive, 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.
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 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.
-2-
3
(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 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.
-3-
4
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.
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.
-4-
5
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 effective date of this Plan is the date on which the stock of the Tenneco
Packaging Inc. is distributed to the shareholders of Tenneco Inc.
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.
Date: ________________________ ________________________________
By: ____________________________
Its: ___________________________
-5-