-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QbW+GcZBcnTi3ojvg/D6vMMQtdzzUK/4PjRHVXrvvc/X6FwUgkDOrYFzmN6C8A+k Y8WztYZetSzNWxoZP0Bx5w== 0000950129-96-003577.txt : 19961231 0000950129-96-003577.hdr.sgml : 19961231 ACCESSION NUMBER: 0000950129-96-003577 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19961226 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961226 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TENNESSEE GAS PIPELINE CO CENTRAL INDEX KEY: 0000097142 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 741056569 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04101 FILM NUMBER: 96686473 BUSINESS ADDRESS: STREET 1: TENNECO BLDG STREET 2: 1010 MILAM STREET CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7137572131 MAIL ADDRESS: STREET 1: 1010 MILAM ST CITY: HOUSTON STATE: TX ZIP: 77002 FORMER COMPANY: FORMER CONFORMED NAME: TENNECO INC DATE OF NAME CHANGE: 19871227 FORMER COMPANY: FORMER CONFORMED NAME: TENNESSEE GAS TRANSMISSION CO DATE OF NAME CHANGE: 19680411 8-K 1 TENNESSEE GAS PIPELINE CO. - DATED 12/26/96 1 - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: December 26, 1996 (Date of Earliest Event Reported: December 11, 1996) TENNESSEE GAS PIPELINE COMPANY (Exact Name of Registrant as Specified in the Charter) Delaware (State or Other Jurisdiction of Incorporation) 1-4101 74-1056569 (Commission File Number No.) (I.R.S. Employer Identification No.) El Paso Energy Building 1001 Louisiana 77002 Houston, Texas (Zip Code) (Address of Principal Executive Offices) (713) 757-2131 (Registrant's Telephone Number, Including Area Code) 1010 Milam Houston, Texas 77002 (former address, if changed since last report.) - ------------------------------------------------------------------------------- 1 2 the effective time of the Merger under a $3 billion Revolving Credit and Competitive Advance Facility Agreement, dated as of November 4, 1996 (the "Credit Agreement"), among Old Tenneco, the banks and other financial institutions party thereto and The Chase Manhattan Bank, as agent), and (3) $300 million of Old Tenneco preferred stock; o the issuance of approximately 18.83 million shares of common stock of El Paso valued at approximately $914 million, based on a closing price per of common stock share on the New York Stock Exchange ("NYSE") of $48.625 on December 19, 1996, to Old Tenneco's then existing common and preferred stockholders; and o the retention of approximately $600 million of estimated assumed liabilities related to certain discontinued businesses of Old Tenneco. The number of shares of El Paso's common stock issued in the Merger to shareholders of Old Tenneco was determined pursuant to formulas set forth in the Merger Agreement. In the Merger, (i) holder of Old Tenneco's common stock received .093 of a share of El Paso's common stock for each share of Tenneco common stock, (ii) a holder of Old Tenneco's $7.40 Cumulative Preferred Stock received 2.365 shares of El Paso's common stock for each such share of $7.40 Cumulative Preferred Stock, and (iii) a holder of Old Tenneco's $4.50 Cumulative Preferred Stock received 2.365 shares of El Paso's common stock for each such share of $4.50 Cumulative Preferred Stock. As a result of the Merger, El Paso indirectly owns 100% of the common equity and approximately 75% of the combined equity value of El Paso Tennessee. Currently, approximately $300 million of preferred stock issued in a public offering by Old Tenneco on November 18, 1996 remains outstanding. The holders of such preferred stock have the right to elect one-sixth of the board of directors of El Paso Tennessee. El Paso currently is engaged in a comprehensive review of the business and operations of Tenneco Energy. Following the completion of such review, El Paso intends to integrate, for the most part, the operations of Tenneco Energy with those of El Paso to increase operating and administrative efficiency through consolidation and reengineering of facilities, workforce reductions and coordination of purchasing, sales and marketing activities. El Paso anticipates that the complementary interstate and intrastate pipeline operations and gas marketing activities of El Paso and Tenneco Energy should provide the combined company with increased operating flexibility and access to additional customers and markets. Prior to the Merger, Old Tenneco and its subsidiaries (including TGP) effected various intercompany transfers and distributions which restructured, divided and separated their businesses, assets and liabilities so that all the assets, liabilities and operations related to their automotive parts, packaging and administrative services businesses (collectively, the "Industrial Business") and their shipbuilding business (the "Shipbuilding Business") were spun-off to Old Tenneco's then existing common stockholders (the "Distributions"). The -2- 3 Distributions were effected on December 11, 1996 pursuant to the Distribution Agreement dated as of November 1, 1996 (as amended, the "Distribution Agreement"), among Old Tenneco, New Tenneco and Newport News Shipbuilding Inc. ("Newport News"), which Distribution Agreement is filed as an exhibit to this Current Report on Form 8-K and incorporated herein by reference. Following the Distributions, the remaining operations of Old Tenneco consisted primarily of those operations related to the transmission and marketing of natural gas. In connection with the Distributions, certain assets of TGP relating to the Industrial Business were transferred from TGP to New Tenneco. In connection with the Distribution, Old Tenneco's Board of Directors declared a special distribution consisting of all of the capital stock of (i) New Tenneco (now known as Tenneco Inc.), a newly formed, wholly owned subsidiary of Old Tenneco which held the Industrial Business, and (ii) Newport News, a newly formed, wholly owned subsidiary of Old Tenneco which held the Shipbuilding Business. In connection with the Distributions, certain assets of TGP were transferred from TGP to New Tenneco. The shares of common stock of New Tenneco and Newport News were distributed to holders of record of Old Tenneco's common stock on the distribution record date, December 11, 1996, without any consideration being paid by such holders, on the basis of (i) one share of common stock of New Tenneco for every share of common stock of Old Tenneco and (ii) one share of common stock of Newport News for every five shares of common stock of Old Tenneco. No certificates or scrip representing fractional shares of Newport News common stock were issued in the Distributions. Holders of Old Tenneco common stock who would be entitled to receive fractional shares of common stock of Newport News received cash in the Distributions, in lieu of such fractional shares, derived from the sale of such fractional shares on the open market. The reorganization of Old Tenneco, including the Merger and the Distributions, were approved by the shareholders of Old Tenneco at a special meeting of shareholders on December 10, 1996. The issuance of common stock of El Paso in the Merger was approved by El Paso Shareholders on December 9, 1996. -3- 4 approved by the shareholders of El Paso at a special meeting of shareholders on December 9, 1996. Although the separation of the Industrial Business from the remainder of the businesses, operations and companies constituting the Tenneco Group prior to the Merger has been structured as a "spin-off" of New Tenneco and Newport News for legal, tax and other reasons, New Tenneco will succeed to certain important aspects of the former Tenneco business, organization and affairs, namely: (i) New Tenneco has been renamed "Tenneco Inc." subsequent to the consummation of the Merger; (ii) New Tenneco is headquartered at Tenneco's current headquarters in Greenwich, Connecticut; (iii) New Tenneco's Board of Directors consist of those persons previously constituting the former Tenneco Board of Directors prior to the Merger; (iv) New Tenneco's executive management consist substantially of the Tenneco executive management; and (v) the Industrial Business to be conducted by New Tenneco will consist largely of Tenneco Automotive and Tenneco Packaging, which combined represent over half of the assets, revenues and operating income of the businesses, operations and companies constituting the Tenneco Group. Consequently, New Tenneco will reflect the Newport News business and the energy businesses which were merged with El Paso as discontinued operations in its financial statements. Additionally, the Company will reflect the financial position and results of operations of the acquired energy businesses on a separate and stand alone basis in its historical financial statements. The directors and executive officers of TGP prior to the Merger resigned and, upon consummation of the Merger, the following persons became the directors and executive officers of TGP: NAME AGE POSITION ---- --- -------- William A. Wise . . . . . . . 51 Chairman of the Board, President and Chief Executive Officer H. Brent Austin . . . . . . . 42 Senior Vice President, Chief Financial Officer and Director Joel Richards III . . . . . . 49 Senior Vice President and Director Britton White, Jr.. . . . . . 53 Senior Vice President, General Counsel and Director Jeffrey I. Beason . . . . . . 47 Vice President, Treasurer, Controller and Director Executive Officers and Directors WILLIAM A. WISE--Upon consummation of the Merger, Mr. Wise will become the Chairman of the Board, President and Chief Executive Officer of Tenneco. Mr. Wise has been Chairman of the Board of El Paso since January 1994 and the President and Chief Executive Officer of El Paso since January 1990. He was President and Chief Operating Officer of El Paso from April 1989 to December 1989. From March 1987 until April 1989, Mr. Wise was an Executive Vice President of El Paso. From January 1984 to February 1987, he was a Senior Vice President of El Paso. He is a member of the Board of Directors of Battle Mountain Gold Company. H. BRENT AUSTIN--Upon consummation of the Merger, Mr. Austin will become the Senior Vice President, Chief Financial Officer and a Director of Tenneco. Mr. Austin has been Executive Vice President of El Paso since May 1995 and he has been Chief Financial Officer of El Paso since April 1992. He was Senior Vice President of El Paso from April 1992 to April 1995. He was Vice President, Planning and Treasurer of Burlington Resources Inc. ("BR") from November 1990 to March 1992 and Assistant Vice President, Planning of BR from January 1989 to October 1990. JOEL RICHARDS III--Upon consummation of the Merger, Mr. Richards will become the Senior Vice President and a Director of Tenneco. Mr. Richards has been Senior Vice President of El Paso since January 1991 and he was Vice President from June 1990 to December 1990. He was Senior Vice President, Finance and Human Resources of Meridian Minerals Company, a wholly owned subsidiary of BR, from October 1988 to June 1990. BRITTON WHITE, JR.--Upon consummation of the Merger, Mr. White will become the Senior Vice President, General Counsel and a Director of Tenneco. Mr. White has been Senior Vice President and General Counsel of El Paso since March 1991 and from March 1991 to April 1992, he was also Corporate Secretary of El Paso. For more than five years prior to that time, Mr. White was a partner in the law firm of Holland & Hart. As described above, Old Tenneco entered into the Credit Agreement under which a syndicate of banks and other financial institutions (the "Lenders") committed to provide up to $3 billion of financing to Old Tenneco on an unsecured basis. Chase Securities Inc. arranged the Credit Agreement and The Chase Manhattan Bank is acting as agent for the Lenders. A list of the Lenders is set forth on Exhibit 99.1 which is incorporated herein by reference. The Credit Agreement consists of a 364-day revolving credit facility, with a two-year term thereafter, the proceeds of which were used to effect the Debt Realignment (as defined and as described in the Merger Agreement) and for other general corporate purposes, and is guaranteed by El Paso. The borrowings under the Credit Agreement will mature in November 1999. Borrowings under the Credit Agreement will bear interest at a rate per annum equal to, at the borrowers' option, either (a) the highest of (i) the rate from time to time publicly announced by The Chase Manhattan Bank in New York City as its prime rate, and (ii) the federal funds effective rate from time to time plus 1/2 of 1%, plus in each case, the Applicable Margin (as defined), or (b) the average of the rates at which eurodollar deposits for one, two, three or six months or, subject to availability to each lender, nine or 12 months (as selected by the borrowers) are offered in the interbank eurodollar market in the approximate amount of the relevant loan, plus the Applicable Margin. -4- 5 The "Applicable Margin" will be based on El Paso's senior long-term debt rating, as determined from time to time, or if El Paso's debt is not rated, each rating agency will be assumed to have assigned its lowest rating. At December 26, 1996, the outstanding loans under the Credit Agreement bore a weighted average interest rate of 5.94% per annum. The Credit Agreement requires that El Paso's ratio of total indebtedness to total indebtedness plus net worth not exceed 70%. Failure to satisfy the foregoing minimum requirement will be a default under the Credit Agreement that will enable the Lenders to refuse to loan funds to El Paso TGP and to accelerate the indebtedness thereunder. The Credit Agreement also imposes prohibitions or limitations on liens (other than agreed permitted liens), subsidiary indebtedness and guarantee obligations, and asset dispositions (with certain permitted exceptions), among others. The Credit Agreement contains certain default provisions, including, among other things, (i) nonpayment of any amount due to the lenders under the Credit Agreement, (ii) material breach of representations and warranties, (iii) default in the performance of covenants, (iv) bankruptcy or insolvency, (v) cross-default with respect to indebtedness for borrowed money and related guaranty obligations in excess of $100 million, and (vi) a judgment suffered by El Paso in excess of $50 million not covered by insurance and which judgment shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days. 6 Item 5. Other Events. El Paso announced on December 23, 1996 that it reached a settlement that resolves its gas purchase contract disputes with KCS Energy Inc. Attached as an Exhibit 99.2 to this Current Report on Form 8-K and incorporated by reference herein is a press release related to such settlement. Item 7. Financial Statements and Exhibits. (b) Pro forma financial information: 7 TENNESSEE GAS PIPELINE COMPANY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF TENNESSEE The following Unaudited Pro Forma Consolidated Financial Statements of TGP (the "Pro Forma Financial Statements") illustrate the effect of: the Corporate Restructuring Transactions, the Cash Realignment and Debt Realignment. The Unaudited Pro Forma Consolidated Balance Sheet has been prepared as if such transactions occurred on September 30, 1996; the Unaudited Pro Forma Consolidated Statements of Income have been prepared as if such transactions occurred as of January 1, 1995. Capitalized terms used herein shall have the respective meanings set forth in the Merger Agreement or the Distribution Agreement unless otherwise defined herein. Pursuant to the Corporate Restructuring Transactions, Tenneco Inc. transferred to TGP certain of its directly owned assets and liabilities, and the assets and liabilities of certain of its subsidiaries, which were not historically part of TGP. Subsequent to the Corporate Restructuring Transactions, the only assets directly held by Tenneco Inc. were its investment in TGP common stock and certain cash balances, and Tenneco Inc.'s only directly held liabilities were borrowings under the Tenneco Credit Facility, Tenneco Inc. public debt securities which were not redeemed or exchanged, respectively, pursuant to the Debt Realignment, and certain intercompany notes and advances payable. The Corporate Restructuring Transactions represent a reorganization of companies, assets and liabilities under common control and, accordingly, the transfers of assets and liabilities pursuant to the Corporate Restructuring Transactions have been accounted for at historical cost. El Paso's acquisition of Tenneco, and Tenneco Inc.'s ownership in Tennessee, will be accounted for under the purchase method and the purchase price adjustments will be reflected in the separate consolidated financial statements of Tennessee. A final determination of required purchase accounting adjustments, including the allocation of the purchase price to the assets acquired and liabilities assumed based on their respective fair values, has not yet been made. Accordingly, the purchase accounting adjustments made in connection with the development of the Pro Forma Financial Statements are preliminary and have been made solely for purposes of developing the pro forma consolidated financial information. However, El Paso's management believes that the pro forma adjustments and the underlying assumptions reasonably present the significant effects of the Merger and the Refinancing Transactions. In addition, El Paso will undertake a study to determine the fair value of Tennessee's assets and liabilities and will revise purchase accounting adjustments upon completion of that study. The actual financial position and results of operations of Tennessee will differ, perhaps significantly, from the pro forma amounts reflected herein because of a variety of factors, including access to additional information, changes in value and changes in operating results between the dates of the pro forma financial information and the date on which purchase accounting adjustments are finalized. The Pro Forma Financial Statements are not necessarily indicative of actual operating results or financial position had the transactions reflected therein occurred as of the dates indicated above, nor do they purport to indicate operating results or financial position which may be attained in the future. 106 8 TENNESSEE GAS PIPELINE COMPANY UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1996 (MILLIONS)
PRE-MERGER PRO FORMA PRO FORMA MERGER ------------------------------------------------- ------------------------------ CONSOLIDATED RESTRUCTURING TGP MERGER AND CONSOLIDATED TGP AND AS REFINANCING TGP HISTORICAL REALIGNMENT ADJUSTED TRANSACTIONS PRO FORMA ----------- ------------ -------- ------------ ------------ ASSETS Current assets: Cash and temporary investments..... $ 114 $ (114)(c) $ -- $ -- $ -- Receivables........................ 1,914 (1,075)(b) 839 839 Notes receivable from Tenneco...... 2,419 (979)(b) 1,440 1,440 Inventories........................ 1,209 (1,184)(b) 25 25 Other current assets................ 363 (245)(b) 118 118 ------- ------- ------ ------- ------ Total current assets............ 6,019 (3,597) 2,422 -- 2,422 ------- ------- ------ ------- ------ Net property, plant and equipment..... 6,490 (3,557)(b) 2,933 1,720 (e) 4,073 (580)(g) Goodwill and intangibles.............. 1,305 (1,257)(b) 48 48 Other assets and deferred charges..... 1,744 (832)(b) 912 (590)(d) 402 80 (g) ------- ------- ------ ------- ------ Total assets................... $15,558 $(9,243) $6,315 $ 630 $6,945 ======= ======= ====== ======= ====== LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities: Short-term debt.................. $ 342 $ (281)(a) $ 52 $ $ 52 (9)(b) Payables......................... 1,222 (869)(b) 353 353 Other current liabilities........ 1,202 (768)(b) 424 424 (10)(a) ------- ------- ------ ------- ------ Total current liabilities..... 2,766 (1,937) 829 829 ------- ------- ------ ------- ------ Long-term debt...................... 244 (196)(a) 48 48 Other liabilities and deferred credits.......................... 1,130 (562)(b) 568 151 (d) 719 Deferred income taxes............... 962 (539)(b) 423 382 (f) 805 ------- ------- ------ ------- ------ 5,102 (3,234) 1,868 533 2,401 ------- ------- ------ ------- ------ Minority interest................... 479 (479)(b) -- -- -- ------- ------- ------ ------- ------ Stockholder's equity Common Stock and paid-in capital....................... 4,906 4,906 1,720 (e) 4,544 (741)(d) (382)(f) (500)(g) Cumulative translation (459)(h) adjustments................... 18 (18)(b) -- -- Retained earnings (accumulated deficit)...................... 5,053 (5,885)(b) (459) 459 (h) -- 487 (a) (114)(c) ------- ------- ------ ------- ------ Total liabilities and stockholder's equity....... $15,558 $(9,243) $6,315 $ 630 $6,945 ======= ======= ====== ======= ======
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet. 107 9 TENNESSEE GAS PIPELINE COMPANY NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET RESTRUCTURING AND REALIGNMENT: (a) To reflect the restructuring and realignment of the TGP debt pursuant to the Corporate Restructuring Transactions, the Debt Realignment and the applicable provisions of the Merger Agreement, and the assumed payment of accrued interest on the TGP debt defeased, redeemed or tendered as part of the Debt Realignment. (b) To reflect the capitalization or settlement of certain intercompany receivables and payables, the distribution of the Industrial Business and Shipbuilding Business assets and liabilities held by TGP pursuant to the Corporate Restructuring Transactions and the transfer to TGP of certain directly held assets and liabilities of Tenneco Inc., and other Tenneco Inc. subsidiaries, as part of the Corporate Restructuring Transactions. (c) To reflect distribution to Tenneco of all TGP cash pursuant to the Cash Realignment provisions of the Merger Agreement and Distribution Agreement. MERGER AND REFINANCING TRANSACTIONS: (d) To reflect the preliminary estimated acquisition adjustments under the purchase method of accounting, which will be reflected in the separate financial statements of TGP to record assets acquired and liabilities assumed at estimated fair value for: (i) reduction of certain other assets, deferred charges and regulatory assets; (ii) the revision of benefit plan assumptions relating to the retiree medical plan obligation; and (iii) adjustments related to other employee benefit costs and environmental costs. The following adjustments reflect El Paso management's intended business strategies which may differ from the business strategies employed by Tenneco management prior to the Merger (in millions): Other assets and deferred charges.................... $590 Other liabilities and deferred credits............... 151 ---- $741 ====
(e) To reflect the allocation to property, plant and equipment of the $1,720 million excess purchase price of the Merger, which will be reflected in the separate financial statements of TGP. The allocation of excess purchase price reflects El Paso's internal evaluation and is subject to the completion of an independent appraisal of the fair value of the property acquired. It is not expected that any excess purchase price allocated to property, plant and equipment will be allowed for regulatory purposes or recovery through rates. Should the independent appraisal not support such allocation to property, plant and equipment, the excess of total purchase price over the fair value of the net assets acquired will be reflected as goodwill. (f) To reflect the increase in deferred income taxes of $382 million which have been provided for temporary differences after the allocation of the pro forma purchase price and acquisition adjustments. The following pro forma adjustments were required for estimated book and tax basis differences resulting from the allocation of the pro forma purchase price, at an assumed statutory tax rate of 39% (in millions): Property, plant and equipment........................ $ 671 Other assets......................................... (230) Other liabilities.................................... (59) ---- $ 382 ====
(g) To reflect the assumed monetization of $500 million of assets through sales or project financings, at book value, and to reflect TGP's remaining $80 million investment in certain Australian projects using the equity method. The proceeds from these transactions are assumed to be distributed to Tenneco as a capital distribution. (h) To reflect the capitalization of the pre-merger "Tennessee as adjusted" accumulated equity. 10 TENNESSEE GAS PIPELINE COMPANY UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (MILLIONS)
PRE-MERGER PRO FORMA PRO FORMA MERGER ------------------------------------------ ----------------------------- CONSOLIDATED RESTRUCTURING TGP MERGER AND CONSOLIDATED TGP AND AS REFINANCING TGP HISTORICAL REALIGNMENT ADJUSTED TRANSACTIONS PRO FORMA ------------ ------------- --------- ------------ ------------ Revenues................................... $ 8,228 $ (6,231)(b) $ 1,997 $ (36)(e) $ 1,961 Operating costs and expenses............... 7,418 (5,604)(b) 1,814 32 (c) 1,821 6 (d) (31)(e) --------- ---------- -------- --------- --------- Operating Income......................... 810 (627) 183 (43) 140 Other (income) expense, net: Interest (income), affiliated companies.. (241) 42 (b) (199) (199) Other (income) expense, net.............. (184) 60 (b) (124) (124) Interest expense: Affiliated companies..................... 113 (48)(b) 65 65 Other.................................... 68 (28)(a) 40 (3)(e) 37 --------- ---------- -------- --------- --------- Income before income taxes and minority interest...................... 1,054 (653) 401 (40) 361 Provision for income taxes................. 388 11 (a) 152 (1)(e) 135 (247)(b) (16)(f) Minority interest.......................... 24 (24)(b) -- -- --------- ---------- -------- --------- --------- Net income from continuing operations.... $ 642 $ (393) $ 249 $ (23) $ 226 ========= ========== ======== ========= =========
See accompanying Notes to Unaudited Pro Forma Consolidated Income Statements. 109 11 TENNESSEE GAS PIPELINE COMPANY UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1995 (MILLIONS)
PRE-MERGER PRO FORMA PRO FORMA MERGER --------------------------------------------------- ------------------------------ CONSOLIDATED RESTRUCTURING TGP MERGER AND CONSOLIDATED TGP AND AS REFINANCING TGP HISTORICAL REALIGNMENT ADJUSTED TRANSACTIONS PRO FORMA ------------ ------------- ---------- ------------- ------------ Revenues . . . . . . . . . . . $8,840 $(6,919)(b) $1,921 $(47)(e) $1,874 43 (c) Operating costs and (41)(e) expenses . . . . . . . . . . 7,837 (6,087)(b) 1,750 8 (d) 1,760 ------ ------- ------ ---- ------ Operating Income . . . . . . 1,003 (832) 171 (57) 114 Other (income) expense, net: Interest (income), affiliated companies . . . . . . . . . (360) 64 (b) (296) (296) Other (income) expense, net . . . . . . . . . . . . (203) 97 (b) (106) (106) Interest expense: Affiliated companies . . . . 155 (67)(b) 88 88 Other . . . . . . . . . . . . 132 (121)(a) 11 (4)(e) 15 ------ ------- ------ ---- ------ Income before income taxes and minority interest . . . 1,279 (805) 474 (61) 413 Provision for income taxes . . 478 47 (a) 107 (3)(e) 83 (418)(b) (21)(f) Minority interest . . . . . . 33 (33)(b) -- -- ------ ------- ------ ---- ------ Net income from continuing operations . . . . . . . . . $ 768 $ (401) $ 367 $(37) $ 330 ====== ======= ====== ==== ======
See accompanying Notes to Unaudited Pro Forma Consolidated Income Statements. 110 12 TENNESSEE GAS PIPELINE COMPANY NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENTS RESTRUCTURING AND REALIGNMENT: (a) To reflect the effect on interest expense for the restructuring and realignment of Tennessee debt pursuant to the Debt Realignment and the applicable provisions of the Merger Agreement, and the related effect on the provision for income taxes at an assumed effective tax rate of 39%. (b) To reflect effect on TGP's results of operations for the distribution of the Industrial Business and Shipbuilding Business operations held by TGP, and other transactions, pursuant to the Corporate Restructuring Transactions. MERGER AND REFINANCING TRANSACTIONS: (c) To reflect depreciation expense related to the increase in estimated fair value of property, plant and equipment, depreciated over a 40-year period which approximates the FERC approved depreciation rate for the regulated property, plant and equipment of TGP prospectively. (d) To reflect the assumed pro forma postretirement benefit cost for Tennessee employees. (e) To remove the historical operating results of TGP's exploration and production business which is assumed to be disposed of at book value. (f) To reflect the income tax expense effects of pro forma adjustments at an assumed effective tax rate of 39%. 111 13 (c) Exhibits: See the Exhibit Index following the signature page of this Current Report on Form 8-K, which is incorporated by reference herein. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TENNESSEE GAS PIPELINE COMPANY (Registrant) By /s/ H. BRENT AUSTIN ------------------------------ H. Brent Austin Senior Vice President Date: December 26, 1996 3 15 EL PASO TENNESSEE PIPELINE COMPANY EXHIBIT INDEX TO FORM 8-K CURRENT REPORT DATE OF REPORT: DECEMBER 26, 1996 EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1 Amended and Restated Agreement and Plan of Merger, dated as of June 19, 1996, among El Paso, El Paso Merger Company and Old Tenneco. 2.2 Distribution Agreement, dated as of November 1, 1996, among Old Tenneco, New Tenneco and Newport News. 2.3 Letter Agreement, dated December 11, 1996, between El Paso and New Tenneco. 2.4 Amendment No. 1 to Distribution Agreement, entered into as of December 11, 1996, among Old Tenneco, New Tenneco and Newport News. 99.1 List of Lenders under the Credit Agreement 99.2 Press Release, dated December 23, 1996. EX-2.1 2 AMENDED & RESTATED AGREEMENT & PLAN OF MERGER 1 EXHIBIT 2.1 AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER DATED AS OF JUNE 19, 1996 AMONG EL PASO NATURAL GAS COMPANY, EL PASO MERGER COMPANY AND TENNECO INC. 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2 ARTICLE II THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7 2.1 Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7 2.2 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7 2.3 Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . B-8 2.4 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-8 2.5 Conversion of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-8 2.6 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9 2.7 New Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11 ARTICLE III CLOSING AND FILING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11 3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11 3.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF TENNECO . . . . . . . . . . . . . . . . . . . . . . B-12 4.1 Organization and Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12 4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12 4.3 Authority and Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12 4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-13 4.5 Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . . . . B-13 4.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-14 4.7 Tenneco SEC Documents; Accuracy of Information . . . . . . . . . . . . . . . . . . . . B-14 4.8 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-14 4.9 Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-14 4.10 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-14 4.11 Amendments to Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-15 ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUBSIDIARY . . . . . . . . . . . . . . B-15 5.1 Organization and Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-15 5.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-15 5.3 Authority and Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16 5.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16 5.5 Consent and Approvals; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . B-16 5.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17 5.7 Acquiror SEC Documents; Accuracy of Information . . . . . . . . . . . . . . . . . . . B-17 5.8 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17 5.9 Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17 5.10 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17 5.11 Due Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17 5.12 No Active Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17 5.13 Ownership of Tenneco Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17 ARTICLE VI COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-18 6.1 Conduct of Tenneco and its Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . B-18 6.2 Conduct of the Business of Acquiror and its Subsidiaries . . . . . . . . . . . . . . . B-21 6.3 Access to Information; Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . B-22 6.4 Directors' and Officers' Indemnification and Insurance. . . . . . . . . . . . . . . . B-22 6.5 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-24 6.6 Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25 6.7 Registration Statement; Joint Proxy Statement; NPS Materials; Tender and Exchange Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
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PAGE ---- 6.8 Stockholders' Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-28 6.9 Further Action; Reasonable Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . B-28 6.10 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-29 6.11 Listing of Acquiror Common Stock and Depositary Shares. . . . . . . . . . . . . . . . B-30 6.12 Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-30 6.13 The Spinoffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-30 6.14 Antitrust Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-30 6.15 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31 6.16 Debt Realignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31 6.17 No Solicitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-31 6.18 Performance of Agreement and Distribution Agreement . . . . . . . . . . . . . . . . . B-31 6.19 Affiliates of Tenneco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32 6.20 Antitakeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32 6.21 Equity Issuance by Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32 6.22 Ruhrgas AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32 6.23 Additional Covenants of Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32 ARTICLE VII CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-34 7.1 Conditions to Obligations of Each Party to Effect the Merger . . . . . . . . . . . . . B-34 7.2 Additional Conditions to Obligations of Acquiror and Subsidiary. . . . . . . . . . . . B-35 7.3 Additional Conditions to Obligations of Tenneco . . . . . . . . . . . . . . . . . . . B-36 ARTICLE VIII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-36 8.1 Grounds for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-36 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-38 8.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-38 ARTICLE IX EXTENT AND SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-38 9.1 Scope of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-38 9.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-38 ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-39 10.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-39 10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40 10.3 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40 10.4 Consent to Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40 10.5 Successors and Assignors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40 10.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40 10.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40 10.8 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40 10.9 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-41 10.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-41 10.11 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-41 10.12 Incorporation of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-41 10.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-41
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EXHIBITS EXHIBIT A Distribution Agreement--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT B Certificate of Designation Respecting Acquiror Preferred Stock--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT C Debt Realignment Plan EXHIBIT D [Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT E Certificate of Designation Respecting New Preferred Stock--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT F Pro Forma Financial Information Concerning the Energy Business--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT G Certain Permitted Actions, Transactions and Other Matters--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT H Text of Section 14 of Article IV of the By-Laws of the Surviving Corporation--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT I Certain Deferred Intercompany Gains--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT J Representations in Connection with IRS Ruling Letter--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT K Benefits for Employees of the Energy Business--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT L Guarantees--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT M Form of Rule 145 Letter--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT N Form of Jenner & Block Tax Opinion--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT O Form of Depositary Agreement--[Intentionally Omitted from Joint Proxy Statement-Prospectus] ANNEX 1 Form of Amendment to Tenneco Certificate of Incorporation--[Intentionally Omitted from Joint Proxy Statement-Prospectus] Omitted exhibits and annex available upon request.
B-iii 5 AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER is entered into as of June 19, 1996 (the ''AGREEMENT EFFECTIVE DATE''), by and among Tenneco Inc., a Delaware corporation (''TENNECO''), El Paso Natural Gas Company, a Delaware corporation (''ACQUIROR''), and El Paso Merger Company, a Delaware corporation and an indirect wholly-owned subsidiary of Acquiror (''SUBSIDIARY''). W I T N E S S E T H: WHEREAS, the board of directors of Tenneco has approved a plan of distribution set forth in the form of agreement attached hereto as EXHIBIT A (which, together with any exhibits, schedules or attachments thereto, is hereinafter referred to as the ''DISTRIBUTION AGREEMENT'') which will be entered into prior to the Effective Time (as defined below) and pursuant to which, prior to the Effective Time, (i) Tenneco and its subsidiaries will, through various intercompany transfers and distributions, restructure, divide and separate their existing automotive, packaging and shipbuilding businesses so that all of the assets, liabilities and operations of (a) the automotive and packaging businesses will be owned, directly and indirectly, by a wholly-owned subsidiary of Tenneco (the ''INDUSTRIAL SUBSIDIARY''), and (b) the shipbuilding business will be owned, directly and indirectly, by a wholly-owned subsidiary of Tenneco (the ''SHIPBUILDING SUBSIDIARY''), and (ii) all of the shares of capital stock of each of the Industrial Subsidiary and the Shipbuilding Subsidiary will be distributed on a pro rata basis as a dividend to the holders of Tenneco's issued and outstanding common stock (the ''SPINOFFS''); WHEREAS, Acquiror (which is the ultimate parent company of its consolidated group) desires to acquire Tenneco and its direct and indirect subsidiaries remaining immediately following the Spinoffs pursuant to the merger of Subsidiary with and into Tenneco (the ''MERGER''), with Tenneco surviving as an indirect subsidiary of Acquiror (the ''SURVIVING CORPORATION''); WHEREAS, the respective boards of directors of Acquiror, Subsidiary and Tenneco, deeming the Merger to be advisable and in the best interests of their respective stockholders, have authorized and approved the execution and delivery of this Agreement and the performance of their respective obligations hereunder; WHEREAS, for federal income tax purposes, the parties hereto intend that (i) the Spinoffs will qualify as tax-free distributions within the meaning of Section 355 of the Internal Revenue Code of 1986, as amended (the ''CODE''), and (ii) the Merger will be treated as a reorganization pursuant to the provisions of Section 368(a)(1)(B) of the Code; WHEREAS, this Agreement is intended to be, and is adopted as, a plan of reorganization. WHEREAS, the parties entered into an Agreement and Plan of Merger (the ''PRIOR AGREEMENT'') as of June 19, 1996, and now desire to amend and restate the Prior Agreement in its entirety effective as of the Agreement Effective Date. NOW, THEREFORE, in consideration of the premises and of the mutual and dependent promises, representations, warranties and covenants herein contained, the parties agree as follows: B-1 6 ARTICLE I DEFINITIONS Unless otherwise defined herein or unless the context otherwise requires, the following terms shall have the meanings set forth below: ''ACQUIROR COMMON STOCK'' means the Common Stock, par value $3.00 per share, of Acquiror. ''ACQUIROR PREFERRED STOCK'' means the series of voting preferred stock of Acquiror to be designated as Adjustable Rate Cumulative Preferred Stock and described in the form of Certificate of Designation therefor attached hereto as EXHIBIT B; provided, however, that if either Tenneco or Acquiror determines, in good faith after consultation with the other party and its advisors, that there exists a reasonable likelihood that the issuance of Acquiror Preferred Stock (or Depositary Shares (as defined below) in respect thereof) in connection with the Merger would cause the Merger to be taxable to the stockholders of Tenneco, Acquiror shall have the absolute obligation (at Acquiror's sole cost) to amend, if legally possible, the terms of the Acquiror Preferred Stock in a manner reasonably acceptable to Tenneco so that the issuance would not cause the Merger to be so taxable. In the event that the terms of the Acquiror Preferred Stock are amended pursuant to the proviso in the immediately preceding sentence, the parties hereto hereby agree, if required by applicable Law, they shall (i) prepare and execute an appropriate amendment to this Agreement reflecting said amendment to the terms of the Acquiror Preferred Stock, (ii) subject to SECTIONS 6.7(A) and 6.8 hereof, prepare, file and mail an appropriate supplement to the Joint Proxy Statement reflecting the terms of this Agreement and of the Merger as so amended, and (iii) if such amendment is made after the approval of the Merger by the stockholders of Tenneco, resubmit for the approval of the stockholders of Tenneco this Agreement and the Merger as so amended. ''ACQUIROR COMMON STOCKHOLDERS' MEETING'' has the meaning set forth in SECTION 6.8 hereof. ''ACQUIROR SEC DOCUMENTS'' means all filings made by Acquiror or its subsidiaries, including Subsidiary, with the SEC from January 1, 1995 through the Agreement Effective Date, including notes, schedules, amendments and exhibits thereto. ''ACQUIROR STOCK'' means the Acquiror Common Stock and the Acquiror Preferred Stock. ''ACQUIROR STOCK FUND'' has the meaning set forth in SECTION 2.6(A) hereof. ''ACQUISITION TRANSACTION'' has the meaning set forth in SECTION 6.17 hereof. ''ADJUSTED COMMON EQUITY CONSIDERATION'' means the product of (i) the Average Acquiror Price, and (ii) the quotient determined by dividing the Common Equity Consideration by the Average Acquiror Common Equity Price. ''AFFILIATE'' means, when used with respect to a specified Person, another Person that directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified. ''AGREEMENT'' means this Amended and Restated Agreement and Plan of Merger, as the same may be amended from time to time in accordance with the terms hereof. ''AGREEMENT EFFECTIVE DATE'' means June 19, 1996, the date on which the Prior Agreement was entered into. ''ALLOCATION AGREEMENT'' means the Debt and Cash Allocation Agreement included in the Distribution Agreement as an exhibit. ''APPRAISAL CONSIDERATION'' has the meaning set forth in SECTION 2.6(H) hereof. ''ACQUIROR PRICE'' means the closing price of the Acquiror Common Stock on the NYSE Composite Transactions Reporting System, as reported in The Wall Street Journal, for the trading day immediately B-2 7 preceding the day on which the holders of Tenneco Stock entitled to vote at the Tenneco Stockholders' Meeting vote with respect to Merger; provided, however, if there is no closing price for Acquiror Common Stock on such trading day, the Acquiror Price shall be the closing price for Acquiror Common Stock on the next preceding trading day on which a trade of Acquiror Common Stock occurred. ''AVERAGE ACQUIROR PRICE'' means the average of the closing prices of the Acquiror Common Stock on the NYSE Composite Transactions Reporting System, as reported in The Wall Street Journal, for the Average Period (but subject to correction for typographical or other manifest errors in such reporting), rounded to four decimal places. ''AVERAGE ACQUIROR COMMON EQUITY PRICE'' means the Average Acquiror Price; provided that if the Average Acquiror Price is greater than $38.3625, the Average Acquiror Common Equity Price shall be $38.3625 and if the Average Acquiror Price is less than $31.3875, the Average Acquiror Common Equity Price shall be $31.3875; provided further, however, that the aforesaid dollar amounts shall be subject to appropriate adjustments, reasonably satisfactory to Tenneco and Acquiror in all respects, to reflect any recapitalization, reclassification, stock split, combination of shares, issuance of equity (other than issuances of shares pursuant to the exercise of employee stock options) or options for less than full market value or the like of or involving Acquiror. ''AVERAGE PERIOD'' means the 20 trading days on the NYSE immediately preceding the second trading day prior to the Effective Time. ''BENEFITS AGREEMENT'' means the Benefits Agreement attached to the Distribution Agreement as Exhibit A. ''BLACK-OUT PERIOD'' means the Average Period and the 20 trading days preceding the Average Period. ''CERTIFICATES'' has the meaning set forth in SECTION 2.6(B) hereof. ''CLAIM'' has the meaning set forth in SECTION 6.4(B) hereof. ''CLAIMS ADMINISTRATION'' means the handling of claims made under the D&O Policies, including the management, defense and settlement of claims. ''CLOSING'' has the meaning set forth in SECTION 3.1 hereof. ''CLOSING DATE'' has the meaning set forth in SECTION 3.1 hereof. ''COMMISSION'' means the United States Securities and Exchange Commission. ''COMMON CONVERSION NUMBER CASE A'' means the number of shares (rounded to the nearest one-thousandth of a share) of Acquiror Common Stock to be issued upon conversion of a single share of Tenneco Common Stock at the Effective Time pursuant to SECTION 2.5 hereof and the other terms and conditions of this Agreement, determined by dividing the Common Equity Consideration by the Average Acquiror Common Equity Price and dividing the result by the number of shares of Tenneco Common Stock outstanding immediately prior to the Effective Time as certified to Acquiror by Tenneco's principal registrar and transfer agent, which are to be converted into the right to receive Acquiror Stock pursuant to the provisions of SECTION 2.5 hereof. ''COMMON CONVERSION NUMBER CASE B'' means the number of shares (rounded to the nearest one-thousandth of a share) of Acquiror Common Stock to be issued upon conversion of a single share of Tenneco Common Stock at the Effective Time pursuant to SECTION 2.5 hereof and the other terms and conditions of this Agreement, determined by dividing (x) the excess of (i) 7,000,000 over (ii) the number of shares of Acquiror Common Stock issued in exchange for shares of $4.50 Preferred Stock and $7.40 Preferred Stock in the Merger by (y) the number of shares of Tenneco Common Stock outstanding immediately prior to the Effective Time as certified to Acquiror by Tenneco's principal registrar and transfer agent, which are to be converted into the right to receive Acquiror Stock pursuant to the provisions of SECTION 2.5 hereof. ''COMMON EQUITY CONSIDERATION'' means the Equity Consideration less the Preferred Stock Amount. ''CORPORATE RESTRUCTURING TRANSACTIONS'' has the meaning ascribed to that term in the Distribution Agreement. B-3 8 ''DEBT'' means any indebtedness representing an obligation for the repayment of money borrowed by a subject Person (including short-term debt and current maturities of long-term obligations), and any accrued but unpaid or accreted interest related to such indebtedness. ''DEBT REALIGNMENT'' means the plan for repayment, exchange and/or modification of the indebtedness of Tenneco, as described in EXHIBIT C attached hereto. ''DEPOSITARY'' means The First National Bank of Boston, N.A. ''DEPOSITARY AGREEMENT'' means the Depositary Agreement attached hereto as EXHIBIT O. ''DEPOSITARY RECEIPT'' means a depositary receipt issued by the Depositary to evidence a Depositary Share. ''DEPOSITARY SHARE'' means a unit representing a one twenty-fifth fractional interest in a whole share of Acquiror Preferred Stock which shall be evidenced by a Depositary Receipt issued to the Person entitled to such fractional interest and which shall entitle the holder thereof, pursuant to the Depositary Agreement, to rights equivalent to those of a holder of a whole share of Acquiror Preferred Stock (to the extent of such one twenty-fifth fractional interest therein). ''DISSENTING SHARES'' has the meaning set forth in SECTION 2.6(H) hereof. ''DGCL'' means the Delaware General Corporation Law, as amended. ''D&O POLICIES'' has the meaning set forth in SECTION 6.4(D) hereof. ''EFFECTIVE TIME'' has the meaning set forth in SECTION 3.2 hereof. ''ENERGY ASSETS'' has the meaning ascribed to that term in the Distribution Agreement. ''ENERGY BUSINESS'' has the meaning ascribed to that term in the Distribution Agreement. ''ENERGY GROUP'' has the meaning ascribed to that term in the Distribution Agreement. ''ENERGY SUBSIDIARIES'' means the direct and indirect consolidated subsidiaries of Tenneco immediately following the Spinoffs, including the Major Subsidiaries. ''EQUITY CONSIDERATION'' means $750,000,000. ''EXCHANGE ACT'' means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. ''EXCHANGE AGENT'' means First Chicago Trust Company of New York, or such other trust company or bank designated by Acquiror and acceptable to Tenneco, who shall act as agent for the holders of Tenneco Stock in connection with the Merger to receive the Exchange Fund (as defined in SECTION 2.6(A) hereof). ''$4.50 PREFERRED STOCK'' means the $4.50 Cumulative Preferred Stock of Tenneco. ''$4.50 PREFERRED CONVERSION NUMBER'' means the number of shares (rounded to the nearest one-thousandth of a share) of Acquiror Common Stock to be issued upon conversion of a single share of $4.50 Preferred Stock at the Effective Time pursuant to SECTION 2.5 and the other terms and conditions of this Agreement, determined by dividing (i) $115, by (ii) the Acquiror Price. ''GAAP'' means United States generally accepted accounting principles and practices, as in effect on the date of this Agreement, as promulgated by the Financial Accounting Standards Board and its predecessors. ''GAINS TAX'' has the meaning set forth in SECTION 10.1(C) hereof. ''GOVERNMENTAL AUTHORITY'' means any government or any agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign. B-4 9 ''HIGHER PROPOSAL'' has the meaning set forth in SECTION 6.17 hereof. ''HSR ACT'' means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. ''INDEMNIFIED PARTIES'' has the meaning set forth in SECTION 6.4(B) hereof. ''INDUSTRIAL BUSINESS'' has the meaning ascribed to that term in the Distribution Agreement. ''INDUSTRIAL GROUP'' has the meaning ascribed to that term in the Distribution Agreement. ''INSURANCE ADMINISTRATION'' means, with respect to a D&O Policy, the accounting for premiums, defense costs, indemnity payments, deductibles and retentions, as appropriate, under the terms and conditions of such D&O Policy, and the distribution of Insurance Proceeds. ''INSURANCE PROCEEDS'' means, with respect to an insured party, those monies, net of any applicable premium adjustment, deductible, retention or similar cost paid or held by or for the benefit of such insured party, which are either (i) received by an insured from an insurance carrier, or (ii) paid by an insurance carrier on behalf of an insured. ''IRS RULING LETTER'' has the meaning set forth in SECTION 7.1(G) hereof. ''JOINT PROXY STATEMENT'' has the meaning set forth in SECTION 6.7 hereof. ''LAW'' means any constitutional provision, statute, law, ordinance, rule, regulation, permit, decree, injunction, judgment, order, decree, ruling, determination, finding or writ of any Governmental Authority. ''LAZARD'' means Lazard Freres & Co. LLC. ''MAJOR SUBSIDIARIES'' means the following subsidiaries of Tenneco after giving effect to the Spinoffs:
JURISDICTION NAME OF ORGANIZATION - ---- --------------- Tennessee Gas Pipeline Company Delaware Tenneco Energy Resources Corporation Delaware Tenneco Gas Australia, Inc. Delaware Tenneco Corporation Delaware Tenneco Ventures Corporation Delaware Midwestern Gas Transmission Company Delaware East Tennessee Natural Gas Company Tennessee
''MATERIAL ADVERSE EFFECT ON ACQUIROR'' means an event, change or effect that: (i) is or is reasonably likely to be materially adverse to the business, operations, properties or financial condition of Acquiror and its consolidated subsidiaries, taken as a whole; or (ii) prevents Acquiror or Subsidiary from consummating the transactions contemplated hereby, including the Merger, prior to the date specified in SECTION 8.1(II) hereof. ''MATERIAL ADVERSE EFFECT ON TENNECO'' means an event, change or effect that: (i) is or is reasonably likely to be materially adverse to the business, operations, properties or financial condition of the Energy Business, taken as a whole; or (ii) prevents Tenneco from consummating the transactions contemplated hereby, including the Spinoffs and the Merger, prior to the date specified in SECTION 8.1(II) hereof. ''NEW CERTIFICATES'' has the meaning set forth in SECTION 2.6(A) hereof. ''NEW PREFERRED STOCK'' means the series of junior preferred stock of Tenneco to be issued prior to the Closing Date as set forth in SECTION 6.1(D) hereof and described in the form of Certificate of Designation therefor attached hereto as EXHIBIT E. B-5 10 ''NPS MATERIALS'' means any registration statement, private placement memorandum and/or other documents or filings prepared by or on behalf of Tenneco or Acquiror (or their Affiliates or representatives) and (i) distributed to prospective purchasers or other receivers of New Preferred Stock, or (ii) filed with the Commission or other Governmental Authority, or the NYSE or other stock exchange, relating to the issuance of New Preferred Stock. ''NPS VALUE'' means the market value of the New Preferred Stock issued and outstanding at and as of the Effective Time, as jointly determined by the financial advisors identified in SECTIONS 4.10 and 5.10 below on the Closing Date (or, if they are unable to so agree, by Morgan Stanley & Co. Incorporated later on the Closing Date). If the New Preferred Stock is issued pursuant to a public issuance or private placement (as opposed to a stock dividend), the gross proceeds of the issuance or placement shall be presumptive evidence of the NPS Value (subject only to adjustment for changes in value, if any, occurring between the date of the issuance or placement and the Closing Date). ''NYSE'' means the New York Stock Exchange. ''1981 STOCK PLAN'' means the 1981 Tenneco Inc. Key Employee Stock Option Plan. ''1994 STOCK PLAN'' means the 1994 Tenneco Inc. Stock Ownership Plan. ''OPTION PLANS'' means the 1981 Stock Plan and the 1994 Stock Plan. ''PERSON'' means any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company or other entity, or any government, or any agency or political subdivision thereof. ''PREFERRED STOCK AMOUNT'' means an amount equal to the Acquiror Price times the number of shares of Acquiror Common Stock issued to the holders of the $4.50 Preferred Stock and the $7.40 Preferred Stock pursuant to the terms of SECTION 2.5 hereof. ''PREFERRED STOCK CONVERSION NUMBER'' means the result obtained by (x) subtracting from the Adjusted Common Equity Consideration the product of (i) the excess of (A) 7,000,000 over (B) the number of shares of Acquiror Common Stock issued in exchange for shares of $4.50 Preferred Stock and $7.40 Preferred Stock in the Merger and (ii) the Average Acquiror Price, (y) dividing the result obtained pursuant to clause (x) by the ''Assigned Value'' (as set forth in EXHIBIT B attached hereto) (being the liquidation value) of the Acquiror Preferred Stock and (z) dividing the result obtained pursuant to clause (y) by the number of shares of Tenneco Common Stock outstanding immediately prior to the Effective Time as certified to Acquiror by Tenneco's principal registrar and transfer agent. ''RIGHTS'' shall mean the preferred stock purchase rights issued pursuant to the Rights Agreement. ''RIGHTS AGREEMENT'' shall mean the Rights Agreement dated as of May 24, 1988, as amended and restated as of October 1, 1989, between Tenneco and First Chicago Trust Company of New York. ''REGISTRATION STATEMENT'' has the meaning set forth in SECTION 6.7 hereof. ''REPLACEMENT D&O POLICY'' has the meaning set forth in SECTION 6.4(D) hereof. ''SECT'' means the Stock Employee Compensation Trust currently maintained by Tenneco. ''SECURITIES ACT'' means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. ''$7.40 PREFERRED STOCK'' means the $7.40 Cumulative Preferred Stock of Tenneco. ''$7.40 PREFERRED CONVERSION NUMBER'' means the number of shares (rounded to the nearest one-thousandth of a share) of Acquiror Common Stock to be issued upon conversion of a single share of $7.40 B-6 11 Preferred Stock at the Effective Time pursuant to SECTION 2.5 and the other terms and conditions of this Agreement, determined by dividing (i) $115, by (ii) the Acquiror Price. ''S/I TRANSACTION'' has the meaning set forth in SECTION 6.13 hereof. ''SHIPBUILDING BUSINESS'' has the meaning ascribed to that term in the Distribution Agreement. ''SHIPBUILDING GROUP'' has the meaning ascribed to that term in the Distribution Agreement. ''STOCKHOLDERS' MEETINGS'' has the meaning set forth in SECTION 6.8 hereof. ''TAKEOVER STATUTE'' means any ''fair price,'' ''moratorium,'' ''control share acquisition'' or other similar antitakeover statute or regulation enacted under state or federal laws in the United States or any foreign jurisdiction. ''TENDER AND EXCHANGE MATERIALS'' means any registration statement, private placement memorandum, offer to purchase and/or other documents or filings prepared by or on behalf of Tenneco or Acquiror (or their Affiliates or representatives), either separately or jointly, and (i) distributed to the record and/or beneficial holders of Tenneco consolidated Debt in connection with the Debt Realignment, and/or (ii) filed with the Commission or other Governmental Authority, or the NYSE or other stock exchange, relating to Debt Realignment. ''TENNECO COMMON STOCK'' means the Common Stock, par value $5.00 per share, of Tenneco. ''TENNECO SEC DOCUMENTS'' means all filings made by Tenneco or its subsidiaries with the SEC since January 1, 1995 through the Agreement Effective Date, including notes, schedules, amendments and exhibits thereto. ''TENNECO STOCK'' means the Tenneco Common Stock, the $7.40 Preferred Stock and the $4.50 Preferred Stock (but not the New Preferred Stock). ''TENNECO STOCKHOLDERS' MEETING'' has the meaning set forth in SECTION 6.8 hereof. ''TRANSFER TAXES'' has the meaning set forth in SECTION 10.1(C) hereof. ''$'' is a reference to United States dollars. All monetary amounts set forth in this Agreement are intended to be United States currency amounts. ARTICLE II THE MERGER 2.1 MERGER. Upon the terms and subject to the conditions herein set forth, Subsidiary shall be merged with and into Tenneco at the Effective Time. 2.2 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time the separate existence and corporate organization of Subsidiary shall cease and Tenneco shall continue as the Surviving Corporation, and all the identity, purposes, properties, rights, privileges, powers, assets, franchises, debts and duties of Tenneco and Subsidiary shall, except as expressly provided herein or in the DGCL, vest in the Surviving Corporation and become the identity, purposes, properties, rights, privileges, powers, assets, franchises, debts and duties of the Surviving Corporation. B-7 12 2.3 CERTIFICATE OF INCORPORATION AND BYLAWS. (a) At the Effective Time, the certificate of incorporation of Tenneco in effect immediately prior to the Effective Time shall be amended as set forth in ANNEX 1 hereto, and as so amended shall be the certificate of incorporation of the Surviving Corporation. (b) From and after the Effective Time, the by-laws of Subsidiary, as in effect immediately prior to the Effective Time (but, in any event, to be in form and substance reasonably acceptable to Tenneco), shall, until further amended as provided by law, constitute the by-laws of the Surviving Corporation, except that the by-laws of the Surviving Corporation shall include the provisions specified in SECTION 6.4(A)(I) of this Agreement. 2.4 DIRECTORS. The directors of Subsidiary at the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office from the Effective Time in accordance with the certificate of incorporation and bylaws of the Surviving Corporation and until his or her successor is duly elected and qualified. 2.5 CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger and without any action on the part of any stockholder of either Tenneco or Subsidiary, as applicable, but subject to SECTION 2.6 hereof, each outstanding share of Subsidiary's capital stock and Tenneco Stock (but not New Preferred Stock) shall be cancelled or converted in accordance with the following provisions of this SECTION 2.5: (a) CAPITAL STOCK OF SUBSIDIARY. Each share of Subsidiary's capital stock issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $5.00 per share, of the Surviving Corporation. (b) CANCELLATION OF TREASURY AND ACQUIROR-OWNED STOCK. Each share of Tenneco Stock owned immediately prior to the Effective Time (after giving effect to the Spinoffs) by Tenneco, directly as treasury stock or indirectly through one or more of its wholly-owned subsidiaries, or by Acquiror or any direct or indirect wholly-owned subsidiary of Acquiror, shall be cancelled and retired and shall cease to exist and no Acquiror Stock or other consideration shall be delivered in exchange therefor or with respect thereto. (c) CONVERSION OF $7.40 PREFERRED STOCK. Each share of $7.40 Preferred Stock issued and outstanding immediately prior to the Effective Time (other than shares to be cancelled in accordance with SECTION 2.5(B) above) shall be converted into the right to receive that number of fully paid and nonassessable shares of Acquiror Common Stock that is equal to the $7.40 Preferred Conversion Number. (d) CONVERSION OF $4.50 PREFERRED STOCK. Each share of $4.50 Preferred Stock issued and outstanding immediately prior to the Effective Time (other than shares to be cancelled in accordance with SECTION 2.5(B) above) shall be converted into the right to receive that number of fully paid and nonassessable shares of Acquiror Common Stock that is equal to the $4.50 Preferred Conversion Number. (e) CONVERSION OF TENNECO COMMON STOCK. Each share of Tenneco Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be cancelled in accordance with SECTION 2.5(B) above) shall be converted into the right to receive (i) that number of fully paid and nonassessable shares of (i) Acquiror Common Stock that is equal to the Common Conversion Number Case A if the issuance of Acquiror Common Stock as contemplated by this SECTION 2.5(E)(I) is approved by the requisite vote of the holders of the Acquiror Common Stock, or if such vote is not required by law or the rules of any national securities exchange on which the Acquiror Common Stock is listed, or (ii) if the issuance of shares of Acquiror Common Stock as contemplated by SECTION 2.5(E)(I) is not approved by the requisite vote of the holders of the Acquiror Common Stock and is not permissible as aforesaid without such vote, (A) that number of fully paid and nonassessable shares of Acquiror Common Stock that is equal to the Common Conversion Number Case B and (B) that number of Depositary Shares representing interests in that fraction of a fully paid and nonassessable share of Acquiror Preferred Stock that is equal to the Preferred Stock Conversion Number. (f) REDEMPTION OF PREFERRED STOCK. Subject to the consent of Acquiror (which shall not be unreasonably withheld or delayed), Tenneco may at any time hereafter, prior to the Effective Time, redeem the $4.50 Preferred Stock and/or the $7.40 Preferred Stock in accordance with their respective terms. B-8 13 2.6 EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. Promptly after the Effective Time, Acquiror shall deposit with the Exchange Agent, for the benefit of the holders of shares of Tenneco Stock, for exchange in accordance with this SECTION 2.6, certificates and Depositary Receipts, if any (together, the ''NEW CERTIFICATES'') representing shares of Acquiror Stock and any Depositary Shares, respectively, in amounts sufficient to allow the Exchange Agent to make all deliveries of New Certificates that may be required in exchange for Certificates (as defined below) pursuant to this SECTION 2.6 (the ''ACQUIROR STOCK FUND'') (such Acquiror Stock Fund, together with any dividends or distributions with respect thereto contemplated by SECTION 2.6(D) hereof and cash in lieu of fractional shares or any fractional Depositary Shares contemplated by SECTION 2.6(C) hereof, being hereinafter referred to as the ''EXCHANGE FUND''). (b) EXCHANGE PROCEDURES. As soon as practicable after the Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Tenneco Stock which were converted pursuant to SECTION 2.5 hereof into the right to receive shares of Acquiror Stock and Depositary Shares, if any (the ''CERTIFICATES'') (i) a letter of transmittal (which shall be in such form and have such provisions as Acquiror and Tenneco may reasonably specify), and (ii) instructions for use in effecting the surrender of the Certificates in exchange for New Certificates. Upon surrender of a Certificate for cancellation to the Exchange Agent together with such letter of transmittal, duly completed in accordance with the instructions thereto and executed, the holder of such Certificate shall be entitled to receive in exchange therefor a New Certificate or New Certificates representing that number of whole shares of Acquiror Stock (and any whole Depositary Shares) which such holder has the right to receive pursuant to the provisions of SECTION 2.5 hereof (after giving effect to SECTIONS 2.6(C) and 2.6(H) hereof) and any cash paid in lieu of fractional shares (or any fractional Depositary Shares) and any dividends or distributions with respect thereto as contemplated by SECTIONS 2.6(C) and 2.6(D) hereof, after giving effect to any required tax withholdings, and the Certificate so surrendered shall forthwith be cancelled. In the event of a transfer of ownership of Tenneco Stock that is not registered in the transfer records of Tenneco, a New Certificate representing the proper number of shares of Acquiror Stock (and any Depositary Shares) may be issued to a transferee if the Certificate formerly representing such Tenneco Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this SECTION 2.6(B), each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender a New Certificate or New Certificates representing such whole shares of Acquiror Stock (and any whole Depositary Shares), any dividends or distributions in respect of such shares of Acquiror Stock (and any Depositary Shares) and cash in lieu of any fractional shares of Acquiror Stock (or any fractional Depositary Shares), as is contemplated by SECTIONS 2.5 and 2.6 of this Agreement. (c) FRACTIONAL SHARES. Notwithstanding anything to the contrary contained herein (but except for the issuance of Depositary Receipts), no scrip or certificates for fractional shares of Acquiror Stock or for any fractional Depositary Shares shall be issued, and no Person otherwise entitled to any such fractional share or fractional Depositary Share shall be entitled to vote, to receive dividends, or to any other rights of a holder of a share or Depositary Share with respect to such fractional interest. Instead, the Exchange Agent shall act as agent for the holders of Tenneco Stock and shall sell on the NYSE, as promptly as possible, but in any event not later than 30 days after the Closing Date, for the account of the Persons otherwise entitled to such fractional shares or fractional Depositary Shares, shares of Acquiror Stock or Depositary Shares equivalent to the aggregate of such fractional interests. The Exchange Agent shall, until December 31, 1998, pay to such Persons upon surrender of their Certificate(s) their respective pro rata shares of the net proceeds of such sale, without interest. On December 31, 1998, any remaining proceeds of the sale shall be paid over to Acquiror, after which the Persons otherwise entitled to such fractional interests represented by such proceeds shall look only to Acquiror for payment, subject to the requirements of escheat laws of the various states that may be applicable. B-9 14 (d) DIVIDENDS AND OTHER DISTRIBUTIONS. Any dividend or other distribution declared or made after the Effective Time with a record date after the Effective Time in respect of Acquiror Stock issuable hereunder to the holder of a Certificate not then surrendered pursuant to SECTION 2.6(B) hereof shall be paid to the Exchange Agent (or, if payable after December 31, 1998, shall be set aside and retained by Acquiror), and no such dividend or other distribution payable in respect of such Acquiror Stock shall be paid to the holder of such outstanding Certificate until such Certificate shall have been so surrendered to the Exchange Agent (or, if after December 31, 1998, to Acquiror). Upon surrender of such outstanding Certificate, there shall be paid by the Exchange Agent (or, if after December 31, 1998, by Acquiror) to or at the direction of the holder of the New Certificate(s) issued in exchange therefor the amount (without interest thereon) of all dividends or distributions which have theretofore been paid to the Exchange Agent (or, if after December 31, 1998, set aside and retained by Acquiror) with respect to the number of shares of Acquiror Stock and any Depositary Shares represented by the New Certificate(s) issued upon such surrender and exchange. (e) NO FURTHER OWNERSHIP RIGHTS IN TENNECO STOCK. All shares of Acquiror Stock and any Depositary Shares issued upon the surrender for exchange of shares of Tenneco Stock in accordance with the terms hereof (including any cash paid pursuant to SECTION 2.6(C) hereof) shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Tenneco Stock, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Tenneco Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be cancelled and exchanged as provided in this SECTION 2.6. (f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund held by the Exchange Agent that remains undistributed to the stockholders of Tenneco after December 31, 1998, shall be delivered to Acquiror, and any stockholders of Tenneco who have not theretofore complied with this SECTION 2.6 shall thereafter look only to Acquiror for payment of their claims for Acquiror Stock, any Depositary Shares, any cash in lieu of fractional shares of Acquiror Stock or in lieu of any fractional Depositary Shares and any dividends or distributions with respect to Acquiror Stock. (g) NO LIABILITY. None of Acquiror, Subsidiary, Tenneco, the Industrial Subsidiary or the Shipbuilding Subsidiary (or any of their respective direct or indirect subsidiaries or Affiliates) shall be liable to any holder of shares of Tenneco Stock, Acquiror Stock or any Depositary Shares, as the case may be, for such shares (or dividends or distributions with respect thereto) or cash for payment in lieu of fractional shares or in lieu of any fractional Depositary Shares delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. The Industrial Subsidiary, the Shipbuilding Subsidiary and their respective direct and indirect subsidiaries and Affiliates shall be deemed third party beneficiaries of this SECTION 2.6(G) and all other provisions of this Agreement necessary or appropriate for purposes of enforcing this SECTION 2.6(G). (h) DISSENTING HOLDERS OF $4.50 PREFERRED STOCK AND DISSENTING HOLDERS OF NEW PREFERRED STOCK. Notwithstanding anything in this Agreement to the contrary, shares of $4.50 Preferred Stock and New Preferred Stock that are issued and outstanding immediately prior to the Effective Time and are held by stockholders who are entitled to appraisal rights in respect thereof under Section 262 of the DGCL and who have (i) not voted such shares in favor of the adoption of this Agreement or otherwise waived or lost their right to demand appraisal of such shares and (ii) properly demanded appraisal of such shares in accordance with Section 262 of the DGCL (the ''DISSENTING SHARES'') shall not be converted as described in SECTION 2.5(D) above or remain outstanding as described in SECTION 2.7 hereof, as the case may be, but shall become the right to receive such consideration as may be determined to be due to such stockholders pursuant to Section 262 of the DGCL (''APPRAISAL CONSIDERATION''). If, after the Effective Time, any such stockholder withdraws his demand for appraisal or fails to perfect or otherwise loses his right of appraisal, in any case pursuant to the DGCL, his Dissenting Shares shall be deemed to be converted as of the Effective Time into the right to receive shares of Acquiror Common Stock (without any interest thereon) B-10 15 as provided in SECTION 2.5(D) hereof or shall be deemed to have remained outstanding as provided in SECTION 2.7 hereof, as the case may be. Promptly upon receiving any demands for appraisal, withdrawals of demand for appraisal or any other instrument served pursuant to Section 262 of the DGCL, Tenneco shall so notify Acquiror and shall give Acquiror the opportunity to participate in and direct all negotiations and proceedings with respect to any such appraisal demands. Tenneco shall not, without the prior written consent of Acquiror, make any payment with respect to, or settle, offer to settle or otherwise negotiate, any such appraisal demands. From and after the Effective Time, the Surviving Corporation shall be solely responsible for the payment of any and all Appraisal Consideration, and shall indemnify, defend, protect and hold harmless the Industrial Subsidiary, the Shipbuilding Subsidiary and their respective direct and indirect subsidiaries from and against any and all claims, losses, expenses, payments, liabilities and damages (including attorneys' fees) relating to any Dissenting Shares or claims of stockholders holding Dissenting Shares. In order to effect the payment of any Appraisal Consideration, the Surviving Corporation shall establish an escrow with the Exchange Agent (or other escrow agent reasonably acceptable to the Industrial Subsidiary) consisting of an adequate amount of cash from the $25,000,000 of cash required to be on hand at Tenneco as of the Effective Time pursuant to the Allocation Agreement. The Industrial Subsidiary, the Shipbuilding Subsidiary and their respective direct and indirect subsidiaries shall be deemed third party beneficiaries of this SECTION 2.6(H) and all other provisions of this Agreement necessary or appropriate for purposes of enforcing this SECTION 2.6(H). 2.7 NEW PREFERRED STOCK. Subject to SECTION 2.6(H) hereof, the shares of New Preferred Stock outstanding immediately prior to the Effective Time shall not be converted or otherwise exchanged pursuant to the Merger and shall remain outstanding immediately after the Effective Time, held by the Persons who were holders of the New Preferred Stock immediately prior to the Effective Time. ARTICLE III CLOSING AND FILING 3.1 CLOSING. Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to SECTION 8.1 hereof, and subject to the satisfaction or, if permissible, waiver of the conditions set forth in ARTICLE VII hereof, the closing of the Merger (the ''CLOSING'') shall take place as promptly as practicable (and in any event within two business days) after satisfaction or waiver of the conditions set forth in ARTICLE VII hereof, at the offices of Tenneco Inc., 1010 Milam Street, Houston, Texas, unless another date, time or place is agreed to in writing by the parties hereto; provided, however, that if, (i) during the Black-out Period there occurs an event or series of events that, in the opinion of either Tenneco or Acquiror, could reasonably be expected to have a temporary effect on the price of Acquiror Stock, and (ii) but for the provisions of this proviso the Average Acquiror Price would be greater than $38.3625 or less than $31.3875 (said dollar amounts to be adjusted on the same basis as is described in the definition of Average Acquiror Common Equity Price), then either Tenneco (in the case the Average Acquiror Price would be greater than $38.3625 as aforesaid) or Acquiror (in the case the Average Acquiror Price would be less than $31.3875 as aforesaid) may, by written notice to the other, elect to delay or to restart the commencement of the Average Period (and thereby the Closing) until such day as such temporary effect has ended (but in no event shall the Closing be delayed by more than 15 days and in no event beyond the dated specified in SECTION 8.1(II) hereof), as determined and specified by the notifying party. The date on which the Closing occurs is referred to in this Agreement as the ''CLOSING DATE''. 3.2 EFFECTIVE TIME. As promptly as practicable after the satisfaction or, if permissible, waiver of the conditions set forth in ARTICLE VII hereof, but subject to the terms of SECTION 3.1 hereof, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger with the Secretary of State of the State of Delaware in such form as required by, and executed in accordance with the relevant provisions of, the DGCL (the date and time of the acceptance of such filing, or such later date or time as set forth therein, being the ''EFFECTIVE TIME''). B-11 16 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF TENNECO Tenneco hereby represents and warrants to Acquiror and Subsidiary as follows: 4.1 ORGANIZATION AND EXISTENCE. Each of Tenneco and the Major Subsidiaries is a corporation validly existing and in good standing under the laws of the jurisdiction of its organization with the corporate power and authority to own its properties and assets and to carry on its business as now being conducted, except where the failure to be so existing and in good standing or to have such power and authority would not have a Material Adverse Effect on Tenneco. 4.2 CAPITALIZATION. (a) As of the dates indicated below, the authorized and outstanding capital stock of Tenneco was as follows:
AUTHORIZED AS OF THE CLASS DATE HEREOF OUTSTANDING AS OF MARCH 31, 1996 ----- ------------------- -------------------------------- Common Stock 350,000,000 191,354,932 shares (including 17,358,445 shares held in treasury or by subsidiaries of Tenneco) Preferred Stock 15,000,000 803,723 shares of $4.50 Preferred Stock; 391,519 shares of $7.40 Preferred Stock Junior Preferred Stock 50,000,000 none
(b) Between March 31, 1996 and the Agreement Effective Date, Tenneco has issued no shares of its capital stock except for shares of Tenneco Common Stock issued upon the exercise of options granted pursuant to the Option Plans or to executives of Tenneco outside the Option Plans. (c) As of March 31, 1996, except for (i) Rights issued pursuant to the Rights Agreement and (ii) options to acquire an aggregate of 5,207,655 shares of Tenneco Common Stock, there were no outstanding options, warrants, rights, puts, calls, commitments or other contracts, arrangements, or understandings issued by or binding upon Tenneco requiring or providing for, and there were no outstanding securities of Tenneco or its subsidiaries which upon the conversion, exchange or exercise thereof would require or provide for, the issuance by Tenneco of any new or additional equity interests in Tenneco or any other securities of Tenneco which, with notice, lapse of time and/or payment of monies, are or would be convertible into or exercisable or exchangeable for equity interests in Tenneco (each, a ''TENNECO EQUITY RIGHT''). Between March 31, 1996 and the Agreement Effective Date, Tenneco has not issued or granted any Tenneco Equity Right except for (i) Rights issued in connection with the issuance of Tenneco Common Stock as described in SECTION 4.2(B) hereof and (ii) options to purchase 11,000 shares of Tenneco Common Stock granted pursuant to the 1994 Stock Plan. (d) As of the Agreement Effective Date all outstanding shares of Tenneco Stock are, and immediately prior to the Effective Time all outstanding shares of Tenneco Stock and New Preferred Stock will be, validly issued, fully paid and nonassessable and free of any preemptive (or similar) right. 4.3 AUTHORITY AND APPROVAL. Tenneco has the corporate power and authority, and no other corporate proceedings on the part of Tenneco are necessary, to execute and deliver this Agreement and the Distribution Agreement and to consummate the transactions contemplated hereby and thereby (subject to securing the B-12 17 approval of the stockholders of Tenneco as contemplated by SECTION 6.8 hereof, and formal declaration of the dividends necessary to effectuate the Spinoffs and the issuance of the New Preferred Stock). This Agreement has been duly executed and delivered by Tenneco and, assuming this Agreement constitutes a valid and binding obligation of each of Acquiror and Subsidiary, this Agreement constitutes a valid and binding obligation of Tenneco, enforceable against Tenneco in accordance with its terms. 4.4 FINANCIAL STATEMENTS. The audited financial statements of Tenneco and consolidated subsidiaries as of December 31, 1995 and 1994 and for the three years ended December 31, 1995, included in Tenneco's 1995 Annual Report on Form 10- K, as filed with the Commission, (i) were prepared in accordance with GAAP applied on a consistent basis (except as indicated therein or in the notes thereto) and (ii) fairly present the financial position of Tenneco and consolidated subsidiaries as of the dates thereof and the results of their operations and cash flows for the periods then ended. The unaudited financial statements of Tenneco and consolidated subsidiaries as of March 31, 1996 and 1995 and for the three- month periods ended on each of such dates, included in Tenneco's March 31, 1996 Quarterly Report on Form 10-Q as filed with the Commission, (A) comply in all material respects with the published rules and regulations of the Commission with respect thereto, (B) were prepared in accordance with GAAP, except as otherwise permitted under the Exchange Act and the rules and regulations thereunder, on a consistent basis (except as indicated therein or in the notes thereto) and (C) fairly present the financial position of Tenneco and consolidated subsidiaries as of the dates thereof and the results of their operations and cash flows for the periods then ended, subject to normal year-end adjustments and any other adjustments described herein or in the notes or schedules thereto. The unaudited pro forma financial information of the Energy Business (including related notes thereto) as of December 31, 1995 included in EXHIBIT F-1 attached to this Agreement (which were prepared without cash flow statements and treating the Energy Business as if it were a separate entity for the purpose of estimates and judgments of materiality) appropriately reflects all significant pro forma adjustments necessary to and does fairly present the financial position of the Energy Business as of December 31, 1995 and for the year then ended, except that such financial information was prepared on the assumption that the Energy Business had no long-term debt as of December 31, 1995. The historical financial balances included in the unaudited pro forma financial balances included in EXHIBIT F-1 have been derived from amounts included in the consolidated balances presented in the audited financial statements of Tenneco and consolidated subsidiaries included in Tenneco's December 31, 1995 Annual Report on Form 10-K as filed with the Commission. The unaudited pro forma financial information of the Energy Business (including related notes thereto) as of March 31, 1996 included in EXHIBIT F-2 attached to this Agreement (which were prepared without cash flow statements and treating the Energy Business as if it were a separate entity for the purpose of estimates and judgments of materiality) appropriately reflects all significant pro forma adjustments necessary to and does fairly present the financial position of the Energy Business as of March 31, 1996, except that such financial information was prepared on the assumption that the Energy Business had no long-term debt as of March 31, 1996. The historical financial balances included in the unaudited pro forma financial balances included in EXHIBIT F-2 have been derived from amounts included in the consolidated balances presented in the audited financial statements of Tenneco and consolidated subsidiaries included in Tenneco's March 31, 1996 Quarterly Report on Form 10-Q as filed with the Commission. The financial statements of Tennessee Gas Pipeline Company, Midwestern Gas Transmission Company and East Tennessee Natural Gas Company as of and for the years ended December 31, 1995 and 1994 included on pages 110 through 123 of each company's respective Federal Energy Regulatory Commission Form 2 were prepared in all material respects in accordance with the accounting requirements of the Federal Energy Regulatory Commission as set forth in its applicable Uniform System of Accounts and published accounting releases. 4.5 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution, delivery and, subject to securing the approval of the stockholders of Tenneco as contemplated by SECTION 6.8 hereof, formal declaration of the dividends necessary to effectuate the Spinoffs and the issuance of the New Preferred Stock, performance by Tenneco of B-13 18 this Agreement and the Distribution Agreement and the consummation by Tenneco of the transactions contemplated hereby or thereby do not or will not: (i) conflict with or result in any breach of any provisions of the certificate of incorporation or bylaws of Tenneco; (ii) except as contemplated by this Agreement or the Distribution Agreement, require any filing by Tenneco or any Energy Subsidiary with any Governmental Authority, or require Tenneco or any Energy Subsidiary to obtain any permit, authorization, consent or approval from any Governmental Authority; (iii) after giving effect to the Debt Realignment, result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement, franchise, permit, concession or other instrument, obligation, understanding, commitment or other arrangement to which Tenneco or any Energy Subsidiary is a party or by which any of them or any of their respective material properties or assets may be bound or affected; or (iv) violate any Law applicable to Tenneco or any Energy Subsidiary; except, in the case of each of clauses (ii) through (iv) above, for failures to make filings or obtain permits, authorizations, consents or approvals, violations, breaches or defaults that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Tenneco. 4.6 LITIGATION. Except as previously disclosed in writing to Acquiror, as of the Agreement Effective Date there are no actions, suits, proceedings or, to the knowledge of Tenneco, governmental investigations or inquiries pending against Tenneco or any of its subsidiaries or their respective properties, assets, operations or businesses which could reasonably be expected to delay, prevent or hinder the consummation of the transactions contemplated hereby or by the Distribution Agreement, and to the knowledge of Tenneco as of the Agreement Effective Date, no such actions, suits, proceedings or governmental investigations or inquiries are threatened. 4.7 TENNECO SEC DOCUMENTS; ACCURACY OF INFORMATION. The information relating to the Energy Business contained in the Tenneco SEC Documents (A) complied, as of the date of filing thereof (or, in the case of any registration statement, on the date it was declared effective), in all material respects with the applicable requirements of the Exchange Act or Securities Act and (B) did not contain, as of the date of filing thereof (or, in the case of any registration statement, on the date it was declared effective), any untrue statement of a material fact or omit to state any material fact necessary in order to have the statements made therein, in light of the circumstances under which they were made, not misleading. 4.8 NO MATERIAL ADVERSE EFFECT. Except as previously disclosed to Acquiror in writing prior to the date of this Agreement, between December 31, 1995 and the Agreement Effective Date, there has occurred no Material Adverse Effect on Tenneco. 4.9 ADVISORS. Except for Lazard, Morgan Stanley & Co. Incorporated, and J.P. Morgan Securities Incorporated, which have been retained by Tenneco to assist and advise Tenneco in connection with the transactions contemplated by this Agreement and the Distribution Agreement, Tenneco has not employed any broker, finder or intermediary in connection with such transactions who might be entitled to a fee or commission upon the consummation of this Agreement, the Distribution Agreement or the transactions contemplated hereby or thereby. A copy of the engagement letter between Tenneco and each such advisor has been provided to Acquiror. 4.10 OPINION OF FINANCIAL ADVISOR. Tenneco has received the opinion of Lazard, dated as of the Agreement Efffective Date, to the effect that, as of such date, the consideration to be received in the Merger by Tenneco's stockholders is fair to Tenneco's stockholders from a financial point of view (and Tenneco has the right to refer B-14 19 to that opinion, so long as such reference is in form and substance satisfactory to Lazard, in the Joint Proxy Statement and other appropriate filings with the Commission and mailings to its stockholders). 4.11 AMENDMENTS TO RIGHTS AGREEMENT. Tenneco has caused the Rights Agreement to be amended such that (i) neither a ''Triggering Event'' nor a ''Distribution Date'' (in each case as defined in the Rights Agreement) will occur solely by reason of the execution of this Agreement and the consummation of the transactions contemplated hereby, and (ii) the Rights will expire at the Effective Time. ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUBSIDIARY Acquiror and Subsidiary hereby represent and warrant, jointly and severally, to Tenneco as follows: 5.1 ORGANIZATION AND EXISTENCE. Each of Acquiror and Subsidiary is a corporation validly existing and in good standing under the laws of the jurisdiction of its organization with the corporate power and authority to own its properties and assets and to carry on its business as now being conducted, except where the failure to be so existing and in good standing or to have such power and authority would not have a Material Adverse Effect on Acquiror. 5.2 CAPITALIZATION. (a) ACQUIROR. (i) As of the Agreement Effective Date, the authorized capital stock of Acquiror consists of: (A) 100,000,000 shares of Acquiror Common Stock of which, at June 18, 1996, 35,582,074 shares were issued and outstanding and 1,769,151 shares were held in treasury (including shares held in Acquiror's Benefits Protection Trust); and (B) 25,000,000 shares of Preferred Stock , $.01 par value, none of which are issued and outstanding. (ii) As of the Agreement Effective Date, except for rights issued pursuant to the Shareholders Rights Agreement, dated as of July 7, 1992, between Acquiror and The First National Bank of Boston and options to acquire an aggregate of 4,066,487 shares of Acquiror Common Stock, there were no outstanding options, warrants, rights, puts, calls, commitments or other contracts, arrangements, or understandings issued by or binding upon Acquiror requiring or providing for, and there were no outstanding securities of Acquiror or its subsidiaries which upon the conversion, exchange or exercise thereof would require or provide for, the issuance by Acquiror of any new or additional equity interests in Acquiror or any other securities of Acquiror which, with notice, lapse of time and/or payment of monies, are or would be convertible into or exercisable or exchangeable for equity interests in Acquiror (each, an ''ACQUIROR EQUITY RIGHT''). (iii) As of the Agreement Effective Date all outstanding shares of the capital stock of Acquiror are, and immediately prior to the Effective Time all outstanding shares of the capital stock of Acquiror will be, validly issued, fully paid and nonassessable and free of any preemptive (or similar) right. (b) SUBSIDIARY. (i) The authorized capital stock of Subsidiary consists of 1,000 shares of common stock, $1.00 par value, all of which are issued and outstanding. (ii) There are no outstanding options, warrants, rights, puts, calls, commitments or other contracts, arrangements, or understandings issued by or binding upon Subsidiary requiring or providing for, and there were B-15 20 no outstanding securities of Subsidiary which upon the conversion, exchange or exercise thereof would require or provide for, the issuance by Subsidiary of any new or additional equity interests in Subsidiary or any other securities of Subsidiary which, with notice, lapse of time and/or payment of monies, are or would be convertible into or exercisable or exchangeable for equity interests in Subsidiary. (iii) All outstanding shares of the capital stock of Subsidiary are, and immediately prior to the Effective Time all outstanding shares of the capital stock of Subsidiary will be, validly issued, fully paid and nonassessable and free of any preemptive (or similar) right. 5.3 AUTHORITY AND APPROVAL. Each of Acquiror and Subsidiary has the corporate power and authority, and no other corporate proceedings on the part of Acquiror or Subsidiary are necessary, to execute and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of Acquiror and Subsidiary and, assuming this Agreement constitutes a valid and binding obligation of Tenneco, this Agreement constitutes the valid and binding obligation of Acquiror and Subsidiary, enforceable against each of them in accordance with its terms. 5.4 FINANCIAL STATEMENTS. Acquiror has heretofore delivered to Tenneco complete and correct copies of all filings made by Acquiror pursuant to the Exchange Act since January 1, 1995. The audited consolidated financial statements of Acquiror included in such filings (i) were prepared in accordance with GAAP applied on a consistent basis (except as indicated therein or in the notes thereto) during the periods presented and (ii) fairly present the financial position of Acquiror and its consolidated subsidiaries as of the dates thereof and the results of their operations and cash flows for the periods then ended. The unaudited financial statements included in such filings (i) comply in all material respects with the published rules and regulations of the Commission with respect thereto, (ii) were prepared in accordance with GAAP, except as otherwise permitted under the Exchange Act and the rules and regulations thereunder, on a consistent basis (except as may be indicated therein or in the notes or schedules thereto) during the periods presented and (iii) fairly present the financial position of Acquiror and its consolidated subsidiaries as at the dates thereof and the results of their operations and cash flows for the periods then ended, subject to normal year-end adjustments and any other adjustments described therein or in the notes or schedules thereto. 5.5 CONSENT AND APPROVALS; NO VIOLATION. The execution, delivery and performance by Acquiror and Subsidiary of this Agreement and the consummation by Acquiror and Subsidiary of the transactions contemplated hereby do not and will not: (i) conflict with or result in any breach of any provisions of the certificate of incorporation, bylaws or other governing documents of Acquiror or Subsidiary, (ii) except as contemplated by this Agreement, require any filing by Acquiror or any of its subsidiaries (including Subsidiary) with any Governmental Authority or require Acquiror or any of its subsidiaries (including Subsidiary) to obtain any permit, authorization, consent or approval of any Governmental Authority; (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement, franchise, permit, concession or other instrument, obligation, understanding, commitment or other arrangement to which Acquiror or any of its subsidiaries (including Subsidiary) is a party or by which any of them or any of their respective material properties or assets may be bound or affected; or (iv) violate any Law applicable to Acquiror or any of its subsidiaries (including Subsidiary); B-16 21 except, in the case of each of clauses (ii) through (iv) above, for failures to make filings or obtain permits, authorizations, consents or approvals, violations, breaches or defaults which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Acquiror. 5.6 LITIGATION. Except as previously disclosed in writing to Tenneco, as of the Agreement Effective Date, there are no actions, suits, proceedings or, to Acquiror's knowledge, governmental investigations or inquiries pending against Acquiror or any of its subsidiaries (including Subsidiary) or their respective properties, assets, operations or businesses which could reasonably be expected to delay, prevent or hinder the consummation of the transactions contemplated hereby and, to the knowledge of Acquiror, no such actions, suits, proceedings or governmental investigations or inquiries are threatened. 5.7 ACQUIROR SEC DOCUMENTS; ACCURACY OF INFORMATION. The information regarding Acquiror and its consolidated subsidiaries contained in the Acquiror SEC Documents (A) complied, as of the date of filing thereof (or, in the case of any registration statement, on the date it was declared effective), in all material respects with the applicable requirements of the Exchange Act or Securities Act and (B) did not contain, as of the date of filing thereof (or, in the case of any registration statement, on the date it was declared effective), any untrue statement of a material fact or omit to state any material fact necessary in order to have the statements made therein, in light of the circumstances under which they were made, not misleading. 5.8 NO MATERIAL ADVERSE EFFECT. Except as previously disclosed to Tenneco in writing prior to the date of this Agreement, between December 31, 1995 and the Agreement Effective Date, there has occurred no Material Adverse Effect on Acquiror. 5.9 ADVISORS. Except for Donaldson, Lufkin & Jenrette (''DLJ''), which has been retained by Acquiror to assist and advise Acquiror in connection with the transactions contemplated by this Agreement, Acquiror has not employed any broker, finder or intermediary in connection with such transactions who might be entitled to a fee or commission upon the consummation of this Agreement or the transactions contemplated hereby. 5.10 OPINION OF FINANCIAL ADVISOR. Acquiror has received the opinion of DLJ, dated as of the Agreement Effective Date, to the effect that, as of such date, the consideration to be paid in the Merger by Acquiror is fair to Acquiror's stockholders from a financial point of view (and Acquiror has the right to refer to that opinion, so long as such reference is in form and substance satisfactory to DLJ, in the Joint Proxy Statement and other appropriate filings with the Commission and mailings to its stockholders). 5.11 DUE AUTHORIZATION. The shares of Acquiror Stock and any Depositary Shares issued in connection with the Merger as contemplated by this Agreement will be duly authorized and will be validly issued, fully paid and nonassessable. 5.12 NO ACTIVE BUSINESS. Subsidiary has not engaged in any business and does not have any contractual liabilities, commitments, or obligations (other than pursuant to this Agreement) or any assets (other than cash representing its initial capitalization). Subsidiary has been formed solely for purposes of effectuating the transactions contemplated by this Agreement and having such transactions treated for federal income tax purposes as an acquisition of the outstanding Tenneco Stock by Acquiror in exchange for Acquiror Stock through the Merger of Subsidiary with and into Tenneco pursuant to this Agreement. 5.13 OWNERSHIP OF TENNECO STOCK. Neither Acquiror nor Subsidiary is (i) an ''Interested Stockholder'' of Tenneco as defined in Article NINTH of the Certificate of Incorporation of Tenneco or (ii) an ''interested stockholder'' of Tenneco as defined in Section 203 of the DGCL. B-17 22 As of the Agreement Effective Date, Acquiror and its Affiliates own (directly or indirectly, beneficially or of record) no shares of Tenneco Stock and neither Acquiror nor any of its Affiliates own any rights to acquire any shares of Tenneco Stock, except pursuant to this Agreement. ARTICLE VI COVENANTS OF THE PARTIES 6.1 CONDUCT OF TENNECO AND ITS SUBSIDIARIES. (a) Between the Agreement Effective Date and the Effective Time, unless Acquiror shall have consented in writing (such consent not to be unreasonably withheld), and except for (i) actions taken that either affect solely the Industrial Business or the Shipbuilding Business or only adversely affect the Energy Business to a de minimis extent and do not materially delay or prevent consummation of the transactions contemplated hereby, (ii) actions taken by Tenneco and its Affiliates and subsidiaries (including the Energy Subsidiaries) in order to consummate any of the Merger, the Spinoffs and the other transactions contemplated by this Agreement or the Distribution Agreement, which actions are taken in good faith and either are contemplated by this Agreement or the Distribution Agreement (including the Corporate Restructuring Transactions described therein) or do not have more than a de minimis effect on Tenneco or do not materially delay or prevent consummation of the transactions contemplated hereby, or (iii) actions or matters set forth in EXHIBIT G attached hereto, Tenneco shall, and shall cause each of the Energy Subsidiaries to: (A) use its reasonable best efforts to (I) operate the Energy Business in good faith and in the ordinary course, consistent with past practices, including, without limitation, with respect to the payment and administration of accounts payable and the collection and administration of accounts receivable, inventory management and control policies and implementation of capital programs for the Energy Business in a timely manner, (II) preserve substantially intact the present business organization of the Energy Business, (III) keep available, consistent with the past practices of the Energy Business, the services of the present officers, employees and consultants of Tenneco and each of the Energy Subsidiaries (to the extent they customarily provide services to the Energy Business), and (IV) preserve the relationships with customers, suppliers and others having business dealings with the Energy Business, it being understood that (x) certain employees of Tenneco and the Energy Subsidiaries will also be engaged in activities for the Industrial Business and the Shipbuilding Business, and (y) the failure of any officer, employee or consultant of the Energy Business to remain an officer, employee or consultant of the Energy Business or to become an officer, employee or consultant of Acquiror or any subsidiary of Acquiror shall not constitute a breach of this covenant; (B) not amend or otherwise change the certificate of incorporation or bylaws of Tenneco (except as may be necessary or appropriate to effect the transactions contemplated hereby or by the Distribution Agreement); B-18 23 (C) not issue or authorize the issuance of (except, as to Tenneco, in the ordinary course of business consistent with past practices or as contemplated in this Agreement) or the Distribution Agreement, any shares of any class of the capital stock of Tenneco or any Energy Subsidiary (other than New Preferred Stock) or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest), of Tenneco or any of the Energy Subsidiaries (other than the issuance of Rights and shares of Tenneco Common Stock either (I) in connection with any dividend reinvestment plan, (II) upon the exercise of options granted prior to the Agreement Effective Date, (III) pursuant to the terms of any other Tenneco employee benefit plan with an employee stock fund or employee stock ownership plan feature, (IV) in accordance with the Rights Agreement, or (V) as is otherwise permitted pursuant to this Agreement or the Distribution Agreement); (D) not reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any class of the capital stock of Tenneco or of any of the Energy Subsidiaries other than acquisitions by a dividend reinvestment plan or by any Tenneco employee benefit plan with an employee stock fund or employee stock ownership plan feature, consistent with the terms thereof and applicable securities laws; (E) not declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any class of the capital stock of Tenneco or any of the Energy Subsidiaries, except: (I) in the case of Tenneco, regular dividends (including the regular dividend for the dividend period in which the Effective Time occurs) with respect to the $4.50 Preferred Stock, the $7.40 Preferred Stock and the New Preferred Stock and regular quarterly dividends on the Tenneco Common Stock at such times and in such amounts as the Board of Directors of Tenneco in its sole discretion determines; (II) the Spinoffs; (III) the issuance of New Preferred Stock; and (IV) cash dividends declared and paid by any of the Energy Subsidiaries; (F) with respect to the individuals who will be executive officers or employees of the Energy Business after the Effective Time, not: (I) increase the compensation payable or to become payable to any of such executive officers or employees except for increases in the ordinary course of business in accordance with past practices; (II) grant any severance or termination pay to, or enter into any employment or severance agreement with, any executive officer of the Energy Subsidiaries; or (III) except as contemplated in this Agreement or in the Distribution Agreement, establish, adopt, enter into or amend or take action to accelerate any rights or benefits under, any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any such director, executive officer or employee; provided, however, that Tenneco may continue to provide benefits under employee benefit plans and incentive compensation plans that are in effect on the Agreement Effective Date; (G) not take, or permit any of its subsidiaries in respect of which it has the direct or indirect voting power to control to take, any action that would reasonably likely result in any of the conditions to the B-19 24 Merger set forth in ARTICLE VII of this Agreement not being satisfied or that would materially impair the ability of Tenneco to consummate the Spinoffs in accordance with the terms of the Distribution Agreement or the Merger in accordance with the terms hereof or would materially delay such consummation or that would disqualify either of the Spinoffs as a tax free distribution within the meaning of Section 355 of the Code; (H) not implement any change in its accounting principles, practices or methods, other than as (X) may be required by GAAP, the Financial Accounting Standards Board, the Commission or any other Governmental Authority or oversight agency and (Y) relating solely to the Shipbuilding Group and/or the Industrial Group; (I) except in the ordinary course of business, consistent with past practices, with respect to inventory or services or except where the effect on the Energy Business would be de minimis, not, with respect to the Energy Business, transfer, lease, license, sell, mortgage, pledge or dispose of any property or assets included in the Energy Assets or otherwise encumber any property or assets included in the Energy Assets; (J) not release any third party from, or amend, modify or waive any provisions of, any confidentiality or standstill agreement to which Tenneco is a party (except any that relate solely to the Industrial Business or the Shipbuilding Business); (K) file on or before the due date therefor all tax returns required to be filed by Tenneco or any Energy Subsidiary, which tax returns shall, to the extent such tax returns relate to the Energy Business, be (i) complete and correct in all material respects and (ii) prepared in accordance and on a basis consistent with the elections, accounting methods, conventions and principles of tax returns used for the most recent taxable periods for which tax returns involving similar tax items have been filed; and (L) not make, change or revoke any tax election relating to the Energy Business to the extent such election may have more than a de minimis effect on the Energy Business or Acquiror, or enter into any material agreement or settlement regarding taxes relating to the Energy Business with any tax authority to the extent such settlement or agreement may have a more than de minimis effect on the Energy Business or Acquiror. (b) Prior to the Effective Time, Tenneco shall cause all stock options issued under the Option Plans (or to executives outside the Option Plans) to be (i) converted to options to acquire the stock of the Industrial Company or the Shipbuilding Company; (ii) exercised; and/or (iii) cancelled. Tenneco shall also cause all such options not held by employees of the Energy Business to be so converted if not exercised or cancelled prior to the Effective Time in accordance with their terms. All such options held by employees of the Energy Business shall become exercisable prior to the Effective Time and, if not exercised by the Effective Time, shall be cancelled. (c) Between the Agreement Effective Date and the Effective Time, Tenneco shall cause the Industrial Subsidiary to succeed to sponsorship of the SECT. To the extent the SECT continues to own Tenneco Stock, the SECT will participate in the Merger, the Spinoffs and the conversion of shares pursuant to SECTION 2.5 hereof (and the other transactions contemplated by this Agreement and/or the Distribution Agreement) as any other stockholder of Tenneco. (d) Tenneco shall have the right, and shall use its reasonable best efforts to, issue shares of New Preferred Stock prior to the Effective Time on the following basis: (i) the issuance may be effected through public sale or private placement (either United States or foreign, but with a placement agent mutually and reasonably acceptable to both Tenneco and Acquiror), or B-20 25 if such sale or placement is not reasonably practicable under the circumstances, through a dividend-in-kind to the holders of Tenneco Common Stock, but shall in any event be in accordance with all applicable securities and other Laws (and, if publicly issued or issued as a dividend-in-kind, shall be listed on the NYSE); (ii) the NPS Value shall be approximately 25% (but in no event 20% or less) of the sum of: (x) the NPS Value, plus (y) the market value of all outstanding Tenneco Common Stock (as determined as of the Effective Time pursuant to the same procedure as applies to determining the NPS Value). (e) Prior to the Effective Time, Tenneco shall cause the elimination of all intercompany accounts (including accounts and notes receivable and payable) between members of the Energy Group, the Shipbuilding Group and the Industrial Group, as the case may be (except trade accounts incurred in the ordinary course of business), as set forth in the Distribution Agreement. (f) From and after the Agreement Effective Date, Tenneco shall afford Acquiror and its officers, employees, representatives and agents the opportunity to participate with Tenneco in the process of obtaining the rulings set forth in the IRS Ruling Request, including the right to participate in the submission of written materials by Tenneco to the Internal Revenue Service, and in-person and telephonic conferences between Tenneco and the Internal Revenue Service, to the extent such communications relate to the IRS Ruling Request. Notwithstanding the foregoing, Tenneco shall have the right, subject to prior consultation with Acquiror, to determine, in its reasonable discretion, that Acquiror's participation in certain communications with the Internal Revenue Service (or any other aspects of the rulings process) may hinder or delay Tenneco's ability to obtain the rulings requested in the IRS Ruling Request, in which case Acquiror will be precluded from such participation; provided, that Tenneco shall promptly inform Acquiror of the substance of any matter in which Acquiror does not participate. (g) In the event that, between the Agreement Effective Date and the Closing Date, the General Counsel or an Executive Vice President of Tenneco becomes aware that the Energy Business has the realistic opportunity to exercise its right of first refusal with respect to the acquisition of additional interests in the Oasis pipeline or otherwise to acquire additional interests in the Oasis pipeline, Tenneco shall notify Acquiror thereof and shall consult and cooperate with Acquiror prior to exercising its right of first refusal or making any acquisition proposal. Any exercise of such right of first refusal or other acquisition of interests in the Oasis pipeline by the Energy Business shall be subject to the consent of Acquiror, which consent shall not be unreasonably withheld or delayed. 6.2 CONDUCT OF THE BUSINESS OF ACQUIROR AND ITS SUBSIDIARIES. (a) Between the Agreement Effective Date and the Effective Time, neither Acquiror nor Subsidiary nor any of their Affiliates shall: (i) take any action that would be reasonably likely to result in any of the conditions to the Merger set forth in ARTICLE VII of this Agreement not being satisfied or that would impair the ability of Acquiror or Subsidiary to consummate the Merger in accordance with the terms hereof or delay such consummation; (ii) acquire (directly or indirectly, beneficially or of record), any shares of Tenneco Stock (or any rights to acquire any such shares, except pursuant to this Agreement); or (iii) amend or otherwise change its certificate of incorporation (except as is contemplated by this Agreement in respect of the designation of the Acquiror Preferred Stock), bylaws or other organizational documents; provided, however, that the provisions of this clause (iii) shall not apply to any Affiliate of Acquiror or Subsidiary if the amendment or other change would not adversely effect any of the rights or benefits hereunder or under any of the Ancillary Agreements of Tenneco or the holders of Tenneco Stock (other than to a de minimis extent) or otherwise materially delay or prevent the consummation of the transactions contemplated hereby. (b) Acquiror shall not, and shall not permit any of its subsidiaries (including Subsidiary) to, take or cause or permit to be taken any action that would disqualify either of the Spinoffs as a tax-free distribution within the meaning of Section 355 of the Code. B-21 26 (c) Between the Agreement Effective Date and the Effective Time, Subsidiary shall not engage in any activities of any nature except as provided in, or in connection with the transactions contemplated by, this Agreement. 6.3 ACCESS TO INFORMATION; CONFIDENTIALITY. (a) Between the date of this Agreement and the Effective Time, and except as may otherwise be required by applicable law, each of Tenneco and Acquiror shall (and shall cause its subsidiaries and officers, directors, employees, auditors and agents to) afford the officers, employees and agents of the other party (the ''RESPECTIVE REPRESENTATIVES'') reasonable access at all reasonable times to its officers, employees, agents, properties, offices, plants and other facilities, books and records, and shall furnish such Respective Representatives with all financial, operating and other data and information as may be reasonably requested, in each case to the extent that such access and disclosure would not: (i) violate the terms of any agreement to which the disclosing party or any of its Affiliates is bound or any applicable law or regulation; or (ii) impair any attorney-client privilege of the disclosing party. Notwithstanding the foregoing, Tenneco shall not be required (and shall not be required to cause its subsidiaries and officers, directors, employees, auditors and agents) to provide the access, data and information described in the preceding sentence with respect to the Industrial Business or the Shipbuilding Business unless Acquiror has a reasonable interest in obtaining such access, data or information in connection with the Merger. (b) All information obtained by Tenneco, Acquiror or their Respective Representatives pursuant to SECTION 6.3(A) hereof shall be kept confidential in accordance with the confidentiality agreement, dated March 28, 1996, executed by Acquiror and the confidentiality agreement, dated June 12, 1996, executed by Tenneco. (c) The Industrial Subsidiary and the Shipbuilding Subsidiary (and their respective direct and indirect subsidiaries and Affiliates) shall be deemed third party beneficiaries of this SECTION 6.3 and all other provisions of this Agreement necessary or appropriate for purposes of enforcing this SECTION 6.3. 6.4 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. (a) For a period of six years after the Effective Time, Acquiror shall not cause or permit any amendment, repeal or other modification of the provisions of (i) Article IV, Section 14 of the by-laws of the Surviving Corporation, as set forth in EXHIBIT H attached hereto, or (ii) Article Eighth of the certificate of incorporation of the Surviving Corporation, in either case in any manner that would adversely affect the rights thereunder of individuals who at any time prior to the Effective Time were directors, officers or employees of Tenneco or any of its subsidiaries or Affiliates or who are otherwise entitled to indemnification pursuant to such provisions in respect of actions or omissions occurring at or prior to the Effective Time (including, without limitation, the transactions contemplated by this Agreement and the Distribution Agreement), unless such modification is required by the DGCL or applicable federal law, and then only to the extent of such applicable requirements of the DGCL or federal law. To the extent the Surviving Corporation is unable for any reason to fulfill its obligations under the bylaw provisions set forth in EXHIBIT H attached hereto, Acquiror agrees to pay, perform and discharge all such obligations. (b) Prior to the Effective Time, Tenneco shall, and from and after the Effective Time the Acquiror and the Surviving Corporation jointly and severally shall, indemnify, defend and hold harmless each Person who is now, has been at any time prior to the date of this Agreement or who becomes prior to Effective Time an officer, director or employee of Tenneco or any of its subsidiaries (collectively, the ''INDEMNIFIED PARTIES'') against all losses, expenses, claims, damages, liabilities or amounts that are paid in settlement of, with the approval of the B-22 27 indemnifying party (which approval shall not unreasonably be withheld), or otherwise in connection with any claim, action, suit, proceeding or investigation (a ''CLAIM''), based in whole or in part on the fact that such Person is or was a director, officer or employee of Tenneco or any of its subsidiaries and arising out of actions or omissions occurring at or prior to the Effective Time (including, without limitation, the transactions contemplated by this Agreement and the Distribution Agreement), whether or not such Claim was asserted prior to, at or after the Effective Time, in each case to the fullest extent permitted under the DGCL or other applicable law (and shall pay expenses in advance of the final disposition of any such Claim to each Indemnified Party to the fullest extent permitted under the DGCL or other applicable law, upon receipt from the Indemnified Party to whom expenses are advanced of any undertaking to repay such advances required by Section 145(e) of the DGCL or other applicable law). Notwithstanding anything contained herein, Tenneco's obligation to indemnify any such person pursuant to this SECTION 6.4 shall not affect the allocation of liability among the Energy Group, the Industrial Group and Shipbuilding Group pursuant to the Distribution Agreement and any corresponding indemnification rights thereunder. (c) Without limiting the generality of the foregoing, in the event any Claim is brought against any Indemnified Party (whether arising before or after the Effective Time): (i) the Indemnified Party may retain counsel satisfactory to him with the consent of Tenneco (or the consent of Acquiror and the Surviving Corporation after the Effective Time) which consent of Tenneco (or, after the Effective Time, Acquiror and the Surviving Corporation) with respect to such counsel retained by the Indemnified Party may not be unreasonably withheld or delayed; (ii) Tenneco (or, after the Effective Time, Acquiror and the Surviving Corporation) shall pay all reasonable fees and expenses of such counsel for the Indemnified Party promptly as statements therefor are received; and (iii) Tenneco (or, after the Effective Time, Acquiror and the Surviving Corporation) will use all reasonable efforts to assist in the vigorous defense of any such matter, provided that none of Tenneco, Acquiror or the Surviving Corporation shall be liable for any settlement of any Claim effected without its written consent, which consent, however, shall not be unreasonably withheld. Any Indemnified Party wishing to claim indemnification under this SECTION 6.4, upon learning of any such Claim, shall notify Tenneco (or, after the Effective Time, Acquiror and the Surviving Corporation) (but any failure so to notify shall not relieve Tenneco, Acquiror or the Surviving Corporation from any liability which it may have under this SECTION 6.4, except to the extent such failure materially prejudices such party), and shall deliver to Tenneco (or, after the Effective Time, Acquiror and the Surviving Corporation) any undertaking required by Section 145(e) of the DGCL or other applicable law. The Indemnified Parties as a group may retain only one law firm to represent them with respect to each such Claim unless there is, under applicable standards of professional conduct, a conflict on any significant issue between the positions of any two or more Indemnified Parties. (d) (i) MAINTENANCE OF D&O POLICIES. On or prior to the Closing Date, Tenneco shall provide Acquiror with copies and a schedule of those Directors' and Officers' Liability Insurance Policies which Tenneco shall enter into effective as of the Closing Date (the ''D&O POLICIES''). For a period of seven years after the Effective Time, Acquiror and the Surviving Corporation shall cause to be maintained in full force and effect the D&O Policies. Acquiror and the Surviving Corporation shall be jointly and severally responsible for payment of all premiums due as respects the D&O Policies and shall take all other actions necessary or appropriate to maintain the D&O Policies in full force and effect (other than to the extent the available limit of liability of any such D&O Policy may be reduced or exhausted solely as the result of the payment of claims thereunder) for the agreed term of seven years after the Effective Time. If at any time an insurance carrier under any of the D&O Policies becomes unable or unwilling, or it becomes probable that such insurance carrier will be unable or unwilling (which determination shall be made in the reasonable discretion of the Industrial Subsidiary), to fulfill any of its obligations under any D&O Policy, whether due to such insurance carrier's dissolution, bankruptcy, insolvency or otherwise, then Acquiror and the Surviving Corporation shall obtain a directors' and officers' liability B-23 28 insurance policy in substitution (with an insurance carrier acceptable to the Industrial Subsidiary) of each D&O Policy under which such insurance carrier was to provide coverage (a ''REPLACEMENT D&O POLICY''), which shall provide at least the same coverage and amounts, and contain terms and provisions which are no less favorable to the insured parties, as existed under the D&O Policy so replaced. Acquiror and the Surviving Corporation shall pay any costs associated with the obtaining and maintenance of any Replacement D&O Policy as contemplated hereby. (ii) OWNERSHIP AND ADMINISTRATION OF POLICIES. The parties hereto agree that the D&O Policies and any Replacement D&O Policy shall be owned by the Industrial Subsidiary. From and after the Effective Time, the Industrial Subsidiary shall be solely responsible for all aspects of service and administration of such policies (other than the payment of any premiums due), including the notification to insurers, and the management, negotiation and settlement, of any claims made under the D&O Policies and any Replacement D&O Policy. From and after the Effective Time, Acquiror and the Surviving Corporation shall have the right to participate in the negotiation and participate in and consent to settlement (such consent not to be unreasonably withheld or delayed) of any claim under the D&O Policies and any Replacement D&O Policy for which, and then only to the extent, that either is obligated to indemnify any of the present or former directors or officers of Tenneco or any of its present or past subsidiaries (''DIRECTORS OR OFFICERS'') for liabilities associated with such claim. The Industrial Subsidiary's responsibilities for administering and servicing the D&O Policies and any Replacement D&O Policy shall in no manner restrict, reduce, limit or impair any of the Directors' or Officers' rights to indemnification from Acquiror, the Surviving Corporation or their respective successors or assigns in accordance with any applicable Law, statute, charter or bylaw provision. (iii) COOPERATION. Acquiror and the Surviving Corporation shall cooperate with the Directors and Officers in the defense and settlement of any claim made against them based upon or arising out of any actual or alleged wrongful act (as such term may be defined in the applicable D&O Policies or Replacement D&O Policy) occurring at or prior to the Effective Time. Acquiror and the Surviving Corporation shall provide any reasonable assistance or information that may be required by a Director or Officer in connection with any such claim. Neither Acquiror, the Surviving Corporation nor any of their respective representatives shall cause any action or inaction that could reasonably be expected to jeopardize or otherwise impair the rights or ability of the Directors or Officers to recover loss amounts due under the D&O Policies or any Replacement D&O Policy. (e) Neither Acquiror nor the Surviving Corporation shall take any action that could reasonably be expected to jeopardize or otherwise interfere with the ability of any of the Indemnified Parties to collect any proceeds payable under any of the D&O Policies. (f) Each of Tenneco, Acquiror and Subsidiary acknowledges and agrees that the Industrial Subsidiary's responsibilities hereunder for Claims Administration and Insurance Administration shall not relieve any Person submitting an insured claim under any of the D&O Policies of (i) the primary responsibility for giving notice of such insured claim accurately, completely and in a timely manner, or (ii) any other right or responsibility which such Person may have pursuant to the terms of any of the D&O Policies. (g) This SECTION 6.4 (and all other provisions of this Agreement necessary or appropriate for purposes of enforcing this SECTION 6.4) is intended to be for the benefit of, and shall be enforceable by, the Industrial Subsidiary and the Indemnified Parties, their heirs and personal representatives and shall be binding on Tenneco, the Surviving Corporation and Acquiror and each of their respective successors and assigns. 6.5 NOTIFICATION OF CERTAIN MATTERS. Between the Agreement Effective Date and the Effective Time, Tenneco and Acquiror shall give prompt notice to the other of : (i) the occurrence or nonoccurrence of any event, the occurrence or nonoccurrence of which would likely cause B-24 29 (A) any of its representations or warranties contained in this Agreement to be untrue or inaccurate, or (B) any of its covenants, conditions or agreements contained in this Agreement not to be complied with or satisfied; and (ii) its (or in the case of Acquiror, Acquiror's or Subsidiary's) failure to comply with or satisfy any of its covenants, conditions or agreements to be complied with or satisfied by it (or, in the case of Acquiror, Acquiror or Subsidiary) at or prior to the Effective Time; provided, however, that the delivery of any notice pursuant to this SECTION 6.5 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. 6.6 TAX TREATMENT. (a) Each of Tenneco, on the one hand, and Acquiror and Subsidiary, on the other hand, intend the Merger to qualify as a reorganization under Code Section 368(a)(1)(B) and the Spinoffs to be treated as tax-free distributions under Code Section 355, and each such party shall use its reasonable best efforts to cause the Merger and Spinoffs to so qualify. Neither Tenneco, on the one hand, nor Acquiror or Subsidiary, on the other hand, shall take any action which might cause (i) the Merger to fail to qualify as a reorganization under Code Section 368(a)(1)(B), (ii) the Spinoffs to fail to qualify as tax free distributions under Code Section 355, (iii) any other transfer described in the Corporate Restructuring Transactions that is intended (as described in Tenneco's request for rulings from the Internal Revenue Service) to qualify as a tax free transfer under Code Sections 332, 351, 355 or 368 to fail to so qualify, or (iv) Tenneco or any Energy Subsidiary to recognize any gains relating to deferred intercompany transactions or excess loss accounts between or among any members of the affiliated group of corporations of which Tenneco is the common parent (other than those deferred intercompany gains listed on EXHIBIT I attached hereto). (b) In furtherance of SECTION 6.6(A) above, Tenneco shall make the representations set forth in EXHIBIT J attached hereto, and such other representations as are reasonably necessary to ensure the tax-free treatment of the Merger, Spinoffs and related transactions described in SECTION 6.6(A) above, and shall assure the continuing accuracy of such representations. (c) In furtherance of SECTION 6.6(A) above, Acquiror and Subsidiary shall each make the representations set forth in EXHIBIT J attached hereto, and such other representations as are reasonably necessary to ensure the tax-free treatment of the Merger, Spinoffs and related transactions described in SECTION 6.6(A) above, and shall assure the continuing accuracy of such representations. (d) The Industrial Subsidiary and the Shipbuilding Subsidiary (and their respective direct and indirect subsidiaries and Affiliates) shall be deemed third party beneficiaries of this SECTION 6.6 and all other provisions of this Agreement necessary or appropriate for purposes of enforcing this SECTION 6.6. 6.7 REGISTRATION STATEMENT; JOINT PROXY STATEMENT; NPS MATERIALS; TENDER AND EXCHANGE MATERIALS. (a) As promptly as practicable after the Agreement Effective Date, Tenneco and Acquiror shall prepare and file, or cause to be prepared and filed, with the Commission a joint proxy statement (the ''JOINT PROXY STATEMENT'') and other proxy solicitation materials relating to the Stockholders' Meeting (as defined in SECTION 6.8 hereof), and Acquiror shall prepare and file, or cause to be prepared and filed, with the Commission a registration statement on Form S-4 in which the Joint Proxy Statement shall be included as a prospectus (the ''REGISTRATION STATEMENT''), in connection with the registration under the Securities Act of the shares of Acquiror Stock (and any Depositary Shares) to be issued to the stockholders of Tenneco pursuant to the Merger. B-25 30 Each of Acquiror and Tenneco shall furnish or cause to be furnished to the other party all information concerning itself and its subsidiaries as the other party may reasonably request in connection with such actions and the preparation of the Registration Statement and the Joint Proxy Statement (and in connection with the preparation of the NPS Materials and the Tender and Exchange Materials). Each of Acquiror and Tenneco hereby agree to take, and to cause their respective subsidiaries to take, (i) such actions as may be required to have the Registration Statement and, to the extent applicable, the NPS Materials and the Tender and Exchange Materials declared effective under the Securities Act and to have the Joint Proxy Statement cleared by the Commission, in each case as promptly as practicable, including by consulting with each other as to, and responding promptly to, any Commission comments with respect thereto, and (ii) such actions as may be required to be taken under applicable state securities or ''blue sky'' laws in connection with the issuance of shares of Acquiror Stock (and any Depositary Shares) pursuant to the Merger. As promptly as practicable after the Registration Statement shall have become effective, each of Tenneco and Acquiror shall mail the Joint Proxy Statement to its respective stockholders (and Tenneco and Acquiror shall attempt to effect their respective mailings on the same date), and the Joint Proxy Statement shall include the recommendation of the board of directors of Tenneco in favor of adoption and approval of this Agreement and the Merger and the Spinoffs, and of the board of directors of Acquiror in favor of approval of the Stock Issuance (as defined in SECTION 6.8 hereof); provided, however, that no obligation of Tenneco pursuant to this SECTION 6.7(A) shall be required to be performed if there is a substantial risk that the performance thereof would constitute a breach of the fiduciary duties of the board of directors of Tenneco as determined by the board of directors of Tenneco in good faith after consultation with and based upon the advice of its independent legal counsel (who may be its regularly engaged independent legal counsel). (b) Acquiror covenants that the information supplied by or on behalf of Acquiror for inclusion in the Registration Statement and the Joint Proxy Statement shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading, at any of: (i) the time the Registration Statement (or any amendment or supplement thereto) is declared effective; (ii) the time the Joint Proxy Statement (or any amendment or supplement thereto) is first mailed to the stockholders of Tenneco and Acquiror; (iii) the time of each of the Stockholders' Meetings; and (iv) the Effective Time. Likewise, Acquiror covenants that the information and data supplied by or on behalf of Acquiror for inclusion in the NPS Materials and Tender and Exchange Materials (including, without limitation, all information and financial data (pro forma or otherwise) relating to the business and operations of Tenneco following consummation of the Merger supplied by or on behalf of Acquiror) shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading, at all times through the completion of (A) in the case of the NPS Materials, the offering and sale of the New Preferred Stock, and (B) in the case of the Tender and Exchange Materials, the tender and exchange offers pursuant to the Debt Realignment. (c) Tenneco covenants that the financial information (including pro forma financial data and information) supplied or to be supplied by Tenneco or its representatives for inclusion or incorporation by reference in the Registration Statement or the Joint Proxy Statement (or the NPS Materials and/or Tender and Exchange Materials) shall comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto, shall be prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto B-26 31 or, in the case of unaudited financial information, as permitted by the rules of the Commission) and shall fairly present (subject, in the case of unaudited financial information, to normal, recurring audit adjustments) the financial information reflected therein as of the dates thereof or for the periods then ended. The Joint Proxy Statement shall, as it relates to the Tenneco Stockholders' Meeting, comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder, except that no representation is herein made by Tenneco with respect to statements made in the Joint Proxy Statement based on information supplied by Acquiror or any of its representatives for inclusion in the Joint Proxy Statement or with respect to information concerning Acquiror or any of its subsidiaries (including Subsidiary) incorporated by reference in the Joint Proxy Statement. If at any time prior to the Effective Time any event or circumstance relating to Acquiror or any of its subsidiaries (including Subsidiary), their respective officers or directors, or Acquiror's plans and intentions regarding its operation of the Surviving Corporation after the Merger should be discovered by Acquiror or any of its subsidiaries (including Subsidiary) that should be set forth in an amendment or a supplement to the Registration Statement or Joint Proxy Statement (or in any of the NPS Materials or Tender and Exchange Materials), Acquiror shall promptly inform Tenneco in writing. (d) Tenneco covenants that the information supplied by or on behalf of Tenneco for inclusion in the Registration Statement and the Joint Proxy Statement shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading, at (i) the time the Registration Statement (or any amendment or supplement thereto) is declared effective, (ii) the time the Joint Proxy Statement (or any amendment or supplement thereto) is first mailed to the stockholders of Tenneco and Acquiror, (iii) the time of each of the Stockholders' Meetings, and (iv) the Effective Time. Likewise, Tenneco covenants that the NPS Materials and Tender and Exchange Materials shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading, at all times through the completion of (A) in the case of the NPS Materials, the offering and sale of the New Preferred Stock, and (B) in the case of the Tender and Exchange Materials, the tender and exchange offers pursuant to the Debt Realignment; provided, that the foregoing provisions of this sentence shall not apply to any information or financial data (including pro forma financial information and data) supplied by or on behalf of Acquiror, including information and data relating to the business and operations of Tenneco following consummation of the Merger. (e) Acquiror covenants that the financial information (including pro forma financial data and information regarding Acquiror or Tenneco) supplied or to be supplied by Acquiror or its representatives for inclusion or incorporation by reference in the Registration Statement or the Joint Proxy Statement (or the NPS Materials or Tender and Exchange Materials) shall comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto, shall be prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited financial information, as permitted by the rules of the Commission) and shall fairly present (subject, in the case of unaudited financial information, to normal, recurring audit adjustments) the financial information reflected therein as of the dates thereof or for the periods then ended. Each of the Joint Proxy Statement, as it relates to the Acquiror Common Stockholders' Meeting, and the Registration Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder or the Securities Act and the rules and regulations thereunder, as applicable, except that no representation is herein made by Acquiror with respect to statements made in the Joint Proxy Statement or Registration Statement based on information supplied by Tenneco or any of its representatives for inclusion in the Joint Proxy Statement or Registration Statement or with respect to information concerning Tenneco or any of its subsidiaries incorporated by reference in the Joint Proxy Statement or B-27 32 Registration Statement. If at any time prior to the Effective Time any event or circumstance relating to Tenneco or any of its subsidiaries, or their respective officers or directors, should be discovered by Tenneco or any of its subsidiaries which should be set forth in an amendment or a supplement to the Registration Statement or Joint Proxy Statement (or in any of the NPS Materials or Tender and Exchange Materials), Tenneco shall promptly inform Acquiror in writing. (f) None of the Joint Proxy Statement, the Registration Statement, the NPS Materials or the Tender and Exchange Materials shall be filed or distributed, and, prior to the termination of this Agreement, no amendment or supplement to the Joint Proxy Statement or the Registration Statement shall be filed or distributed, by or on behalf of Tenneco or Acquiror, without consultation with the other party and its counsel. 6.8 STOCKHOLDERS' MEETINGS. Tenneco shall call and hold a meeting of its stockholders (the ''Tenneco Stockholders' Meeting'') for the purpose of voting upon the adoption and approval of this Agreement, the Merger and the Spinoffs. Acquiror shall call and hold a meeting of its stockholders (the ''Acquiror Common Stockholders' Meeting'') for the purpose of voting upon the approval of the issuance of Acquiror Common Stock in connection with the Merger as contemplated by this Agreement (the ''Stock Issuance'') (the Acquiror Common Stockholders' Meeting and the Tenneco Stockholders' Meeting being collectively referred to herein as the ''Stockholders' Meetings''). Each of Tenneco and Acquiror shall use its reasonable best efforts to schedule and hold their respective Stockholders' Meetings so that the Acquiror Common Stockholders' Meeting occurs at least one business day prior to the Tenneco Stockholders' Meeting, and otherwise so as not to delay the transactions contemplated hereby (it being intended that the Joint Proxy Statement shall be mailed and the Stockholders' Meetings shall be scheduled to occur as soon as practicable after the receipt of the IRS Ruling Letter). Each of Tenneco and Acquiror shall use its reasonable best efforts to solicit from its stockholders proxies in favor of the approval and adoption of this Agreement, the Merger and the Spinoffs or the Stock Issuance, as applicable, and shall take all other action necessary or advisable to secure the vote or consent of stockholders required therefor by applicable Law and/or its certificate of incorporation or other governing instrument or document. The stockholders of Tenneco will vote on the Spinoffs and the Merger as a single transaction. Notwithstanding the foregoing, Tenneco shall not be required to take any action if there is a substantial risk that the subject action would constitute a breach of the fiduciary duties of the board of directors of Tenneco as determined by the board of directors of Tenneco in good faith after consultation with and based upon the advice of independent legal counsel (who may be its regularly engaged independent legal counsel). 6.9 FURTHER ACTION; REASONABLE BEST EFFORTS. (a) Upon the terms and subject to the provisions of this Agreement, each of the parties hereto shall use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations promptly to consummate and make effective the transactions contemplated hereby and by the Distribution Agreement (subject, however, to the vote of the stockholders of Tenneco and, to the extent required, Acquiror as provided herein), including, without limitation, using its reasonable best efforts to obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Authorities and parties to contracts with Tenneco and, to the extent required, Acquiror and their respective subsidiaries as are necessary for the consummation of the transactions contemplated by this Agreement. Each party hereto shall promptly consult with each other party with respect to, and provide to each other party all such information or documentation which shall be reasonably requested with respect to, all filings made by such party with any Governmental Authority in connection with this Agreement and the transactions contemplated hereby. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall use their reasonable best efforts to take all such action. (b) Between the Agreement Effective Date and the Closing Date, (i) Tenneco and Acquiror shall, and shall cause their respective Affiliates and representatives to, consult, cooperate and work together in good faith and with reasonable best efforts and all deliberate speed to attempt jointly to obtain a favorable resolution prior to the Effective Time with respect to pending B-28 33 regulatory proceedings affecting the Energy Business, including sharing ideas and information concerning alternative approaches to resolving such regulatory proceedings and coordinating the timing and content of communications with customers of the Energy Business, affecting the Energy Business, and regulatory authorities having jurisdiction over the operations of the Energy Business; provided, that any settlement (or proposed settlement) of any such regulatory proceedings shall require the consent of both Tenneco and Acquiror, such consent not to be arbitrarily withheld; and (ii) Tenneco shall, and shall cause its Affiliates and representatives to, consult and work with Acquiror and its Affiliates and representatives to attempt to obtain favorable resolutions of material litigation affecting the Energy Business; provided that, except as otherwise set forth on EXHIBIT G attached hereto, any settlement (or proposed settlement) of any such litigation shall require the consent of Acquiror, such consent not to be arbitrarily withheld. (c) Except as set forth on EXHIBIT G attached hereto, between the Agreement Effective Date and the Closing Date, the Energy Business shall not incur any additional off balance sheet indebtedness for the purpose of monetization of any Energy Assets. Subject to the terms of the previous sentence, Acquiror and Tenneco shall consult and cooperate with each other with respect to off-balance sheet financing opportunities for the Australian assets of the Energy Business, the Orange Cogeneration Project and the South Sulawesi Project and any such off-balance sheet financing may be incurred by mutual agreement between Acquiror and Tenneco. Between the Agreement Effective Date and the Closing Date, Tenneco shall attempt to cooperate with Acquiror to the extent reasonably requested by Acquiror in connection with sales by the Energy Business after the Closing Date of material Energy Assets; provided that any such transactions shall be subject to the covenants, restrictions and limitations set forth in SECTION 6.6 hereof. (d) Between the Agreement Effective Date and the Closing Date, Tenneco shall, to the extent permitted by law, consult and work in good faith with Acquiror with respect to the payment and administration of accounts payable, inventory levels and policies and the collection and administration of accounts receivable of the Energy Business and the making of capital expenditures by the Energy Business to preserve the value of the Energy Business and not to artificially delay payment of accounts payable, accelerate collections of accounts receivable, alter inventory levels or unreasonably delay capital expenditures; provided, however, that Tenneco shall have the right to effect the actions and transactions identified on EXHIBIT G attached hereto. To the extent permitted by Law, Tenneco shall consult with Acquiror with respect to other matters pertaining to the operation of the Energy Business. Each of Tenneco and Acquiror shall designate one or more members of management to act as coordinators with respect to the matters covered by this SECTION 6.9. (e) Each party shall use its reasonable best efforts to not take any action, or enter into any transaction, that would cause any of its representations or warranties contained in this Agreement to be untrue or result in a breach of any covenant made by it in this Agreement. (f) The Industrial Subsidiary shall be a deemed third party beneficiary of this SECTION 6.9 and all other provisions of this Agreement necessary or appropriate for purposes of enforcing this SECTION 6.9. 6.10 PUBLIC ANNOUNCEMENTS. Each party hereto shall consult with each other before issuing any press release or otherwise issuing any other similar written public statement with respect to this Agreement or the Merger and shall not issue any such press release or make any such public statement without the prior consent of each other party, which shall not be unreasonably withheld; provided, however, that a party may, without the prior consent of any other party, issue such press release or other similar written public statement as may be required by law or any listing agreement with a national securities exchange to which Tenneco or Acquiror is a party if it has used all reasonable efforts to consult with such other party and to obtain such party's consent but has been unable to do so in a timely manner. Further, the parties shall use their respective reasonable best efforts to coordinate and jointly schedule and interface with the various Governmental Authorities and ratings agencies and other applicable bodies and groups involved or otherwise interested in the transactions contemplated by this Agreement. B-29 34 6.11 LISTING OF ACQUIROR COMMON STOCK AND DEPOSITARY SHARES. Acquiror shall use its reasonable best efforts to cause the shares of Acquiror Common Stock and any Depositary Shares to be issued in or in connection with the Merger to be approved for listing on the NYSE and any other national securities exchange on which shares of Acquiror Common Stock may at such time be listed, subject to official notice of issuance prior to the Effective Time. 6.12 RIGHTS AGREEMENT. Except as contemplated by this Agreement, prior to the Effective Time the Board of Directors of Tenneco shall not, without the prior written approval of Acquiror, (i) amend or supplement the Rights Agreement in any manner that would cause either a ''Triggering Event'' or a ''Distribution Date'' (in each case as defined in the Rights Agreement) to occur or to be deemed to have occurred solely by reason of the execution of this Agreement and the consummation of the transactions contemplated hereby, or (ii) redeem the Rights. 6.13 THE SPINOFFS. Prior to the Closing, Tenneco shall enter into the Distribution Agreement (with only such amendments or modifications as are not prejudicial, other than to a de minimis extent, to the Energy Business or do not materially delay or prevent consummation of the Merger) and shall cause the Industrial Subsidiary and the Shipbuilding Subsidiary to enter into the Distribution Agreement (with only such amendments), and Tenneco shall take, or cause to be taken, all actions and do, or cause to be done, all things necessary to effect the Spinoffs pursuant to the terms of the Distribution Agreement (with only such amendments). Notwithstanding the foregoing, after prior notice to Acquiror, Tenneco may furnish information or enter into negotiations regarding, or enter into an agreement for, any sale, merger or other disposition transaction(s) involving either or both of the Shipbuilding Business and/or the Industrial Business, or any portion of either (an ''S/I TRANSACTION''), which may render either or both of the Spinoffs (or any portion thereof) impossible or impracticable; provided, that Tenneco shall not solicit any S/I Transaction involving the Industrial Subsidiary, the Shipbuilding Subsidiary, the Industrial Business as a whole, the Shipbuilding Business as a whole or any other S/I Transaction which could be reasonably predicted to render the Merger impossible or impracticable or materially delay or prevent consummation thereof. Tenneco may enter into any such S/I Transaction in its sole discretion if the subject S/I Transaction would not be adverse, other than to a de minimis extent, to Acquiror or the Energy Business (including with respect to any covenants or obligations of a party under this Agreement or the Distribution Agreement) and would not render the Merger impossible or impracticable or materially delay or prevent consummation thereof. If the S/I Transaction would be so adverse to Acquiror or the Energy Business, or would render the Merger impossible or impracticable or materially delay or prevent consummation thereof, then S/I Transaction may be pursued and/or entered into only (a) prior to the approval of this Agreement, the Merger and the Spinoffs by the Tenneco stockholders and (b) if Tenneco's board of directors determines in good faith, after consultation with and based upon the advice of independent legal counsel (which may be Tenneco's regularly engaged independent legal counsel), that there is a substantial risk that the failure to do so would constitute a breach of its fiduciary duties under applicable Law. 6.14 ANTITRUST MATTERS. (a) Tenneco and Acquiror shall file with the Federal Trade Commission and the Department of Justice, as promptly as practicable but in any event within 20 business days of the Agreement Effective Date, the notification and report form required for the transactions contemplated hereby and shall promptly provide any supplemental information which may be reasonably requested in connection therewith pursuant to the HSR Act, which notification, report and supplemental information shall comply in all material respects with the requirements of the HSR Act. (b) Although the parties do not believe that the Merger has any antitrust implications, Acquiror shall use all reasonable efforts to resolve antitrust objections, if any, that may be asserted with respect to the transactions contemplated hereby by the Federal Trade Commission, the Antitrust Division of the Department of Justice or any other federal or state agency. Acquiror shall make such divestitures, or enter into such hold-separate B-30 35 agreements, as may be necessary to prevent the entry of, or effect the dissolution of, any injunction, temporary restraining order or other order that has the effect of preventing for any period of time the consummation of the Merger in any respect. Acquiror shall reimburse Tenneco for reasonable attorneys' fees and costs incurred by Tenneco in connection with defending any antitrust investigation or other proceeding brought by any of the above identified entities. 6.15 EMPLOYEE MATTERS. (a) Prior to the Effective Time, Tenneco shall enter into the Benefits Agreement and shall take the actions with respect to compensation and benefits described elsewhere in this Agreement or in the Distribution Agreement. (b) Acquiror shall provide, or shall cause the Surviving Corporation (or any of its subsidiaries, as appropriate) to provide, to the employees and former employees of the Energy Business and the dependents of either, as applicable, the benefits described in EXHIBIT K attached hereto. 6.16 DEBT REALIGNMENT. Each of Tenneco and Acquiror shall use its reasonable best efforts so that, immediately prior to the Spinoffs, the Debt Realignment has been effected (with only such modifications as are not adverse, except to a de minimis extent, to Acquiror, the Energy Business, the Industrial Subsidiary or the Shipbuilding Subsidiary). 6.17 NO SOLICITATIONS. Tenneco shall immediately cease any existing discussions or negotiations with any third parties conducted prior to the date hereof with respect to any merger, consolidation, business combination, sale of the Energy Business, sale of a Major Subsidiary, tender or exchange offer or similar transaction involving the Energy Business as a whole or any Major Subsidiary as a whole, other than the transactions contemplated by this Agreement or the Distribution Agreement (an ''ACQUISITION TRANSACTION''). Neither Tenneco nor any of its subsidiaries nor any of their respective directors and officers shall, and Tenneco shall use its best efforts to ensure that none of its or its subsidiaries' Affiliates, representatives or agents shall, directly or indirectly, solicit any person, entity or group concerning any Acquisition Transaction; provided, however, that, after prior notice to Acquiror and prior to the approval of this Agreement, the Merger and the Spinoffs by the Tenneco stockholders, Tenneco may furnish information or enter into negotiations regarding, or enter into an agreement for, an Acquisition Transaction if Tenneco's board of directors determines in good faith, after consultation with and based upon the advice of independent legal counsel (which may be Tenneco's regularly engaged independent legal counsel), that there is a substantial risk that the failure to do so would be found to constitute a breach of its fiduciary duties under applicable Law, but only in response to a proposal (which may be subject to due diligence) for an Acquisition Transaction received by Tenneco which the board of directors of Tenneco determines in good faith after consultation with its financial advisors is reasonably likely to result in consummation of an Acquisition Transaction more favorable, from a financial point of view, to the stockholders of Tenneco than the transactions contemplated hereby, taking into account the financial responsibility of the party making such proposal, as then reasonably determinable by Tenneco, and such party's ability, as then reasonably determinable by Tenneco, to obtain regulatory approvals for such Acquisition Transaction (a ''HIGHER PROPOSAL''). Tenneco shall advise Acquiror immediately if any proposal of or other indication of interest in a Higher Proposal is received by Tenneco and the terms and conditions thereof and keep Acquiror promptly informed of the status thereof. 6.18 PERFORMANCE OF AGREEMENT AND DISTRIBUTION AGREEMENT. After the Effective Time, Acquiror shall, and shall cause the Surviving Corporation and the Energy Subsidiaries to, perform their respective obligations under this Agreement and the Distribution Agreement and their respective obligations under each and every other agreement to be entered into pursuant to the Distribution Agreement and/or the Spinoffs, and Acquiror hereby guarantees the full and timely payment and performance of all of the respective obligations and covenants of Tenneco, the Surviving Corporation and the Energy Subsidiaries under this Agreement and the Distribution Agreement and their respective obligations under each and every other agreement to be entered into pursuant to the Distribution Agreement and/or the Spinoffs, which are to be performed from and after the Effective Time. Without limiting the generality of the foregoing sentence, the foregoing covenant and guarantee of Acquiror shall B-31 36 specifically be deemed to apply to the obligations of the Surviving Corporation to make any payments due to the Industrial Subsidiary pursuant to Section 6 of the Tax Sharing Agreement attached to the Distribution Agreement in respect of any Tax Benefit attributable to any Debt Discharge Item (as those terms are defined in the Tax Sharing Agreement). The Industrial Subsidiary and the Shipbuilding Subsidiary are hereby designated as, and deemed to be, third party beneficiaries of this SECTION 6.18 (and all other provisions of this Agreement necessary or appropriate for purposes of enforcing the terms of this SECTION 6.18). The covenants and guarantees of Acquiror set forth in this SECTION 6.18 are not in limitation of or substitution for, but are in addition to, the Guarantees attached hereto as EXHIBIT L, which shall be executed by Acquiror and delivered to the Industrial Subsidiary and the Shipbuilding Subsidiary on the Closing Date. 6.19 AFFILIATES OF TENNECO. Tenneco shall promptly deliver to Acquiror a letter (i) identifying all Persons who may be deemed affiliates of Tenneco under Rule 145 of the Securities Act, including, without limitation, all directors and executive officers of Tenneco, and (ii) representing to Acquiror that Tenneco has advised the Persons identified in such letter of the resale restrictions with respect to shares of Acquiror Common Stock and any Depositary Shares received in connection with the Merger imposed by applicable securities laws. Tenneco shall use its reasonable best efforts to obtain from each Person identified in such letter a written agreement, substantially in the form of EXHIBIT M. Tenneco shall use its reasonable best efforts to obtain as soon as practicable from any Person who may be deemed to have become an Affiliate of Tenneco after Tenneco's delivery of the letter referred to above and prior to the Effective Time, a written agreement substantially in the form of EXHIBIT M. 6.20 ANTITAKEOVER STATUTES. If any Takeover Statute is or may become applicable to the transactions contemplated hereby, each of the parties hereto and the members of its board of directors shall grant such approvals and take such actions as are necessary so that the transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or minimize the effects of any Takeover Statute on any of the transactions contemplated by this Agreement; provided however, that no party hereto shall be required to take any action if there is a substantial risk that the subject action would be held to constitute a breach of the fiduciary duties of the board of directors of the subject party, as determined by the subject board of directors in good faith after consultation with and based upon the advice of independent legal counsel (who may be the subject party's regularly engaged independent counsel). 6.21 EQUITY ISSUANCE BY ACQUIROR. Acquiror intends, subject to market conditions, to issue, after the Closing Date, $150,000,000 to $250,000,000 of equity securities. The initial press release with respect to the transactions contemplated hereby will include disclosure of Acquiror's intention to effect such issuances of additional equity securities. 6.22 RUHRGAS AG. Between the Agreement Effective Date and the Closing Date, Tenneco shall use its reasonable best efforts to repurchase for cash the equity interest of Ruhrgas AG in Tenneco Energy Resources Corporation, provided that the terms of any such repurchase shall be acceptable to Acquiror. Acquiror shall have the right to participate in any discussions or negotiations with Ruhrgas AG with respect to the foregoing. 6.23 ADDITIONAL COVENANTS OF ACQUIROR. (a) From the Agreement Effective Date through the Effective Time, Acquiror shall not take, enter into or propose, or allow any of its subsidiaries to take, enter into or propose, any action or transaction (other than actions or transactions expressly permitted under this Agreement) which is primarily for the purpose of reducing the value of the transactions contemplated by this Agreement and the Distribution Agreement to the stockholders of Tenneco. (b) From the Agreement Effective Date through the Effective Time, Acquiror shall not enter into any internal corporate restructuring involving Acquiror and one or more of its direct or indirect subsidiaries. B-32 37 (c) During the Black-out Period, except as expressly contemplated by this Agreement or the Distribution Agreement in order to effect the transactions described herein or therein: (i) Acquiror and its subsidiaries shall carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and use all reasonable efforts to preserve intact their present business organizations, and preserve their relationships with customers, suppliers and others having business dealings with them to the end that their goodwill and ongoing businesses shall not be impaired in any material respect at the Effective Time. (ii) Acquiror shall not, nor shall Acquiror permit any of its subsidiaries to, nor shall Acquiror or any of its subsidiaries propose to, (A) declare or pay any dividends on or make other distributions in respect of any of its capital stock (other than intercompany dividends and regular quarterly dividends on Acquiror Common Stock), (B) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (C) repurchase or otherwise acquire any shares of capital stock. (iii) Except for the issuance of shares of Acquiror Common Stock upon the exercise of outstanding stock options disclosed in Section 5.2 hereof, Acquiror shall not issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock of any class, any debt or securities convertible into, or any rights, warrants or options to acquire, any such shares or convertible securities or debt. (iv) Acquiror shall not amend or propose to amend its Certificate of Incorporation or By-laws or other organizational documents. (v) Acquiror shall not, nor shall it permit any of its subsidiaries to, acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any assets, in each case which are material, individually or in the aggregate, to Acquiror and its subsidiaries taken as a whole. (vi) Except for sales of inventory and services in the ordinary course of business, Acquiror shall not, nor shall it permit any of its subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree to sell, lease, encumber or otherwise dispose of, any of its assets, which are material, individually or in the aggregate, to Acquiror and its subsidiaries taken as a whole. (d) If the Stock Issuance is not approved by the requisite vote of the holders of Acquiror Common Stock at the Acquiror Common Stockholders' Meeting, Acquiror, prior to or as of the Effective Time, shall: (i) enter into the Depositary Agreement with the Depositary so that the holders of Tenneco Common Stock are issued Depositary Shares in connection with the Merger and such holders of Depositary Shares will have rights equivalent to those of holders of whole shares of Acquiror Preferred Stock (to the extent of their fractional interest therein); and (ii) issue to the Depositary, and deliver to the Depositary certificates for, the number of shares of Acquiror Preferred Stock provided for in the SECTION 2.5 (E) (II) (B) hereof. (e) From and after the Agreement Effective Date, Acquiror shall use its reasonable best efforts, and shall cause its subsidiaries and Affiliates to use their respective reasonable best efforts, to cause each of the ''EPNGC Facilities'' (as defined in that certain $3 Billion Revolving Credit and Competitive Advance Facility Agreement (the ''$3 Billion Credit Agreement'') among Tenneco Inc., the several banks and other financial institutions (the ''Bank Group'') from time to time parties to the $3 Billion Credit Agreement and The Chase Manhattan Bank, as agent (''Chase''), to become in full force and effect no later than the ''Effective Date'' under Section 3.1 of the $3 Billion Credit Agreement, and to remain in full force and effect from said Effective Date through the ''Closing Date'' under Section 3.2 of the $3 Billion Credit Agreement. From and after the Agreement Effective Date, Tenneco shall use its reasonable best efforts, and shall cause its subsidiaries and Affiliates to use their respective reasonable best efforts, to cause the $3 Billion Credit Agreement to become in full force and effect in order to effect the transactions contemplated by the Debt Realignment. B-33 38 ARTICLE VII CONDITIONS PRECEDENT 7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The respective obligations of each party hereto to effect the Merger and the other transactions contemplated herein shall be subject to the satisfaction, at or prior to the Closing, of the following conditions, any or all of which may be waived, in whole or in part, to the extent permitted by applicable law: (a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration Statement shall have been declared effective by the Commission under the Securities Act, no stop order suspending the effectiveness of the Registration Statement shall have been issued by the Commission and no proceedings for that purpose shall have been initiated or, to the knowledge of Tenneco or Acquiror, threatened by the Commission. (b) STOCKHOLDER APPROVAL. This Agreement, the Merger and the Spinoffs (and/or any S/I Transaction, if requiring such approval) shall have been approved and adopted by the requisite vote of the stockholders of Tenneco in accordance with the certificate of incorporation of Tenneco and the DGCL. (c) HSR ACT. The waiting period under the HSR Act applicable to the transactions contemplated hereby shall have expired or been terminated. (d) OTHER APPROVALS. All authorizations, consents, orders and approvals of, and declarations or filings with, and expirations of waiting periods imposed by, any Governmental Authority or other Person which if not obtained or filed would have a Material Adverse Effect on Acquiror or a Material Adverse Effect on Tenneco shall have been obtained or filed, as applicable, and shall be in full force and effect. (e) NO ORDER. No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and which materially restricts, prevents or prohibits consummation of the Merger or any transaction contemplated by this Agreement; it being understood that the parties hereto hereby agree to use their reasonable best efforts to cause any such decree, judgment, injunction or other order to be vacated or lifted as promptly as possible. (f) NYSE LISTING. The Acquiror Common Stock and any Depositary Shares issuable to stockholders of Tenneco in accordance with SECTION 2.5 hereof shall have been authorized for listing on the NYSE upon official notice of issuance. (g) TAX RULING. Tenneco shall have received rulings from the Internal Revenue Service (the ''IRS RULING LETTER''), reasonably acceptable to Tenneco and Acquiror, to the effect that: (i) the distribution of the capital stock of the Industrial Subsidiary on a pro rata basis to the stockholders of Tenneco as contemplated under the Distribution Agreement will be tax-free for federal income tax purposes to Tenneco under Section 355(c)(1) of the Code and to the stockholders of Tenneco under Section 355(a) of the Code; (ii) the distribution of the capital stock of the Shipbuilding Subsidiary on a pro rata basis to the stockholders of Tenneco as contemplated under the Distribution Agreement will be tax-free for federal income tax purposes to Tenneco under Section 355(c)(1) of the Code and to the stockholders of Tenneco under Section 355(a) of the Code; (iii) The following distributions will be tax free to the respective transferor corporations under Section 355(c)(1) or 361a) of the Code and to the respective stockholders of the transferor corporation under Section 355(a) of the Code: (A) the distribution by the Shipbuilding Subsidiary of the capital stock of Tenneco Packaging Inc. to Tenneco Corporation as contemplated under the Distribution Agreement, (B) the distribution by Tenneco Corporation of the capital stock of the Shipbuilding Subsidiary and the Industrial Subsidiary to Tennessee Gas Pipeline Company as contemplated under B-34 39 the Distribution Agreement and (C) the distribution by Tennessee Gas Pipeline Company of the capital stock of the Shipbuilding Subsidiary and the Industrial Subsidiary to Tenneco Inc. as contemplated under the Distribution Agreement. (h) SPINOFFS CONSUMMATED. The Distribution Agreement, in substantially the form attached hereto with such changes as do not adversely affect, other than to a de minimis extent, the Energy Business, shall have been duly executed and delivered by each of Tenneco, the Industrial Subsidiary and the Shipbuilding Subsidiary, and the transactions contemplated thereby, including the Spinoffs (and/or any S/I Transaction) and the Debt Realignment, shall have been consummated (with only such changes). (i) TAX OPINION. Tenneco shall have received an opinion of Jenner & Block, in form and substance substantially as set forth in EXHIBIT N attached hereto, dated the Closing Date, which opinion may be based on appropriate representations of Tenneco and Acquiror that are in form and substance reasonably satisfactory to Jenner & Block. The condition set forth in this SECTION 7.1(I) shall be deemed satisfied to the extent the matters referred to as to be covered by the tax opinion are instead covered by the IRS Ruling Letter. (j) NEW PREFERRED STOCK. The New Preferred Stock shall have been issued by Tenneco and shall be outstanding as set forth in SECTION 6.1(D) hereof and, if publicly issued or issued as a dividend-in-kind to the stockholders of Tenneco, shall have been authorized for listing on the NYSE upon official notice of issuance. (k) DEBT REALIGNMENT. The Debt Realignment shall have been effected in accordance with EXHIBIT C attached hereto. (l) CHARTER AMENDMENT. The Charter Amendment shall have become effective. 7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND SUBSIDIARY. The obligations of Acquiror and Subsidiary to consummate the Merger and the other transactions contemplated herein are also subject to the satisfaction, at the Closing, of all of the following conditions, any one or more of which may be waived, in whole or in part, by Acquiror and Subsidiary: (a) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties of Tenneco contained in this Agreement, without giving effect to any notification to Acquiror delivered pursuant to SECTION 6.5 hereof, shall be true and correct as of the Closing Date as though made on and as of the Closing Date, except (i) for changes specifically permitted by this Agreement, and (ii) that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date, except in any case for such failures to be true and correct which would not, individually or in the aggregate, have a Material Adverse Effect on Tenneco. (b) AGREEMENTS AND COVENANTS. Tenneco shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it at or prior to the Closing. (c) OFFICERS' CERTIFICATES. Acquiror shall have received certificates, dated the Closing Date, of (i) the President or any Vice President of Tenneco certifying as to the matters specified in SECTIONS 7.2(A) and (B) hereof and (ii) the Secretary of Tenneco certifying as to (A) the content and continuing effectiveness as of the Closing Date of the resolutions of the board of directors of Tenneco approving this Agreement and the transactions contemplated hereby, and (B) the fact that this Agreement and the transactions contemplated hereby have been duly approved by the requisite vote of the stockholders of Tenneco in accordance with the certificate of incorporation of Tenneco and the DGCL and that such approval is in full force and effect. B-35 40 (d) CERTAIN LEGISLATION. There shall not have occurred any announcement or introduction of legislation by an Appropriate Person as a result of which Acquiror reasonably determines, in good faith after consultation with Tenneco and its advisors, that there exists a reasonable likelihood that the Spinoffs or the Merger would not be tax free for federal income tax purposes to Tenneco and Acquiror. For purposes of this SECTION 7.2(D), an ''Appropriate Person'' is a member of the House Ways and Means Committee or the Senate Finance Committee, the President or a President-elect, a cabinet-level member of the Executive Branch, an Assistant Secretary of the Treasury, the Reporting Assistant Secretary of the Treasury for Tax Policy, the Tax Legislation Counsel, the Chief of Staff of the Joint Committee of Taxation or a current or presumptive Majority or Minority Leader of the House or Senate. 7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TENNECO. The obligations of Tenneco to consummate the transactions contemplated hereby are also subject to the satisfaction, at the Closing, of all of the following conditions, any one or more of which may be waived, in whole or in part, by Tenneco: (a) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties of Acquiror and Subsidiary contained in this Agreement, without giving effect to any notification made by Acquiror to Tenneco pursuant to SECTION 6.5 hereof, shall be true and correct as of the Closing Date, as though made on and as of the Closing Date, except (i) for changes specifically permitted by this Agreement, and (ii) that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date, except in any case for such failures to be true and correct which would not, individually or in the aggregate, have a Material Adverse Effect on Acquiror. (b) AGREEMENTS AND COVENANTS. Each of Acquiror and Subsidiary shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it at or prior to the Closing. (c) OFFICERS' CERTIFICATES. Tenneco shall have received certificates, dated the Closing Date, of (i) the President or any Vice President of each of Acquiror and Subsidiary certifying as to the matters specified in SECTIONS 7.3(A) and (B) hereof and (ii) the Secretaries or Assistant Secretaries of Acquiror and Subsidiary certifying as to (A) the content and continuing effectiveness as of the Closing Date of the resolutions of the sole stockholder of Subsidiary and of the boards of directors of Acquiror and Subsidiary approving this Agreement and the transactions contemplated hereby, and (B) the fact that the Stock Issuance has been duly approved, if required, by the requisite vote of the stockholders of Acquiror in accordance with the rules and regulations of the NYSE, any other applicable Law and the certificate of incorporation and/or other governing document or instrument of Acquiror, and that such approval is in full force and effect, or, alternatively, that no such vote of the stockholders is so required. ARTICLE VIII TERMINATION 8.1 GROUNDS FOR TERMINATION. This Agreement may be terminated at any time prior to the Effective Time, whether before or after adoption and approval of this Agreement, the Merger and the Spinoffs by the stockholders of Tenneco and approval of the Stock Issuance by the stockholders of Acquiror: (i) by the mutual written agreement of Tenneco and Acquiror authorized by their respective boards of directors; B-36 41 (ii) by Tenneco or by Acquiror if the Merger shall not have been consummated prior to June 30, 1997 unless such eventuality shall be due to the failure of the party seeking to terminate this Agreement to perform or observe any of the covenants, agreements and conditions hereof to be performed or observed by such party on or prior to the Closing Date; (iii) by Tenneco or by Acquiror if Tenneco enters into an S/I Transaction pursuant to the last sentence of SECTION 6.13 above; (iv) by Acquiror if (A) there has been a material breach on the part of Tenneco in the representations, warranties or covenants of Tenneco set forth herein, or any failure on the part of Tenneco to comply with its obligations hereunder or any other events or circumstances shall have occurred such that, in any such case, any of the conditions to the consummation of the Merger set forth in SECTIONS 7.1 or 7.2 hereof could not be satisfied on or prior to the termination date contemplated by paragraph (ii) of this SECTION 8.1, (B) Tenneco's stockholders entitled to vote thereat do not adopt and approve this Agreement, and the Merger and the Spinoffs as contemplated by Section 7.1(B) hereof at the Tenneco Stockholders' Meeting, (C) the board of directors of Tenneco withdraws, amends, or modifies in a manner materially adverse to Acquiror its favorable recommendation of this Agreement or the Merger, or approves an agreement for or recommends to the stockholders of Tenneco an Acquisition Transaction, provided that any action taken by Tenneco pursuant to PARAGRAPH (V)(A) of this SECTION 8.1 or any public announcement by Tenneco relating thereto shall not give rise to any right of termination by Acquiror, or (D) there has occurred since the Agreement Effective Date of any event, change or effect which, in the aggregate with all other events, changes or effects (giving effect to both positive and negative events, changes and events), reduces the value of the Energy Business as of the Agreement Effective Date by more than $75,000,000, but excluding any negative events, changes or effects which result from (A) any action by Acquiror or any of its subsidiaries, Affiliates, officers, employees, agents or representatives, (B) changes in general economic, financial (including, without limitation, equity and debt) markets or industrial conditions, and (C) any ruling by the Federal Energy Regulatory Commission Administrative Law Judge in the proceedings regarding the Energy Business pending as of the Agreement Effective Date before the Federal Energy Regulatory Commission Administrative Law Judge, or (v) by Tenneco if (A) there has been a material breach on the part of Acquiror or Subsidiary in the representations, warranties or covenants of Acquiror or Subsidiary set forth herein, or any failure on the part of Acquiror or Subsidiary to comply in any material respect with its obligations hereunder or any other events or circumstances shall have occurred such that, in any such case, any of the conditions to the consummation of the Merger set forth in SECTIONS 7.1 or 7.3 hereof could not be satisfied on or prior to the termination date contemplated by paragraph (ii) of this SECTION 8.1, (B) Tenneco's stockholders entitled to vote thereat do not adopt and approve this Agreement,the Merger and the Spinoffs as contemplated by SECTION 7.1(B) hereof at the Tenneco Stockholders' Meeting, (C) the board of directors of Acquiror withdraws, amends, or modifies in a manner materially adverse to Tenneco its favorable recommendation of this Agreement, the Merger or the Stock Issuance, or approves an agreement for or recommends to the stockholders of Acquiror an Acquisition Transaction, provided that any action taken by Acquiror pursuant to PARAGRAPH (IV)(A) of this SECTION 8.1 or any public announcement by Acquiror relating thereto shall not give rise to any right of termination by Tenneco, or B-37 42 (D) there has occurred since the Agreement Effective Date any event, change or effect which, in the aggregate with all other events, changes or effects (giving effect to both positive and negative events, changes and events), reduces the value of Acquiror as of the Agreement Effective Date by more than $75,000,000, but excluding any negative events, changes or effects which result from (i) any action by Tenneco or any of its subsidiaries, Affiliates, officers, employees, agents or representatives, and (ii) changes in general economic, financial (including, without limitation, equity and debt) market or industrial conditions; or (vi) by Tenneco or by Acquiror (but only prior to the approval of this Agreement by Tenneco's stockholders) if (1) Tenneco receives a Higher Proposal that it advises Acquiror in writing Tenneco wishes to accept and (2) Acquiror does not make, within five business days of receipt of written notice of Tenneco's desire to accept such Higher Proposal, an offer that the board of directors of Tenneco believes, in good faith after consultation with its financial advisors, is at least as favorable, from a financial point of view, to the stockholders of Tenneco as the Higher Proposal. 8.2 EFFECT OF TERMINATION. If this Agreement is terminated by Tenneco or by Acquiror as permitted under SECTION 8.1 hereof, except as provided in SECTION 10.1(B) such termination shall be without liability to the terminating party, or any stockholder, director, officer, employee, agent, consultant or representative of such party, but such termination shall not relieve any other party of any damages or other amounts for which it would otherwise be liable. 8.3 WAIVER. Any time prior to the Effective Time any party hereto, by action taken or authorized by its board of directors, may, to the extent legally allowed: (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other parties contained herein or in any document delivered pursuant hereto, and (iii) waive compliance by any of the other parties hereto with any of the agreements or conditions contained herein. Any waiver of rights by any party hereto shall be valid only if set forth in a written instrument signed on behalf of such party. ARTICLE IX EXTENT AND SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS 9.1 SCOPE OF REPRESENTATIONS. Except as set forth in ARTICLES IV and V hereof, the parties make no representations or warranties whatsoever, and each party disclaims all liability and responsibility for any other representation, warranty, statement or information made or communicated (orally or in writing) to another party (including, but not limited to, any opinion, information or advice which may have been provided to Acquiror or Subsidiary by any officer, stockholder, director, employee, agent or consultant of Tenneco, Lazard or any other agent or representative of Tenneco). Acquiror acknowledges and affirms that it has made its own independent investigation, analysis and evaluation of Tenneco and its subsidiaries, their properties and assets, operations, business and prospects, and that it is relying exclusively upon such investigation, analysis and evaluation in entering into this Agreement. 9.2 SURVIVAL. The representations, warranties, covenants and agreements set forth in this Agreement and in any certificate delivered in connection herewith shall survive until the Effective Time and, except for SECTIONS 2.3, 2.6, 6.2(B), 6.3(B), 6.4, 6.6, 6.9(A) AND (F), 6.10, 6.14(B), 6.15, 6.18, 9.1 AND 9.2 and ARTICLE X hereof and B-38 43 EXHIBIT J attached hereto, shall terminate and expire at the Effective Time and shall be of no force or effect thereafter. If the Merger is consummated, no party to this Agreement (or any of its present or former Affiliates) shall have any liability to any other party (or any of its present or former Affiliates) for any breaches of this Agreement that occurred prior to the Effective Time, whether or not known at the Effective Time. ARTICLE X MISCELLANEOUS 10.1 EXPENSES. (a) All legal and other costs and expenses shall be paid by Acquiror, Subsidiary or Tenneco, as the case may be, depending upon which party incurred such expenses. Subsequent to the Merger, Acquiror shall cause the Surviving Corporation promptly to pay any and all such costs and expenses (including, without limitation, the fees and expenses of the Exchange Agent and Tenneco's financial advisors, and all legal, accounting and actuarial fees and expenses incurred by Tenneco in connection with this Agreement and the transactions contemplated hereby) incurred by Tenneco prior to the Effective Time which have not been paid as of such time. (b) In the event that this Agreement shall be terminated pursuant to SECTION 8.1(III), 8.1(IV)(B), 8.1(V)(B) or 8.1(VI), Tenneco shall pay to Acquiror, as liquidated damages, in exchange for a complete release of any liabilities of Tenneco hereunder, the amount of $25,000,000 plus actual out of pocket expenses (up to $10,000,000) incurred by Acquiror to third parties in connection with the transactions contemplated hereby, payable to an account specified by Acquiror in writing by wire transfer of immediately available funds within 5 business days after the effective date of the subject termination (except that (i) no such amounts shall be payable unless concurrently therewith, Tenneco receives the aforesaid complete release (other than with respect to the items referred to in clause (ii), as to which Acquiror shall deliver a complete release concurrently with the receipt of payment therefor) and (ii) the aforesaid payment for Acquiror's out of pocket expenses shall not be payable unless and until 5 business days after receipt of reasonably satisfactory documentation of the subject expenses). Notwithstanding the foregoing, Tenneco shall have no obligations under this SECTION 10.1(B) due to any termination of this Agreement pursuant to either SECTION 8.1(IV)(B) or 8.1(V)(B) unless Tenneco's Board of Directors has withdrawn, amended or modified in a manner materially adverse to Acquiror (other than by reason of a matter referred to in SECTION 8.1(V)(A) hereof) its recommendation concerning the Merger or the Spinoffs prior to the vote of Tenneco's stockholders which is the subject of SECTION 8.1(IV)(B) or 8.1(V)(B), as the case may be. (c) Acquiror shall cause the Surviving Corporation to pay any New York State Tax on Gains Derived from Certain Real Property Transfers (the ''Gains Tax''), New York State Real Estate Transfer Tax and New York City Real Property Transfer Tax (the ''Transfer Taxes'') and any similar taxes in any other jurisdiction (and any penalties and interest with respect to such taxes) that become payable in connection with the Merger, on behalf of the stockholders of Tenneco. Tenneco and Acquiror shall cooperate in the preparation, execution and filing of any required returns with respect to such taxes (including returns on behalf of the stockholders of Tenneco) and in the determination of the portion of the consideration allocable to the real property of Tenneco and the Tenneco subsidiaries in New York State and City (or in any other jurisdiction, if applicable). In order to effect the payment of any transfer taxes subject to this SECTION 10.1(C), Tenneco shall establish a separately maintained escrow account consisting of an adequate amount of cash from the $25,000,000 of cash required to be on hand at Tenneco as of the Effective Time pursuant to the Allocation Agreement. The terms of the Joint Proxy Statement shall provide that the stockholders of Tenneco shall be deemed to have agreed to be bound by the allocation established pursuant to this SECTION 10.1(C) in the preparation of any return with respect to the Gains Tax and the Transfer Taxes and any similar taxes, if applicable. (d) This SECTION 10.1 (and all other provisions of this Agreement necessary or appropriate for purposes of enforcing this SECTION 10.1) shall be enforceable by the Industrial Subsidiary, which is hereby deemed a third party beneficiary hereof. B-39 44 10.2 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or mailed by registered or certified mail, return receipt requested, to the parties at the following addresses: (A) If to Tenneco, to: Tenneco Inc. 1275 King Street Greenwich, Connecticut 06831 Attention: Corporate Secretary (B) If to the Acquiror or Subsidiary, to: El Paso Natural Gas Company One Paul Kayser Center 100 North Stanton Street El Paso, Texas 79901 Attention: William A. Wise Chairman and Chief Executive Officer 10.3 REMEDIES. Any party having any rights under any provision of this Agreement will have all rights and remedies set forth in this Agreement and all rights and remedies which such party may have been granted at any time under any other agreement or contract and all of the rights which such party may have under any law. Any party having any rights or remedies under this Agreement will be entitled to enforce such rights specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. 10.4 CONSENT TO AMENDMENTS. Prior to the Effective Time, whether before or after approval and adoption of this Agreement by the stockholders of Tenneco, the provisions of this Agreement may be amended by a written agreement executed and delivered by the parties hereto, subject to applicable law (and shall be so amended if expressly required by the terms of this Agreement). After the Effective Time, the provisions of this Agreement may be amended only by a written agreement executed and delivered by Acquiror, the Surviving Corporation and the Industrial Subsidiary. Any purported amendment to this Agreement that does not strictly comply with the foregoing provisions of this SECTION 10.4 shall be null and void ab initio. This SECTION 10.4 (and all other provisions of this Agreement necessary or appropriate for purposes of enforcing this SECTION 10.4) shall be enforceable by the Industrial Subsidiary, which is hereby deemed a third party beneficiary hereof. 10.5 SUCCESSORS AND ASSIGNORS. No party hereto may assign or delegate any of such party's rights or obligations under or in connection with this Agreement without the written consent of the other parties hereto, and any attempted assignment without such consent shall be null and void ab initio. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will be binding upon and enforceable against the respective successors and assigns of such party and will be enforceable by and will inure to the benefit of the respective successors and permitted assigns of such party. 10.6 SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 10.7 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. 10.8 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. B-40 45 10.9 NO THIRD-PARTY BENEFICIARIES. Except as expressly provided in SECTIONS 2.6(G), 2.6(H), 6.3, 6.4, 6.6, 6.9, 6.18, 10.1 and 10.4 hereof, this Agreement will not confer any rights or remedies upon any person other than the parties hereto and their respective successors and permitted assigns. 10.10 ENTIRE AGREEMENT. Except for the Confidentiality Agreements identified in SECTION 6.3(B) hereof, this Agreement constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. 10.11 CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rule of strict construction will be applied against any party. The use of the word ''including'' in this Agreement means ''including without limitation'' and is intended by the parties to be by way of example rather than limitation. 10.12 INCORPORATION OF EXHIBITS. The Exhibits identified in this Agreement are incorporated herein by reference and made a part hereof. 10.13 GOVERNING LAW. ALL QUESTIONS AND/OR DISPUTES CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS HERETO SHALL BE GOVERNED BY THE INTERNAL LAWS, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES TO BE SUBJECT TO, AND HEREBY CONSENTS AND SUBMITS TO, THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE OF DELAWARE. B-41 46 IN WITNESS WHEREOF, the undersigned have executed this Agreement, as of the date first written above. TENNECO INC. By /s/ ROBERT G. SIMPSON ------------------------------------- Title: Vice President EL PASO NATURAL GAS COMPANY By /s/ BRITTON WHITE, JR. ------------------------------------- Title: Senior Vice President and General Counsel EL PASO MERGER COMPANY By /s/ BRITTON WHITE, JR. ------------------------------------- Title: Vice President B-42 47 EXHIBIT C TO AGREEMENT AND PLAN OF MERGER DEBT REALIGNMENT PLAN (Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Agreement and Plan of Merger to which this is attached.) 1. On or prior to the effectiveness of the Spinoffs (which will occur prior to the Merger), Tenneco shall, or shall cause Tennessee Gas Pipeline Company (''TGP'') and/or Tenneco Credit Corporation (''TCC'') to, tender for, redeem, prepay, defease or let mature, or cause Industrial Subsidiary to offer to exchange its debt for, one or more of the issues of Consolidated Debt (as defined below) (collectively, the ''Debt Realignment''). Concurrently with the Debt Realignment, Tenneco, TGP and TCC will solicit the consent of the holders of such Consolidated Debt to provide that the relevant debt instruments are amended and that the tendered-for debt is accepted in each case immediately before the Spinoffs. Tenneco reserves the right to determine whether or not it, TGP and/or TCC tenders for, redeems, prepays, defeases, lets mature or leaves outstanding, or causes Industrial Subsidiary to offer to exchange its debt for, any particular issue of Consolidated Debt. The term ''Consolidated Debt'' means indebtedness for money borrowed of Tenneco and its consolidated Energy Subsidiaries (including accrued and accreted interest and fees and expenses). 2. There will not be any restriction on the right of Tenneco and/or its consolidated subsidiaries to incur after the date of the Agreement and Plan of Merger and on or prior to the closing of the Merger additional Consolidated Debt. 3. Tenneco shall, at its expense, have the sole right and authority to, and will use its commercially reasonable efforts to, have in place a credit facility for itself (with such guarantees of its obligations thereunder by the Energy Subsidiaries as it deems necessary) in an aggregate principal amount sufficient (together with other funds available to Tenneco) to fund such tenders, redemptions, prepayments, defeasances and maturities; to pay all the fees, costs and expenses incurred by Tenneco and its subsidiaries in preparing for, negotiating and effecting the Spinoffs, the Merger and the Debt Realignment and any financings in connection therewith; and for other general corporate purposes (including, without limitation, working capital, the repayment or refinancing of Consolidated Debt and the payments of dividends). This facility shall be in effect at, and have a maturity date at least 180 days following, the Effective Time. The aggregate amount of debt including accrued and accreted interest and fees and expenses outstanding as of the Effective Time under this facility is hereinafter called the ''Tenneco Revolving Debt''. Acquiror shall cooperate with Tenneco in arranging such facility and will provide, effective as of the Effective Time, such credit support and undertakings as shall be reasonably requested of it by the providers thereof. 4. All aspects of (x) the Debt Realignment and any financing thereof, and (y) the terms of any consents solicited in respect of or amendments with respect to Consolidated Debt, shall be controlled solely and exclusively by Tenneco. As appropriate, Tenneco shall consult with and update Acquiror from time to time in respect thereof, and Acquiror shall cooperate with Tenneco in connection therewith. Tenneco shall select in its sole discretion the dealer manager for any and all consent solicitations, debt tenders and debt exchanges in respect of Consolidated Debt. Tenneco and Industrial Subsidiary shall have the right, in their sole discretion, to fix the timing, tender and/or exchange prices, conditions and other terms of and the strategy and amounts of the fees, costs and expenses payable with respect to any and all such consent solicitations, tenders and exchanges. 5. Tenneco, Industrial Subsidiary and Acquiror shall comply with all applicable securities, blue sky and other laws in connection with the Debt Realignment Plan and the other transactions contemplated hereunder. 6. Industrial Subsidiary shall transfer to Tenneco on or prior to the Effective Time all Consolidated Debt acquired by it in any exchange offer undertaken by it. B-C-1 48 7. Adjustments shall be made in respect of Consolidated Debt outstanding as of the Effective Time as set forth in the Debt and Cash Allocation Agreement attached as Exhibit C to the Distribution Agreement. 8. Notwithstanding anything contained herein, (a) contemporaneously with the Spinoffs, Tenneco and the Energy Subsidiaries shall be removed as obligor under (and released from liability with respect to) any indebtedness for borrowed money for which Tenneco or its subsidiaries are liable and which are assumed by the Industrial Subsidiary or the Shipbuilding Subsidiary, (b) any Tenneco Revolving Debt shall be prepayable without penalty, subject to customary notice provisions, (c) in respect of publicly-traded Consolidated Debt, between the date of the Merger Agreement and the Effective Time there shall be no (i) extension of maturity or average life, (ii) increase in interest rates or (iii) adverse change in defeasance or redemption provisions with respect to any indebtedness for borrowed money for which Tenneco or the Energy Subsidiaries will be liable on or after the Effective Time and (d) except for the Tenneco Revolving Debt, no indebtedness for borrowed money of Tenneco or the Energy Subsidiaries at the Effective Time shall contain any affirmative or negative financial or operational covenants other than ones that are (x) mutually acceptable to Tenneco and Acquiror or (y) no more restrictive in the aggregate and substantially equivalent to those set forth in the Indenture dated as of January 1, 1992 of El Paso Natural Gas Company as in effect as of the date of the Merger Agreement (other than Section 10.05 of the Indenture). B-C-2 EX-2.2 3 DISTRIBUTION AGREEMENT 1 EXHIBIT 2.2 DISTRIBUTION AGREEMENT AMONG TENNECO INC., NEW TENNECO INC. AND NEWPORT NEWS SHIPBUILDING INC. (FORMERLY KNOWN AS TENNECO INTERAMERICA INC.) DATED AS OF NOVEMBER 1, 1996 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.01 General . . . . . . . . . . . . . . . . . . . 1 SECTION 1.02 References . . . . . . . . . . . . . . . . . 12 ARTICLE II PRE-DISTRIBUTION TRANSACTIONS; CERTAIN COVENANTS . . . . . . 13 SECTION 2.01 Corporate Restructuring Transactions . . . . 13 SECTION 2.02 Pre-Distribution Stock Dividends to Tenneco . 13 SECTION 2.03 Charters and Bylaws . . . . . . . . . . . . . 13 SECTION 2.04 Election of Directors of Industrial Company and Shipbuilding Company . . . . . . . . . . 13 SECTION 2.05 Transfer and Assignment of Certain Licenses and Permits . . . . . . . . . . . . . . . . . 14 SECTION 2.06 Transfer and Assignment of Certain Agreements . . . . . . . . . . . . . . . . . . 14 SECTION 2.07 Consents . . . . . . . . . . . . . . . . . . 15 SECTION 2.08 Other Transactions . . . . . . . . . . . . . 15 SECTION 2.09 Election of Officers . . . . . . . . . . . . 15 SECTION 2.10 Registration Statements . . . . . . . . . . . 16 SECTION 2.11 State Securities Laws . . . . . . . . . . . . 16 SECTION 2.12 Listing Application . . . . . . . . . . . . . 16 SECTION 2.13 Certain Financial and Other Arrangements . . 16 SECTION 2.14 Director, Officer and Employee Resignations. . 17 SECTION 2.15 Transfers Not Effected Prior to the Distributions; Transfers Deemed Effective as of the Distribution Date . . . . . . . . . 17 SECTION 2.16 Ancillary Agreements . . . . . . . . . . . . 18 ARTICLE III THE DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 18 SECTION 3.01 Tenneco Action Prior to the Distributions . . 18 SECTION 3.02 The Distributions . . . . . . . . . . . . . . 19 SECTION 3.03 Fractional Shares . . . . . . . . . . . . . . 19 ARTICLE IV CONDITIONS TO THE DISTRIBUTIONS . . . . . . . . . . . . . . 20 SECTION 4.01 Conditions Precedent to the Distributions . . 20 SECTION 4.02 No Constraint . . . . . . . . . . . . . . . . 21 SECTION 4.03 Deferral of Distribution Date . . . . . . . . 21 SECTION 4.04 Public Notice of Deferred Distribution Date . . . . . . . . . . . . . . . . . . . . 21 ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 5.01 Further Assurances . . . . . . . . . . . . . 22 SECTION 5.02 Tenneco Name . . . . . . . . . . . . . . . . 22 SECTION 5.03 Supplies and Documents . . . . . . . . . . . 22 SECTION 5.04 Assumption and Satisfaction of Liabilities . . 23 SECTION 5.05 No Representations or Warranties; Consents . . 23 SECTION 5.06 Removal of Certain Guarantees . . . . . . . . 24 SECTION 5.07 Public Announcements . . . . . . . . . . . . 24 SECTION 5.08 Intercompany Agreements . . . . . . . . . . . 25 SECTION 5.09 Tax Matters . . . . . . . . . . . . . . . . . 25 ARTICLE VI ACCESS TO INFORMATION . . . . . . . . . . . . . . . . . . . 25 SECTION 6.01 Provision, Transfer and Delivery of Applicable Corporate Records . . . . . . . . . 25 SECTION 6.02 Access to Information . . . . . . . . . . . . 26 SECTION 6.03 Reimbursement; Other Matters . . . . . . . . 26 SECTION 6.04 Confidentiality . . . . . . . . . . . . . . . 26 SECTION 6.05 Witness Services . . . . . . . . . . . . . . 27 SECTION 6.06 Retention of Records . . . . . . . . . . . . 27 SECTION 6.07 Privileged Matters . . . . . . . . . . . . . 27
A-i 3
PAGE ---- ARTICLE VII INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 7.01 Indemnification by Tenneco . . . . . . . . . 28 SECTION 7.02 Indemnification by Industrial Company . . . . 28 SECTION 7.03 Indemnification by Shipbuilding Company . . . 28 SECTION 7.04 Limitations on Indemnification Obligations . . 29 SECTION 7.05 Procedures for Indemnification . . . . . . . 30 SECTION 7.06 Indemnification Payments . . . . . . . . . . 31 SECTION 7.07 Other Adjustments . . . . . . . . . . . . . . 31 SECTION 7.08 Obligations Absolute . . . . . . . . . . . . 32 SECTION 7.09 Survival of Indemnities . . . . . . . . . . . 32 SECTION 7.10 Remedies Cumulative . . . . . . . . . . . . . 32 SECTION 7.11 Cooperation of the Parties With Respect to Actions and Third Party Claims . . . . . . . 32 SECTION 7.12 Contribution . . . . . . . . . . . . . . . . 33 ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 8.01 Complete Agreement; Construction . . . . . . 33 SECTION 8.02 Ancillary Agreements . . . . . . . . . . . . 33 SECTION 8.03 Counterparts . . . . . . . . . . . . . . . . 33 SECTION 8.04 Survival of Agreements . . . . . . . . . . . 33 SECTION 8.05 Responsibility for Expenses . . . . . . . . . 34 SECTION 8.06 Notices . . . . . . . . . . . . . . . . . . . 34 SECTION 8.07 Waivers . . . . . . . . . . . . . . . . . . . 34 SECTION 8.08 Amendments . . . . . . . . . . . . . . . . . 34 SECTION 8.09 Assignment . . . . . . . . . . . . . . . . . 35 SECTION 8.10 Successors and Assigns . . . . . . . . . . . 35 SECTION 8.11 Termination . . . . . . . . . . . . . . . . . 35 SECTION 8.12 Third Party Beneficiaries . . . . . . . . . . 35 SECTION 8.13 Attorney Fees . . . . . . . . . . . . . . . . 35 SECTION 8.14 Title and Headings . . . . . . . . . . . . . 35 SECTION 8.15 Exhibits and Schedules . . . . . . . . . . . 35 SECTION 8.16 Specific Performance . . . . . . . . . . . . 35 SECTION 8.17 Governing Law . . . . . . . . . . . . . . . . 35 SECTION 8.18 Severability . . . . . . . . . . . . . . . . 36 SECTION 8.19 Subsidiaries . . . . . . . . . . . . . . . . 36 SECTION 8.20 Shipbuilding Hedging Transactions . . . . . . 36
A-ii 4 EXHIBITS EXHIBIT A Benefits Agreement--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT B Corporate Restructuring Transactions--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT C Debt and Cash Allocation Agreement EXHIBIT D Energy Business Pro Forma Balance Sheet--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT E Energy Subsidiaries--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT F Industrial Business Pro Forma Balance Sheet--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT G Industrial Subsidiaries--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT H Insurance Agreement--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT I Shipbuilding Business Pro Forma Balance Sheet-- [Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT J Shipbuilding Subsidiaries--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT K Tax Sharing Agreement--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT L TBS Services Agreement--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT M Transition Services Agreement--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT N Form of Restated Certificate of Incorporation-- [Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT O Form of Bylaws--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT P Tenneco Transition Trademark License--[Intentionally Omitted from Joint Proxy Statement-Prospectus] EXHIBIT Q Shipbuilding Transition Trademark License--[Intentionally Omitted from Joint Proxy Statement-Prospectus] Omitted exhibits available upon request. A-iii 5 DISTRIBUTION AGREEMENT THIS DISTRIBUTION AGREEMENT is made and entered into as of this first day of November, 1996 by and among TENNECO INC., a Delaware corporation ("TENNECO"), NEW TENNECO INC., a Delaware corporation ("INDUSTRIAL COMPANY"), and NEWPORT NEWS SHIPBUILDING INC. (formerly known as Tenneco InterAmerica Inc.), a Delaware corporation ("SHIPBUILDING COMPANY"). R E C I T A L S WHEREAS, Tenneco, El Paso Natural Gas Company, a Delaware corporation ("ACQUIROR"), and El Paso Merger Company, a Delaware corporation and an indirect wholly owned subsidiary of Acquiror ("ACQUIROR SUBSIDIARY"), have entered into an Amended and Restated Agreement and Plan of Merger, dated as of June 19, 1996 (as amended from time to time, the "MERGER AGREEMENT"), providing for the merger of Acquiror Subsidiary with and into Tenneco (the "MERGER"), with Tenneco continuing as the surviving corporation of the Merger (the "SURVIVING CORPORATION"), upon the terms and subject to the conditions set forth in the Merger Agreement; WHEREAS, the Board of Directors of Tenneco has deemed it appropriate and advisable, prior to the Merger and as contemplated by the Merger Agreement, to: (a) separate and divide the existing businesses of Tenneco so that (i) the automotive, packaging and business services businesses shall be owned directly and indirectly by Industrial Company, and (ii) the shipbuilding business shall be owned directly and indirectly by Shipbuilding Company; and (b) distribute, following such separation and division and immediately prior to the Merger, as a dividend to the holders of shares of Common Stock, par value $5.00 per share, of Tenneco (the "TENNECO COMMON STOCK") all of the outstanding shares of common stock, $.01 par value, of Industrial Company (the "INDUSTRIAL COMMON STOCK") and all of the outstanding shares of common stock, $.01 par value, of Shipbuilding Company (the "SHIPBUILDING COMMON STOCK"); WHEREAS, following such separation, division and distributions, the remaining businesses, operations, assets and liabilities of Tenneco and its remaining direct and indirect subsidiaries shall be acquired by Acquiror pursuant to the Merger; and WHEREAS, each of Tenneco, Industrial Company and Shipbuilding Company has determined that it is necessary and desirable to set forth the principal corporate transactions required to effect such separation, division and distributions and to set forth other agreements that will govern certain other matters prior to and following such separation, division and distributions. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. GENERAL. Unless otherwise defined herein or unless the context otherwise requires, the following terms will have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined). "ACTION" means any action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration tribunal. "ACQUIROR SUBSIDIARY" has the meaning ascribed to such term in the recitals to this Agreement. "AFFILIATE" means, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified. A-1 6 "AGENT" means First Chicago Trust Company of New York, or such other trust company or bank designated by Tenneco, who shall act as agent for the holders of Tenneco Common Stock in connection with the Distributions. "AGREEMENT" means this Distribution Agreement by and among Tenneco, Industrial Company and Shipbuilding Company, including any amendments hereto and each Schedule and Exhibit attached hereto. "ANCILLARY AGREEMENTS" means all of the written agreements, instruments, understandings, assignments or other arrangements (other than this Agreement or the Merger Agreement) entered into by the parties hereto or any other member of their respective Group in connection with the Corporate Restructuring Transactions, the Distributions and the other transactions contemplated hereby or thereby, including, without limitation, the following: (i) the Debt and Cash Allocation Agreement; (ii) the Insurance Agreement; (iii) the Conveyancing and Assumption Instruments; (iv) the Benefits Agreement; (v) the Tax Sharing Agreement; (vi) the Transition Services Agreement; (vii) the TBS Services Agreement; and (viii) the Transition Trademark License. "BENEFITS AGREEMENT" means the Benefits Agreement by and among Tenneco, Industrial Company and Shipbuilding Company, which agreement shall be entered into on or prior to the Distribution Date in the form attached hereto as EXHIBIT A, except for such changes or modifications thereto that do not, individually or in the aggregate, adversely affect the Energy Business other than to a de minimis extent. "BOOKS AND RECORDS" means all books, records, manuals, agreements and other materials (in any form or medium), including without limitation, all mortgages, licenses, indentures, contracts, financial data, customer lists, marketing materials and studies, advertising materials, price lists, correspondence, distribution lists, supplier lists, production data, sales and promotional materials and records, purchasing materials and records, personnel records, manufacturing and quality control records and procedures, blue prints, research and development files, records, data and laboratory books, accounts records, sales order files, litigation files, computer files, microfiche, tape recordings and photographs. "CODE" means the Internal Revenue Code of 1986, as amended, or any successor law. "COMMISSION" means the United States Securities and Exchange Commission. "CONSENTS" has the meaning ascribed to such term in SECTION 2.07 hereof. "CONVEYANCING AND ASSUMPTION INSTRUMENTS" means, collectively, the various written agreements, instruments and other documents to be entered into to effect the Corporate Restructuring Transactions or to otherwise effect the transfer of assets and the assumption of Liabilities in the manner contemplated by this Agreement, the Ancillary Agreements and the Corporate Restructuring Transactions. "CORPORATE RESTRUCTURING TRANSACTIONS" means, collectively, (a) each of the distributions, transfers, conveyances, contributions, assignments and other transactions described and set forth on EXHIBIT B attached hereto, and (b) such other distributions, transfers, conveyances, contributions, assignments and other transactions (so long as such other distributions, transfers, conveyances, contributions, assignments and other transactions do not, individually or in the aggregate, adversely affect the Energy Business (other than to a de minimis extent) or materially delay or prevent the consummation of the Merger) that may be required to be accomplished, effected or consummated by any of Tenneco, Industrial Company, A-2 7 Shipbuilding Company or any of their respective Subsidiaries and Affiliates in order to separate and divide, in a series of transactions that, to the extent intended to qualify for tax-free transactions under the Code, shall qualify for tax-free treatment under the Code, the existing businesses of Tenneco so that, except as otherwise expressly set forth on EXHIBIT B hereto: (i) the Industrial Assets, Industrial Liabilities and Industrial Business shall be owned, directly and indirectly, by Industrial Company; (ii) the Shipbuilding Assets, Shipbuilding Liabilities and Shipbuilding Business shall be owned, directly and indirectly, by Shipbuilding Company; and (iii) the businesses, assets and liabilities of Tenneco that remain after the separations and divisions described in clauses (i) and (ii) above, including, without limitation, the Energy Assets, Energy Liabilities and Energy Business, are, after giving effect to the Distributions, owned, directly and indirectly, by Tenneco. "DEBT AND CASH ALLOCATION AGREEMENT" means the Debt and Cash Allocation Agreement by and among Tenneco, Industrial Company and Shipbuilding Company, which agreement shall be entered into on or prior to the Distribution Date in the form attached hereto as EXHIBIT C, except for such changes or modifications thereto that do not, individually or in the aggregate, adversely affect the Energy Business (other than to a de minimis extent) or materially delay or prevent the consummation of the Merger. "DEBT REALIGNMENT" has the meaning ascribed to such term in the Merger Agreement. "DEBT REALIGNMENT DOCUMENTS" means all documents furnished by Tenneco or Industrial Company to any holders of indebtedness or debt securities of Tenneco or any of its Subsidiaries or filed by Tenneco or Industrial Company in connection therewith with any Governmental Authority or securities exchange in connection with the Debt Realignment. "DISTRIBUTIONS" means the Industrial Distribution and the Shipbuilding Distribution. "DISTRIBUTION DATE" means such date as may hereafter be determined by Tenneco's Board of Directors as the date on which the Distributions shall be effected. "DISTRIBUTION RECORD DATE" means the close of business on the date determined by the Board of Directors of Tenneco for the purpose of determining the holders of record of Tenneco Common Stock entitled to participate in the Distributions. "DGCL" means the Delaware General Corporation Law, as amended. "ENERGY ASSETS" means, collectively, all the rights and assets owned by Tenneco or any of its Subsidiaries as of the close of business on the Distribution Date other than the Industrial Assets, the Shipbuilding Assets and the capital stock of Industrial Company and Shipbuilding Company, including without limitation: (i) the capital stock of the Energy Subsidiaries; (ii) all of the assets included on the Energy Business Pro Forma Balance Sheet which are owned by Tenneco and its Subsidiaries as of the close of business on the Distribution Date and any other asset acquired by Tenneco or any of its Subsidiaries from the date of the Energy Business Pro Forma Balance Sheet to the close of business on the Distribution Date that is owned by Tenneco and its Subsidiaries as of the close of business on the Distribution Date and that is of a type or nature that would have resulted in such asset being included as an asset on the Energy Business Pro Forma Balance Sheet had it been acquired on or prior to the date of the Energy Business Pro Forma Balance Sheet, determined on a basis consistent with the determination of assets included on the Energy Business Pro Forma Balance Sheet; and (iii) all of the assets and rights expressly allocated to Tenneco or any of the Energy Subsidiaries under this Agreement, any of the Ancillary Agreements or the Merger Agreement. "ENERGY BUSINESS" means the businesses (other than the Industrial Business and the Shipbuilding Business) that, after giving effect to the Corporate Restructuring Transactions, are or were conducted by: (i) Tenneco, the Energy Subsidiaries or any of the other members of the Energy Group; (ii) any other division, Subsidiary or investment of Tenneco, or any Energy Subsidiary or any of the other members of the Energy Group managed or operated or in existence as of the date of this Agreement or any prior time, unless such other division, Subsidiary or investment is expressly included A-3 8 in either the Industrial Group or the Shipbuilding Group immediately after giving effect to the Corporate Restructuring Transactions; and (iii) any business entity acquired or established by or for Tenneco or any of the Energy Subsidiaries between the date of this Agreement and the close of business on the Distribution Date that is engaged in, or intends to engage in, any business that is of a type or nature that would have resulted in such business being included either as a Subsidiary or an asset of Tenneco on the Energy Business Pro Forma Balance Sheet had it been acquired or established on or prior to the date of the Energy Business Pro Forma Balance Sheet, determined on a basis consistent with the determination of the Subsidiaries and assets included on the Energy Business Pro Forma Balance Sheet. "ENERGY BUSINESS PRO FORMA BALANCE SHEET" means the Pro Forma Consolidated Balance Sheet for Tenneco and the Energy Subsidiaries as of June 30, 1996 attached hereto as EXHIBIT D. "ENERGY GROUP" means Tenneco, the Energy Subsidiaries and the corporations, partnerships, joint ventures, investments and other entities that represent equity investments of Tenneco or any of the Energy Subsidiaries following consummation of the Corporate Restructuring Transactions and the Distributions. "ENERGY INDEMNITEES" means: (i) Tenneco, the Energy Subsidiaries and each Affiliate thereof after giving effect to the Corporate Restructuring Transactions and the Distributions; and (ii) each of the respective past, present and future directors, officers, employees and agents of any of the entities described in the immediately preceding clause (i) and each of the heirs, executors, successors and assigns of such directors, officers, employees and agents. "ENERGY LIABILITIES" means, collectively, all of the Liabilities of Tenneco and the Energy Subsidiaries and each of the other members of the Energy Group remaining after giving effect to the Corporate Restructuring Transactions, the Distributions and the transactions contemplated under the Debt and Cash Allocation Agreement, including without limitation: (i) all of the Liabilities included on the Energy Business Pro Forma Balance Sheet which remain outstanding as of the close of business on the Distribution Date; (ii) all Liabilities which are incurred or which otherwise accrue or are accrued at any time on, prior to or after the date of the Energy Business Pro Forma Balance Sheet and which arise or arose out of, or in connection with, the Energy Assets or the Energy Business, determined on a basis consistent with the determination of Liabilities of Tenneco included on the Energy Business Pro Forma Balance Sheet; (iii) all of the Liabilities of Tenneco, the Energy Subsidiaries or any of the other members of the Energy Group under, or to be retained or assumed by Tenneco, any Energy Subsidiary or any of the other members of the Energy Group pursuant to the Corporate Restructuring Transactions, this Agreement, any of the Ancillary Agreements or the Merger Agreement; (iv) all of the Liabilities of the parties hereto or their respective Subsidiaries (whenever arising whether prior to, on or following the Distribution Date) arising out of or in connection with or otherwise relating to the management or conduct before or after the Distribution Date of the Energy Business; (v) all Securities Liabilities relating to or arising out of the information and data (financial or otherwise and including pro forma financial data) provided by or on behalf of Acquiror for inclusion in the Registration Statement on Form S-4 of Industrial Company registering certain debt securities of New Tenneco to be exchanged for certain existing debt securities of Tenneco and certain of its Subsidiaries in connection with the Debt Realignment, including, without limitation, information, disclosures and data relating to or concerning Acquiror, Acquiror Subsidiary, the business, operations and management of the Energy Business and/or Energy Group following the Merger and any refinancing or other transactions which Acquiror, Acquiror Subsidiary and/or any member of the Energy Group anticipates consummating following the Merger (collectively "ENERGY EXCHANGE LIABILITIES"); and A-4 9 (vi) all other Liabilities of Tenneco, the Energy Subsidiaries or any of the other members of the Energy Group (which do not constitute Industrial Liabilities or Shipbuilding Liabilities), which other Liabilities of Tenneco, the Energy Subsidiaries or any of the other members of the Energy Group shall include, without limitation, any and all Liabilities arising out of or relating to any Action or Third Party Claim by any Governmental Authority or any other Person that is based on (A) any violations or alleged violations by Tenneco, its Subsidiaries (prior to giving effect to the Distributions) and/or any of their respective directors, officers, employees, agents or representatives of any of the provisions of the Exchange Act, Securities Act, or the rules and regulations of the Commission promulgated thereunder or any other securities or similar Law (other than Liabilities (collectively "INFORMATION STATEMENT LIABILITIES") for violations or alleged violations that arise out of, or in connection with, the Industrial Information Statement, the Shipbuilding Information Statement or information or data in the Joint Proxy Statement or the Debt Realignment Documents concerning the Shipbuilding Business or the Industrial Business), (B) any alleged breach of fiduciary duty by the Board of Directors of Tenneco or any member thereof, or (C) any stockholder derivative suit or other similar Actions. "ENERGY RECORDS" has the meaning ascribed to such term in SECTION 6.01(C) hereof. "ENERGY SUBSIDIARIES" means the Subsidiaries of Tenneco set forth on EXHIBIT E hereto and all other Subsidiaries of Tenneco other than Shipbuilding Company, Industrial Company, the Shipbuilding Subsidiaries and the Industrial Subsidiaries. "ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions (including without limitation the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq.), whether now or hereafter in existence, relating to the environment, natural resources or human health and safety or endangered or threatened species of fish, wildlife and plants or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment, including, without limitation, ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the cleanup or other remediation thereof. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE FILE MATERIAL" means the Registration Statements, as amended at the times they were declared effective under the Exchange Act, the related Information Statements or any amendment or supplement thereto, the related letter of transmittal, any related stockholder communication, any other exhibits to any of the foregoing and any amendment or supplement thereto, in each case including all information incorporated by reference therein. "GAAP" means United States generally accepted accounting principles and practices, as in effect on the date of this Agreement, as promulgated by the Financial Accounting Standards Board and its predecessors. "GOVERNMENTAL AUTHORITY" means any government or any agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign. "GROUP" means (i) with respect to Tenneco, the Energy Group, (ii) with respect to Industrial Company, the Industrial Group, and (iii) with respect to Shipbuilding Company, the Shipbuilding Group. "INDEMNIFIABLE LOSSES" means, with respect to any Person, any and all losses, liabilities, penalties, claims, damages, demands, costs and expenses (including, without limitation, reasonable attorneys' fees, investigation expenses and any and all other out-of-pocket expenses, but excluding any punitive or consequential damages) or other Liabilities whatsoever that are assessed, imposed, awarded against, incurred or accrued by such Person either (a) in investigating, preparing for, defending against or otherwise arising out of or in connection with any Actions, any potential or threatened Actions or any Third Party A-5 10 Claims for which such Person would be entitled to indemnification under ARTICLE VII hereof, or (b) in respect of any other event, occurrence or matter for which such Person would be entitled to indemnification under ARTICLE VII hereof, in each case whether accrued or incurred on, before or after the date of this Agreement. "INDEMNIFYING PARTY" has the meaning ascribed to such term in SECTION 7.04(A) hereof. "INDEMNITEE" has the meaning ascribed to such term in SECTION 7.04(A) hereof. "INDUSTRIAL ASSETS" means, collectively, all of the following rights and assets that are owned by Tenneco or any of its Subsidiaries as of the close of business on the Distribution Date: (i) the capital stock of the Industrial Subsidiaries; (ii) all of the assets included on the Industrial Business Pro Forma Balance Sheet that are owned by Tenneco or any of its Subsidiaries as of the close of business on the Distribution Date; (iii) all of the assets and rights expressly allocated to Industrial Company or any of the Industrial Subsidiaries under this Agreement or any of the Ancillary Agreements; and (iv) any other asset acquired by Tenneco or any of its Subsidiaries from the date of the Industrial Business Pro Forma Balance Sheet to the close of business on the Distribution Date that is owned by Tenneco or any of its Subsidiaries as of the close of business on the Distribution Date and that is of a type or nature that would have resulted in such asset being included as an asset on the Industrial Business Pro Forma Balance Sheet had it been acquired on or prior to the date of the Industrial Business Pro Forma Balance Sheet, determined on a basis consistent with the determination of the assets included on the Industrial Business Pro Forma Balance Sheet. "INDUSTRIAL BUSINESS" means the businesses that, after giving effect to the Corporate Restructuring Transactions, are conducted by: (i) the Industrial Company, the Industrial Subsidiaries or any of the other members of the Industrial Group; and (ii) any business entity acquired or established by or for Tenneco, Industrial Company or any of the Industrial Subsidiaries between the date of this Agreement and the close of business on the Distribution Date that is engaged in, or intends to engage in, any business that is of a type or nature that would have resulted in such business being included either as a Subsidiary or an asset of Industrial Company on the Industrial Business Pro Forma Balance Sheet had it been acquired or established on or prior to the date of the Industrial Business Pro Forma Balance Sheet, determined on a basis consistent with the determination of the Subsidiaries and assets included on the Industrial Business Pro Forma Balance Sheet. "INDUSTRIAL BUSINESS PRO FORMA BALANCE SHEET" means the Pro Forma Consolidated Balance Sheet for Industrial Company and the Industrial Subsidiaries as of June 30, 1996 attached hereto as EXHIBIT F. "INDUSTRIAL COMMON SHARES" means the shares of Industrial Common Stock owned by Tenneco after giving effect to the stock dividend provided for in SECTION 2.02(A) hereof. "INDUSTRIAL COMMON STOCK" has the meaning ascribed to such term in the recitals to this Agreement. "INDUSTRIAL COMPANY" means New Tenneco Inc., a Delaware corporation. "INDUSTRIAL DISTRIBUTION" means the distribution on the Distribution Date as a dividend to holders of record of shares of Tenneco Common Stock as of the Distribution Record Date of all of the outstanding Industrial Common Shares owned by Tenneco on the basis provided in SECTION 3.02 hereof. "INDUSTRIAL GROUP" means Industrial Company, the Industrial Subsidiaries and the corporations, partnerships, joint ventures, investments and other entities that represent equity investments of any of Industrial Company or any of the Industrial Subsidiaries following the consummation of the Corporate Restructuring Transactions and the Distributions. "INDUSTRIAL INDEMNITEES" means: (i) Industrial Company and each Affiliate thereof after giving effect to the Corporate Restructuring Transactions and the Distributions; and A-6 11 (ii) each of the respective past, present and future directors, officers, employees and agents of any of the entities described in the immediately preceding clause (i) and each of the heirs, executors, successors and assigns of any of such directors, officers, employees and agents. "INDUSTRIAL INFORMATION STATEMENT" means the information statement or registration statement relating to Industrial Company and the transactions contemplated hereby to be distributed to holders of Tenneco Common Stock pursuant to the terms of this Agreement. "INDUSTRIAL LIABILITIES" means, collectively, all of the Liabilities of Industrial Company, the Industrial Subsidiaries and each of the other members of the Industrial Group after giving effect to the Corporate Restructuring Transactions, the Distributions and the transactions contemplated under the Debt and Cash Allocation Agreement, including, without limitation: (i) all of the Liabilities included on the Industrial Business Pro Forma Balance Sheet which remain outstanding as of the close of business on the Distribution Date; (ii) all Liabilities (other than Energy Exchange Liabilities) which are incurred or which otherwise accrue or are accrued at any time on, prior to or after the date of the Industrial Business Pro Forma Balance Sheet and which arise or arose out of, or in connection with (A) the Industrial Assets, the Industrial Business or the Prior Industrial Businesses, determined on a basis consistent with the determination of Liabilities of Industrial Company on the Industrial Business Pro Forma Balance Sheet, including Information Statement Liabilities which arise or arose out of or in connection with, the Industrial Information Statement or which arise or arose out of or in connection with information or data in the Joint Proxy Statement or the Debt Realignment Documents concerning the Industrial Business (except to the extent such Liabilities constitute Shipbuilding Securities Liabilities or are otherwise based on any of (i) the actions or inactions of Shipbuilding Company, any other member of the Shipbuilding Group, or any director, officer or employee of the Shipbuilding Company or any other member of the Shipbuilding Group or any underwriter or investment banking firm of any member of the Shipbuilding Group (or any of their directors, officers, employees, advisors or representatives) (collectively, the "SHIPBUILDING PARTIES," or individually, a "SHIPBUILDING PARTY"), or (ii) the information or data provided in writing by any Shipbuilding Party expressly for inclusion in the Industrial Information Statement), or (B) the Shipbuilding Information Statement to the extent such Information Statement Liabilities are based on information or data concerning directly and solely the Industrial Company or the Industrial Business that is provided in writing by Industrial Company (or any other member of its Group or any Affiliate thereof after giving effect to the Distributions) expressly for inclusion in the Shipbuilding Information Statement; (iii) all of the Liabilities of Industrial Company, the Industrial Subsidiaries or any of the other members of the Industrial Group under, or to be retained or assumed by Industrial Company, any Industrial Subsidiary or any of the other members of the Industrial Group pursuant to this Agreement or any of the Ancillary Agreements; and (iv) all of the Liabilities of the parties hereto or their respective Subsidiaries (whenever arising whether prior to, at or following the Distribution Date) arising out of or in connection with or otherwise relating to the management or conduct before or after the Distribution Date of the Industrial Business. "INDUSTRIAL RECORDS" has the meaning ascribed to such term in SECTION 6.01(A) hereof. "INDUSTRIAL REGISTRATION STATEMENT" means the Registration Statement on Form 10 to be filed with the Commission pursuant to the requirements of Section 12 of the Exchange Act and the rules and regulations thereunder in order to register the Industrial Common Stock under Section 12(b) of the Exchange Act. "INFORMATION STATEMENT LIABILITIES" has the meaning ascribed to such term in CLAUSE (V) of the definitions herein of Energy Liabilities. "INFORMATION STATEMENTS" means the Industrial Information Statement and the Shipbuilding Information Statement. "INDUSTRIAL SUBSIDIARIES" means the Subsidiaries listed on EXHIBIT G hereto. A-7 12 "INSURANCE AGREEMENT" means the Insurance Agreement by and among Tenneco, Industrial Company and Shipbuilding Company, which agreement shall be entered into on or prior to the Distribution Date in the form attached hereto as EXHIBIT H except for such changes or modifications thereto that do not, individually or in the aggregate, adversely affect the Energy Business other than to a de minimis extent. "INSURANCE PROCEEDS" means, with respect to any insured party, those monies, net of any applicable premium adjustment, retrospectively-rated premium, deductible, retention, or cost of reserve paid or held by or for the benefit of such insured, which are either: (i) received by an insured from an insurance carrier; or (ii) paid by an insurance carrier on behalf of an insured. "JOINT PROXY STATEMENT" has the meaning ascribed to such term in the Merger Agreement. "LAW" means all laws, statutes and ordinances and all regulations, rules and other pronouncements of Governmental Authorities having the effect of law of the United States, any foreign country, or any domestic or foreign state, province, commonwealth, city, country, municipality, territory, protectorate, possession or similar instrumentality, or any Governmental Authority thereof. "LIABILITIES" means any and all debts, liabilities, obligations, responsibilities, response actions, losses, damages (whether compensatory, punitive or treble), fines, penalties and sanctions, absolute or contingent, matured or unmatured, liquidated or unliquidated, foreseen or unforeseen, joint, several or individual, asserted or unasserted, accrued or unaccrued, known or unknown, whenever arising, including, without limitation, those arising under or in connection with any Law (including any Environmental Law), Action, threatened Action, order or consent decree of any Governmental Authority or any award of any arbitration tribunal, and those arising under any contract, guarantee, commitment or undertaking, whether sought to be imposed by a Governmental Authority, private party, or party to this Agreement, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, or otherwise, and including any costs, expenses, interest, attorneys' fees, disbursements and expense of counsel, expert and consulting fees and costs related thereto or to the investigation or defense thereof. "MERGER" has the meaning ascribed to such term in the recitals to this Agreement. "MERGER AGREEMENT" has the meaning ascribed to such term in the recitals to this Agreement. "NYSE" means the New York Stock Exchange. "PERSON" means any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company or other entity, or any government, or any agency or political subdivision thereof. "PRIOR INDUSTRIAL BUSINESSES" means, collectively, all divisions, Subsidiaries, other business entities or investments of Tenneco (or one of its Subsidiaries) that, at any time prior to the date of the Industrial Business Pro Forma Balance Sheet, were included in the "automotive parts" or "packaging" segments for purposes of segment reporting in any of Tenneco's Annual Reports on Form 10-K, and were sold, transferred, otherwise disposed of or discontinued prior to such date. "PRIOR SHIPBUILDING BUSINESSES" means, collectively, all divisions, Subsidiaries, other business entities or investments of Tenneco (or one of its Subsidiaries) that, at any time prior to the date of the Shipbuilding Business Pro Forma Balance Sheet, were included in the "shipbuilding" segment for purposes of segment reporting in any of Tenneco's Annual Reports on Form 10-K, and were sold, transferred, otherwise disposed of or discontinued prior to such date. "PRIVILEGE" has the meaning ascribed to such term in SECTION 6.07(A) hereof. "PRIVILEGED INFORMATION" has the meaning ascribed to such term in SECTION 6.07(A) hereof. A-8 13 "REGISTRATION STATEMENTS" means the Industrial Registration Statement and the Shipbuilding Registration Statement. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SECURITIES LIABILITIES" means any and all losses, liabilities, penalties, claims, damages, demands, costs or expenses or other Liabilities whatsoever that are assessed, imposed, awarded against, incurred or accrued by a Person arising out of or relating in whole or in part to any Action, any potential or threatened Action or any Third Party Claim (or potential or threatened Third Party Claim) by any Governmental Authority or any other Person that is based on any violations or alleged violations of the Securities Act, Exchange Act, any of the rules or regulations of the Commission promulgated under the Securities Act or Exchange Act, or any other securities or other similar Law. "SHIPBUILDING ASSETS" means, collectively, all of the following rights and assets that are owned by Tenneco and or any of its Subsidiaries as of the close of business on the Distribution Date: (i) the capital stock of the Shipbuilding Subsidiaries; (ii) all of the assets included on the Shipbuilding Business Pro Forma Balance Sheet that are owned by Tenneco or any of its Subsidiaries as of the close of business on the Distribution Date; (iii) all of the assets and rights expressly allocated to Shipbuilding Company or any of the Shipbuilding Subsidiaries under this Agreement or any of the Ancillary Agreements; and (iv) any other asset acquired by Tenneco or any of its Subsidiaries from the date of the Shipbuilding Business Pro Forma Balance Sheet to the close of business on the Distribution Date that is owned by Tenneco or any of its Subsidiaries as of the close of business on the Distribution Date and that is of a nature or type that would have resulted in such asset being included as an asset on the Shipbuilding Business Pro Forma Balance Sheet had it been acquired on or prior to the date of the Shipbuilding Business Pro Forma Balance Sheet, determined on a basis consistent with the determination of the assets included on the Shipbuilding Business Pro Forma Balance Sheet. "SHIPBUILDING BUSINESS" means the businesses that, after giving effect to the Corporate Restructuring Transactions, are conducted by: (i) the Shipbuilding Company, the Shipbuilding Subsidiaries or any of the other members of the Shipbuilding Group; and (ii) any business entity acquired or established by or for Tenneco, Shipbuilding Company or any of the Shipbuilding Subsidiaries between the date of this Agreement and the close of business on the Distribution Date that is engaged in, or intends to engage in, any business that is of a type or nature that would have resulted in such business being included either as a Subsidiary or an asset of Shipbuilding Company on the Shipbuilding Business Pro Forma Balance Sheet had it been acquired or established on or prior to the date of the Shipbuilding Business Pro Forma Balance Sheet, determined on a basis consistent with the determination of the Subsidiaries and assets included on the Shipbuilding Business Pro Forma Balance Sheet. "SHIPBUILDING BUSINESS PRO FORMA BALANCE SHEET" means the Pro Forma Consolidated Balance Sheet for Shipbuilding Company and the Shipbuilding Subsidiaries (prepared in accordance with GAAP) as of June 30, 1996 attached hereto as EXHIBIT I. "SHIPBUILDING COMMON SHARES" means the Shares of Shipbuilding Common Stock owned by Tenneco after giving effect to the stock dividend provided for in SECTION 2.02(B) hereof. A-9 14 "SHIPBUILDING COMMON STOCK" has the meaning ascribed to such term in the recitals to this Agreement. "SHIPBUILDING COMPANY" means Newport News Shipbuilding Inc. (formerly known as Tenneco InterAmerica Inc.), a Delaware corporation. "SHIPBUILDING DISTRIBUTION" means the distribution on the Distribution Date as a dividend to holders of record of shares of Tenneco Common Stock as of the Distribution Record Date, of all of the outstanding Shipbuilding Common Shares owned by Tenneco on the basis provided in SECTION 3.02 hereof. "SHIPBUILDING FINANCING MATERIALS" means any registration statement, private placement memorandum, offering circular, prospectus, information memorandum and/or any other document or filing (with the Commission or any Governmental Authority or the NYSE or other stock exchange) prepared by or on behalf of Shipbuilding Company (or its Affiliates) and distributed to prospective lenders or prospective purchasers of any debt or equity securities of the Shipbuilding Company (or any other member of the Shipbuilding Group) in connection with any of the transactions contemplated under this Agreement, the Merger Agreement or any of the Ancillary Agreements, including, without limitation, the Confidential Information Memorandum dated September 1996 relating to the Senior Credit Facility (as defined in the Shipbuilding Information Statement), the 144A Offering Memorandum relating to the Senior Subordinated Notes and Senior Notes (as such terms are defined in the Shipbuilding Information Statement), and the registration statement on Form S-1 to be filed by Shipbuilding Company after the Distribution Date to register the Senior Subordinated Notes and Senior Notes under the Securities Act and all related documents. "SHIPBUILDING GROUP" means Shipbuilding Company, the Shipbuilding Subsidiaries and the corporations, partnerships, joint ventures, investments and other entities that represent equity investments of Shipbuilding Company or any of the Shipbuilding Subsidiaries following the consummation of the Corporate Restructuring Transactions and the Distributions. "SHIPBUILDING INDEMNITEES" means: (i) Shipbuilding Company and each Affiliate thereof after giving effect to the Corporate Restructuring Transactions and the Distributions; and (ii) each of the respective past, present and future directors, officers, employees and agents of any of the entities described in the immediately preceding clause (i) and each of the heirs, executors, successors and assigns of any of such directors, officers, employees and agents. "SHIPBUILDING INFORMATION STATEMENT" means the information statement or registration statement relating to Shipbuilding Company and the transactions contemplated hereby to be distributed to holders of Tenneco Common Stock pursuant to the terms of this Agreement. "SHIPBUILDING LIABILITIES" means, collectively, all of the Liabilities of Shipbuilding Company, the Shipbuilding Subsidiaries and each of the other members of the Shipbuilding Group after giving effect to the Corporate Restructuring Transactions, the Distributions and the transactions contemplated by the Debt and Cash Allocation Agreement, including, without limitation: (i) all of the Liabilities included on the Shipbuilding Business Pro Forma Balance Sheet that remain outstanding as of the close of business on the Distribution Date; (ii) all other Liabilities that are incurred or which accrue or are accrued at any time on, prior to or after the date of the Shipbuilding Business Pro Forma Balance Sheet and that arise or arose out of, or in connection with, the Shipbuilding Assets, the Shipbuilding Business or the Prior Shipbuilding Businesses, determined on a basis consistent with the determination of Liabilities of Shipbuilding Company on the Shipbuilding Business Pro Forma Balance Sheet, including, without limitation, A-10 15 Shipbuilding Securities Liabilities and Information Statement Liabilities to the extent such Information Statement Liabilities (A) arise or arose out of or in connection with the Shipbuilding Information Statement or information or data in the Joint Proxy statement or the Debt Realignment Documents concerning the Shipbuilding Business or (B) are based on information or data provided in writing by Shipbuilding Company (or any member of its Group or any Affiliate (after giving effect to the Distributions) thereof) expressly for inclusion in the Industrial Information Statement; (iii) all of the Liabilities of Shipbuilding Company, the Shipbuilding Subsidiaries or any of the other members of the Shipbuilding Group under, or to be retained or assumed by Shipbuilding Company, any Shipbuilding Subsidiary or any of the other members of the Shipbuilding Group pursuant to, this Agreement or any of the Ancillary Agreements; and (iv) all the Liabilities of the parties hereto or their respective Subsidiaries (whenever arising whether prior to, on or following the Distribution Date) arising out of or in connection with or otherwise relating to the management or conduct before or after the Distribution Date of the Shipbuilding Business. "SHIPBUILDING RECORDS" has the meaning ascribed to such term in SECTION 6.01(B) hereof. "SHIPBUILDING REGISTRATION STATEMENT" means the Registration Statement on Form 10 to be filed with the Commission pursuant to the requirements of Section 12 of the Exchange Act and the rules and regulations promulgated thereunder in order to register the Shipbuilding Common Stock under Section 12(b) of the Exchange Act. "SHIPBUILDING SECURITIES LIABILITIES" means any and all Securities Liabilities arising out of, or in connection with, or relating in whole or in part to any of the following: (i) the Shipbuilding Registration Statement; (ii) the Shipbuilding Information Statement (whether in the form as an Appendix to the Joint Proxy Statement or as the Information Statement included in the Shipbuilding Registration Statement); (iii) the Shipbuilding Financing Materials; (iv) any of the information, data (financial or otherwise) or disclosures in (or any alleged failure to set forth certain information, data or disclosures in) the Shipbuilding Registration Statement, Shipbuilding Information Statement (whether in the form as an Appendix to the Joint Proxy Statement or as the Information Statement included in the Shipbuilding Registration Statement) or Shipbuilding Financing Materials, irrespective of (A) who authored, prepared or provided such information, data or disclosures (or, as the case may be, the section or discussion in which certain information, data or disclosure is alleged to have been omitted), or (B) the form in which, or medium through which (e.g., verbally, in writing, etc.), such information, data, disclosures, discussion or section were provided; or (v) any of the information, data (financial or otherwise) or disclosures in (or any alleged failure to set forth certain information, data or disclosures in) the Joint Proxy Statement or the Debt Realignment Documents concerning any matter relating to the business, operations, management, financial results or potential risks of (or pending or threatened claims or investigations relating to) the Shipbuilding Business, Prior Shipbuilding Businesses, Shipbuilding Assets or Shipbuilding Liabilities, irrespective of (A) who authored, prepared or provided such information data or disclosures (or, as the case may be, the section or discussion in which certain information, data or disclosure is alleged to have been omitted), or (B) the form in which, or medium through which (e.g., verbally, in writing, etc.), such information, data, disclosure, section or discussion were provided. "SHIPBUILDING SUBSIDIARIES" means the Subsidiaries listed on EXHIBIT J hereto. "SUBSIDIARY" means, with respect to any Person: (i) any corporation of which at least a majority in interest of the outstanding voting stock (having by the terms thereof voting power under ordinary circumstances to elect a majority of the directors of such corporation, irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of a contingency) is at A-11 16 the time, directly or indirectly, owned or controlled by such Person or by such Person and one or more of its Subsidiaries; or (ii) any non-corporate entity in which such Person or such Person and one or more Subsidiaries of such Person either (a) directly or indirectly, at the date of determination thereof, has at least majority ownership interest, or (b) at the date of determination is a general partner or an entity performing similar functions (e.g., manager of a Limited Liability Company or a trustee of a trust). "SURVIVING CORPORATION" has the meaning ascribed to such term in the recitals to this Agreement. "TAX" or "TAXES" means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, unemployment, disability, property, ad valorem, stamp, excise, occupation, services, sales, use, license, lease, transfer, import, export, value added, alternative minimum, estimated or other similar tax (including any fee, assessment or other charge in the nature of or in lieu of any tax) imposed by any governmental entity or political subdivision thereof, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing. "TAX SHARING AGREEMENT" means the Tax Sharing Agreement by and among Tenneco, Shipbuilding Company, Industrial Company and Acquiror, which agreement shall be entered into on or prior to the Distribution Date in the form attached hereto as EXHIBIT K, except for such changes or modifications thereto that do not, individually or in the aggregate, adversely affect the Energy Business other than to a de minimis extent. "TENNECO" means Tenneco Inc., a Delaware corporation. "TENNECO COMMON STOCK" has the meaning ascribed to such term in the recitals to this Agreement. "TENNECO CORPORATE RECORDS" has the meaning ascribed to such term in SECTION 6.01(A) hereof. "TENNECO HOLDERS" means the holders of record of Tenneco Common Stock as of the Distribution Record Date. "TENNECO TRADEMARKS AND TRADENAMES" means all trademarks, service marks, and tradenames containing "TENNECO", "TEN", or "TENN" or variations thereof, along with their respective applications and registrations wherever used or registered; provided, however, that the term shall not include the word "Tennessee" to the extent such word is used in the business and operations of Tennessee Gas Pipeline Company or otherwise in the Energy Business. "TERMINATION DATE" means the date on which this Agreement is terminated pursuant to and in accordance with the provisions of SECTION 8.11 of this Agreement. "THIRD PARTY CLAIM" has the meaning as defined in SECTION 7.05(A) hereof. "TBS SERVICES AGREEMENT" means the Services Agreement by and among Industrial Company, Shipbuilding Company and Tenneco Business Services Inc., which agreement shall be entered into on or prior to the Distribution Date in substantially the form attached hereto as EXHIBIT L and which agreement Tenneco and the Energy Business will not become a party to and not be bound by without the consent of Acquiror, which Acquiror may withhold in its sole discretion. "TRANSITION SERVICES AGREEMENT" means the Transition Services Agreement by and between Tenneco and Tenneco Business Services Inc., which agreement shall be entered into on or prior to the Distribution Date in the form attached hereto as EXHIBIT M. "TRANSITION TRADEMARK LICENSE" has the meaning ascribed to such term in SECTION 5.02 hereof. SECTION 1.02. REFERENCES. References to an "EXHIBIT" or to a "SCHEDULE" are, unless otherwise specified, to one of the Exhibits or Schedules attached to this Agreement, and references to a "SECTION" are, unless otherwise specified, to one of the Sections of this Agreement. A-12 17 ARTICLE II PRE-DISTRIBUTION TRANSACTIONS; CERTAIN COVENANTS SECTION 2.01. CORPORATE RESTRUCTURING TRANSACTIONS. On or prior to the Distribution Date (but in all events prior to the Distributions) and otherwise in accordance with the terms and provisions set forth in EXHIBIT B hereto, each of Tenneco, Industrial Company and Shipbuilding Company shall, and shall cause each of their respective Subsidiaries to, as applicable, take such action or actions as is necessary to cause, effect and consummate the Corporate Restructuring Transactions. Each of Tenneco, Shipbuilding Company and Industrial Company hereby agrees that any one or more of the Corporate Restructuring Transactions may be modified, supplemented or eliminated; provided such modification, supplement or elimination (a) is determined to be necessary or appropriate (i) to divide the existing businesses of Tenneco so that the automotive, packaging and business services businesses shall be owned, directly and indirectly, by Industrial Company and the shipbuilding business shall be owned, directly and indirectly, by Shipbuilding Company, or (ii) to obtain a ruling from the Internal Revenue Service as described in Section 7.1(g) of the Merger Agreement, and (b) does not, individually or in the aggregate, adversely affect the Energy Business (other than to a de minimis extent) or materially delay or prevent the consummation of the Merger. SECTION 2.02. PRE-DISTRIBUTION STOCK DIVIDENDS TO TENNECO. On or prior to the Distribution Date (but in all events prior to the Distributions): (a) INDUSTRIAL COMPANY STOCK DIVIDEND. Industrial Company shall issue to Tenneco, as a stock dividend, the number of shares of Industrial Common Stock as is required to effect the Industrial Distribution, as certified by the Agent. In connection therewith, Tenneco shall deliver to Industrial Company for cancellation the share certificate (or certificates) currently held by it representing all Industrial Common Stock, and Industrial Company shall issue a new certificate (or certificates) to Tenneco representing the total number of Industrial Common Shares to be owned by Tenneco after giving effect to such stock dividend. (b) SHIPBUILDING COMPANY STOCK DIVIDEND. Shipbuilding Company shall issue to Tenneco, as a stock dividend, the number of shares of Shipbuilding Common Stock as is required to effect the Shipbuilding Distribution, as certified by the Agent. In connection therewith, Tenneco shall deliver to Shipbuilding Company for cancellation the share certificate (or certificates) currently held by it representing all Shipbuilding Common Stock, and Shipbuilding Company shall issue a new certificate (or certificates) representing the total number of Shipbuilding Common Shares to be owned by Tenneco after giving effect to such stock dividend. SECTION 2.03. CHARTERS AND BYLAWS. (a) CERTIFICATE OF INCORPORATION AND BYLAWS OF INDUSTRIAL COMPANY. On or prior to the Distribution Date (but in all events prior to the Distributions), Tenneco and Industrial Company shall each take all necessary actions so that, as of the Distribution Date, the Restated Certificate of Incorporation and Bylaws of Industrial Company will be substantially in the forms set forth in EXHIBITS N and O, respectively. (b) CERTIFICATE OF INCORPORATION AND BYLAWS OF SHIPBUILDING COMPANY. On or prior to the Distribution Date (but in all events prior to the Distributions), Tenneco and Shipbuilding Company shall each take all necessary actions so that, as of the Distribution Date, the Restated Certificate of Incorporation and Bylaws of Shipbuilding Company will be substantially in the forms set forth in EXHIBITS N and O, respectively. SECTION 2.04. ELECTION OF DIRECTORS OF INDUSTRIAL COMPANY AND SHIPBUILDING COMPANY. On or prior to the Distribution Date, Tenneco, as the sole stockholder of each of Industrial Company and Shipbuilding Company, shall take all necessary action so that as of the Distribution Date the directors of Industrial Company and of Shipbuilding Company will be as set forth in the Industrial Information Statement and the Shipbuilding Information Statement, respectively. A-13 18 SECTION 2.05. TRANSFER AND ASSIGNMENT OF CERTAIN LICENSES AND PERMITS. (a) LICENSES AND PERMITS RELATING TO THE INDUSTRIAL BUSINESS. On or prior to the Distribution Date, or as soon as reasonably practicable thereafter, each of Tenneco and Shipbuilding Company shall (and, if applicable, shall cause any other Person over which it has legal or effective direct or indirect control to), severally but not jointly, duly and validly transfer or cause to be duly and validly transferred to the appropriate member of the Industrial Group (as directed by Industrial Company) all transferrable licenses, permits and authorizations issued by any Governmental Authority that relate to the Industrial Business but which are held in the name of any member of the Energy Group or the Shipbuilding Group, or any of their respective employees, officers, directors, stockholders or agents. (b) LICENSES AND PERMITS RELATING TO THE SHIPBUILDING BUSINESS. On or prior to the Distribution Date, or as soon as reasonably practicable thereafter, each of Tenneco and Industrial Company shall (and, if applicable, shall cause any other Person over which it has legal or effective direct or indirect control to), severally but not jointly, duly and validly transfer or cause to be duly and validly transferred to the appropriate member of the Shipbuilding Group (as directed by Shipbuilding Company) all transferrable licenses, permits and authorizations issued by any Governmental Authority that relate to the Shipbuilding Business but which are held in the name of any member of the Energy Group or the Industrial Group, or any of their respective employees, officers, directors, stockholders or agents. (c) LICENSES AND PERMITS RELATING TO THE ENERGY BUSINESS. On or prior to the Distribution Date, or as soon as reasonably practicable thereafter, each of Industrial Company and Shipbuilding Company shall (and, if applicable, shall cause any other Person over which it has legal or effective direct or indirect control to), severally but not jointly, duly and validly transfer or cause to be duly and validly transferred to the appropriate member of the Energy Group (as directed by Tenneco) all transferrable licenses, permits and authorizations issued by any Governmental Authority that relate to the Energy Business but which are held in the name of any member of the Industrial Group or the Shipbuilding Group, or any of their respective employees, officers, directors, stockholders or agents. SECTION 2.06. TRANSFER AND ASSIGNMENT OF CERTAIN AGREEMENTS. (a) TRANSFER AND ASSIGNMENT OF ENERGY BUSINESS AGREEMENTS. On or prior to the Distribution Date, or as soon as reasonably practicable thereafter, and subject to the limitations set forth in this SECTION 2.06, each of Industrial Company and Shipbuilding Company shall (and, if applicable, shall cause any of the other members of its Group over which it has legal or effective direct or indirect control to), severally but not jointly, assign, transfer and convey to Tenneco (or such other member of the Energy Group as Tenneco shall direct) all of its (or such other member of its Group's) right, title and interest in and to any and all agreements that relate exclusively to the Energy Business or any member of the Energy Group. (b) TRANSFER AND ASSIGNMENT OF INDUSTRIAL BUSINESS AGREEMENTS. On or prior to the Distribution Date, or as soon as reasonably practicable thereafter, and subject to the limitations set forth in this SECTION 2.06, each of Tenneco and Shipbuilding Company shall (and, if applicable, shall cause any of the other members of its Group over which it has legal or effective direct or indirect control to), severally but not jointly, assign, transfer and convey to Industrial Company (or such other member of the Industrial Group as Industrial Company shall direct) all of its (or such other member of its Group's) right, title and interest in and to any and all agreements that relate exclusively to the Industrial Business or any member of the Industrial Group. (c) TRANSFER AND ASSIGNMENT OF SHIPBUILDING BUSINESS AGREEMENTS. On or prior to the Distribution Date, or as soon as reasonably practicable thereafter, and subject to the limitations set forth in this SECTION 2.06, each of Tenneco and Industrial Company shall (and, if applicable, shall cause any of the other members of its Group over which it has legal or effective direct or indirect control to), severally but not jointly, assign, transfer and convey to Shipbuilding Company (or such other member of the Shipbuilding Group as Shipbuilding Company shall direct) all of its (or such other member of its Group's) right, title and interest in and to any and all agreements that relate exclusively to the Shipbuilding Business or any member of the Shipbuilding Group. A-14 19 (d) JOINT AGREEMENTS. Subject to the provisions of SECTION 2.06(F) below, any agreement to which any party hereto (or any other member of such party's Group) is a party that inures to the benefit of more than one of the Energy Business, the Industrial Business and the Shipbuilding Business shall be assigned in part, at the expense and risk of the assignee, on or prior to the Distribution Date or as soon as reasonably practicable thereafter, so that each party (or such other member of such party's Group) shall be entitled to the rights and benefits inuring to its business under such agreement. (e) OBLIGATIONS OF ASSIGNEES. The assignee of any agreement assigned, in whole or in part, hereunder (an "ASSIGNEE") shall, as a condition to such assignment, assume and agree to pay, perform, and fully discharge all obligations of the assignor under such agreement (whether such obligations arose or were incurred prior to, on or subsequent to the Distribution Date and irrespective of whether such obligations have been asserted as of the Distribution Date) or, in the case of a partial assignment under SECTION 2.06(D) above, such Assignee's related portion of such obligations as determined in accordance with the terms of the relevant agreement, where determinable on the face thereof, and otherwise as determined in accordance with the practice of the parties prior to the Distributions. Furthermore, the Assignee shall use its commercially reasonable efforts to cause the assignor of such agreement to be released from its obligations under the assigned agreements. (f) NO ASSIGNMENT OF CERTAIN AGREEMENTS. Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any agreement, in whole or in part, or any rights thereunder if the agreement to assign or attempt to assign, without the consent of a third party, would constitute a breach thereof or in any way adversely affect the rights of the Assignee thereof until such consent is obtained. If an attempted assignment thereof would be ineffective or would adversely affect the rights of any party hereto so that the Assignee would not, in fact, receive all such rights, the parties hereto will cooperate with each other to effect any arrangement designed reasonably to provide for the Assignee the benefits of, and to permit the Assignee to assume liabilities under, any such agreement, subject to the remaining sentences of this SECTION 2.06(F). There are certain software license agreements held in the name of a member of the Industrial Group that presently inure to the benefit of the Energy Business, the Industrial Business and the Shipbuilding Business. Notwithstanding any other provision of this Agreement, each such license agreement shall continue to be held by that member of the Industrial Group without any obligation of any party to cause the assignment or inurement to the benefit of such license agreement, or to effect any arrangement to provide such benefit, to the Energy Business or the Shipbuilding Business, except where the license agreement expressly permits the benefits and obligations to be divided among the Businesses or as may be negotiated with the licensor by that member of the Industrial Group and such other parties and the Industrial Business shall use commercially reasonable efforts to do so. SECTION 2.07. CONSENTS. The parties hereto shall use their best efforts to obtain any third-party consents or approvals that are required to consummate the Corporate Restructuring Transactions, the Distributions and the other transactions contemplated herein (the "CONSENTS"). SECTION 2.08. OTHER TRANSACTIONS. On or prior to the Distribution Date (but in all events prior to the Distributions), each of Tenneco, Industrial Company and Shipbuilding Company shall have consummated those other transactions in connection with the Corporate Restructuring Transactions and the Distributions that are contemplated by the Information Statements and the ruling request submission by Tenneco to the Internal Revenue Service dated June 27, 1996 (as subsequently supplemented), and not specifically referred to in SECTIONS 2.01 through 2.07 above, subject, however, to the limitations set forth in SUBPARAGRAPH (B) of SECTION 2.01 above. SECTION 2.09. ELECTION OF OFFICERS. On or prior to the Distribution Date, each of Tenneco, Industrial Company and Shipbuilding Company shall, as applicable, take all actions necessary and desirable so that as of the Distribution Date the officers of Industrial Company and of Shipbuilding Company will be as set forth in the Industrial Information Statement and the Shipbuilding Information Statement, respectively. A-15 20 SECTION 2.10. REGISTRATION STATEMENTS. Each of Tenneco, Industrial Company and Shipbuilding Company shall prepare, and shall file with the Commission, the Registration Statements in accordance with the terms of this SECTION 2.10. (a) PREPARATION AND FILING OF INDUSTRIAL REGISTRATION STATEMENT. Tenneco, Industrial Company and Shipbuilding Company shall prepare or cause to be prepared, and Industrial Company shall file or cause to be filed with the Commission, the Industrial Registration Statement. The Industrial Registration Statement shall include or incorporate by reference the Industrial Information Statement setting forth appropriate disclosure concerning Tenneco, Industrial Company, Shipbuilding Company, the Distributions and such other matters as may be required to be disclosed therein by the provisions of the Exchange Act and the rules and regulations promulgated thereunder. Tenneco and Industrial Company shall take all such actions as may be reasonably necessary or appropriate in order to cause the Industrial Registration Statement to become effective by order of the Commission pursuant to the Exchange Act. (b) PREPARATION AND FILING OF SHIPBUILDING REGISTRATION STATEMENT. Tenneco, Industrial Company and Shipbuilding Company shall prepare or cause to be prepared, and Shipbuilding Company shall file or cause to be filed with the Commission, the Shipbuilding Registration Statement. The Shipbuilding Registration Statement shall include or incorporate by reference the Shipbuilding Information Statement setting forth appropriate disclosure concerning Tenneco, Shipbuilding Company, Industrial Company, the Distributions and such other matters as may be required to be disclosed therein by the provisions of the Exchange Act and the rules and regulations promulgated thereunder. Tenneco and Shipbuilding Company shall take all such actions as may be reasonably necessary or appropriate in order to cause the Shipbuilding Registration Statement to become effective by order of the Commission pursuant to the Exchange Act. SECTION 2.11. STATE SECURITIES LAWS. Prior to the Distribution Date, Tenneco, Industrial Company and Shipbuilding Company shall take all such action as may be necessary or appropriate under the securities or blue sky laws of states or other political subdivisions of the United States in order to effect the Distributions. SECTION 2.12. LISTING APPLICATION. Prior to the Distribution Date, Tenneco, Industrial Company and Shipbuilding Company shall prepare and file with the NYSE listing applications and related documents and shall take all such other actions with respect thereto as shall be necessary or desirable in order to cause the NYSE to list on or prior to the Distribution Date, subject to official notice of issuance, the Industrial Common Shares and the Shipbuilding Common Shares. SECTION 2.13. CERTAIN FINANCIAL AND OTHER ARRANGEMENTS. (a) SETTLEMENT OF INTERCOMPANY ACCOUNTS BETWEEN INDUSTRIAL GROUP AND ENERGY GROUP. All intercompany receivables, payables and loans (other than receivables, payables and loans otherwise specifically provided for in any of the Ancillary Agreements or hereunder), including, without limitation, in respect of any cash balances, any cash balances representing deposited checks or drafts for which only a provisional credit has been allowed or any cash held in any centralized cash management system, between any member of the Industrial Group, on the one hand, and any member of the Energy Group, on the other hand, shall, as of the close of business on the Distribution Date, be settled, capitalized or converted into ordinary trade accounts, in each case as may be agreed in writing prior to the Distribution Date by duly authorized representatives of Tenneco, Industrial Company and the Acquiror. (b) SETTLEMENT OF INTERCOMPANY ACCOUNTS BETWEEN SHIPBUILDING GROUP AND ENERGY GROUP. All intercompany receivables, payables and loans (other than receivables, payables and loans otherwise specifically provided for in any of the Ancillary Agreements or hereunder), including, without limitation, in respect of any cash balances, any cash balances representing deposited checks or drafts for which only a provisional credit has been allowed or any cash held in any centralized cash management system, between any member of the Shipbuilding Group, on the one hand, and any member of the Energy Group, on the other hand, shall, as of the close of business on the Distribution Date, be settled, capitalized or converted into ordinary trade accounts, in each case as may be agreed in writing prior to the Distribution Date by duly authorized representatives of Tenneco, Shipbuilding Company and the Acquiror. A-16 21 (c) SETTLEMENT OF INTERCOMPANY ACCOUNTS BETWEEN INDUSTRIAL GROUP AND SHIPBUILDING GROUP. All intercompany receivables, payables and loans (other than receivables, payables and loans otherwise specifically provided for in any of the Ancillary Agreements or hereunder), including, without limitation, in respect of any cash balances, any cash balances representing deposited checks or drafts for which only a provisional credit has been allowed or any cash held in any centralized cash management system, between any member of the Industrial Group, on the one hand, and any member of the Shipbuilding Group, on the other hand, shall, as of the close of business on the Distribution Date, be settled, capitalized or converted into ordinary trade accounts, in each case as may be agreed in writing prior to the Distribution Date by duly authorized representatives of Industrial Company and Shipbuilding Company. (d) OPERATIONS IN ORDINARY COURSE. Except as otherwise provided in this Agreement, the Merger Agreement or any Ancillary Agreement, during the period from the date of this Agreement through the Distribution Date, each of Tenneco, Industrial Company and Shipbuilding Company shall, and shall cause any entity that is a Subsidiary of such party at any time during such period to, conduct its business in a manner substantially consistent with current and past operating practices and in the ordinary course, including, without limitation, with respect to the payment and administration of accounts payable and the collection and administration of accounts receivable, the purchase of capital assets and equipment and the management of inventories. SECTION 2.14. DIRECTOR, OFFICER AND EMPLOYEE RESIGNATIONS. Subject to the provisions of SECTION 2.04 and SECTION 2.09 above: (a) RESIGNATIONS BY DIRECTORS AND EMPLOYEES OF THE ENERGY GROUP. Tenneco shall cause all of its directors and all employees of the Energy Group to resign, effective as of the close of business on the Distribution Date, from all boards of directors or similar governing bodies of each member of the Industrial Group or the Shipbuilding Group on which they serve, and from all positions as officers or employees of any member of the Industrial Group or the Shipbuilding Group, except as otherwise set forth in the Information Statements or mutually agreed to in writing on or prior to the Distribution Date by Tenneco, on the one hand, and, as applicable, Industrial Company and/or Shipbuilding Company, on the other hand. (b) RESIGNATIONS BY DIRECTORS AND EMPLOYEES OF THE INDUSTRIAL GROUP. Industrial Company shall cause all of its directors and all employees of the Industrial Group to resign, effective as of the close of business on the Distribution Date, from all boards of directors or similar governing bodies of each member of the Energy Group or the Shipbuilding Group on which they serve, and from all positions as officers or employees of any member of the Energy Group or the Shipbuilding Group, except as otherwise set forth in the Information Statements or mutually agreed to in writing on or prior to the Distribution Date by Industrial Company, on the one hand, and, as applicable, Tenneco and/or Shipbuilding Company, on the other hand. (c) RESIGNATIONS BY DIRECTORS AND EMPLOYEES OF THE SHIPBUILDING GROUP. Shipbuilding Company shall cause all of its directors and all employees of the Shipbuilding Group to resign, effective as of the close of business on the Distribution Date, from all boards of directors or similar governing bodies of each member of the Energy Group or the Industrial Group on which they serve, and from all positions as officers or employees of any member of the Energy Group or the Industrial Group, except as otherwise set forth in the Information Statements or mutually agreed to in writing on or prior to the Distribution Date by Shipbuilding Company, on the one hand, and, as applicable, Industrial Company and/or Tenneco, on the other hand. SECTION 2.15. TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTIONS; TRANSFERS DEEMED EFFECTIVE AS OF THE DISTRIBUTION DATE. To the extent that any transfers contemplated by this ARTICLE II shall not have been consummated on or prior to the Distribution Date, the parties hereto shall cooperate (and shall cause each of their respective Affiliates and each member of their respective Groups over which they have legal or effective direct or indirect control to cooperate) to effect such transfers as promptly following the Distribution Date as shall be practicable. Nothing herein shall be deemed to require the transfer of any assets or the assumption of any Liabilities which by their terms or operation of Law cannot be transferred or assumed; provided, however, that the parties hereto shall cooperate (and shall cause each of their respective Affiliates and each member of their respective Groups over which they have legal or effective direct or indirect control to cooperate) to seek to A-17 22 obtain any necessary consents or approvals for the transfer of all assets and Liabilities contemplated to be transferred pursuant to this ARTICLE II. In the event that any such transfer of assets or Liabilities has not been consummated, from and after the Distribution Date the party retaining such asset or Liability (or, as applicable, such other member or members of such party's Group) shall hold such asset in trust for the use and benefit of the party entitled thereto (at the expense of the party entitled thereto) or retain such Liability for the account of the party by whom such Liability is to be assumed pursuant hereto, as the case may be, and take such other action as may be reasonably requested by the party to whom such asset is to be transferred, or by whom such Liability is to be assumed, as the case may be, in order to place such party, insofar as is reasonably possible, in the same position as would have existed had such asset or Liability been transferred or assumed as contemplated hereby. As and when any such asset or Liability becomes transferable or assumable, such transfer shall be effected forthwith. As of the Distribution Date, each party hereto (or, if applicable, such other members of such party's Group) shall be deemed to have acquired (or, as applicable, retained) complete and sole beneficial ownership over all of the assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have assumed in accordance with the terms of this Agreement all of the Liabilities, and all duties, obligations and responsibilities incident thereto, which such party (or any other member of such party's Group) is entitled to acquire or required to assume pursuant to the terms of this Agreement. SECTION 2.16. ANCILLARY AGREEMENTS. Prior to the Distribution Date, each of Tenneco, Industrial Company and Shipbuilding Company shall enter into, and/or where applicable shall cause such other members of their respective Groups to enter into, (a) the Ancillary Agreements and (b) any other agreements in respect of the Corporate Restructuring Transactions and the Distributions as are reasonably necessary or appropriate in connection with the transactions contemplated hereby and thereby so long as such agreements do not materially delay or prevent consummation of the Merger or adversely affect the Energy Business other than to a de minimis extent. ARTICLE III THE DISTRIBUTIONS SECTION 3.01. TENNECO ACTION PRIOR TO THE DISTRIBUTIONS. Subject to the terms and conditions set forth herein, Tenneco shall take, or cause to be taken, the following acts or actions in connection with, and to otherwise effect in accordance with the terms of this Agreement, the Distributions. (a) DECLARATION OF DISTRIBUTIONS AND ESTABLISHMENT OF DISTRIBUTION DATE. The Board of Directors of Tenneco shall, in its sole discretion and subject to and in accordance with the applicable rules of the NYSE and provisions of the DGCL, declare the Distributions and establish the Distribution Record Date, the Distribution Date, the date on which Industrial Common Shares, Shipbuilding Common Shares and any cash in lieu of fractional shares shall be mailed to the Tenneco Holders and all appropriate procedures in connection with the Distributions to the extent not provided for herein; provided, however, that no such action shall create any obligation on the part of Tenneco to effect the Distributions or in any way limit Tenneco's power of termination as set forth in SECTION 8.11 hereof or alter the consequences of any such termination from those specified in such Section. (b) NOTICE TO NYSE. Tenneco shall, to the extent possible, give the NYSE not less than ten days advance notice of the Distribution Record Date in compliance with Rule 10b-17 under the Exchange Act. (c) MAILING OF INDUSTRIAL INFORMATION STATEMENT. Tenneco shall, as soon as practicable after the Industrial Registration Statement shall have been declared effective under the Exchange Act, cause the Industrial Information Statement to be mailed to the Tenneco Holders. (d) MAILING OF SHIPBUILDING INFORMATION STATEMENT. Tenneco shall, as soon as practicable after the Shipbuilding Registration Statement shall have been declared effective under the Exchange Act, cause the Shipbuilding Information Statement to be mailed to the Tenneco Holders. A-18 23 SECTION 3.02. THE DISTRIBUTIONS. (a) DUTIES AND OBLIGATIONS OF TENNECO. Subject to the conditions contained herein, on the Distribution Date but effective immediately following the close of business on the Distribution Date Tenneco shall: (i) deliver to the Agent the share certificates representing the Industrial Common Shares and Shipbuilding Common Shares issued to Tenneco by Industrial Company and Shipbuilding Company, respectively, pursuant to SECTION 2.02 hereof, endorsed by Tenneco in blank, for the benefit of the Tenneco Holders; and (ii) instruct the Agent to distribute, as soon as practicable following consummation of the Distributions, to the Tenneco Holders the following: (A) one share of Industrial Common Stock for every one share of Tenneco Common Stock; (B) one share of Shipbuilding Common Stock for every five shares of Tenneco Common Stock; and (C) cash, if applicable, in lieu of fractional shares obtained in the manner provided in SECTION 3.03 hereof. (b) DUTIES AND RESPONSIBILITIES OF INDUSTRIAL COMPANY AND SHIPBUILDING COMPANY. Industrial Company and Shipbuilding Company shall provide, or cause to be provided, to the Agent sufficient certificates representing Industrial Common Stock and Shipbuilding Common Stock, respectively, in such denominations as the Agent may request in order to effect the Distributions. All shares of Industrial Common Stock issued pursuant to the Industrial Distribution will be validly issued, fully paid and nonassessable and free of any preemptive (or similar) rights. All shares of Shipbuilding Common Stock issued pursuant to the Shipbuilding Distribution will be validly issued, fully paid and nonassessable and free of any preemptive (or similar) rights. SECTION 3.03. FRACTIONAL SHARES. (a) NO FRACTIONAL SHARES. Notwithstanding anything herein to the contrary, no certificate or scrip evidencing a fractional share of Industrial Common Stock or Shipbuilding Common Stock shall be issued in connection with the Distributions, and any such fractional share interests to which a Tenneco Holder would otherwise be entitled will not entitle such Tenneco Holder to vote or to any rights of a stockholder of Industrial Company or Shipbuilding Company, as the case may be. In lieu of any such fractional shares, each Tenneco Holder who, but for the provisions of this SECTION 3.03, would be entitled to receive a fractional share interest of Industrial Common Stock or Shipbuilding Common Stock pursuant to the Distributions shall be paid cash, without any interest thereon, as hereinafter provided. Tenneco shall instruct the Agent to determine the number of whole shares and fractional shares of Industrial Common Stock and Shipbuilding Common Stock allocable to each Tenneco Holder, to aggregate all such fractional shares into whole shares, to sell the whole shares obtained thereby in the open market at the then prevailing prices on behalf of Tenneco Holders who otherwise would be entitled to receive fractional share interests and to distribute to each such Tenneco Holder his, her or its ratable share of the total proceeds of such sale, after making appropriate deductions of the amount required for federal income tax withholding purposes and after deducting any applicable transfer taxes. All brokers' fees and commissions incurred in connection with such sales shall be paid by Tenneco. (b) UNCLAIMED STOCK OR CASH. Any Industrial Common Stock, Shipbuilding Common Stock or cash in lieu of fractional shares and dividends or distributions with respect to Industrial Common Stock or Shipbuilding Common Stock that remain unclaimed by any Tenneco Holder 180 days after the Distribution Date shall be returned to Tenneco and any such Tenneco Holders shall look only to Tenneco for the Industrial Common Stock, Shipbuilding Common Stock, cash, if any, in lieu of fractional share interests and any such dividends or distributions to which they are entitled, subject in each case to applicable escheat or other abandoned property laws. A-19 24 (c) BENEFICIAL OWNERS. Solely for purposes of computing fractional share interests pursuant to SECTION 3.03(A), the beneficial owner of shares of Tenneco Common Stock held of record in the name of a nominee will be treated as the holder of record of such shares. ARTICLE IV CONDITIONS TO THE DISTRIBUTIONS SECTION 4.01. CONDITIONS PRECEDENT TO THE DISTRIBUTIONS. The obligation of Tenneco to cause the Distributions to be consummated shall be subject, at the option of Tenneco, to the fulfillment or waiver, on or prior to the Termination Date, of each of the following conditions. (a) TAX SHARING AGREEMENT. Tenneco, Industrial Company, Shipbuilding Company and Acquiror shall have executed and delivered the Tax Sharing Agreement and such agreement shall be in full force and effect. (b) BENEFITS AGREEMENT. Tenneco, Industrial Company and Shipbuilding Company shall have executed and delivered the Benefits Agreement and such agreement shall be in full force and effect. (c) TRANSITION SERVICES AGREEMENT. Tenneco and Tenneco Business Services Inc. shall have executed and delivered the Transition Services Agreement and such agreement shall be in full force and effect. (d) INSURANCE AGREEMENT. Tenneco, Industrial Company and Shipbuilding Company shall have executed and delivered the Insurance Agreement and such agreement shall be in full force and effect. (e) DEBT AND CASH ALLOCATION AGREEMENT. Tenneco, Industrial Company and Shipbuilding Company shall have executed and delivered the Debt and Cash Allocation Agreement and such agreement shall be in full force and effect. (f) EFFECTIVE DATE OF REGISTRATION STATEMENT. Each of the Registration Statements shall have been declared effective by order of the Commission and no stop order shall have been entered, and no proceeding for that purpose shall have been initiated or threatened by the Commission with respect thereto. (g) NYSE LISTING. The Industrial Common Shares and the Shipbuilding Common Shares shall have been approved for listing on the NYSE, subject to official notice of issuance. (h) TAX RULING. Tenneco shall have received rulings from the Internal Revenue Service reasonably acceptable to Tenneco and Acquiror, which rulings shall be in full force and effect as of the Distribution Date, to the effect that: (i) The Industrial Distribution as contemplated hereunder will be tax-free for federal income tax purposes to Tenneco under Section 355(c)(1) of the Code and to the stockholders of Tenneco under Section 355(a) of the Code; (ii) The Shipbuilding Distribution as contemplated hereunder will be tax-free for federal income tax purposes to Tenneco under Section 355(c)(1) of the Code and to the stockholders of Tenneco under Section 355(a) of the Code; and (iii) The following distributions will be tax free to the respective transferor corporations under Section 355(c)(1) of the Code and to the respective stockholders of the transferor corporations under Section 355(a) of the Code: (A) the distribution by the Shipbuilding Company of the capital stock of Tenneco Packaging Inc. to Tenneco Corporation contemplated under the Corporate Restructuring Transactions; (B) the distribution by Tenneco Corporation of the capital stock of the Shipbuilding Company and the Industrial Company to Tennessee Gas Pipeline Company as contemplated under the Corporate Restructuring Transactions; and (C) the distribution by Tennessee Gas Pipeline Company of the capital stock of the Shipbuilding Company and the Industrial Company to Tenneco Inc. as contemplated under the Corporate Restructuring Transactions. A-20 25 (i) PRE-DISTRIBUTION TRANSACTIONS. Each of the transactions and other matters contemplated by ARTICLE II and SECTION 3.01 hereof (including, without limitation, each of the distributions, transfers, conveyances, contributions, assignments or other transactions included in, or otherwise necessary to consummate, the Corporate Restructuring Transactions) shall have been fully effected, consummated and accomplished. (j) COVENANTS. The covenants contained in ARTICLE V of this Agreement that are required to be performed on or before the Distribution Date shall have been fully performed. (k) NO PROHIBITIONS. Consummation of the transactions contemplated hereby shall not be prohibited by Law and no Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and which materially restricts, prevents or prohibits consummation of the Distributions, the Merger or any transaction contemplated by this Agreement or the Merger Agreement, it being understood that the parties hereto hereby agree to use their reasonable best efforts to cause any such decree, judgment, injunction or other order to be vacated or lifted as promptly as possible. (l) CONSENTS. Tenneco, Industrial Company, Shipbuilding Company and the other members of their respective Groups shall have obtained all Consents the failure of which to obtain would, in the determination of the Board of Directors of Tenneco, have a material adverse effect on the Energy Group, the Industrial Group or the Shipbuilding Group, each taken as a whole, and such Consents shall be in full force and effect. (m) STOCKHOLDER APPROVAL. The Distributions shall have been approved by the requisite vote of the holders of the outstanding Tenneco Common Stock and the holders of the outstanding $7.40 Cumulative Preferred Stock of Tenneco, voting together as a class, by the requisite vote of the holders of the outstanding $4.50 Cumulative Preferred Stock of Tenneco and the holders of the outstanding $7.40 Cumulative Preferred Stock of Tenneco, voting together as a class, and by any requisite vote of the holders of the outstanding New Preferred Stock (as defined in the Merger Agreement), voting separately as a class, in accordance with the DGCL and the provisions of Tenneco's Certificate of Incorporation. (n) HSR ACT. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, applicable to the transactions contemplated under the Merger Agreement shall have expired or been terminated. (o) DEBT REALIGNMENT. Each of the transactions and other matters contemplated under the Debt Realignment (as defined under the Merger Agreement) shall have been fully effected, consummated and accomplished. SECTION 4.02. NO CONSTRAINT. Notwithstanding the provisions of SECTION 4.01 above (but subject to Tenneco's obligations under the Merger Agreement), the fulfillment or waiver of any or all of the conditions precedent to the Distributions set forth therein shall not: (i) create any obligation on the part of Tenneco or any other party hereto to effect the Distributions; (ii) in any way limit Tenneco's right and power under SECTION 8.11 hereof to terminate this Agreement and the process leading to the Distributions and to abandon the Distributions; or (iii) alter the consequences of any such termination under SECTION 8.11 hereof from those specified in such Section. SECTION 4.03. DEFERRAL OF DISTRIBUTION DATE. If the Distribution Date shall have been established by the Board of Directors of Tenneco but all the conditions precedent to the Distributions set forth in this Agreement have not theretofore been fulfilled or waived, or Tenneco does not reasonably anticipate that they will be fulfilled or waived, on or prior to the date established as the Distribution Date, Tenneco may, by resolution of its Board of Directors (or a committee thereof, so authorized), defer the Distribution Date to a later date. SECTION 4.04. PUBLIC NOTICE OF DEFERRED DISTRIBUTION DATE. If the Board of Directors (or a committee thereof, so authorized) of Tenneco shall defer the Distribution Date in accordance with SECTION 4.03 above and public announcement of the prior Distribution Date has theretofore been made, Tenneco shall promptly thereafter A-21 26 issue, in accordance with the advice of legal counsel, a public announcement with respect to such deferment and shall, with the advice of legal counsel, take such other actions as may be deemed necessary or desirable with respect to the dissemination of such information. ARTICLE V COVENANTS SECTION 5.01. FURTHER ASSURANCES. Each of Tenneco, Industrial Company and Shipbuilding Company shall use all reasonable efforts to: (a) take or cause to be taken all actions, and to do or cause to be done all things reasonably necessary, proper or advisable under applicable Law and agreements or otherwise to consummate and make effective the transactions contemplated hereby, including without limitation using commercially reasonable efforts to obtain any consents and approvals from, enter into any amendatory agreements with and make any applications, registrations or filings with, any third Person or any Governmental Authority necessary or desirable in order to consummate the transactions contemplated hereby or to carry out the purposes of this Agreement; and (b) execute and deliver such further instruments and documents and take such other actions as the other party may reasonably request in order to consummate the transactions contemplated hereby and effectuate the purposes of this Agreement. SECTION 5.02. TENNECO NAME. Industrial Company shall grant to each of Tenneco and Shipbuilding Company transition licenses, in the forms of EXHIBIT P and Q, respectively (the "Transition Trademark License"), to use the Tenneco Trademarks and Tradenames for the limited use as more fully described below in this SECTION 5.02 and in SECTION 5.03. Each of Tenneco and Shipbuilding Company shall, and shall cause each of the other members of its Group over which it has legal or effective direct or indirect control to, at its own expense: (a) Within 30 days following the Distribution Date, change, if necessary, its corporate name to delete therefrom the word "Tenneco" or any other word that is confusingly similar to the word "Tenneco" (except the word "Tennessee"); and (b) With respect to Tenneco, within two years following the Distribution Date, and, with respect to Shipbuilding Company, within one year following the Distribution Date, remove any and all references to the Tenneco Trademark and Tradenames from any and all signs, displays or other identification or advertising material (excluding any such material that is the subject of SECTION 5.03 below). After the conclusion of such period, each of Tenneco, Shipbuilding Company, and each other member of its respective Group or over which it has legal or effective direct or indirect control shall not use or display any of the Tenneco Trademarks and Tradenames without the prior written consent of Industrial Company, which consent may be withheld for any reason or no reason whatsoever. After the Distribution Date, no party hereto shall represent or permit to be represented to any third Person that it or any member of its Group has a business affiliation with any other party hereto or any member of such other party's Group, except as expressly permitted by any of the Ancillary Agreements. SECTION 5.03. SUPPLIES AND DOCUMENTS. Notwithstanding the provisions of SECTION 5.02 above, for a period of six (6) months following the Distribution Date, the Transition Trademark License shall license (on a nonexclusive basis) to each of the members of the Energy Group and the Shipbuilding Group the right to use existing supplies and documents which have imprinted thereon any of the Tenneco Trademarks and Tradenames to the extent that such supplies and documents were existing in the inventory of such member of the Energy Group or Shipbuilding Group, as applicable, as of the Distribution Date. A-22 27 SECTION 5.04. ASSUMPTION AND SATISFACTION OF LIABILITIES. Except as otherwise specifically set forth in any Ancillary Agreement, from and after the Distribution Date: (a) Tenneco shall, and shall cause each of the other members of the Energy Group over which it has legal or effective direct or indirect control to, assume, pay, perform and discharge all Energy Liabilities in accordance with their terms, when determinable, and otherwise as determined in accordance with the practice of the parties prior to the Distributions; (b) Industrial Company shall, and shall cause each of the other members of the Industrial Group over which it has legal or effective direct or indirect control to, assume, pay, perform and discharge all Industrial Liabilities in accordance with their terms, when determinable, and otherwise as determined in accordance with the practice of the parties prior to the Distributions; and (c) Shipbuilding Subsidiary shall, and shall cause each of the other members of the Shipbuilding Group over which it has legal or effective direct or indirect control to, assume, pay, perform and discharge all Shipbuilding Liabilities in accordance with their terms, when determinable, and otherwise as determined in accordance with the practice of the parties prior to the Distributions. SECTION 5.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS. (a) GENERAL. Each of the parties hereto understands and agrees that no party hereto is, in this Agreement or in any other agreement or document contemplated by this Agreement (including the Ancillary Agreements) or otherwise, making any representation or warranty whatsoever, including without limitation, any representation or warranty: (i) as to the value or freedom from encumbrance of, or any other matter concerning, any assets of such party; or (ii) as to the legal sufficiency to convey title to any asset as of the execution, delivery and filing of this Agreement or any Ancillary Agreement, including, without limitation, any Conveyancing and Assumption Instrument. (b) DISCLAIMER OF MERCHANTABILITY OR FITNESS OF ASSETS. Each party hereto further understands and agrees that there are no warranties, express or implied, as to the merchantability or fitness of any of the assets either transferred to or retained by the Energy Group, the Industrial Group or the Shipbuilding Group, as the case may be, pursuant to Corporate Restructuring Transactions and the other terms and provisions of this Agreement, any Conveyancing and Assumption Agreement or any Ancillary Agreement, and all such assets which are so transferred will be transferred on an "AS IS, WHERE IS" basis, and the party to which any such assets are transferred hereunder, or which retains assets hereunder, shall bear the economic and legal risk that any conveyances of such assets shall prove to be insufficient or that the title of such party or any other member of its respective Group to any such assets shall be other than good and marketable and free from encumbrances. (c) ACKNOWLEDGEMENT OF DISCLOSURE AND WAIVER. Each of Industrial Company and Shipbuilding Company acknowledges, for itself and on behalf of each other member of its respective Group, that: (i) Tenneco and the other members of the Energy Group have disclosed, and Industrial Company and Shipbuilding Company have knowledge of, all matters pertaining to the assets and properties to be conveyed to Industrial Company, Shipbuilding Company or any member of their respective Group pursuant to the Corporate Restructuring Transactions or otherwise pursuant to the other terms of this Agreement to the same extent that Tenneco and the other members of the Energy Group have knowledge of such matters; and (ii) such knowledge constitutes notice and disclosure of such matters. Each of Industrial Company and Shipbuilding Company waives, to the fullest extent permitted by law, for itself and for each other member of its respective Group, any and all claims or causes of action which any of them may have arising out of such matters or the failure of any Conveyancing and Assumption Instrument to describe or refer to, or provide notice of, any such matters. A-23 28 (d) NO REPRESENTATIONS OR WARRANTIES REGARDING CONSENTS. Each of the parties hereto understands and agrees that no party hereto is, in this Agreement or any Ancillary Agreement or in any other agreement or document contemplated by this Agreement or any Ancillary Agreement or otherwise, representing or warranting in any way that the obtaining of any consents or approvals, the execution and delivery of any amendatory agreements and the making of any filings or applications contemplated by this Agreement will satisfy the provisions of any or all applicable agreements or the requirements of any or all applicable Law. Each of the parties hereto further agrees and understands that the party to which any assets are transferred as contemplated by the Corporate Restructuring Transactions or the other provisions of this Agreement shall bear the economic and legal risk that any necessary consents or approvals are not obtained, that any necessary amendatory agreements are not executed and delivered or that any requirements of Laws are not complied with. (e) COVENANT TO USE REASONABLE EFFORTS TO OBTAIN CONSENTS. Notwithstanding the provisions of SECTION 5.05(D) above, each of the parties hereto shall (and shall cause each other member of its respective Group over which it has direct or indirect legal or effective control to) use commercially reasonable efforts to obtain all consents and approvals, to enter into all amendatory agreements and to make all filings and applications which may be reasonably required for the consummation of the transactions contemplated by this Agreement and shall take all such further reasonable actions as shall be reasonably necessary to preserve for each of the Energy Group, the Industrial Group and the Shipbuilding Group, to the greatest extent feasible, the economic and operational benefits of the allocation of assets and Liabilities contemplated by this Agreement. In case at any time after the Distribution Date any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall take all such necessary or desirable action. SECTION 5.06. REMOVAL OF CERTAIN GUARANTEES. (a) REMOVAL OF ENERGY GROUP AS GUARANTOR OF INDUSTRIAL AND SHIPBUILDING LIABILITIES. Except as otherwise contemplated in the Corporate Restructuring Transactions or otherwise specified in any Ancillary Agreement, each of Tenneco, Industrial Company and Shipbuilding Company shall use its commercially reasonable efforts to have, on or prior to the Distribution Date, or as soon as practicable thereafter, Tenneco and any other member of the Energy Group removed as a guarantor of, or obligor under or for, any Industrial Liability or Shipbuilding Liability. (b) REMOVAL OF INDUSTRIAL GROUP AS GUARANTOR OF ENERGY AND SHIPBUILDING LIABILITIES. Except as otherwise contemplated in the Corporate Restructuring Transactions or otherwise specified in any Ancillary Agreement, each of Tenneco, Industrial Company and Shipbuilding Company shall use its commercially reasonable efforts to have, on or prior to the Distribution Date, or as soon as practicable thereafter, Industrial Company and any other member of the Industrial Group removed as a guarantor of, or obligor under or for, any Energy Liability or Shipbuilding Liability. (c) REMOVAL OF SHIPBUILDING GROUP AS GUARANTOR OF ENERGY AND INDUSTRIAL LIABILITIES. Except as otherwise contemplated in the Corporate Restructuring Transactions or otherwise specified in any Ancillary Agreement, each of Tenneco, Industrial Company and Shipbuilding Company shall use their commercially reasonable efforts to have, on or prior to the Distribution Date, or as soon as practicable thereafter, Shipbuilding Company and any other member of the Shipbuilding Group removed as a guarantor of, or obligor under or for, any Energy Liability or Industrial Liability. SECTION 5.07. PUBLIC ANNOUNCEMENTS. Each party hereto shall consult with each other before issuing any press release or otherwise issuing any other similar written public statement with respect to this Agreement or the Distributions and shall not issue any such press release or make any such public statement without the prior consent of each other party, which shall not be unreasonably withheld; provided, however, that a party may, without the prior consent of any other party, issue such press release or other similar written public statement as may be required by law or any listing agreement with a national securities exchange to which any party hereto (or any member of such party's Group) is a party if it has used all reasonable efforts to consult with such other party and to obtain such party's consent but has been unable to do so in a timely manner. A-24 29 SECTION 5.08. INTERCOMPANY AGREEMENTS. Effective as of the consummation of the Distributions, each of Industrial Company, Shipbuilding Company and Tenneco shall (and shall cause each other member of its respective Group over which it has legal or effective direct or indirect control) to terminate each and every agreement between it and any member of any of the other Groups other than this Agreement, any of the Ancillary Agreements and any of the license agreements referred to in SECTION 2.06(F) above; provided, however, that such termination shall not have any effect whatsoever on any of its rights and/or obligations that accrued or were incurred prior to the Distribution Date (subject to the terms of SECTION 2.13 above). SECTION 5.09. TAX MATTERS. Each of Tenneco, the Industrial Company and the Shipbuilding Company intend the Distributions to be treated as tax-free distributions under Code Section 355 and each such party shall use its reasonable best efforts to cause the Distributions to so qualify. Neither Tenneco, on the one hand, nor the Industrial Company and Shipbuilding Company, on the other hand, shall take any action (other than the Merger) which might cause: (i) the Distributions to fail to qualify as tax-free distributions under Code Section 355; (ii) any other transfer described in the Corporate Restructuring Transactions that is intended (as described in Tenneco's request for rulings from the Internal Revenue Service) to qualify as a tax free transfer under Code Sections 332, 351, 355 or 368 to fail to so qualify; or (iii) Tenneco or any Energy Subsidiary to recognize any gains relating to deferred intercompany transactions or excess loss accounts between or among any member of affiliated group of corporations of which Tenneco is the common parent, other than those defined intercompany gains listed on EXHIBIT H to the Merger Agreement. ARTICLE VI ACCESS TO INFORMATION SECTION 6.01. PROVISION, TRANSFER AND DELIVERY OF APPLICABLE CORPORATE RECORDS. (a) PROVISION, TRANSFER AND DELIVERY OF INDUSTRIAL RECORDS. Each of Tenneco and Shipbuilding Company shall (and shall cause each other member of its respective Group over which it has legal or effective direct or indirect control to) arrange as soon as practicable following the Distribution Date for the transportation (at Industrial Company's cost) to Industrial Company of the Books and Records in its possession (i) that relate primarily to the Industrial Business or are necessary to operate the Industrial Business (collectively, the "INDUSTRIAL RECORDS"), and (ii) that consist of the corporate minutes of the Board of Directors (or committees thereof) of Tenneco or otherwise relate to the business, administrative and management operations of Tenneco as the parent holding company of the Energy Business, Industrial Business and Shipbuilding Business (collectively, the "TENNECO CORPORATE RECORDS") except to the extent such items are already in the possession of any member of the Industrial Group. The Industrial Records and the Tenneco Corporate Records shall be the property of Industrial Company, but shall be available to each of Tenneco and Shipbuilding Company for review and duplication, at their cost, pursuant to the terms of this Agreement. (b) PROVISION, TRANSFER AND DELIVERY OF SHIPBUILDING RECORDS. Each of Tenneco and Industrial Company shall (and shall cause each other member of its respective Group over which it has legal or effective direct or indirect control to) arrange as soon as practicable following the Distribution Date for the transportation (at Shipbuilding Company's cost) to Shipbuilding Company of the Books and Records in its possession that relate primarily to the Shipbuilding Business or are necessary to operate the Shipbuilding Business (collectively, the "SHIPBUILDING RECORDS"), except to the extent such items are already in the possession of any member of the Shipbuilding Group. The Shipbuilding Records shall be the property of Shipbuilding Company, but shall be available to each of Tenneco and Industrial Company for review and duplication , at their cost, pursuant to the terms of this Agreement. (c) PROVISION, TRANSFER AND DELIVERY OF ENERGY RECORDS. Each of Industrial Company and Shipbuilding Company shall (and shall cause each other member of its respective Group over which it has legal or effective direct or indirect control to) arrange as soon as practicable following the Distribution Date for the transportation (at Tenneco's cost) to Tenneco of the Books and Records in its possession that relate primarily to the Energy A-25 30 Business or are necessary to operate the Energy Business (collectively, the "ENERGY RECORDS"), except to the extent such items are already in the possession of any member of the Energy Group. The Energy Records shall be the property of Tenneco, but shall be available to each of Industrial Company and Shipbuilding Company for review and duplication, at their cost, pursuant to the terms of this Agreement. SECTION 6.02. ACCESS TO INFORMATION. (a) ACCESS TO BOOKS AND RECORDS. Unless otherwise contemplated by SECTION 6.06 hereof, from and after the Distribution Date, each of Tenneco, Industrial Company and Shipbuilding Company shall (and shall cause each of the other members of its respective Group over which it has legal or effective direct or indirect control to) afford to each other party and its authorized accountants, counsel and other designated representatives reasonable access and duplicating rights (all such duplicating costs to be borne by the requesting party) during normal business hours, subject to appropriate restrictions for classified, privileged or confidential information, to the personnel, properties, Books and Records and other data and information of such party and each other member of such party's Group relating to operations prior to the Distributions insofar as such access is reasonably required by the other requesting party for the conduct of the requesting party's business (but not for competitive purposes). (b) PROVISION OF POST-DISTRIBUTION COMMISSION FILINGS. For a period of five years following the Distribution Date, each of Tenneco, Industrial Company and Shipbuilding Company shall (and shall cause each of the other members of its respective Group over which it has legal or effective direct or indirect control to) provide to the other, promptly following such time at which such documents are filed with the Commission, all documents (other than documents or portions thereof for which confidential treatment has been granted or a request for confidential treatment is pending) filed by it and by each other member of such party's Group with the Commission pursuant to the Securities Act or the periodic and interim reporting requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder. SECTION 6.03. REIMBURSEMENT; OTHER MATTERS. Except to the extent otherwise contemplated hereby or by any Ancillary Agreement, a party providing Books and Records or access to information to any other party (or such party's representatives) under this ARTICLE VI shall be entitled to receive from such other party, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred in providing such Books and Records or access to information. SECTION 6.04. CONFIDENTIALITY. (a) GENERAL RESTRICTION ON DISCLOSURE. Each of Tenneco, Industrial Company and Shipbuilding Company shall not (and shall not permit any other member of its respective Group over which it has legal or effective direct or indirect control to) use or permit the use of (without the prior written consent of the other) and shall hold, and shall cause its consultants, advisors and other representatives and any other member of its respective Group (over which it has legal or effective direct or indirect control) to hold, in strict confidence, all information concerning each other party hereto and the other members of such other party's Group in its possession, custody or control to the extent such information either (i) relates to the period up to the Distribution Date, (ii) relates to any Ancillary Agreement, or (iii) is obtained in the course of performing services for the other party pursuant to any Ancillary Agreement, and each party hereto shall not (and shall cause each other member of its respective Group over which it has legal or effective direct or indirect control not to) otherwise release or disclose such information to any other Person, except its auditors, attorneys, financial advisors, bankers and other consultants and advisors, without the prior written consent of the other affected party or parties, unless compelled to disclose such information by judicial or administrative process or unless such disclosure is required by Law and such party has used commercially reasonable efforts to consult with the other affected party or parties prior to such disclosure. A-26 31 (b) COMPELLED DISCLOSURE. To the extent that a party hereto is compelled by judicial or administrative process to disclose such information under circumstances in which any evidentiary privilege would be available, such party agrees to assert such privilege in good faith prior to making such disclosure. Each of the parties shall consult with each relevant other party in connection with any such judicial or administrative process, including, without limitation, in determining whether any privilege is available, and shall not object to each such relevant party and its counsel participating in any hearing or other proceeding (including, without limitation, any appeal of an initial order to disclose) in respect of such disclosure and assertion of privilege. (c) EXCEPTIONS TO CONFIDENTIAL TREATMENT. Anything herein to the contrary notwithstanding, no party hereto shall be prohibited from using or permitting the use of, or required to hold in confidence, any information to the extent that (i) such information has been or is in the public domain through no fault of such party, (ii) such information is, after the Distribution Date, lawfully acquired from other sources by such party, or (iii) this Agreement, any Ancillary Agreement or any other agreement entered into pursuant hereto permits the use or disclosure of such information by such party. SECTION 6.05. WITNESS SERVICES. At all times from and after the Distribution Date, each of Tenneco, Industrial Company and Shipbuilding Company shall use its reasonable efforts to make available to each other party hereto, upon reasonable written request, the officers, directors, employees and agents of each member of its respective Group for fact finding, consultation or interviews and as witnesses to the extent that: (a) such persons may reasonably be required in connection with the prosecution or defense of any Action in which the requesting party or any member of its respective Group may from time to time be involved; and (b) there is no conflict in the Action between the requesting party or any member of its respective Group and the party to which a request is made pursuant to this SECTION 6.05 or any member of such party's Group. Except as otherwise agreed by the parties, a party providing witness services to any other party under this Section shall be entitled to receive from the recipient of such services, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses (but not salary expenses) and direct and indirect costs of employees who participate in fact finding, consultation or interviews or are witnesses, as are actually and reasonably incurred in providing such fact finding, consulting, interviews or witness services by the party providing such services. SECTION 6.06. RETENTION OF RECORDS. Except when a longer period is required by Law or is specifically provided for herein or in any Ancillary Agreement, each party hereto shall cause the members of its Group over which it has legal or effective direct or indirect control, to retain, for a period of at least seven years following the Distribution Date, all material information (including without limitation all material Books and Records) relating to such Group and its operations prior to the Distribution Date. Notwithstanding the foregoing, any party hereto may offer in writing to deliver to the other parties all or a portion of such information as it relates to members of the offering party's Group and, if such offer is accepted in writing within 90 days after receipt thereof, the offering party shall promptly arrange for the delivery of such information (or copies thereof) to each accepting party (at the expense of such accepting party). If such offer is not so accepted, the offered information may be destroyed or otherwise disposed of by the offering party at any time thereafter. SECTION 6.07. PRIVILEGED MATTERS. (a) PRIVILEGED INFORMATION. Each of the parties hereto shall, and shall cause the members of its Group over which it has legal or effective direct or indirect control to, use its reasonable efforts to maintain, preserve, protect and assert all privileges including, without limitation, all privileges arising under or relating to the attorney-client relationship (including without limitation the attorney-client and attorney work product privileges) that relate directly or indirectly to any member of any other Group for any period prior to the Distribution Date ("PRIVILEGE" or "PRIVILEGES"). Each of the parties hereto shall use its reasonable efforts not to waive, or permit any member of its Group over which it has legal or effective direct or indirect control to waive, any such Privilege that could be asserted under applicable Law without the prior written consent of the other parties. With respect to each party, the rights and obligations created by this SECTION 6.07 shall apply to all information as to which a member of any Group did assert or, but for the A-27 32 Distributions, would have been entitled to assert the protection of a Privilege ("PRIVILEGED INFORMATION") including, but not limited to, any and all information that either: (i) was generated or received prior to the Distribution Date but which, after the Distributions, is in the possession of a member of another Group; or (ii) is generated or received after the Distribution Date but refers to or relates to Privileged Information that was generated or received prior to the Distribution Date. (b) PRODUCTION OF PRIVILEGED INFORMATION. Upon receipt by a party or any member of its Group of any subpoena, discovery or other request that arguably calls for the production or disclosure of Privileged Information, or if a party or any member of its Group obtains knowledge that any current or former employee of such party or any member of its Group has received any subpoena, discovery or other request which arguably calls for the production or disclosure of Privileged Information, such party shall promptly notify the other parties of the existence of the request and shall provide the other parties a reasonable opportunity to review the information and to assert any rights it may have under this SECTION 6.07 or otherwise to prevent the production or disclosure of Privileged Information. No party will, or will permit any member of its Group over which it has direct or indirect legal or effective control to, produce or disclose any information arguably covered by a Privilege under this SECTION 6.07 unless: (i) each other party has provided its express written consent to such production or disclosure; or (ii) a court of competent jurisdiction has entered an order which is not then appealable or a final, nonappealable order finding that the information is not entitled to protection under any applicable privilege. (c) NO WAIVER. The parties hereto understand and agree that the transfer of any Books and Records or other information between any members of the Energy Group, the Industrial Group, or the Shipbuilding Group shall be made in reliance on the agreements of Tenneco, Industrial Company and Shipbuilding Company, as set forth in SECTION 6.04 and SECTION 6.07 hereof, to maintain the confidentiality of Privileged Information and to assert and maintain all applicable Privileges. The Books and Records being transferred pursuant to SECTION 6.01 hereof, the access to information being granted pursuant to SECTION 6.02 hereof, the agreement to provide witnesses and individuals pursuant to SECTION 6.05 hereof and the transfer of Privileged Information to either party pursuant to this Agreement shall not be deemed a waiver of any Privilege that has been or may be asserted under this Section or otherwise. ARTICLE VII INDEMNIFICATION SECTION 7.01. INDEMNIFICATION BY TENNECO. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, Tenneco shall, to the fullest extent permitted by law, indemnify, defend and hold harmless the Industrial Indemnitees and the Shipbuilding Indemnitees from and against any and all Indemnifiable Losses of the Industrial Indemnitees and the Shipbuilding Indemnitees, respectively, arising out of, by reason of or otherwise in connection with either (i) the Energy Liabilities, or (ii) the breach by Tenneco of any provision of this Agreement or any Ancillary Agreement. SECTION 7.02. INDEMNIFICATION BY INDUSTRIAL COMPANY. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, Industrial Company shall, to the fullest extent permitted by law, indemnify, defend and hold harmless the Energy Indemnitees and the Shipbuilding Indemnitees from and against any and all Indemnifiable Losses of the Energy Indemnitees and the Shipbuilding Indemnitees, respectively, arising out of, by reason of or otherwise in connection with either (i) the Industrial Liabilities, or (ii) the breach by Industrial Company of any provision of this Agreement or any Ancillary Agreement. SECTION 7.03. INDEMNIFICATION BY SHIPBUILDING COMPANY. Except as otherwise specifically set forth in any provision of this Agreement or of any Ancillary Agreement, Shipbuilding Company shall, to the fullest A-28 33 extent permitted by law, indemnify, defend and hold harmless the Energy Indemnitees and the Industrial Indemnitees from and against any and all Indemnifiable Losses of the Energy Indemnitees and the Industrial Indemnitees, respectively, arising out of, by reason of or otherwise in connection with either (i) the Shipbuilding Liabilities, or (ii) the breach by Shipbuilding Company of any provision of this Agreement or any Ancillary Agreement. In addition, and without limiting the generality of the foregoing indemnification provisions of this SECTION 7.03, Shipbuilding Company shall, to the fullest extent permitted by law, indemnify, defend and hold harmless the Industrial Indemnitees and the Energy Indemnitees from and against any and all Indemnifiable Losses of the Industrial Indemnitees and the Energy Indemnitees, respectively, arising out of, by reason of or otherwise in connection with any matter, of whatever kind or nature, relating in any way to the commercial ships commonly known as the "Double Eagle" product tankers, including without limitation, (i) the design, engineering or construction of any of the Double Eagle product tankers, (ii) the sale or other disposition of any of the Double Eagle product tankers (or the sale or other disposition of any direct or indirect equity interest in any of the Double Eagle product tankers), (iii) the direct or indirect financing of the construction of any of the Double Eagle product tankers or any other financing relating to any of the Double Eagle product tankers, (iv) the direct or indirect equity investments in any of the Double Eagle product tankers, (v) the purchase of raw materials and other materials and services in connection with the design, construction or engineering of any of the Double Eagle product tankers, (vi) the negotiation of any contract for the construction of or financing for the construction of, any of the Double Eagle product tankers, or (vii) the operation by any Person whatsoever of any of the Double Eagle product tankers. SECTION 7.04. LIMITATIONS ON INDEMNIFICATION OBLIGATIONS. (a) REDUCTIONS FOR INSURANCE PROCEEDS AND OTHER RECOVERIES. The amount that any party (an "INDEMNIFYING PARTY") is or may be required to pay to any other Person (an "INDEMNITEE") pursuant to SECTION 7.01, SECTION 7.02 or SECTION 7.03 above, as applicable, shall be reduced (retroactively or prospectively) by any Insurance Proceeds or other amounts actually recovered from third parties by or on behalf of such Indemnitee in respect of the related Indemnifiable Losses (except that nothing herein shall be construed as requiring any Indemnitee in respect of any Shipbuilding Securities Liability to file any claim for insurance). The existence of a claim by an Indemnitee for insurance or against a third party in respect of any Indemnifiable Loss shall not, however, delay any payment pursuant to the indemnification provisions contained herein and otherwise determined to be due and owing by an Indemnifying Party. Rather the Indemnifying Party shall make payment in full of such amount so determined to be due and owing by it against an assignment by the Indemnitee to the Indemnifying Party of the entire claim of the Indemnitee for such insurance or against such third party. Notwithstanding any other provisions of this Agreement, it is the intention of the parties hereto that no insurer or any other third party shall be (i) entitled to a benefit it would not be entitled to receive in the absence of the foregoing indemnification provisions or (ii) relieved of the responsibility to pay any claims for which it is obligated. If an Indemnitee shall have received the payment required by this Agreement from an Indemnifying Party in respect of any Indemnifiable Losses and shall subsequently actually receive Insurance Proceeds or other amounts in respect of such Indemnifiable Losses, then such Indemnitee shall hold such Insurance Proceeds in trust for the benefit of such Indemnifying Party and shall pay to such Indemnifying Party a sum equal to the amount of such Insurance Proceeds or other amounts actually received, up to the aggregate amount of any payments received from such Indemnifying Party pursuant to this Agreement in respect of such Indemnifiable Losses. (b) FOREIGN CURRENCY ADJUSTMENTS. In the event that any indemnification payment required to be made hereunder or under any Ancillary Agreement shall be denominated in a currency other than U.S. Dollars, the amount of such payment shall be translated into U.S. Dollars using the foreign exchange rate for such currency determined in accordance with the following rules: (i) with respect to any Indemnifiable Losses arising from the payment by a financial institution under a guarantee, comfort letter, letter of credit, foreign exchange contract or similar instrument, the foreign exchange rate for such currency shall be determined as of the date on which such financial institution shall have been reimbursed; (ii) with respect to any Indemnifiable Losses covered by insurance, the foreign exchange rate for such currency shall be the foreign exchange rate employed by the insurance company providing such insurance in settling such Indemnifiable Losses with the Indemnifying Party; and A-29 34 (iii) with respect to any Indemnifiable Losses not covered by either clause (i) or (ii) above, the foreign exchange rate for such currency shall be determined as of the date that notice of the claim with respect to such Indemnifiable Losses shall be given to the Indemnitee. SECTION 7.05. PROCEDURES FOR INDEMNIFICATION. Except as otherwise specifically provided in any Ancillary Agreement, including, without limitation, the Tax Sharing Agreement and the Benefits Agreement: (a) NOTICE OF THIRD PARTY CLAIMS. If a claim or demand is made against an Indemnitee by any Person who is not a member of the Energy Group, Industrial Group or Shipbuilding Group (a "THIRD PARTY CLAIM") as to which such Indemnitee is entitled to indemnification pursuant to this Agreement, such Indemnitee shall notify the Indemnifying Party in writing, and in reasonable detail, of the Third Party Claim promptly (and in any event within 15 business days) after receipt by such Indemnitee of written notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the Indemnitee's right to indemnification hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure (except that the Indemnifying Party shall not be liable for any expenses incurred during the period in which the Indemnitee failed to give such notice). Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event within 15 business days) after the Indemnitee's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim. (b) LEGAL DEFENSE OF THIRD PARTY CLAIMS. If a Third Party Claim is made against an Indemnitee, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof with counsel selected by the Indemnifying Party, which counsel shall be reasonably satisfactory to the Indemnitee. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnitee for legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof. If the Indemnifying Party assumes such defense, the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense. The Indemnifying Party shall be liable for the reasonable fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnifying Party has failed to assume the defense of the Third Party Claim (other than during the period prior to the time the Indemnitee shall have given notice of the Third Party Claim as provided above). If the Indemnifying Party so elects to assume the defense of any Third Party Claim, all of the Indemnitees shall cooperate with the Indemnifying Party in the defense or prosecution thereof. Notwithstanding the foregoing: (i) the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim (and shall be liable to the Indemnitee for the reasonable fees and expenses of counsel incurred by the Indemnitee in defending such Third Party Claim) if the Third Party Claim either (A) seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnitee which the Indemnitee reasonably determines, after conferring with its counsel, cannot be separated from any related claim for money damages; provided, however, that if such equitable relief or other relief portion of the Third Party Claim can be so separated from that for money damages, the Indemnifying Party shall be entitled to assume the defense of the portion relating to money damages; or (B) relates to or arises out of any Shipbuilding Securities Liability. (ii) an Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim (and shall be liable for the reasonable fees and expenses of counsel incurred by the Indemnitee in defending such Third Party Claim) if, in the Indemnitee's reasonable judgment, a conflict of interest between such Indemnitee and such Indemnifying Party exists in respect of such Third Party Claim; and (iii) if at any time after assuming the defense of a Third Party Claim an Indemnifying Party shall fail to prosecute or withdraw from the defense of such Third Party Claim, the Indemnitee shall be entitled to resume the defense thereof and the Indemnifying Party shall be liable for the reasonable fees and expenses of counsel incurred by the Indemnitee in such defense. A-30 35 (c) SETTLEMENT OF THIRD PARTY CLAIMS. Except as otherwise provided below in this SECTION 7.05(C), or as otherwise specifically provided in any Ancillary Agreement, including without limitation, the Tax Sharing Agreement and the Benefits Agreement, if the Indemnifying Party has assumed the defense of any Third Party Claim, then (i) in no event will the Indemnitee admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the Indemnifying Party's prior written consent; provided, however, that the Indemnitee shall have the right to settle, compromise or discharge such Third Party Claim without the consent of the Indemnifying Party if the Indemnitee releases the Indemnifying Party from its indemnification obligation hereunder with respect to such Third Party Claim and such settlement, compromise or discharge would not otherwise adversely affect the Indemnifying Party, and (ii) the Indemnitee will agree to any settlement, compromise or discharge of a Third Party Claim that the Indemnifying Party may recommend and that by its terms obligates the Indemnifying Party to pay the full amount of the liability in connection with such Third Party Claim and releases the Indemnitee completely in connection with such Third Party Claim and that would not otherwise adversely affect the Indemnitee. provided, however, that the Indemnitee may refuse to agree to any such settlement, compromise or discharge if the Indemnitee agrees that the Indemnifying Party's indemnification obligation with respect to such Third Party Claim shall not exceed the amount that would be required to be paid by or on behalf of the Indemnifying Party in connection with such settlement, compromise or discharge. If the Indemnifying Party has not assumed the defense of a Third Party Claim then in no event shall the Indemnitee settle, compromise or discharge such Third Party Claim without providing prior written notice to the Indemnifying Party, which shall have the option within 15 business days following receipt of such notice to (i) approve and agree to pay the settlement, (ii) approve the amount of the settlement, reserving the right to contest the Indemnitee's right to indemnity pursuant to this Agreement, (iii) disapprove the settlement and assume in writing all past and future responsibility for such Third Party Claim (including all of Indemnitee's prior expenditures in connection therewith), or (iv) disapprove the settlement and continue to refrain from participation in the defense of such Third Party Claim, in which event the Indemnifying Party shall have no further right to contest the amount or reasonableness of the settlement if the Indemnitee elects to proceed therewith. In the event the Indemnifying Party does not respond to such written notice from the Indemnitee within such 15 business- day period, the Indemnifying Party shall be deemed to have elected option (i). (d) OTHER CLAIMS. Any claim on account of an Indemnifiable Loss which does not result from a Third Party Claim shall be asserted by written notice given by the Indemnitee to the applicable Indemnifying Party. Such Indemnifying Party shall have a period of 15 business days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such 15 business-day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment. If such Indemnifying Party does not respond within such 15 business- day period or rejects such claim in whole or in part, such Indemnitee shall be free to pursue such remedies as may be available to such party under applicable Law or under this Agreement. SECTION 7.06. INDEMNIFICATION PAYMENTS. Indemnification required by this ARTICLE VII shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or loss, liability, claim, damage or expense is incurred. SECTION 7.07. OTHER ADJUSTMENTS. (a) ADJUSTMENTS FOR TAXES. The amount of any Indemnifiable Loss shall be: (i) increased to take into account any net Tax cost actually incurred by the Indemnitee arising from any payments received from the Indemnifying Party (grossed up for such increase); and A-31 36 (ii) reduced to take account of any net Tax benefit actually realized by the Indemnitee arising from the incurrence or payment of any such Indemnifiable Loss. In computing the amount of such Tax cost or Tax benefit, the Indemnitee shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt of any payment with respect to an Indemnifiable Loss or the incurrence or payment of any Indemnifiable Loss. (b) REDUCTIONS FOR SUBSEQUENT RECOVERIES OR OTHER EVENTS. In addition to any adjustments required pursuant to SECTION 7.04 hereof or SECTION 7.07(A) above, if the amount of any Indemnifiable Losses shall, at any time subsequent to any indemnification payment made by the Indemnifying Party pursuant to this ARTICLE VII, be reduced by recovery, settlement or otherwise, the amount of such reduction, less any expenses incurred in connection therewith, shall promptly be repaid by the Indemnitee to the Indemnifying Party, up to the aggregate amount of any payments received from such Indemnifying Party pursuant to this Agreement in respect of such Indemnifiable Losses. SECTION 7.08. OBLIGATIONS ABSOLUTE. The foregoing contractual obligations of indemnification set forth in this ARTICLE VII shall: (i) also apply to any and all Third Party Claims that allege that any Indemnitee is independently, directly, vicariously or jointly and severally liable to such third party; (ii) to the extent permitted by applicable law, apply even if the Indemnitee is partially negligent or otherwise partially culpable or at fault, whether or not such liability arises under any doctrine of strict liability; and (iii) be in addition to any liability or obligation that an Indemnifying Party may have other than pursuant to this Agreement. SECTION 7.09. SURVIVAL OF INDEMNITIES. The obligations of Tenneco, Industrial Company and Shipbuilding Company under this ARTICLE VII shall survive the sale or other transfer by any of them of any assets or businesses or the assignment by any of them of any Liabilities, with respect to any Indemnifiable Loss of any Indemnitee related to such assets, businesses or Liabilities. SECTION 7.10. REMEDIES CUMULATIVE. The remedies provided in this ARTICLE VII shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party. SECTION 7.11. COOPERATION OF THE PARTIES WITH RESPECT TO ACTIONS AND THIRD PARTY CLAIMS. (a) IDENTIFICATION OF PARTY IN INTEREST. Any party to this Agreement that has responsibility for an Action or Third Party Claim shall identify itself as the true party in interest with respect to such Action or Third Party Claim and shall use its commercially reasonable efforts to obtain the dismissal of any other party to this Agreement from such Action or Third Party Claim. (b) DISPUTES REGARDING RESPONSIBILITY FOR ACTIONS AND THIRD PARTY CLAIMS. If there is uncertainty or disagreement concerning which party to this Agreement has responsibility for any Action or Third Party Claim, the following procedure shall be followed in an effort to reach agreement concerning responsibility for such Action or Third Party Claim: (i) The parties in disagreement over the responsibility for an Action or Third Party Claim shall exchange brief written statements setting forth their position concerning which party has responsibility for the Action or Third Party Claim in accordance with the provisions of this ARTICLE VII. These statements shall be exchanged within 5 days of a party putting another party on written notice that the other party is or may be responsible for the Action or Third Party Claim. A-32 37 (ii) If within 5 days of the exchange of the written statement of each party's position agreement is not reached on responsibility for the Action or Third Party Claim, the General Counsel for each of the parties in disagreement over responsibility for the Action or Third Party Claim shall speak either by telephone or in person to attempt to reach agreement on responsibility for the Action or Third Party Claim. (c) EFFECT OF FAILURE TO FOLLOW PROCEDURE. Failure to follow the procedure set forth in clause (b) above shall not affect the rights and responsibilities of the parties as established by the other provisions of this ARTICLE VII. (d) EXCHANGE OF INFORMATION. In connection with the handling of current or future Actions or Third Party Claims, the parties may determine that it is in their mutual interest to exchange privileged or confidential information. If so, the parties agree to discuss whether it is in their mutual interest to enter into a joint defense agreement or information exchange agreement to maintain the confidentiality of their communications and to permit them to maintain the confidentiality of proprietary information or information that is otherwise confidential or subject to an applicable privilege, including but not limited to the attorney-client, work product, executive, deliberative process, or self- evaluation privileges. SECTION 7.12. CONTRIBUTION. To the extent that any indemnification provided for under SECTION 7.01, SECTION 7.02 or SECTION 7.03 is unavailable to an Indemnified Party or is insufficient in respect of any the Indemnifiable Lossess of such Indemnified Party then the Indemnifying Party under such Section, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Indemnifiable Losses (i) in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party on the one hand and the Indemnified Party on the other hand from the transaction or other matter which resulted in the Indemnifiable Losses or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other hand in connection with the action, inaction, statements or omissions that resulted in such Indemnifiable Losses as well as any other relevant equitable considerations. ARTICLE VIII MISCELLANEOUS SECTION 8.01. COMPLETE AGREEMENT; CONSTRUCTION. This Agreement, including the Exhibits and Schedules hereto, and the Ancillary Agreements shall constitute the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. In the event of any inconsistency between this Agreement and any Schedule or Exhibit hereto, the Schedule or Exhibit, as the case may be, shall prevail. Notwithstanding any other provisions in this Agreement to the contrary, in the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of any Ancillary Agreement, such Ancillary Agreement shall control. SECTION 8.02. ANCILLARY AGREEMENTS.20 This Agreement is not intended to address, and should not be interpreted to address, the matters specifically and expressly covered by the Ancillary Agreements. SECTION 8.03. COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. SECTION 8.04. SURVIVAL OF AGREEMENTS. Except as otherwise expressly provided herein, all covenants and agreements of the parties contained in this Agreement shall survive the Distribution Date. A-33 38 SECTION 8.05. RESPONSIBILITY FOR EXPENSES. (a) EXPENSES INCURRED ON OR PRIOR TO DISTRIBUTION DATE. Subject to the provisions of SECTION 8.05(C) below and except as otherwise set forth in this Agreement or any Ancillary Agreement, all costs and expenses incurred on or prior to the Distribution Date (whether or not paid on or prior to the Distribution Date) in connection with the preparation, execution, delivery and implementation of this Agreement and any Ancillary Agreement, the Information Statements and the Distribution, and the consummation of the transactions contemplated hereby and thereby shall be charged to and paid by Tenneco; provided, however, that (i) such amounts shall be included in the calculation of the Actual Energy Debt Amount to the extent expressly provided in the Debt and Cash Allocation Agreement, and (ii) each of Industrial Company and Shipbuilding Company shall be solely responsible and liable for any expenses, fees, or other costs that it separately and directly incurs in connection with any of the transactions contemplated under this Agreement or any of the Ancillary Agreements. (b) EXPENSES INCURRED OR ACCRUED AFTER DISTRIBUTION DATE. Subject to the provisions of SECTION 8.05(C) below and except as otherwise set forth in this Agreement or any Ancillary Agreement, each party shall bear its own costs and expenses first incurred or accrued after the Distribution Date. (c) ENVIRONMENTAL EXPENSES. Notwithstanding the provisions of SECTION 8.05(A) and SECTION 8.05(B) above, expenses and other costs incurred in connection with compliance with any Environmental Laws applicable to the transactions contemplated hereby shall be paid by the party that after the Distribution Date will, or that this Agreement contemplates will, own the assets or operate the business subject to such Environmental Laws. SECTION 8.06. NOTICES. All notices and other communications to a party hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise) to such party (and will be deemed given on the date on which the notice is received by such party) at the address for such party set forth below (or at such other address for the party as the party shall, from time to time, specify by like notice to the other parties): If to Tenneco, at: 1010 Milam Street Houston, Texas 77002 Telecopier: Attention: Corporate Secretary If to Industrial Company, at: 1275 King Street Greenwich, CT 06831 Telecopier: Attention: Corporate Secretary If to Shipbuilding Company, at: 4101 Washington Avenue Newport News, Virginia 23607 Telecopier: Attention: Corporate Secretary SECTION 8.07. WAIVERS. The failure of any party hereto to require strict performance by any other party of any provision in this Agreement will not waive or diminish that party's right to demand strict performance thereafter of that or any other provision hereof. SECTION 8.08. AMENDMENTS. Subject to the terms of SECTION 8.11 hereof, this Agreement may not be modified or amended except by an agreement in writing signed by the parties hereto; provided, however, any such amendments or modifications prior to the termination of the Merger Agreement or consummation of the Merger may only be made with the prior consent of Acquiror unless such modifications or amendments do not, individually or in the aggregate, adversely affect the Energy Business (other than to a de minimis extent) or materially delay or prevent the consummation of the Merger. A-34 39 SECTION 8.09. ASSIGNMENT. This Agreement shall be assignable in whole in connection with a merger or consolidation or the sale of all or substantially all the assets of a party hereto so long as the resulting, surviving or transferee entity assumes all the obligations of the relevant party hereto by operation of law or pursuant to an agreement in form and substance reasonably satisfactory to the other parties to this Agreement. Otherwise this Agreement shall not be assignable, in whole or in part, directly or indirectly, by any party hereto without the prior written consent of the others, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void. SECTION 8.10. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective permitted successors and permitted assigns. SECTION 8.11. TERMINATION. This Agreement may be terminated and the Distributions may be amended, modified or abandoned at any time prior to the Distributions by and in the sole discretion of Tenneco without the approval of Industrial Company or Shipbuilding Company or the stockholders of Tenneco; provided, however, any such termination, abandonment, amendments or modifications prior to the termination of the Merger Agreement or consummation of the Merger may only be made with the prior written consent of Acquiror unless, in the case of a modification or amendment only, such modification or amendment does not, individually or in the aggregate, adversely affect the Energy Business (other than to a de minimis extent) or materially delay or prevent the consummation of the Merger. In the event of such termination, no party shall have any liability of any kind to any other party or any other person. After the Distributions, this Agreement may not be terminated except by an agreement in writing signed by all of the parties hereto; provided, however, that ARTICLE VIII shall not be terminated or amended after the Distributions in respect of the third party beneficiaries thereto without the consent of such persons. Nothing in this SECTION 8.11 shall relieve Tenneco of its obligations, under Section 6.13 of the Merger Agreement. SECTION 8.12. THIRD PARTY BENEFICIARIES. Except as provided in ARTICLE VII hereof (relating to Indemnitees), this Agreement is solely for the benefit of the parties hereto, the members of their respective Groups and Affiliates and the Acquiror, after giving effect to the Distributions, and should not be deemed to confer upon third parties any remedy, claim, liability, right of reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. SECTION 8.13. ATTORNEY FEES. A party in breach of this Agreement shall, on demand, indemnify and hold harmless the other parties hereto for and against all out-of-pocket expenses, including, without limitation, reasonable legal fees, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement. The payment of such expenses is in addition to any other relief to which such other party may be entitled hereunder or otherwise. SECTION 8.14. TITLE AND HEADINGS. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. SECTION 8.15. EXHIBITS AND SCHEDULES. The Exhibits and Schedules attached hereto shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. SECTION 8.16. SPECIFIC PERFORMANCE.20 Each of the parties hereto acknowledges that there is no adequate remedy at law for the failure by such parties to comply with the provisions of this Agreement and that such failure would cause immediate harm that would not be adequately compensable in damages. Accordingly, each of the parties hereto agrees that their agreements contained herein may be specifically enforced without the requirement of posting a bond or other security, in addition to all other remedies available to the parties hereto under this Agreement. SECTION 8.17. GOVERNING LAW. ALL QUESTIONS AND/OR DISPUTES CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE SCHEDULES AND EXHIBITS HERETO SHALL BE GOVERNED BY THE INTERNAL LAWS, AND NOT THE LAW A-35 40 OF CONFLICTS, OF THE STATE OF DELAWARE. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY (i) AGREES TO BE SUBJECT TO, AND HEREBY CONSENTS AND SUBMITS TO, THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE OF DELAWARE, (ii) TO THE EXTENT SUCH PARTY IS NOT OTHERWISE SUBJECT TO SERVICE OF PROCESS IN THE STATE OF DELAWARE, HEREBY APPOINTS THE CORPORATION TRUST COMPANY, AS SUCH PARTY'S AGENT IN THE STATE OF DELAWARE FOR ACCEPTANCE OF LEGAL PROCESS AND (iii) AGREES THAT SERVICE MADE ON ANY SUCH AGENT SET FORTH IN (ii) ABOVE SHALL HAVE THE SAME LEGAL FORCE AND EFFECT AS IF SERVED UPON SUCH PARTY PERSONALLY WITHIN THE STATE OF DELAWARE. SECTION 8.18. SEVERABILITY. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 8.19. SUBSIDIARIES. Each of the parties hereto shall cause to be performed, and hereby guarantee the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such party which is contemplated to be a Subsidiary of such party on and after the Distribution Date. SECTION 8.20. SHIPBUILDING HEDGING TRANSACTIONS. Notwithstanding any other provisions of this Agreement or any other document or instrument (including any of the other Ancillary Agreements), any gains or losses relating to hedging or similar transactions undertaken by Shipbuilding Company or any other member of the Shipbuilding Group which are in effect on the date hereof or at any time hereafter through the Distribution Date shall be for the account of Shipbuilding Company, and, without limiting the generality of the foregoing, (i) Shipbuilding Company and the other members of the Group shall finance and fund any such losses through their own finance facilities, and (ii) no cash or debt relating to any such gains or losses shall be taken into account in making any of the determinations under the Debt and Cash Allocation Agreement, including determinations regarding the amount of the Allocated Shipbuilding Debt and/or the Guaranteed Shipbuilding Cash Amount. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. TENNECO INC. By --------------------------------------- Name: Title: NEW TENNECO INC. By --------------------------------------- Name: Title: NEWPORT NEWS SHIPBUILDING INC. By --------------------------------------- Name: Title: A-36 41 EXHIBIT C TO DISTRIBUTION AGREEMENT DEBT AND CASH ALLOCATION AGREEMENT THIS DEBT AND CASH ALLOCATION AGREEMENT (this "Agreement") is made and entered into as of this day of December, 1996 by and among Tenneco Inc., a Delaware corporation ("Tenneco"), Newport News Shipbuilding Inc. (formerly known as Tenneco InterAmerica Inc.), a Delaware corporation ("Shipbuilding Company"), and New Tenneco Inc., a Delaware corporation ("Industrial Company"). WHEREAS, pursuant to the terms of that certain Distribution Agreement by and among the parties hereto and dated as of November 1, 1996 (the "Distribution Agreement"), the parties have entered into this Agreement regarding the allocation of the Cash and Cash Equivalents and Consolidated Debt of Tenneco and its consolidated subsidiaries as of the Effective Time. For purposes of this Agreement only, the "Effective Time" means 12:01 AM, Houston time, on the date on which the Merger Effective Time occurs. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement and the Distribution Agreement, each of the parties hereto, on behalf of itself and each of the other members of its Group over which it has direct or indirect legal or effective control, hereby agrees as follows: 1. Certain Definitions. Capitalized terms which are used herein but which are not defined below in this SECTION 1 or in any of the other provisions or Sections of this Agreement or in the Distribution Agreement, shall have the meaning ascribed to such terms in the Debt Realignment Plan attached as Exhibit C to the Merger Agreement. (a) "Actual Energy Debt Amount" means the aggregate amount, as of the Effective Time, of the following, without duplication: (i) the then outstanding amount of the Tenneco Revolving Debt plus accrued and accreted interest and fees and expenses in respect thereof (as reflected on the Energy Adjusted Closing Balance Sheet) ; plus (ii) the Consolidated Public Debt Value; plus (iii) the then outstanding principal amount of Consolidated Debt of Tenneco and the Energy Subsidiaries other than that which is described in clauses (i) and (ii) above (for this purpose undrawn letters of credit and guarantees shall not be treated as outstanding) plus accrued and accreted interest and fees and expenses in respect thereof as reflected on the Energy Adjusted Closing Balance Sheet; plus (iv) except as otherwise expressly provided in the Merger Agreement or the Distribution Agreement, the unpaid amount of all direct and out of pocket fees, costs and expenses (as reflected on the Energy Adjusted Closing Balance Sheet) incurred on or prior to the Effective Time by Tenneco and its subsidiaries in respect of the transactions contemplated under the Debt Realignment, with respect to the Merger Agreement, the NPS Issuance and with respect to the Distribution Agreement, including, without limitation, the Corporate Restructuring Transactions, the Distributions, the Merger and the other related transactions, including by way of example items specifically set forth on Schedule 1 to the extent incurred in respect of the aforesaid transactions (collectively, the "Tenneco Transaction Expenses"); (v) any sales and use, gross receipts or other transfer Taxes (including Gains Taxes and Transfer Taxes, as defined in the Merger Agreement) imposed as a result of the Corporate Restructuring Transactions or otherwise occurring pursuant to the Distribution Agreement or the Merger Agreement, excluding, however, any stamp duty imposed by the Stamp Act 1894 (Queensland) as a result of the Merger; plus (vi) Restructuring Taxes (as defined in the Tax Sharing Agreement), except (A) for Taxes resulting from the deferred intercompany items on Schedule 2, and (B) to the extent the IRS ruling provides the Transactions (as defined in the Tax Sharing Agreement) are tax-free; plus A-C-1 42 (vii) the then outstanding amount of any off-balance sheet indebtedness incurred after June 19, 1996 and before the Effective Time to finance the acquisition of any additional interest in the Oasis Pipeline; (viii) dividends declared by Tenneco on its common stock, $4.50 Preferred Stock and $7.40 Preferred Stock which have not been paid prior to the Effective Time but as to which the record date is before the Effective Time; plus (ix) the total amount of dividends accrued on the shares of New Preferred Stock issued pursuant the NPS Issuance that remain unpaid as of the Effective Time. The parties hereto hereby acknowledge and agree that the Actual Energy Debt Amount shall include any amounts (including interest, fees and other charges) that may be due and owing ASCC under or as a result of the factoring arrangement between ASCC and Tenneco (and/or any of its Subsidiaries) other than the amount of Factored Proceeds (the "ASCC Amount"). (b) "Actual Energy Expenditures Amount" means the actual amount of capital expenditures (determined on a basis consistent with the past accounting practices of the Energy Business and the 1996 capital budget provided to Acquiror) made and paid for by the Energy Business from and after January 1, 1996 to and including the Effective Time, including, without limitation any capital expenditures in respect of the 70 MW Dunaferr power project in Hungary; provided, however, that any amount paid for the acquisition of any additional interest in either Tenneco Energy Resources Inc. or the Oasis Pipeline or to repair any gas pipeline shall not be capital expenditures for any purpose under this Agreement and shall not be included in the Actual Energy Expenditures Amount. (c) "Allocated Energy Debt" means the total amount of indebtedness (including accrued and accreted interest and fees and expenses) outstanding as of the Effective Time under each of the Tenneco Revolving Debt, the Consolidated Debt (other than the Tenneco Revolving Debt) of Tenneco and the Energy Subsidiaries and the Tenneco Transaction Expenses, and any and all such indebtedness outstanding or other obligations and liabilities incurred or accrued under any of the foregoing from time to time and at any time after the Effective Time. (d) "Allocated Industrial Debt" means the total amount of indebtedness (including accrued and accreted interest and fees and expenses) outstanding under the Industrial Debt Securities as of the Effective Time, any and all such indebtedness outstanding from time to time thereafter and all other obligations and liabilities incurred or accrued at any time under the Industrial Debt Securities. (e) "Allocated Shipbuilding Debt" means the total amount of indebtedness (including accrued and accreted interest and fees and expenses) outstanding under the Shipbuilding Credit Facility as of the Effective Time, any and all such indebtedness outstanding from time to time at any time thereafter and all other obligations and liabilities incurred or accrued at any time under the Shipbuilding Credit Facility. (f) "Auditors" has the meaning ascribed to such term in SECTION 6 below. (g) "Base Amount" means an amount equal to $2,650,000,000, (i) plus, without duplication, the sum of (A) with respect to Tenneco gas purchase contracts, the amount of all cash payments made by Tenneco and/or any of its Subsidiaries during the period commencing on the date of Merger Agreement and ending as of the Effective Time as a result or in respect of any settlement, judgment or satisfaction of a bond in excess of the market price for gas received by Tenneco and/or any of its Subsidiaries reduced by the amount of any cash payments received from customers, insurers or other third parties with respect thereto (other than ones refunded prior to the Effective Time) or with respect to any gas supply realignment costs which are so recovered (and not refunded) on or prior to the Effective Time, (B) the purchase price paid by Tenneco and/or any of its subsidiaries to acquire any additional interest in the Oasis Pipeline, (C) the amount of all cash payments made by Tenneco and/or any of the Energy Subsidiaries during the period commencing on the date of the Merger Agreement and ending on the Closing Date in settlement of any significant claim, action, suit or proceeding to the extent such matter would be an Energy Liability and with the consent of Acquiror, which shall not be arbitrarily withheld (including, without limitation, cash A-C-2 43 payments in settlement of claims against Tenneco and/or any of its affiliates arising from the Stock Purchase Agreement dated as of July 31, 1986 by and between Tenneco Inc. and I.C.H. Corporation) reduced by the amount of any cash payments received by Tenneco or any of the Energy Subsidiaries during such period from customers, insurers or other third parties with respect thereto, and (D) the total amount of the specific additions or increases to the Base Amount set forth on SCHEDULE 4 attached hereto, (ii) less, without duplication, the sum of (A) the gross amount of cash proceeds from the NPS Issuance (as defined in the Merger Agreement) less the amount of any expenses, fees or other out-of-pocket costs related thereto which are included in the Actual Energy Debt Amount), and (B) the total amount of the specific subtractions and reductions to the Base Amount set forth on SCHEDULE 4 attached hereto. (h) "Cash and Cash Equivalents" has the meaning ascribed to such term under United States generally accepted accounting principles; provided, that in all events checks issued by Tenneco and the Energy Subsidiaries which remain unpaid as of the Effective Time shall be deducted from Cash and Cash Equivalents, and checks received by Tenneco and the Energy Subsidiaries which remain uncollected prior to the Effective Time (other than checks that have been dishonored) shall be included in Cash and Cash Equivalents. (i) "Consolidated Public Debt Value" means the value (including any accrued and unpaid interest thereon) of publicly-held Consolidated Debt of Tenneco and the Energy Subsidiaries outstanding as of the Effective Time (as reflected on the Energy Adjusted Closing Balance Sheet), calculated and determined by Tenneco and Acquiror or if, they are unable to agree, by a nationally recognized investment banking firm selected by mutual agreement between Tenneco and Acquiror, as of the close of business on the fifth (5th) business day preceding the Effective Time based on the applicable spreads to treasuries and the applicable benchmark treasury securities listed on Schedule 3. (j) "Closing Calendar Month" means the calendar month in which the Effective Time occurs. (k) "Debt Realignment" has the meaning ascribed to such term in the Merger Agreement. (l) "Dispute" has the meaning ascribed to such term in SECTION 6 below. (m) "Energy Adjusted Closing Balance Sheet" has the meaning ascribed to such term in SECTION 6 below. (n) "Energy Closing Balance Sheet" has the meaning ascribed to such term in SECTION 6 below. (o) "Energy Receivables" means any and all accounts receivable of the Energy Business (after giving effect to the Corporate Restructuring Transactions and the Distributions and, therefore, specifically excluding receivables relating to the business of Case Corporation and the Industrial Business). (p) "Factored Proceeds" means the total amount of outstanding cash proceeds received by Tenneco from ASCC, as of the last business day of the month preceding the Closing Calendar Month, through the factoring of Energy Receivables, which amount shall not exceed $100,000,000. (q) "Guaranteed Energy Cash Amount" has the meaning ascribed to such term in SECTION 5 below. (r) "Guaranteed Shipbuilding Cash Amount" has the meaning ascribed to such term in SECTION 5 below. (s) "Independent Auditors" has the meaning ascribed to such term in SECTION 6 below. (t) "Industrial Debt Securities" means, collectively, the notes, debentures and other debt securities issued by Industrial Company in exchange for certain issues of the Consolidated Debt pursuant to and in accordance with the debt exchange by Industrial Company contemplated under the Debt Realignment. (u) "Merger Agreement" means the Amended and Restated Agreement and Plan of Merger, dated as of June 19, 1996, among Tenneco, El Paso Natural Gas Company and El Paso Merger Company, as amended from time to time. (v) "Merger Closing Date" means the date on which the Merger is consummated. A-C-3 44 (w) "Required Energy Expenditures Amount" means an aggregate amount of capital expenditures (determined on a basis consistent with the past accounting practices of the Energy Business and the 1996 capital budget provided to Acquiror) by the Energy Business for 1996 equal to $333,200,000, plus an amount of capital expenditures by the Energy Business for 1997 equal to $27,750,000 per month for each month (or pro rata portion thereof) from January 1, 1997 to the Effective Time. (x) "Shipbuilding Adjusted Closing Balance Sheet" has the meaning ascribed to such term in SECTION 6 below. (y) "Shipbuilding Closing Balance Sheet" has the meaning ascribed to such term in SECTION 6 below. (z) "Shipbuilding Credit Facility" has the meaning ascribed to such term in SECTION 3 below. (aa) "Tenneco Allocation Percentage" means a fraction, the numerator of which is the total number of business days remaining in the Closing Calendar Month from and after the Effective Time (including the day on which the Effective Time occurs), and the denominator of which is the total number of business days in the Closing Calendar Month. (bb) "Tenneco Revolving Debt" has the meaning ascribed to such term in SECTION 2 below. 2. Tenneco Credit Facility and Tenneco Revolving Debt. Tenneco shall, at its expense, have the sole right and authority to, and will use its commercially reasonable efforts to, have in place prior to the Distribution Date a credit facility for itself (with such guarantees of its obligations thereunder by the Energy Subsidiaries as it deems necessary) in an aggregate principal amount sufficient (together with other available funds to Tenneco) to fund the tenders, redemptions, prepayments, defeasances and maturities contemplated under the Debt Realignment; to pay all the fees, costs and expenses incurred by Tenneco and its subsidiaries in preparing for, negotiating and effecting the Distributions, the Merger and the Debt Realignment and any financings in connection therewith; and for other general corporate purposes (including, without limitation, working capital, the repayment or refinancing of Consolidated Debt and the payments of dividends). This facility shall be in effect at, and shall have a remaining stated maturity of at least 180 days following, the closing of the Merger and the Distributions. The aggregate amount of debt (including accrued and accreted interest and fees and expenses) outstanding as of the Effective Time under this facility is hereinafter called the "Tenneco Revolving Debt". Notwithstanding anything contained herein, (a) contemporaneously with the Distributions, Tenneco and the Energy Subsidiaries shall be removed as obligor under (and released from liability with respect to) any indebtedness for borrowed money for which Tenneco or its subsidiaries are liable and which are assumed by the Industrial Company or the Shipbuilding Company pursuant to the terms hereof and the Distribution Agreement, (b) any Tenneco Revolving Debt shall be prepayable without penalty, subject to customary notice provisions, (c) in respect of publicly-traded Consolidated Debt, between the date of the Merger Agreement and the Effective Time there shall be no (i) extension of maturity or average life, (ii) increase in interest rates or (iii) adverse change in defeasance or redemption provisions with respect to any indebtedness for borrowed money for which Tenneco or the Energy Subsidiaries will be liable on or after the Effective Time and (d) except for the Tenneco Revolving Debt, no indebtedness for borrowed money of Tenneco or the Energy Subsidiaries at the Effective Time shall contain any affirmative or negative financial or operational covenants other than ones that are (x) mutually acceptable to Tenneco and Acquiror or (y) no more restrictive in the aggregate and substantially equivalent to those set forth in the Indenture dated as of January 1, 1992 of El Paso Natural Gas Company as in effect as of the date of the Merger Agreement (other than Section 10.05 of the Indenture). 3. Shipbuilding Credit Facility and Shipbuilding Revolving Debt. Prior to the Distributions (and at such time as Tenneco shall request), Shipbuilding Company shall, at its expense, obtain and have in place a credit facility (the "Shipbuilding Credit Facility") for itself (with such guarantees of its obligations thereunder by the Shipbuilding Subsidiaries as is necessary to obtain the Shipbuilding Credit Facility) in an aggregate principal amount of at least $600 million (the "Minimum Debt Amount") and shall borrow the Minimum Debt Amount thereunder and distribute the proceeds of such borrowing to Tenneco (or such subsidiary of Tenneco as Tenneco shall designate) at such time on or prior to the consummation of the Distributions as Tenneco shall request. A-C-4 45 4. Allocation and Assumption of Debt. (a) Allocated Energy Debt. On the Distribution Date, Tenneco shall assume, and shall thereafter be solely liable and responsible for, the Allocated Energy Debt. Tenneco hereby acknowledges and agrees that the Allocated Energy Debt shall constitute an Energy Group Liability as defined in the Distribution Agreement. (b) Allocated Industrial Debt. On the Distribution Date, Industrial Company shall assume, and shall thereafter be solely liable and responsible for, the Allocated Industrial Debt. Industrial Company hereby acknowledges and agrees that the Allocated Industrial Debt shall constitute an Industrial Group Liability as defined in the Distribution Agreement. (c) Allocated Shipbuilding Debt. On the Distribution Date, Shipbuilding Company shall assume, and shall thereafter be solely liable and responsible for, the Allocated Shipbuilding Debt. Shipbuilding Company hereby acknowledges and agrees that the Allocated Shipbuilding Debt shall constitute a Shipbuilding Group Liability as defined in the Distribution Agreement. 5. Allocation of Cash and Cash Equivalents. Prior to or contemporaneously with the consummation of the Distributions, each of the parties hereto shall make such transfers of the Cash and Cash Equivalents of Tenneco and its consolidated subsidiaries (prior to giving effect to the Distributions) so that to the extent possible, based on estimates of the aggregate amount of Cash and Cash Equivalents of Tenneco and its consolidated subsidiaries then on hand, (a) Tenneco and the Energy Subsidiaries, on a consolidated basis, shall, as of the Effective Time, have an aggregate amount of Cash and Cash Equivalents equal to the sum of the following: (i) $25.0 million, (ii) the product of (A) the Tenneco Allocation Percentage, and (B) the lesser of (I) $100 million and (II) the total amount of the Factored Proceeds (the lesser of such amounts being referred to as the "Section 5 Amount") and (iii) should the Effective Time occur after the day of the month on which Tenneco generally collects receivables from customers of its regulated pipeline business (typically, the 25th day of a month), the lesser of the amount of (A) the Section 5 Amount owing to ASCC as of the Effective Time, and (B) the total amount of such receivables actually collected by Tenneco or any of its Subsidiaries during the period beginning on the day such receivables are first collected and ending at the Effective Time (the "Actual Collection Amount"), so long as that amount is owing to ASCC as of the Effective Time. It is expressly understood that as of the Effective Time all payables and receivables are for the account of Acquiror. (the sum of the amounts described in the immediately preceding clause (i), (ii) and (iii) is hereinafter, referred to as the "Guaranteed Energy Cash Amount"), and (b) Shipbuilding Company and the Shipbuilding Subsidiaries, on a consolidated basis, shall, as of the close of business on the Merger Closing Date, have an aggregate of $5 million of Cash and Cash Equivalents (the "Guaranteed Shipbuilding Cash Amount"). All remaining Cash and Cash Equivalents of Tenneco and its consolidated subsidiaries shall be allocated to Industrial Company and the Industrial Subsidiaries. 6. Post Distribution Audit. (a) Preparation of Closing Balance Sheets. As soon as practicable after the Merger Closing Date, but in any event within 60 days following the Merger Closing Date, Industrial Company shall cause Arthur Andersen LLP (the "Auditors") to: (i) conduct an audit of Tenneco and the Energy Subsidiaries to determine the aggregate amount, as of the Effective Time, of each of the Factored Proceeds, the Section 5 Amount, the Actual Collection Amount, the Tenneco Revolving Debt, the Consolidated Debt (other than the Tenneco Revolving Debt) of Tenneco and the Energy Subsidiaries, the Tenneco Transaction Expenses, the Cash and Cash Equivalents of Tenneco A-C-5 46 and the Energy Subsidiaries and the Actual Energy Expenditures Amount, and to prepare and deliver to each of Industrial Company and Tenneco a consolidated balance sheet for Tenneco and the Energy Subsidiaries as of the Effective Time reflecting (x) the amount of each of the foregoing (other than the aggregate amount of the Factored Proceeds, the Section 5 Amount, the Actual Collection Amount (which shall be set forth in a footnote to such consolidated balance sheet) and the Consolidated Debt valued as part of the Consolidated Public Debt Value) and (y) the Consolidated Public Debt Value (the "Energy Closing Balance Sheet"); and (ii) conduct an audit of Shipbuilding Company and the Shipbuilding Subsidiaries to determine the aggregate amount of the Cash and Cash Equivalents of Shipbuilding Company and the Shipbuilding Subsidiaries as of the Effective Time, and to prepare and deliver to each of Industrial Company and Shipbuilding Company a consolidated balance sheet for Shipbuilding Company and the Shipbuilding Subsidiaries as of the Effective Time reflecting the aggregate amount of such Cash and Cash Equivalents (the "Shipbuilding Closing Balance Sheet"). The Energy Closing Balance Sheet and the Shipbuilding Closing Balance Sheet shall each be prepared on the basis of an audit conducted by the Auditors in accordance with generally accepted auditing standards and prepared in accordance with generally accepted accounting principles consistently applied and without giving effect to any change in accounting principles required on account of the consummation of the Merger or the Distributions, except that, to the extent that any definition contained herein contemplates inclusion or exclusion of an item that would not be included or excluded under generally accepted accounting principles, the Auditors shall compute such item in accordance with such definition. During the course of the preparation of the Energy Closing Balance Sheet and the Shipbuilding Closing Balance Sheet by the Auditors, and during any period in which there is a dispute regarding either the Energy Closing Balance Sheet or the Shipbuilding Closing Balance Sheet, each of Tenneco, Industrial Company and Shipbuilding Company, as the case may be, shall cooperate with the Auditors and each other and shall have access to all work papers of the Auditors and all pertinent accounting and other records of Tenneco and the Energy Subsidiaries and Shipbuilding Company and the Shipbuilding Subsidiaries, as applicable. Tenneco shall pay the fees and expenses of the Auditors. Notwithstanding any provision of this Agreement or the Distribution Agreement, the Claims Deposit (as defined in Insurance Agreement) shall not be included as Cash and Cash Equivalents of Tenneco and the Energy Subsidiaries. (b) Disputes Regarding Closing Balance Sheet. Unless (i) in the case of the Energy Closing Balance Sheet, Tenneco delivers written notice to Industrial Company on or prior to the 30th day after its receipt of the Energy Closing Balance Sheet that it disputes any of the amounts set forth on the Energy Closing Balance Sheet (hereinafter, an "Energy Dispute"), or (ii) in the case of the Shipbuilding Closing Balance Sheet, Shipbuilding Company delivers written notice to Industrial Company on or prior to the 30th day after its receipt of the Shipbuilding Closing Balance Sheet that it disputes the amount of Cash and Cash Equivalents set forth on the Shipbuilding Closing Balance Sheet (hereinafter, a "Shipbuilding Dispute") then, as applicable, Tenneco and/or Shipbuilding Company shall be deemed to have accepted and agreed to the Energy Closing Balance Sheet or the Shipbuilding Closing Balance Sheet, as applicable, in the form in which it was delivered to it by the Auditors. If such a notice of an Energy Dispute is given by Tenneco or a notice of a Shipbuilding Dispute is given by Shipbuilding Company (in either case such party being hereinafter referred to as the "Disputing Party") within such 30-day period, then Industrial Company and the Disputing Party shall, within 15 days after the giving of any such notice, attempt to resolve such Energy Dispute or Shipbuilding Dispute, as the case may be, and agree in writing upon the final content of the Energy Closing Balance Sheet or Shipbuilding Closing Balance Sheet, as the case may be. In the event that the Disputing Party and Industrial Company are unable to resolve any Energy Dispute or Shipbuilding Dispute, as the case may be, within such 15-day period, then the certified public accounting firm of Ernst & Young or another mutually acceptable independent accounting firm (the "Independent Auditors") shall be employed as arbitrator hereunder to settle such Energy Dispute and/or Shipbuilding Dispute, as the case may be, as soon as practicable. The Independent Auditors shall have access to all documents and facilities necessary to perform its function as arbitrator. The determination of the Independent Auditors with respect to any Energy Dispute and/or Shipbuilding Dispute, as the case may be, shall be final and binding on the applicable parties hereto. Industrial Company and the A-C-6 47 Disputing Party shall each pay one-half (1/2) of the fees and expenses of the Independent Auditors for such services. Industrial Company and the Disputing Party each agree to execute, if requested by the Independent Auditors, a reasonable engagement letter. The term "Energy Adjusted Closing Balance Sheet," as used herein, shall mean the definitive Energy Closing Balance Sheet agreed to by Tenneco and Industrial Company or, as the case may be, the definitive Energy Closing Balance Sheet resulting from the determinations made by the Independent Auditors in accordance with this Section 6(b) (in addition to the matters theretofore agreed to by Tenneco and Industrial Company). The term "Shipbuilding Closing Balance Sheet," as used herein, shall mean the definitive Shipbuilding Closing Balance Sheet agreed to by Shipbuilding Company and Industrial Company or, as the case may be, the definitive Shipbuilding Closing Balance Sheet resulting from the determinations made by the Independent Auditors in accordance with this SECTION 6(B) (in addition to the matters theretofore agreed to by Shipbuilding Company and Industrial Company). The date on which the Energy Adjusted Closing Balance Sheet is determined and provided to each of Industrial Company and Tenneco pursuant to this SECTION 6(B) is hereinafter referred to as the "Energy Determination Date". The date on which the Shipbuilding Adjusted Closing Balance Sheet is determined and provided to each of Industrial Company and Shipbuilding Company pursuant to this SECTION 6(B) is hereinafter referred to as the "Shipbuilding Determination Date". 7. Post Distribution Adjustments and Cash Payments. (a) Adjustments and Payments Relating to Consolidated Debt. If the Actual Energy Debt Amount exceeds the Base Amount, Industrial Company shall pay Tenneco the amount of such excess in cash within 10 days after the Energy Determination Date. If, on the other hand, the Actual Energy Debt Amount is less than the Base Amount, Tenneco shall pay Industrial Company the amount of such deficiency in cash within 10 days after the Energy Determination Date. (b) Adjustments and Payments Relating to Cash and Cash Equivalents. (i) Adjustments and Payments Relating to Shipbuilding Company. If the amount of Cash and Cash Equivalents of Shipbuilding Company and the Shipbuilding Subsidiaries as reflected on the Shipbuilding Adjusted Closing Balance Sheet is less than the Guaranteed Shipbuilding Cash Amount, Industrial Company shall pay Shipbuilding Company the amount of such deficiency in cash within 10 days after the Shipbuilding Determination Date. If, on the other hand, the amount of Cash and Cash Equivalents of Shipbuilding Company and the Shipbuilding Subsidiaries as reflected on the Shipbuilding Adjusted Closing Balance Sheet exceeds the Guaranteed Shipbuilding Cash Amount, Shipbuilding shall pay Industrial Company the amount of such excess in cash within 10 days after the Shipbuilding Determination Date. (ii) Adjustments and Payments Relating to Tenneco. (A) If the amount of Cash and Cash Equivalents of Tenneco and the Energy Subsidiaries as reflected on the Energy Adjusted Closing Balance Sheet is less than the Guaranteed Energy Cash Amount, Industrial Company shall pay Tenneco the amount of such deficiency in cash within 10 days after the Energy Determination Date. If, on the other hand, the amount of Cash and Cash Equivalents of Tenneco and the Energy Subsidiaries as reflected on the Energy Adjusted Closing Balance Sheet exceeds the Guaranteed Energy Cash Amount, Tenneco shall pay Industrial Company the amount of such excess in cash within 10 days after the Energy Determination Date. (B) If the Actual Energy Expenditures Amount as reflected on the Energy Adjusted Closing Balance Sheet is less than the Required Energy Expenditures Amount, Industrial Company shall pay Tenneco the amount of such deficiency in cash within 10 days after the Energy Determination Date. If, on the other hand, the Actual Energy Expenditures Amount as reflected on the Energy Adjusted Closing Balance Sheet is greater than the Required Energy Expenditures Amount, Tenneco shall pay to Industrial Company the amount of such excess in cash within 10 days after the Energy Determination Date. (C) Each of Tenneco and Industrial Company hereby agrees that the amount of any cash payment otherwise due it under any provision of this SECTION 7 may be offset against and reduced, on a dollar for dollar basis, in respect of any cash payment it may otherwise be required to make to the other pursuant to and in accordance with any other provision of this SECTION 7, and that the amount of such offset and reduction shall be treated as payment of its obligations under any provision of this SECTION 7 to the extent of such offset and reduction. A-C-7 48 8. Miscellaneous Provisions. (a) Termination. This Agreement may not be terminated except upon the written agreement of each of the parties hereto. (b) Best Efforts. If at any time after the Merger Closing Date any further action is necessary or desirable to carry out the purposes of this Agreement, each of Tenneco, Industrial Company and Shipbuilding Company shall, on the written request of any of them, take (or cause the appropriate member of its Group over which it has direct or indirect legal or effective control to take) all such reasonably necessary or desirable action. (c) Cooperation. The parties hereto agree to use their reasonable best efforts to cooperate with respect to the various matters contemplated by this Agreement. (d) Successors and Assigns. Except as otherwise expressly provided herein, no party hereto may assign or delegate, whether by operation of law or otherwise, any of such party's rights or obligations under or in connection with this Agreement without the written consent of each other party hereto. No assignment will, however, release the assignor of any of its obligations under this Agreement or waive or release any right or remedy the other parties may have against such assignor hereunder. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will be binding upon and enforceable against the respective successors and assigns of such party and will be enforceable by and will inure to the benefit of the respective successors and permitted assigns of such party. (e) Modification; Waiver; Severabilitys20 . This Agreement may not be amended or modified except in a writing executed by each of the parties hereto. The failure by any party to exercise or a delay in exercising any right provided for herein shall not be deemed a waiver of any right hereunder. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. (f) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same Agreement. (g) Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (h) Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally or five business days after mailing by certified or registered mail, return receipt requested and postage prepaid, to the recipient at such recipient's address as indicated in the Distribution Agreement or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. (i) Survival. Each of the agreements of the parties herein shall survive the Merger Closing Date. (j) No Third Party Beneficiaries. This Agreement is made solely for the benefit of the parties hereto and the other members of their respective Groups, and shall not give rise to any rights of any kind to any other third parties. (k) Governing Law and Consent to Jurisdiction. ALL QUESTIONS AND/OR DISPUTES CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE SCHEDULES AND EXHIBITS HERETO SHALL BE GOVERNED BY THE INTERNAL LAWS, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES TO BE SUBJECT TO, AND HEREBY CONSENTS AND SUBMITS TO, THE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE OF DELAWARE. A-C-8 49 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. TENNECO INC. By --------------------------------------- Name: Title: NEW TENNECO INC. By --------------------------------------- Name: Title: NEWPORT NEWS SHIPBUILDING INC. (formerly known as Tenneco InterAmerica Inc.) By --------------------------------------- Name: Title: A-C-9 50 Schedule 1 to Debt and Cash Allocation Agreement Accounting fees and expenses Actuarial fees and expenses Appraisal fees and expenses Audit fees and expenses Broker/dealer fees and expenses Consulting fees and expenses Exchange/paying agent fees and expenses Exit consent fees Fees and expenses incurred in connection with arranging the Revolving Debt, including commitment fees, drawdown fees, agent's fees, facility fees and similar fees and expenses, and lender's costs and expenses payable by the borrower Filing fees, including SEC, NYSE, NASD, HSR and other similar fees Information agent fees and expenses Investment banking fees and expenses, dealer manager fees and expenses, and similar fees and expenses Fees and expenses with respect to legal matters pertaining to the transactions Mailing expenses Newspaper advertising costs Printing fees and expenses Proxy solicitation fees and expenses Soliciting dealer fees and expenses Rating Agency fees Underwriting, placement, registration and similar fees, commissions and discounts payable in connection with the NPS Preferred Stock A-C-10 51 Schedule 2 to Debt and Cash Allocation Agreement The deferred intercompany items referred to in SECTION 1(A)(VI) of the Debt and Cash Allocation agreement are the following intercompany transactions
SELLER BUYER PROPERTY TRANSFERRED ------ ----- -------------------- Tenneco Corporation Tenneco Inc. Stock of Kern County Land Co. Tenneco Corporation Tenneco Inc. Stock of Tenneco Credit Corp. Tenneco Corporation Tennessee Gas Pipeline Co. Stock of Tenneco International Inc. Channel Gas Marketing Channel Industries Gas DT Line Tenngasco Gas Supply Channel Industries Gas Transmission facilities Tennessee Gas Pipeline Co. Energy TRACS Software assignment agreement
A-C-11 52 TENNECO INC. Schedule 3
PRE-DETERMINED ----------------------------------------------------------- SECURITY DESCRIPTION BENCHMARK TREASURY SPREAD TO TREASURY(1) - --------------------------------------------------------- ----------------------------- --------------------------- INDENTURE FACE COUPON MATURITY COUPON MATURITY CASE A CASE B --------- ----------- ----------- ---------- ----------------- ---------- ------ ------ Inc. . . . . $ 300.0 6.500% 12/15/05 5.875% 11/05 84 bp 76 bp Inc. . . . . 300.0 7.250% 12/15/25 pricing 30yr UST 125 113 Inc. . . . . 500.0 7.875% 10/01/02 6.375% 08/02 73 66 Inc. . . . . 250.0 8.000% 11/15/99 7.750% 11/99 58 52 Inc. . . . . 150.0 9.000% 11/15/12 pricing 30yr UST 95 86 Inc. . . . . 200.0 9.875% 02/01/01 7.750% 02/01 66 59 Inc. . . . . 250.0 10.000% 03/15/08 pricing 30yr UST 91 82 Inc. . . . . 500.0 10.000% 08/01/98 5.875% 08/98 51 46 Inc. . . . . 175.0 10.375% 11/15/00 5.625% 11/00 64 58 TGP . . . . . 400.0 6.000% 12/15/11 pricing 30yr UST 95 86 TGP . . . . . 75.0 8.000% 05/15/97 NA NA NA NA TGP . . . . . 250.0 9.000% 01/15/97 NA NA NA NA TCC . . . . . 7.5 8.500% 01/30/97 NA NA NA NA TCC . . . . . 0.5 8.500% 03/17/97 NA NA NA NA TCC . . . . . 3.0 8.500% 03/24/97 NA NA NA NA TCC . . . . . 5.0 8.520% 03/28/97 NA NA NA NA TCC . . . . . 6.6 8.570% 03/18/97 NA NA NA NA TCC . . . . . 150.0 9.250% 11/01/96 NA NA NA NA TCC . . . . . 12.0 9.470% 09/21/98 5.875% 08/98 48 43 TCC . . . . . 10.0 9.480% 01/28/02 7.500% 11/01 69 62 TCC . . . . . 250.0 9.625% 08/15/01 7.875% 08/01 68 61 TCC . . . . . 7.6 9.720% 09/15/01 7.875% 08/01 68 61 TCC . . . . . 10.0 9.720% 09/25/01 7.875% 08/01 69 62 TCC . . . . . 5.0 9.900% 12/02/96 7.500% 12/96 45 41 TCC . . . . . 3.0 9.900% 08/19/98 5.875% 08/98 48 43 TCC . . . . . 4.5 10.000% 08/19/98 5.875% 08/98 48 43 TCC . . . . . 5.0 10.000% 12/13/01 7.500% 11/01 70 63 TCC . . . . . 50.0 10.500% 08/17/98 5.875% 08/98 48 43 TCC . . . . . 150.0 10.125% 12/01/97 5.250% 12/97 48 43 Inc. . . . . $ 2,625 TGP . . . . . 725 TCC . . . . . 680 . . . . . . . $ 4,030
NOTE: (1) Case A represents the spread to treasury for each security in the event that the percentage of the aggregate principal amount of the bonds participating in any tender or exchange, measured as a group for all bonds tendered or exchanged for, equals or exceeds 80% of all such bonds eligible to participate. In the event that the percentage of bonds participating in any tender or exchange falls short of 80% (calculated as aforesaid), the market value of all bonds remaining outstanding will be determined by using the spread to treasury indicated in Case B. A-C-12 53 SCHEDULE 4 TO DEBT AND CASH ALLOCATION AGREEMENT ADDITIONAL ADJUSTMENTS TO BASE AMOUNT 1. Indonesia (the South Sulawesi Project) (a) All expenditures made by Acquiror at any time from and after June 19, 1996 with respect to this project shall have no effect whatsoever on the Base Amount or the calculation thereof. (b) All expenditures actually incurred and paid by any of Tenneco or its consolidated subsidiaries at any time between June 19, 1996 and the Effective Time (the "PRE-CLOSING PERIOD") shall be added to the Base Amount (but shall not be included as a capital expenditure for purposes of determining the Actual Energy Expenditures Amount); provided, however, the Base Amount will be reduced by the amount of any Net Cash Proceeds (as defined) received by Tenneco or any of its consolidated subsidiaries during the Pre-Closing Period from any monetization of this project during the Pre- Closing Period. As used in the Schedule 4, the term "Net Cash Proceeds" means the total amount of cash proceeds actually received by the party in question during the Pre-Closing Period from the consummation during the Pre-Closing Period of the transaction or transactions in question, less the sum of any and all costs, expenses and taxes related to the transaction or transactions in question which either are (i) actually incurred and paid by Tenneco or any of its consolidated subsidiaries prior to or at the Effective Time (other than taxes based upon income, which shall not be deducted from cash proceeds in determining Net Cash Proceeds), or (ii) incurred but not paid prior to or at the Effective Time by any member of either the Industrial Group and/or Shipbuilding Group and which will remain an obligation or liability of such entity (or any member of its Group) after giving effect to the Distributions without reimbursement therefor by Tenneco or any other member of the Energy Group. 2. Orange Cogeneration Project (a) All expenditures made by Acquiror at any time from and after June 19, 1996 with respect to this project shall have no effect whatsoever on the Base Amount or the calculation thereof. (b) All expenditures actually incurred and paid by any of Tenneco or its consolidated subsidiaries at any time during the Pre-Closing Period shall be added to the Base Amount (but shall not be included as a capital expenditure for purposes of determining the Actual Energy Expenditures Amount); provided, however, the Base Amount will be reduced by the amount of any Net Cash Proceeds received by Tenneco or any of its consolidated subsidiaries during the Pre-Closing Period from any monetization of this project during the Pre-Closing Period. 3. Australian Infrastructure Bonds (a) The Base Amount shall be reduced by any Net Cash Proceeds received by Tenneco or any of its consolidated subsidiaries during the Pre-Closing Period from any off-balance sheet financing in respect of this project. 4. Asset Sales (a) Microwave Licenses. The Base Amount shall be reduced by the aggregate amount of Microwave Net Cash Proceeds (as defined below) from any sale or assignment during the Pre-Closing Period of private operational-fixed microwave licenses issued by the Federal Communications Commission. As used herein, "Microwave Net Cash Proceeds" means the gross cash proceeds actually received by Tenneco or any of its consolidated subsidiaries less the sum of (i) the total amount of relocation costs and cost and expenses of rebuilding an acceptable replacement communication system that are actually incurred and paid by Tenneco or any of its consolidated subsidiaries during the Pre-Closing Period (or incurred by any member of the Industrial Group or Shipbuilding Group and remain unpaid as of the Effective Time), and (ii) the amount of any taxes incurred in connection with any such sale or assignment which are either (A) actually incurred and paid by Tenneco or any of its consolidated subsidiaries prior to the Effective Time (other than taxes based upon income, which shall not be deducted from cash proceeds in determining Net Cash Proceeds), or (B) incurred by any member of the Shipbuilding Group or Industrial Group and remain unpaid as of the Effective Time and which will remain an obligation or liability of such entity (or any member of its Group) after giving effect to the Distributions without reimbursement therefor by Tenneco or any other member of the Energy Group. A-C-13 54 5. Land Sales (a) 960 Acre Parcel Located Along Galveston Bay at Ingleside, Texas. The Base Amount shall be reduced by the total amount of Net Cash Proceeds actually received by Tenneco or any of its consolidated subsidiaries at any time during the Pre-Closing Period, in connection with the sale of the above referenced property. (b) Westchase Development in West Houston (also known as Tract 6A). The Base Amount shall be reduced by the total amount of Net Cash Proceeds actually received by Tenneco or any of its consolidated subsidiaries at any time during the Pre-Closing Period in connection with the sale of the above referenced property. (c) 1625 West Loop (also known as Post Oak Ranch). The Base Amount shall be reduced by the total amount of Net Cash Proceeds actually received by Tenneco or any of its consolidated subsidiaries at any time during the Pre-Closing Period in connection with the sale of the above referenced property. 6. Sales of Gas Turbines The Base Amount shall be reduced by the total amount of Net Cash Proceeds actually received by Tenneco or any of its consolidated subsidiaries (and credited to the account of Industrial Company under the Debt and Cash Allocation Agreement) from its sale of any gas turbines at any time during the Pre-Closing Period. 7. ICH Tax Indemnity Matter The Base Amount shall be increased (without duplication) by any cash payment (up to a maximum amount, however, of $19.0 million) made by Tenneco or any of its consolidated subsidiaries during the Pre-Closing Period in respect of the settlement of the ICH tax indemnity matter. 8. Payments due on Settlement of Certain Lawsuits During the Pre-Closing Period All cash payments actually received by Tenneco or any of its consolidated subsidiaries during the Pre-Closing Period in respect of any settlement of any of the lawsuits or other proceedings identified and referred to in paragraph 9 of, and Schedule G-2 to, Exhibit G to the Merger Agreement shall, to the extent provided for under the terms described under paragraph 9 of such Exhibit G, be for the account of Industrial Company and shall not be included in the Guaranteed Energy Cash Amount or have any effect on the Base Amount or the calculation thereof. 9. Hedging Transactions Any hedging transactions and all costs and expenses with respect thereto that are entered into in connection with or in anticipation of the Debt Realignment shall be for the benefit or detriment of Industrial Company and shall have no effect whatsoever on the Base Amount or the calculation thereof. 10. Rate Refunds Payable to Customers The Base Amount shall be reduced by the amount, calculated as of the Effective Time, of any rate refunds, including interest, which would be payable to customers pursuant to the rate settlement filed with the Federal Energy Regulatory Commission at Docket No. RP95-112 and have not been paid as of the Effective Time, whether such amounts are to be paid to customers or credited against gas supply realignment costs pursuant to a settlement with customers. 11. Sale of Tenneco Ventures The Base Amount shall be reduced by the aggregate amount of Net Cash Proceeds actually received by Tenneco or any of its subsidiaries from any sale of Tenneco Ventures during the Pre-Closing Period. 12. Bonuses for Energy Employees (a) The total amount of cash bonuses for Energy Employees for the calendar year 1996 (the "1996 Bonus Amount") shall be pro rated based on the date on which the Effective Time occurs and shall be shared between Tenneco and Industrial Company based on such pro ration as follows: A-C-14 55 (i) Tenneco shall be responsible and liable for the payment of that portion (the "Tenneco Bonus Portion") of the 1996 Bonus Amount that equals the product of (A) the 1996 Bonus Amount, and (B) a fraction, the numerator of which is the number of days remaining in the 1996 calendar year following the day on which the Effective Time occurs (the "Effective Day"), and the denominator of which is 365. (ii) New Tenneco shall be responsible and liable for the payment of that portion of the 1996 Bonus Amount that equals the amount by which the 1996 Bonus Amount exceeds the Tenneco Bonus Portion. (b) Each of Tenneco's and New Tenneco's liability for its share of the 1996 Bonus Amount shall be accounted for in the Merger as follows: (i) If 100% of the 1996 Bonus Amount is paid on or before the Effective Time, the Base Amount shall be increased by the Tenneco Bonus Portion. (ii) If as of the Effective Time, the amount of the 1996 Bonus Amount that has not been paid exceeds the Tenneco Bonus Portion, the Base Amount shall be reduced by the amount of such excess. (iii) If as of the Effective Time, the amount of the 1996 Bonus Amount that has not been paid equals the Tenneco Bonus Portion, the Base Amount shall not be increased or decreased in respect of the 1996 Bonus Amount. (c) The 1996 Bonus Amount shall be determined by Tenneco prior to the Effective Time with the consent of Acquiror which shall not be unreasonably withheld. 13. Non Cash Proceeds Any proceeds received by Tenneco or any of its subsidiaries from the transactions described in paragraphs 1, 2, 3, 4, 5, 6 and 11 other than cash proceeds shall be for the account of Acquiror and shall be retained by or distributed to the Energy Business. A-C-15 EX-2.3 4 LETTER AGREEMENT DATED 12/11/96 1 EXHIBIT 2.3 El Paso Natural Gas Company One Paul Kayser Center 100 North Stanton Street El Paso, Texas 79901 December 11, 1996 New Tenneco Inc. 1275 King Street Greenwich, CT 06831 Ladies and Gentlemen: This letter is to confirm certain understandings of El Paso Natural Gas Company ("El Paso") and New Tenneco Inc. ("New Tenneco") relating to the Amended and Restated Agreement and Plan of Merger (the "Merger Agreement") dated as of June 19, 1996 among El Paso, El Paso Merger Company and Tenneco Inc. ("Tenneco") and the Debt and Cash Allocation Agreement (including the schedules thereto, the "Debt and Cash Agreement") dated the date hereof among Tenneco, Newport News Shipbuilding Inc. and New Tenneco. Capitalized terms used but not defined in this letter agreement have the respective meanings ascribed to them in the Merger Agreement or the Debt and Cash Agreement, as the case may be, it being understood that the term ("Effective Time" has the meaning set forth in the Merger Agreement except where such term is used in connection with adjustments to the Base Amount, in which case "Effective Time" has the meaning set forth in the Debt and Cash Agreement. 1. The Base Amount shall be reduced by the cash proceeds received by Tenneco and its Subsidiaries, during the Pre-Closing Period, from sales of assets (other than inventory or services in the ordinary course of business consistent with past practice) by the entities comprising the Tenneco Ventures business during the Pre-Closing Period. The estimate of this amount is set forth in Schedule A hereto under (c)(6) of "Subtraction from Base Amount." 2. New Tenneco and its Subsidiaries will be entitled to retain the amount received by Tenneco and its Subsidiaries with respect to the Poe Note and the sale of the property securing such note (sometimes referred to as the San Emedio Ranch). 3. New Tenneco and its Subsidiaries will be entitled to retain any and all regular and/or extraordinary dividends received by Tenneco and/or its Subsidiaries with respect to its investment in Oasis Pipeline from June 19, 1996 to the Effective Time. 2 New Tenneco Inc. December 11, 1996 Page 2 4. New Tenneco shall indemnify and hold harmless Tenneco, the Energy Subsidiaries and their respective Affiliates (the "Energy Entities") from and against all fines and penalties incurred by the Energy Entities arising out of or resulting from the failure of Tenneco or any of its Subsidiaries to take any action required to be taken, or to duly make any filing or obtain any consent required to be made or obtained from any Governmental Authority, under any state or local Environmental Laws (as defined in the Distribution Agreement), including, without limitation, the New Jersey Industrial Site Remediation Act (ISRA), in connection with the transactions contemplated by the Merger Agreement or the Distribution Agreement. New Tenneco's agreement to indemnify the Energy Entities under this paragraph does not in any way change, alter and/or modify the provisions of the Merger Agreement and/or the Distribution Agreement as such provisions pertain to the remediation of the assets of the Energy Entities. Notwithstanding any of the provisions of the Environmental Laws, the provisions of the Merger Agreement and/or the Distribution Agreement shall determine which Person (as defined in the Distribution Agreement) has the obligation to remediate any asset of the Energy Entities. To the extent that any fine and/or penalty imposed, or sought to be imposed, by any Governmental Authority includes the remediation of any asset of the Energy Entities, any such remediation will be performed and financed by the Person who has that obligation under the Merger Agreement and/or the Distribution Agreement. 5. The Base Amount shall be reduced by $7,500,000 to reflect certain adjustments arising out of the Effective Time occurring at 12:01 a.m. on December 12, 1996. 6. New Tenneco shall pay all fees and expenses for printing and mailing relating to the transactions contemplated by the Merger Agreement and the Distribution Agreement (estimated to be approximately $13,000,000) and, in connection therewith, the Base Amount shall be increased by $1,753,939 and Tenneco and El Paso and their Subsidiaries shall have no liability with respect thereto. 7. The Actual Energy Expenditures Amount shall include actual cash expenditures of $20,000,000 paid by Tenneco and its Subsidiaries after December 31, 1995 through the Effective Time with respect to capital expenditures of the Energy Business (determined on a basis consistent with past accounting practices of the Energy Business) incurred (but not paid for) prior to January 1, 1996. 3 New Tenneco Inc. December 11, 1996 Page 3 8. New Tenneco shall be responsible for all severance benefit payments, estimated to be $356,250, made to Thomas C. Livengood and Tenneco and El Paso and their Subsidiaries shall have no liability with respect thereto, provided that the Base Amount shall be increased by 50% of the amount of such payments. 9. Schedule A hereto contains the Purchase Price Adjustment Schedule reflecting the parties' calculations as of the date hereof of the estimated amount of the Actual Energy Debt Amount, the Base Amount, the Actual Energy Expenditures Amount, Cash and Cash Equivalents of Tenneco and the Energy Subsidiaries and various items included in such calculations. The methodology for calculating the amounts set forth on such schedule has been agreed by the parties and is reflected therein. Except in the case of items marked with an asterisk on Schedule A the amounts of which shall be conclusive and binding on the parties absent manifest mathematical error in the calculation of such amounts, the amount of each item set forth on such Schedule is a preliminary estimate only and is subject to post-closing adjustment pursuant to the procedures set forth in the Debt and Cash Agreement. Very truly yours, EL PASO NATURAL GAS COMPANY By: /s/ BRITTON WHITE, JR. -------------------------- Britton White, Jr. Senior Vice President and General Counsel Agreed and Acknowledged: NEW TENNECO INC. By: /s/ KARL A. STEWART ---------------------- Karl A. Stewart Vice President and Secretary 4 FINANCIAL REPORT
Reference Page Tenneco El Paso Merger Fixed Schedule 5:25 p.m. Debt True Up - Calculation of "Base Amount" 12/11/96 All references are to Exhibit C to Distribution Agreement: Debt and Cash Allocation Agreement $ thousands attachment - ------------------------------------ ----------- ---------- Item 1 paragraph(g) A-C-2 Initial Base Amount per merger agreement 2,650,000.0* Additions to Base Amount Item 1 paragraph (g) point (i) A A-C-2 A) GSR payments net of all GSR collections from signing to closing A,B2 (1) Payments(*) TransTexas 125,000.0* B2 Lenape (Coastal Litigation & Bond Payment) 193,760.0* B2 Other 86,500.0 B2 (2) Collections (-) (94,720.0) B2 Item 1 paragraph (g) point (i) B A-C-2 B) Purchase price paid to acquire additional interest in Oasis -- * Item 1 paragraph (g) point (i) C A-C-2 C) Litigation payments net of all cash payments received by Tenneco (1) Payments (+) -- Schedule #4 to Exhibit C, Item 7 A-C-14 ICH (up to $19.0 million) -- Schedule #4 to Exhibit C, Item 8 A-C-14 (2) Collections (-) 620.2 A Item 1 paragraph (g) point (i) D A-C-3 D) Expenditures for: Schedule #4 to Exhibit C, Item 1 A-C-13 (1) Indonesia 23,508.9 C2 Schedule #4 to Exhibit C, Item 2 A-C-13 (2) Orange 36.6 D Schedule #4 to Exhibit C, Item 3 A-C-13 (3) Australia Infrastructure Bonds 1,376.3 D2 Schedule #4 to Exhibit C, Item 12 E) Tenneco Bonus Portion of 1996 Bonus Amount (if applicable) 1,116.2* Side Letter F) Tenneco Portion of Proxy Printing Costs 1,753.9* Item 1 paragraph (g) point (ii) A-C-3 Subtraction from Base Amount Item 1 paragraph (g) point (ii) A A-C-3 A) New Preferred Shares value (300,000.0)* B) Project Monetizations/Off balance sheet financings Schedule #4 to Exhibit C, Item 1 A-C-13 (1) Indonesia -- * Schedule #4 to Exhibit C, Item 2 A-C-13 (2) Orange -- * Schedule #4 to Exhibit C, Item 3 A-C-13 (3) Australia Infrastructure Bonds (14.317.0) E Schedule #4 to Exhibit C, Item 4 A-C-13 C) Asset Sales paragraph (a) A-C-13 (1) Microwaves (8,821.5)* F Schedule #4 to Exhibit C, Item 5 (2) Surplus real estate paragraph (a) A-C-14 Ingleside, Texas -- * F paragraph (b) A-C-14 Westchase Development -- * F paragraph (c) A-C-14 Post Oak Ranch (2,120.0)* F Other (1,400.2)* F Schedule #4 to Exhibit C, Item 6 A-C-14 (3) Gas Turbines -- * Schedule #4 to Exhibit C, Item 11 A-C-14 (4) Tenneco Ventures * (5) Other (3,958.2)* F (6) Other - Sale of Ventures Properties (1,188.3) Schedule #4 to Exhibit C, Item 9 A-C-14 D) Hedging transactions -- Schedule #4 to Exhibit C, Item 10 A-C-14 E) Rate refund obligation to customers (160,736.2)(i) G Schedule #4 to Exhibit C, Item 12 A-C-14 F) Unpaid 1996 bonus amount (if applicable) (1,992.0)* G) Agreed Closing Adjustments (7,500.0)* ------------ Total Base Amount $2,487,118.7 ============ Tenneco Revolver Calculation Total Base Amount $2,487,118.7 Less Outstanding Debt, Transaction Expenses, Taxes Dividends and ASCC interest and expense 322,873.3 Accrued interest on the Revolver (487.8) ------------ Tenneco Revolver 2,163,757.6 ============ Actual Energy Debt All except for Revolver P&I 322,873.3 Revolver Accrued Interest 487.8 Revolver Principle 2,163,757.6 ------------ Total Actual Energy Debt $2,487,118.7 ============
(i) The parties agree that the Rate refund obligation to customers includes amounts to be paid to customers as a rate refund (including amounts related to depreciation) plus interest through December 11, 1996. 5
Reference Page Tenneco/El Paso Merger Debt True Up - Calculation of "Actual Energy Debt Amount" All references are to Exhibit C to Distribution Agreement: $ thousands attachment Debt and Cash Allocation Agreement - ------------------------------------ ----------- ---------- Item (i) paragraph 1.(a) A-C-1 Outstanding Amount of Tenneco Revolver & Interest 2,164,245.4 Item (ii) paragraph 1.(a) A-C-1 Consolidated Public Debt Value 261,536.5* Item (iii) paragraph 1.(a) A-C-1 Outstanding Principle amount of Tenneco & Energy Businesses, plus interest fees and expenses. 51,061.0* Item (iv) paragraph 1.(a) A-C-1 Unpaid Transaction Costs - Item (v) & (vi) paragraph 1.(a) A-C-1 Restructuring Taxes 4,153.8 Item (vii) paragraph 1.(a) A-C-2 Oasis off balance sheet financing - Item (viii) paragraph 1.(a) A-C-2 Dividends Common Stock - $4.50 Preferred Stock 3,617.0* $7.40 Preferred Stock 724.0* Item (ix) paragraph 1.(a) A-C-2 Dividends Accrued on NPS 1,627.0* paragraph 1.(a) A-C-2 ASCC Expenses 154.0 Total Actual Energy Debt $2,487,118.7 ============ Revolver & Interest $2,164,245.4 All Other $322,873.3 Tenneco Revolver Calculation Total Base Amount $2,487,118.7 Less Outstanding Debt, Transaction Expenses, Taxes Dividends and ASCC interest and expense 322,873.3 Tenneco Revolver and interest 2,164,245.4 ------------ Actual Debt 2,487,118.7 ------------ Tenneco Revolver 2,163,757.6 Tenneco Interest 487.8
6
Reference Page Tenneco/El Paso Merger Cash True Up -- Calculation of "Guaranteed Energy Cash Amount" All references are to Exhibit C to Distribution Agreement: Debt and Cash Allocation Agreement $ thousands attachment - ------------------------------------ ----------- ---------- Item 1 paragraph 5 point (i) A-C-5 Initial Base Amount per merger agreement 25,000.0* --------- Item 1 paragraph 5 point (ii) A-C-5 Changes to the Base Amount Factored Proceeds A) Tenneco Allocation Percentage 0.8 multiplied by the lessor of B) (i) $100 Million 100,000.0 B) (ii) $ The total of the factored proceeds 100,000.0 Sub Total from Factoring 61,904.8* --------- Item 1 paragraph 5 point (iii) A-C-5 Receivables (the lessor of) A) Section 5 amount owing to ASCC - B) Total amount of Receivables Collected - Sub Total from Receivables - --------- Guaranteed Energy Cash Amount 88,904.8* --------- Actual Energy Cash Account Listing TE Accounts 20,337.8 Account Listing TMC Discontinued Operations Accounts 15,056.8 Merger Agreement B-39 Item 10.1(c) Tax Escrow Account 5,000.0 Required Cash at TGPL Account 45,510.2 --------- Total Actual Energy Cash 86,904.8 =========
7 TENNECO ENERGY ACTUAL ENERGY EXPENDITURES AMOUNT CALCULATION DECEMBER 11, 1996 Capital bookings through November (A) $290,738,936 A Less: Items accrued but not paid as of November 30, 1996 Accrued in IMPACS (1,511,277)B Accrued by Disbursements Dept (3,421,403)C Accrued by Reports Dept (4,415,732)D Accrued by Ventures (2,463,541)E Accrued by Brisbane (Queensland) (14,680,394)F (26,492,347) ----------- Plus: December 1996 cash payments Houston (through December 10) 7,278,699 G Houston -- Dry Hole 330,000 Houston (December 11) 833,980 N Brisbane (Queensland) 2,870,262 H 11,312,941 ----------- ------------ Cash paid (1995 year-end accruals) Accrued in IMPACS 9,698,503 M Accrued by Int'l Acct -- EEC JV stock 12,000,000 I Accrued by Brisbane Acct -- Queensland 15,851,929 J Accrued by Disbursements -- Miscellaneous International 287,834 K Accrued by Disbursements -- Transportation 6,027,039 K Accrued by Disbursements -- Resources 257,235 K Accrued by Ventures Acct 5,785,021 L Accrued by Reports - Western Market Center 130,000 Accrued by Reports -- Altamont 30,000 50,067,561 ----------- ------------ Less: Adjustment for Limitation to $20,000,000.00 on 1995 year-end accruals paid in 1996. (30,067,561)* ------------ ACTUAL ENERGY EXPENDITURES AMOUNT $295,559,530* ============
(A) Excludes Ruhrgas $41.0 MM and EEC and Ark capital from June 19, 1996 through December 11, 1996 EX-2.4 5 AMEND. #1 TO DISTRIBUTION AGREEMENT 1 EXHIBIT 2.4 AMENDMENT NO. 1 TO DISTRIBUTION AGREEMENT THIS AMENDMENT NO. 1 TO DISTRIBUTION AGREEMENT (this "Amendment") is made and entered into as of this 11th day of December, 1996 by and among TENNECO INC., a Delaware corporation ("Tenneco"), NEW TENNECO INC., a Delaware corporation ("Industrial Company"), and NEWPORT NEWS SHIPBUILDING INC. (formerly known as Tenneco InterAmerica Inc.), a Delaware corporation ("Shipbuilding Company"). R E C I T A L S A. Tenneco, Industrial Company and Shipbuilding Company previously entered into a Distribution Agreement, dated as of November 1, 1996 (the "Distribution Agreement"), pursuant to which, among other things, Tenneco will separate and divide its existing business so that (i) its automotive, packaging and business services businesses (the "Industrial Business") shall be owned directly and indirectly by Industrial Company and (ii) the shipbuilding business (the "Shipbuilding Business) shall be owned directly and indirectly Shipbuilding Company. B. Tenneco, Industrial Company and Shipbuilding Company desire to amend the Distribution Agreement as specifically permitted thereunder. NOW, THEREFORE, in consideration of the mutual promises and agreements of the parties set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: A G R E E M E N T S 1. Terms. Unless otherwise defined herein, terms used herein shall have the meaning ascribed thereto as set forth in the Distribution Agreement. 2. Amendments. Tenneco, Industrial Company and Shipbuilding Company have determined pursuant to Section 2.01 of the Distribution Agreement that: (a) it is necessary to amend, supplement, modify and, in certain respects, eliminate certain of the Corporate Restructuring Transactions to properly divide the existing businesses of Tenneco so that (i) the Industrial Business shall be owned directly and indirectly by Industrial Company and (ii) the Shipbuilding Business shall be owned directly and indirectly by the Shipbuilding Company, and (b) that such amendments, modifications, supplements and eliminations neither individually or in the aggregate, adversely affect the Energy Business nor materially delay or prevent the consummation of the Merger. Accordingly, 2 pursuant to Section 2.01 and Section 8.08 of the Distribution Agreement, the Distribution Agreement is hereby amended as follows: a. Section 5.04(c) of the Distribution Agreement is hereby amended by deleting the term "Shipbuilding Subsidiary" in the first line and inserting the term "Shipbuilding Company" in lieu thereof. b. Exhibit B to the Distribution Agreement is hereby deleted in its entirety and the Exhibit B attached hereto is substituted in lieu thereof. c. Exhibit E to the Distribution Agreement is hereby deleted in its entirety and the Exhibit E attached hereto is substituted in lieu thereof. d. Exhibit G to the Distribution Agreement is hereby deleted in its entirety and the Exhibit G attached hereto is substituted in lieu thereof. e. Exhibit J to the Distribution Agreement is hereby deleted in its entirety and the Exhibit J attached hereto is substituted in lieu thereof. 3. Distribution Agreement in Full Force. Except as herein amended or modified, the Distribution Agreement shall remain unchanged and in full force and effect and is hereby ratified, approved and confirmed in all respects. 4. References. After the date hereof, all references in the Distribution Agreement to "Agreement," "hereof" or similar terms shall refer to the Distribution Agreement as hereby amended. 5. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of Tenneco, Industrial Company and Shipbuilding Company and their respective successors and assigns. 6. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws, and not the laws of conflict, of the State of Delaware. -2- 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first written above. TENNECO INC. By: /s/ KARL A. STINT ------------------------------- Name: ----------------------- Title: ---------------------- NEW TENNECO INC. By: /s/ ROBERT G. LANSING ------------------------------- Name: ----------------------- Title: ---------------------- NEWPORT NEWS SHIPSBUILDING INC. By: /s/ STEPHEN B. CLARKSON ------------------------------- Name: Stephen B. Clarkson ----------------------- Title: Vice President ---------------------- 4 EXHIBIT B TO THE DISTRIBUTION AGREEMENT 5 PROJECT LIZA TRANSACTION STEPS Set forth below are the transactions that, as applicable, the members of each of the Energy Group, Industrial Group, and Shipbuilding Group will consummate in connection with the Distributions and Merger. Capitalized terms used but not otherwise defined herein have the meaning ascribed to them under the Distribution Agreement. A. REALIGNMENT OF INTERCOMPANY ACCOUNTS Except as otherwise provided in Section B below, the following transactions will be effected as of October 31, 1996 to realign the intercompany accounts of the Groups. As a result of these transactions, Tenneco will have one net intercompany account receivable or payable with New Tenneco Inc. ("Industrial Company") and one net intercompany account receivable or payable with Newport News Shipbuilding Inc. ("Shipbuilding Company"), and all other intercompany accounts payable or receivable of members of each Group (other than trade accounts) will be exclusively between members of that Group. Following completion of these transactions, there will be no further transfers of funds between members of the different Groups other than pursuant to transactions occurring in ordinary course of business (trade accounts), transfers from or to Tenneco and either Industrial Company or Shipbuilding Company, and transfers required or otherwise permitted pursuant to these Corporate Restructuring Transactions. 1. Realignment of Industrial Group Intercompany Accounts. Each member of the Industrial Group having a net intercompany receivable from a member of the Energy Group or the Shipbuilding Group (excluding trade accounts receivable) will transfer such net intercompany receivable to Industrial Company in exchange for an intercompany advance receivable from Industrial Company in an amount equal to the amount of the net intercompany receivable transferred. Industrial Company will assume the net intercompany payable of each member of the Industrial Group having the net intercompany payable to a member of the Energy Group or the Shipbuilding Group (excluding trade accounts payable) in exchange for the issuance by each such Industrial Group member of an intercompany advance payable to Industrial Company in an amount equal to the amount of the net intercompany payable assumed. Industrial Company will consent to the assumption of other net intercompany payables by Shipbuilding Company or Tenneco as provided in this section A. 2. Realignment of Shipbuilding Group Intercompany Accounts. Shipbuilding Company will cause each member of the Shipbuilding Group having a net intercompany receivable from a member of the Industrial Group or the Energy Group to transfer such net intercompany receivable to Shipbuilding Company in exchange for an intercompany advance receivable from Shipbuilding Company in an amount equal to the amount of the net intercompany receivable transferred, Shipbuilding Company will assume the net intercompany payable to a member of the Industrial Group or the Energy Group (excluding trade accounts payable) in exchange for the issuance by each such Shipbuilding Group member of an intercompany advance payable to Shipbuilding Company in an amount equal to the amount of the net intercompany payable assumed. Shipbuilding Company will 6 Project Liza Transaction Steps Page 2 consent to the assumption of other net intercompany payables by Industrial Company or Tenneco as provided in this section A. 3. Realignment of Energy Group Intercompany Accounts. Tenneco will cause each member of the Energy Group having a net intercompany receivable from a member of the Industrial Group or the Shipbuilding Group to transfer such net intercompany receivable to Tenneco in exchange for an intercompany advance receivable from Tenneco in an amount equal to the amount of the net intercompany receivable transferred. Tenneco will assume the net intercompany payable of each member of the Energy Group having a net intercompany payable to a member of the Industrial Group or the Shipbuilding Group (excluding trade accounts payable) in exchange for the issuance by each such Energy Group member of an intercompany advance payable to Tenneco in an amount equal to the amount of the net intercompany payable assumed. Tenneco will consent to the assumption of other net intercompany payables by Industrial Company or Shipbuilding Company as provided in this section A. 4. Realignment of Intercompany Accounts Between Industrial Company and Shipbuilding Company. If after the completion of steps A(1) through A(3), Industrial Company has a net intercompany receivable from Shipbuilding Company (excluding trade accounts), Tenneco will assume Shipbuilding Company's net payable to Industrial Company in exchange for the issuance by Shipbuilding Company of an intercompany advance payable to Tenneco in an amount equal to the amount of the net Intercompany payable assumed. If after the completion of steps A(1) through A(3), Shipbuilding Company has a net intercompany receivable from Industrial Company, Tenneco will assume Industrial Company's net payable to Shipbuilding Company in exchange for the issuance by Industrial Company of an intercompany advance payable to Tenneco having a face amount equal to the face amount of the net intercompany payable assumed. B. PRELIMINARY DEBT REALIGNMENT TRANSACTIONS 1. Capitalization or Liquidation of Subsidiaries. The following transactions will be effected to increase the capitalization of various subsidiaries and to liquidate other subsidiaries. Except as otherwise noted, the transfers are effective as of 10/31/96. Transfers of funds will be accomplished by daylight overdrafts. a. Newport News Shipbuilding and Dry Dock Company ("Newport News") will transfer to Newport News Industrial Corporations ("NNIC") as a contribution to capital $1,700,000. NNIC will transfer the funds to Newport News as an intercompany advance. b. NNIC will transfer to Newport News Industrial Corporation of Ohio ("NNICO") as a contribution to capital $200,000. NNICO will transfer the funds to NNIC as an intercompany advance. c. TGP will transfer to TII as a contribution to capital the intercompany account payable owed by Tenneco Automotive Trading Company ("TATC") to TGP as of August 31, 1996 ($____________). 7 Project Liza Transaction Steps Page 3 d. TII will transfer to TATC as a contribution to capital the intercompany account payable received by TII in step B(1)(c). e. TGP will transfer to Tenneco Brake Inc. as a contribution to capital $15,000,000. Tenneco Brake Inc. will transfer the funds to TGP an intercompany advance. The intercompany advance will be settled as provided in Section A above. f. TGP will transfer to Walker Electronic Silencing Inc. as a contribution to capital $10,000,000. Walker Electronic Silencing Inc. will transfer the funds to TGP as an intercompany advance. The intercompany advance will be settled as provided in Section A above. g. TGP will transfer to TII as contribution to capital the intercompany account payable owed by Walker Europe Inc. to TGP as of October 31, 1996 ($_________). TII will transfer to Walker Europe Inc. as a contribution to capital (1) the intercompany account payable received pursuant to the previous sentence, and (2) $10,000,000. Walker Europe Inc. will transfer $10,000,000 to TII as an intercompany advance. The intercompany will be settled as provided in Section A above. h. Effective as of October 30, 1996, Tenneco will transfer to Tenneco Liquidation Company (f/k/a Tenneco Business Services Inc.) ("TBS") as a contribution to capital $60,000,000. TBS will transfer the funds to Tenneco as an intercompany advance. The intercompany advance will be settled as provided in Section A above. Effective as of October 31, 1996, Tenneco will transfer to TBS as a contribution to capital the intercompany account payable owed by TBS to Tenneco as of August 31, 1996 ($______________). i. Tenneco Corporation will transfer to Tenneco Independent Power I Company as a contribution to capital $5,000,000. Tenneco Independent Power I Company will transfer the funds to Tenneco Corporation as an intercompany advance. j. Tenneco Corporation will transfer to Tenneco Independent Power II Company as a contribution to capital $1,000,000. Tenneco Independent Power II Company will transfer the funds to Tenneco Corporation as an intercompany advance. k. Tenneco Corporation will transfer to Tenneco Minerals Company - Nevada as a contribution to capital $5,000,000. Tenneco Minerals Company - Nevada will transfer the funds to Tenneco Corporation as an intercompany advance. l. Tenneco Corporation will transfer to Tenneco Oil Company as a contribution to capital $700,000,000. Tenneco Oil Company will transfer the funds to Tenneco Corporation as an intercompany advance. m. Tenneco Corporation will transfer to Tenneco Power Generation Company as a contribution to capital $5,000,000. Tenneco Power Generation Company will transfer the funds to Tenneco Corporation as an intercompany advance. 8 Project Liza Transaction Steps Page 4 n. Tenneco Power Generation Company will transfer to Tenneco Ethanol Company as a contribution to capital $10,000,000. Tenneco Ethanol Company will transfer the funds to Tenneco Power Generation Company as an intercompany advance. o. The following subsidiaries will merge into their respective parent corporations as indicated below.
Subsidiary Parent ---------- ------ Holmes Machinery Company The Pullman Company Pullman RSC Company The Pullman Company Pullman Aircraft Products Inc. Pullman Aerospace, Inc. Pullman Aerospace Inc. The Pullman Company Peabody Instruments, Inc. Peabody International Corporation Peabody Noise Control Inc. Peabody International Corporation Holmes Blowers Inc. Peabody International Corporation Peabody Solid Waste Management Inc. - Peabody International Corporation DeWald Peabody ABC Corp. Peabody International Corporation Peabody Pumps, Inc. Peabody International Corporation Galco Inc. Peabody International Corporation
2. Refinancing of TIHC Liquidity Facility and TIHC Loan to Tenneco. Effective as of November 1, 1996, Tenneco International Holdings Corp. (Delaware) ("TIHC") will restructure its credit facility with Tenneco Credit Corporation ("TCC") and its loans to Tenneco as follows: a. Tenneco will transfer to Industrial Company as an intercompany advance an amount of funds equal to $25,000,000. b. Industrial Company will transfer the funds received in step B(2)(a) to Tenneco Automotive Inc. (f/k/a Monroe Auto Equipment Company; see step C(13)) ("TAI") as an intercompany advance. c. TAI will enter into a credit facility with TIHC on terms identical to the terms of the credit facility currently existing between TIHC and TCC. TAI will transfer the funds received in step B(2)(b) to TIHC as an advance of funds under the terms of the TAI/TIHC credit facility. d. Tenneco will transfer to TIHC an amount of funds equal to the accrued balance through October 31, 1996 on TIHC's net intercompany loan to Tenneco, and the loan shall be canceled. e. From the funds received in steps B(2)(c) and B(2)(d), TIHC will transfer to TCC an amount of funds equal to the accrued balance through October 31, 1996 under TIHC's credit facility with TCC, and the credit facility will be terminated. f. TCC will transfer the funds received in step B(2)(e) to Tenneco as an intercompany loan. 9 Project Liza Transaction Steps Page 5 g. TIHC will transfer any funds remaining after the transfer described in step B(2)(e) to Industrial Company as an intercompany loan (on terms substantively identical to the terms of the prior loan to Tenneco). h. Industrial Company will transfer the funds received in step B(2)(g) to Tenneco as an intercompany advance. There will be no actual transfers of funds in step B(2); the intercompany transfers will be accomplished though journal entries. 3. Purchase of Diamond Notes. Sara Lee Corporation currently holds a note issued by Tenneco Packaging Inc. to Diamond International Inc. (the "TPI DIAMOND NOTE") and two notes issued by Tenneco International Inc. ("TII") to Diamond International Inc. (the "TII DIAMOND NOTE"). Tenneco Corporation's distribution of the stock of Shipbuilding Company and Industrial Company in step C(16) may violate certain provisions of a guarantee agreement executed by Tenneco Corporation in connection with the issuance of the Diamond Notes. To eliminate the possibility of a violation of the agreement, the Diamond Notes will be purchased from Sara Lee on November 15, 1996 as follows: a. Tenneco will transfer to Industrial Company as an intercompany advance an amount of funds equal to the purchase price of the TPI Diamond Note ($1,365,000). b. Industrial Company will transfer the funds received in Step B(3)(a) to Tenneco Packaging Inc. as an intercompany advance. c. Tenneco will transfer to TII as an intercompany advance an amount of funds equal to the fair market value of the TII Diamond Notes ($3,769,000 plus $673,000). d. Tenneco Packaging Inc. and TII will transfer the funds received in steps B(3)(b) and B(3)(c) to Sara Lee Corporation in exchange for the TPI Diamond Note and the TII Diamond Note, respectively. Step B(3) will be accomplished by a direct transfer of funds ($5,807,000) from Tenneco to Sara Lee Corporation. The intercompany transfers will be accomplished through journal entries. 4. TCC Sale of Case Receivables. Effective as of December 5, 1996, TCC will sell all of its interest in the receivables relating to the business of Case Corporation (the "CASE RECEIVABLES") to a newly formed wholly owned Industrial Company subsidiary ("TENNECO RETAIL RECEIVABLES COMPANY") as follows: a. Tenneco will transfer to Industrial Company as an intercompany advance an amount of funds equal to the fair market value of the Case Receivables (approximately $160,000,000). 10 Project Liza Transaction Steps Page 6 b. Industrial Company will transfer the funds received in step B(4)(a) to Tenneco Retail Receivables Company as an intercompany advance. c. Tenneco Retail Receivables Company will transfer the funds received in step B(4)(b) to TCC in exchange for the Case Receivables. d. TCC will transfer the funds received in step B(4)(c) to Tenneco as an intercompany loan. e. Tenneco Retail Receivables Company will sell all or a portion of the Case Receivables to a third party for cash. f. Tenneco Retail Receivables Company will transfer the funds received in step B(4)(e) to Industrial Company as a repayment of the intercompany advance received from Industrial Company in step B(4)(b). g. Industrial Company will transfer the funds received in step B(4)(e) to Tenneco as a repayment of the intercompany advance received from Tenneco in step B(4)(a). Tenneco will use the funds to repay short-term borrowings under its credit facility or for other corporate purposes. The funds to be received in step B(4)(e) will be transferred directly from the third party's bank to Tenneco's credit facility administrative agent for credit to Tenneco's account. No other funds transfers will required in step B(4). 5. TCC Transfer of Interest in Industrial Group Receivables. Effective as of December 9, 1996, TCC will transfer all of its interest and obligations associated with the receivables relating to the Industrial Business (the "INDUSTRIAL RECEIVABLES"), including TCC's rights and obligations under agreements with ASCC to the extent related to the Industrial Receivables, to a newly formed wholly owned Industrial Company subsidiary ("TMC TEXAS INC.") as follows: a. Tenneco will transfer to Industrial Company as an intercompany advance an amount of funds equal to the fair market value of the Industrial Receivables ($_________). b. Industrial Company will transfer the funds received in step B(5)(a) to TMC Texas Inc. as an intercompany advance. c. TMC Texas Inc. will transfer the funds received in step B(5)(b) to TCC in exchange for the Industrial Receivables. d. TCC will transfer the funds received in step B(5)(c) to Tenneco as an intercompany loan. 6. Sale of Hvide Van Ommeren Interest. Intentionally omitted. 11 Project Liza Transaction Steps Page 7 7. Termination of Eastern Insurance Company Non-Energy Business a. On June 21, 1996, Eastern Insurance Company Limited ("Eastern") paid a dividend of $20,118,711 out of its earned surplus to TGP. TGP transferred the funds to Tenneco as an intercompany advance. b. On September 23, 1996, Eastern transferred funds to Tenneco Management Company in the amount of $34,200,289 representing the amount described in Section 4.3(c)(i) of the Insurance Agreement attached as Exhibit H to the Distribution Agreement (i.e., "all amounts which appear as reserves on the books and records of the Eastern Insurance Provider as of the Termination Time in respect of claims relating to any Industrial Covered Person which have been reported prior to the Termination Time"). c. Effective as of [October 31, 1996], Eastern will transfer funds to Industrial Company in the amount of $2,181,014 representing the amount described in Section 4.3(c)(iii) of the Insurance Agreement attached as Exhibit H to the Distribution Agreement (i.e., "50% of `incurred but not reported' reserve appearing on the books and records of the Eastern Insurance Provider as of the Termination Time under the excess liability programs of the Eastern Policies with respect to Industrial and Energy"). 8. Consents of Lessors and Creditors. As soon as practical, the following consents will be obtained to permit the transactions contemplated by the Corporate Restructuring Transactions: a. Counce. The lenders under loan agreements with Counce Finance Corporation (the "Counce Noteholders") must consent to the distribution by Tenneco Corporation of substantially all of its assets as contemplated by paragraph 16 of the Corporate Restructuring Transactions and to the transfer of the Counce Limited Partnership partnership interests as contemplated by steps C(6), C(9), and C(15A). b. GECC Leases. The lenders, equity holder, and trustee under the Tenneco Packaging Inc. mill leases must consent to Tenneco Packaging Inc. ceasing to be an affiliate of Tenneco as contemplated by step D(1). c. Tenneco International Holding Corp. MW Investors L.L.C., as holder of the Variable Rate Voting Participating Preferred Stock of Tenneco International Holding Corp., must consent to Tenneco International Holding Corp. ceasing to be an affiliate of Tenneco as contemplated by step D(1). 9. Execution of Underwriting Agreement. On November 12, 1996, Tenneco will enter into a firm commitment underwriting agreement with a group of underwriters relating to the issuance by Tenneco to the underwriters of shares of voting junior preferred stock of Industrial Company ("New Preferred Stock") for $300,000,000 cash less underwriting discount. 10. NPS Issuance. On November 18, 1996, Tenneco will issue the New Preferred Stock to the underwriters in exchange for cash of $300,000,000 less underwriting discount. Tenneco will use the funds to pay down existing credit facilities. 12 Project Liza Transaction Steps Page 8 11. Defeasance of a Portion of Tenneco's Consolidated Debt. On December 6, 1996, Tenneco will defease a portion of the debt of TGP and TCC as follows: a. Tenneco will borrow $283,369,921.01 under Tenneco's existing credit facilities to effect a defeasance of the following debt obligations: --------------------------------------------------------------- Interest Issuer Face Amount Coupon Maturity at Maturity --------------------------------------------------------------- TGP $250,000,000 9.00% 01/15/97 $11,250,000 TCC $7,500,000 8.50% 01/30/97 $318,750 TCC $500,000 8.50% 03/17/97 $21,250 TCC $3,000,000 8.50% 03/24/97 $127,500 TCC $5,000,000 8.52% 03/28/97 $213,000 TCC $6,600,000 8.57% 03/18/97 $282,810 ------------ ----------- Total $272,600,000 $12,213,310 ============ =========== b. Tenneco will transfer $23,237,635.59 to TCC from the funds described in step B(11)(a) to defease the TCC debt identified in step B(11)(a). The transfer will be treated as a payment by Tenneco against its intercompany loan payable to TCC. c. Tenneco will transfer $260,132,285.42 to TGP as an intercompany advance from the funds described in step B(11)(a) to defease the TGP debt identified in step B(11)(a). d. TCC will transfer the funds received in step B(11)(b) to JP Morgan, which will use such funds to purchase U.S. Treasury securities and will transfer such securities to the indenture trustee in accordance with the terms of the indenture relating to TCC's debt obligations identified in step B(11)(a) to effect a legal defeasance of such obligations under the terms of the indenture. e. TGP will transfer the funds received in step B(11)(c) to JP Morgan, which will use such funds to purchase U.S. Treasury securities and will transfer such securities to the indenture trustee in accordance with the terms of the indenture relating to TGP's debt obligations identified in step B(11)(a) to effect a legal defeasance of such obligations under the terms of the indenture. f. The indenture trustee will transfer to Industrial Company any proceeds from the defeasance portfolio (including investment of such proceeds) in excess of the amounts necessary to pay the defeasance debt at maturity. 12. Consent of $4.50 Preferred. Approval of the Transaction requires the affirmative vote of holders of a majority of the outstanding shares of Tenneco's $4.50 Preferred Stock and $7.40 Preferred Stock voting as a class. To ensure that the holders of Tenneco's $4.50 Preferred Stock vote in favor of the transaction, Tenneco will obtain an irrevocable proxy from the holders in exchange for amending the Merger Agreement to fix the formula for determining the number of shares of Acquiror Parent voting common stock to be paid to the holders in the Merger. 13. Declaration of Accrued Dividends. Dividends on $4.50 Preferred Stock otherwise due on March 12, 1997 will be declared on December 4, 1996, payable to holders of record on December 13 Project Liza Transaction Steps Page 9 9, 1996, and payable on December 12, 1996. Dividends on $7.40 Preferred Stock otherwise due on December 31, 1996 will be declared on October 8, 1996, payable to holders of record on November 22, 1996, and payable on December 31, 1996. C. IMPLEMENTATION OF CORPORATE RESTRUCTURING TRANSACTIONS The following transactions will be effected following the receipt of the IRS Ruling Letter and on or before the Distribution Date (December 11, 1996) pursuant to the requirement in Section 2.01 of the Distribution Agreement that the parties and their affiliates "take such action or actions as is necessary to cause, effect and consummate the Corporate Restructuring Transactions." Transactions occurring on the same day shall be deemed to have occurred in the order listed herein regardless of the order in which the documentation is executed, filed, or accepted, and regardless of the order in which the funds or other assets are transferred. 1. Effective as of October 31, 1996, TGP will transfer all of the assets and associated liabilities of and relating to the Walker muffler shop distribution center operation located in Carson, California (the "MSDC BUSINESS") to Tenneco Corporation as a contribution to capital. 2. Effective as of October 31, 1996, Tenneco Corporation will transfer the MSDC Business to Industrial Company as a contribution to capital. Any title transfer documents required for steps C(1) and C(2) should reflect the transfer of the assets directly from TGP to Industrial Company. 3. The following transactions will be effected to implement the requirement that Tenneco Corporation satisfy the active business requirements of I.R.C. Section 355(b): a. Effective as of October 31, 1996, TGP will transfer all of the stock of Midwestern Gas Transmission Company (Delaware) ("MIDWESTERN") to Tenneco Corporation as a contribution to capital. b. Effective as of October 31, 1996, Tenneco Energy Resources Corporation (Delaware) ("TERC") will merge into Channel Industries Gas Company (Delaware) ("CIGC"), a wholly owned subsidiary of TERC, with CIGC as the surviving corporation. In the merger, all of the shares of TERC stock held by Tenneco Corporation will be canceled, and Tenneco Corporation will become the owner of all of the shares of CIGC stock formerly held by TERC. As a result of the merger, CIGC will become a wholly owned direct subsidiary of Tenneco Corporation, and all of TERC's assets other than the stock of CIGC will become assets of CIGC. c. Effective as of October 31, 1996, Tenneco Corporation will transfer to New Midwestern Inc., a newly formed wholly owned subsidiary of Tenneco Corporation, as a contribution to capital all of Tenneco Corporation's Energy Business assets other than stock of subsidiaries, and all of its liabilities other than liabilities for accrued taxes. d. Effective as of October 31, 1996, Tenneco Corporation will transfer to Midwestern as a contribution to capital all of the stock of the following companies: Entrade Engine Company (Kentucky) 14 Project Liza Transaction Steps Page 10 H.T. Gathering Company (Texas)(50%)(1) Petro-Tex Chemical Corporation (Delaware) (in dissolution) SWL Security Corp. (Texas) TGP Corporation (Delaware) Tenneco Minerals Company -- California (Delaware) Tenneco Minerals Company -- Nevada (Delaware) Tenneco OCS Company, Inc. (Delaware) Tenneco Oil Company (Delaware) Tenneco Polymers, Inc. (Delaware) Tennessee Overthrust Gas Company (Delaware) New Midwestern Inc. e. Effective as of October 31, 1996, Tenneco Corporation will transfer to CIGC as a contribution to capital all of the stock owned by Tenneco Corporation in the following companies: Deepsea Ventures, Inc. (Delaware) Tenneco Independent Power I Company (Delaware) Tenneco Independent Power II Company (Delaware) Tenneco Insurance Ventures (Delaware) Tenneco Power Generation Company (Delaware) Following step C(3), Tenneco Corporation will have no assets other than the stock of the following companies: Autopartes Walker, S.A. de C.V. (Mexico) (0.02%) Channel Industries Gas Company (Delaware) Midwestern Gas Transmission Company (Delaware) Newport News Shipbuilding Inc. (Delaware) New Tenneco Inc. (Delaware) Tenneco Deutschland Holdinggesellschaft mbH (Germany) (99.97%) Walker Deutschland GmbH (Germany) (1%) Tenneco International Holding Corp. (7.82% interest in Common Stock) 4. Effective as of October 31, 1996, Tenneco will transfer to TGP as a contribution to capital all of its assets other than cash, the interest rate swap contracts entered into in August 1996 relating to the Consolidated Debt, the note receivable from I.C.H. Corporation, the stock to be transferred in step C(12), and the stock of TGP, and all of its liabilities other than the Consolidated Debt issued by Tenneco, accrued taxes, unpaid dividends, and the intercompany payables due to Industrial Company and Shipbuilding Company. The assets to be transferred to TGP include stock of the following companies: - ------------- (1) Tenneco Corporation owns 50% of the issued and outstanding Class A Voting Stock and 20% of the Class B Nonvoting Stock, 29% of the total equity, and Houston Pipe Line Company, an unaffiliated company, owns 50% of the issued and outstanding Class A Voting Stock and 80% of the Class B Nonvoting Stock, 71% of the total equity. 15 Project Liza Transaction Steps Page 11 Greater Houston Small Business Equity Fund, Inc. (Texas) Kern County Land Company (Delaware) MESBIC Financial Corporation of Houston (Texas) Tenneco Credit Corporation (Delaware) Tenneco MLP Inc. (Delaware) 5. Effective as of October 31, 1996. Newport News Industrial Corporation (Virginia) will transfer all of its assets and trade accounts payable to Shipbuilding Company in exchange for a Shipbuilding Company $4,000,000 promissory note. 6. Subject to receipt of the consent of the Counce Noteholders referred to in step B(8)(a), effective as of November 30, 1996 TCC will transfer all of its interest as a limited partner in Counce Limited Partnership, a Texas Limited Partnership ("Counce"), to Tenneco Corporation in exchange for Voting Preferred Stock of Tenneco Corporation having a fair market value equal to the aggregate appraised value of the partnership interest transferred by TCC. 7. Effective as of November 30, 1996, Tenneco Equipment Corporation ("TEC") will transfer (a) all of TEC's interest in the shares of the Common Stock of TIHC, and (b) all of TEC's interest in the shares of $8.00 Junior Preferred Stock of TIHC to Tenneco Corporation in exchange for Voting Preferred Stock of Tenneco Corporation having a fair market value equal to the aggregate appraised value of the stock transferred by TEC. 8. Effective as of November 30, 1996, TII will transfer all of its ownership interest (100% unless otherwise indicated) in the following companies to Tenneco Corporation in exchange for (a) a $50,000 promissory note issued by Tenneco Corporation and (b) Voting Preferred Stock of Tenneco Corporation. The consideration issued by Tenneco Corporation will have an aggregate fair market value equal to the aggregate appraised value of the stock transferred by TII. Autopartes Walker, S.A. de C.V. (Mexico) (0.02%) Omni-Pac GmbH (Germany) (1%) Omni-Pac S.A.R.L. (France) (97%) Tenneco Automotive Trading Company Tenneco International Holding Corp. (761.84% interest in Common Stock and 50% interest in $8.00 Junior Preferred Stock) Tenneco United Kingdom Holdings, Limited Walker Europe, Inc. Walker Norge A/S (Norway) 9. Subject to receipt of the consent of the Counce Noteholders referred to in step B(8)(a), effective as of November 30, 1996 Shipbuilding Company will transfer its interest as general partner in Counce Limited Partnership to PCA Leasing Company as a contribution to capital. 10A. On or shortly before the Distribution Date, Shipbuilding Company will issue $400,000,000 principal amount of high-yield notes, the proceeds of which (after payment of issuance expenses) will be placed in an escrow amount until the Distribution Date, at which time the funds 16 Project Liza Transaction Steps Page 12 will be transferred to Shipbuilding Company account number 910-2-780 609 at The Chase Manhattan Bank. 10B. On the Distribution Date, Shipbuilding Company will borrow $215,000,000 under its credit facility. The funds will be deposited in Shipbuilding Company account number 910-2-780 609 at The Chase Manhattan Bank. From the proceeds of the credit facility borrowing and the proceeds of the high-yield notes released from the escrow described in step C(10A), Shipbuilding Company will transfer $600,000,000 to NNS Delaware Management Company as a contribution to capital. NNS Delaware Management Company will loan the funds to Newport News Shipbuilding and Dry Dock Company. Newport News Shipbuilding and Dry Dock Company will transfer the proceeds of the loan, plus Shipbuilding Company's net intercompany receivable from Tenneco, to Tenneco Corporation as a dividend. Tenneco Corporation will loan the funds received from Shipbuilding Company to Tenneco. Tenneco will use all of the funds to retire existing TGP debt as contemplated by the tender offers described in step C(16B), and to retire existing Tenneco and TCC debt as contemplated by step C(20). To document that the funds received by Tenneco were used to retire debt, the funds will be transferred directly from Shipbuilding Company account number 910-2-780 609 at The Chase Manhattan Bank to the account to be used by The Chase Manhattan Bank as Depositary for the offers to purchase debt of TGP, TCC, and Tenneco as contemplated by steps C(16B) and C(20)(account number 910-2-758 084). 11. On the Distribution Date following consummation of step C(10B), Shipbuilding Company will transfer all of its stock in Tenneco Packaging Inc. to Tenneco Corporation as a distribution with respect to stock (i.e., return of contributed surplus), and will transfer all of its stock of PCA Leasing Company as a dividend. 12. Effective as of October 31, 1996, Tenneco will transfer all of its ownership interest (100% unless otherwise indicated) in the following companies to TGP as a contribution to capital and in exchange and consideration for additional shares of stock of TGP. Autopartes Walker, S.A. de C.V.(Mexico)(0.02%) Tenneco Windsor Box & Display Inc. (f/k/a DeLine Box & Display, Inc.) Tenneco Asia Inc. Tenneco Brazil Ltda. (Brazil) Tenneco Business Services Holdings Inc. (f/k/a Tenneco Business Services, Inc.) Tenneco Foam Products Company (f/k/a Amoco Foam Products Company) Tenneco Management Company (f/k/a 1275, Inc.) 13. Effective of October 31, 1996, Monroe Auto Equipment Company will change its name to Tenneco Automotive Inc., and will create three divisions: Monroe Auto Equipment Company division Walker Manufacturing Company division Tenneco Automotive Headquarters division 17 Project Liza Transaction Steps Page 13 Effective as of October 31, 1996 following the name change referred to in the previous sentence. TGP will transfer all of the assets and related liabilities of the Walker Manufacturing Company division of TGP (other than MSDC Business transferred in step C(1) and (2)) to the Walker Manufacturing Company division of Tenneco Automotive Inc., and will transfer all of the assets and liabilities of the Tenneco Automotive Headquarters Division to the Tenneco Automotive Headquarters division of Tenneco Automotive Inc., in each case as a contribution to capital. For purposes of this transfer, TGP's Asheville, N.C. plant shall not be treated as part of the Walker Manufacturing Company division's assets nor as part of the Tenneco Automotive Headquarters Division's assets. See Step 21 for the transfer of the Asheville, N.C. property. 14. Effective of October 31, 1996 following consummation of step C(12), TGP will transfer all of its ownership interest (100% unless otherwise indicated) in the following assets to Tenneco Corporation as a contribution to capital and in exchange and consideration for additional shares of common stock of Tenneco Corporation. Autopartes Walker, S.A. de C.V. (Mexico)(99.94%)(2) Tenneco Automotive Inc. (f/k/a Monroe Auto Equipment Company) Monroe-Mexico S.A. de C.V. (Mexico)(0.01%) Proveedors Walker S.A. de C.V. (Mexico)(99.99%)(3) Tenneco Automotive Foreign Sales Corporation Ltd. (Jamaica)(1%) Tenneco Brake, Inc. Walker Electronic Silencing, Inc. Walker Manufacturing Company STOCK RECEIVED IN STEP(12) ABOVE -------------------------------- Tenneco Windsor Box & Display Inc. (f/k/a DeLine Box & Display, Inc.) Tenneco Asia Inc. Tenneco Brazil Ltda. (Brazil) Tenneco Business Services Holdings Inc. (f/k/a/ Tenneco Business Services Inc.) Tenneco Foam Products Company (f/k/a Amoco Foam Products Company) Tenneco Management Company (f/k/a 1275, Inc.) Tenneco Moorhead Acquisition, Inc. Tenneco Packaging Hungary Holdings Inc. Tenneco Romania Holdings Inc. - --------------- (2) Includes 0.02% interest acquired from Tenneco in step 12 above. (3) TGP owns 49,999 shares, and Tenneco Automotive Inc. (f/k/a Monroe Auto Equipment Company) owns 1 share. 18 Project Liza Transaction Steps Page 14 15A. Effective as of October 31, 1996 following the consummation of step C(14), Tenneco Corporation will transfer all of its ownership interest (100% unless otherwise indicated) in the following entities to Industrial Company as a contribution to capital and in exchange and consideration for additional shares of stock Industrial Company. STOCK OWNED AT OCTOBER 30, 1996 ------------------------------- Tenneco Deutschland Holdinggesellschaft mbH (Germany) Tenneco Inc. (Nevada) Walker Deutschland GmbH (Germany)(1%) STOCK AND ASSETS RECEIVED IN STEP (14) --------------------------------------- Autopartes Walker, S.A. de C.V. (Mexico)(99.96%)(4) Tenneco Automotive Inc. (f/k/a Monroe Auto Equipment Company) Monroe-Mexico S.A. de C.V. (Mexico)(0.01%) Proveedora Walker S.A. de C.V. (Mexico)(99.99%) Tenneco Automotive Foreign Sales Corporation Ltd. (Jamaica)(1%) Tenneco Brake, Inc. Walker Electronic Silencing, Inc. Walker Manufacturing Company Tenneco Windsor Box & Display Inc. (f/k/a DeLine Box & Display Inc.) Tenneco Asia Inc. Tenneco Brazil Ltda. (Brazil) Tenneco Business Services Holdings, Inc. (f/k/a Tenneco Business Services Inc.) Tenneco Foam Products Company (f/k/a Amoco Foam Products Company) Tenneco Management Company (f/k/a 1275, Inc.) Tenneco Moorehead Acquisition Inc. Tenneco Packaging Hungary Holdings, Inc. Tenneco Romania Holdings, Inc. 15B. Effective as of December 4, 1997 or December 6, 1996, TGP will transfer to Tenneco Management Company as a contribution to capital the following assets: a. All trademarks, trade names, service marks, company or operating unit names containing the word "Tenneco" or any variation of the name "Tenneco", such as those names with a "Tenn" of "Ten" syllable and respective applications or registrations therefor wherever used or registered, except that Tenneco and other members of the Energy Group shall retain the right to use the name "Tennessee" in their respective corporate names or otherwise in respect of the Energy Business. - --------------- (4) Includes: 0.02% interest owned by Tenneco Corporation at 12/31/95; and 99.94% accepted from TGP. Tenneco Automotive Inc. (f/d/a Monroe Auto Equipment Company) continues to own 0.02% of the stock. 19 Project Liza Transaction Steps Page 15 b. All other intellectual property that does not solely and directly relate to the Energy Business and/or the Shipbuilding Business, including but not limited to patents, copyrights, trademarks, service marks, tradenames, know-how, trade secrets, licenses and rights therein. 15C. Effective as of November 30, 1996 following the consummation of steps C(6) through C(8), Tenneco Corporation will transfer all of its ownership interest (100% unless otherwise indicated) in the following entities to Industrial Company as a contribution to capital and in exchange and consideration for additional shares of stock of Industrial Company. The transfer of the Counce Limited Partnership interest is subject to receipt of the consent of the Counce Noteholders referred to in step B(8)(a). STOCK AND PARTNERSHIP INTEREST RECEIVED IN STEPS (6)-(8) Counce Limited Partnership (95% limited partner interest) Tenneco International Holding Corp. (100% interest in Common Stock and 100% interest in $8.00 Junior Preferred Stock) Autopartes Walker, S.A. de C.V. (Mexico)(0.02%) Omni-Pac GmbH (Germany)(1%) Omni-Pac S.A.R.L. (France)(97%) Tenneco Automotive Trading Company Tenneco United Kingdom Holdings Limited Walker Europe, Inc. Walker Norge A/S (Norway) 15D. Effective as of December 1, 1996, TGP will transfer to Tenneco Corporation as a contribution to capital the assets listed on Schedule I. Tenneco Corporation will transfer the assets to Industrial Company as a contribution to capital. Industrial Company will transfer the assets to Tenneco Management Company as a contribution to capital.(5) 15E. On the Distribution Date following the consummation of step C(11), Tenneco Corporation will transfer the stock of the following entities to Industrial Company as a contribution to capital: STOCK RECEIVED IN STEP (11) Tenneco Packaging Inc. PCA Leasing Company 15F. On the Distribution Date following the consummation of steps C(1) through C(15E), Tenneco Corporation will transfer all of its assets (excluding the stock of Industrial Company, Shipbuilding Company, Midwestern, and CIGC, but including the intercompany receivable from Tenneco received in step C(10B)) and all of its liabilities (excluding liabilities for accrued taxes) to Midwestern as a contribution to capital. Midwestern will transfer such assets and liabilities to New - --------------- (5) These transfers are being effected as of December 1, 1996 because the transfer of the partnership interest in Waukegan Corporate Aviation Facilities cannot become effective earlier than the first day of the month following the month in which the transfer is approved by the partnership. 20 Project Liza Transaction Steps Page 16 Midwestern as a contribution to capital. Tenneco Corporation shall not acquire any assets following the consummation of step C(15F) and Tenneco Corporation and Midwestern will enter in to an agreement pursuant to which any assets inadvertently acquired by Tenneco Corporation following the consummation of step C(15F) will be deemed contributed to the capital of Midwestern immediately upon acquisition without any further action by the parties. 16A. On the Distribution Date following the consummation of steps C(1) through C(15), Tenneco Corporation will transfer all of the stock of Shipbuilding Company and Industrial Company of TGP as a distribution with respect to stock (i.e., return of contributed surplus). 16B. On the Distribution Date following the consummation of step C(16A) and prior to the consummation of step C(17), Tenneco will purchase the debt of TGP as follows: a. Pursuant to a tender offer made on November 8, 1996, Tenneco will purchase the debt of TGP validly tendered by the holders (and not withdrawn) at or prior to 5:00 p.m. New York City Time on December 10, 1996 (the "Expiration Time").(6) Using the funds received by Tenneco in step C(10B) (which are being are being held by the Chase Manhattan Bank as Depositary for the offers to purchase TGP, TCC, and Tenneco debt), on the Distribution Date Tenneco will purchase the tendered TGP debt, excluding interest to be paid by TGP. Also on the Distribution Date, TGP will transfer to The Chase Manhattan Bank as Depositary for the tender offers an amount of funds equal to the interest to be paid by TGP pursuant to the terms of the tender offer. To document TGP's payment of interest on the tendered debt, on the Distribution Date Tenneco will make an actual transfer of funds into a TGP account (as an intercompany advance), and TGP will transfer funds from that account to Chase's Depositary account. b. Tenneco will transfer the TGP debt acquired in step C(16)(a) to TGP in exchange for cash equal to Tenneco's cost of acquiring the debt (including fees and expenses paid by Tenneco in connection with the purchase of the TGP debt, but excluding accrued interest paid by TGP), thereby extinguishing the debt. c. Tenneco will transfer the cash received in step C(16B)(b) to TGP as an intercompany advance. The transfers of cash described in steps C(16B)(b) and C(16B)(c) will be accomplished using a daylight overdraft. 17. On the Distribution Date following the consummation of steps C(16A) and C(16B), TGP will transfer all of the stock of Shipbuilding Company and Industrial Company to Tenneco as a distribution with respect to stock (i.e., return of contributed surplus). 18. On the Distribution Date following the consummation of step C(17), Industrial Company will transfer to Tenneco as a dividend the net intercompany account payable owed by Tenneco to Industrial Company. - --------------- (6) These Transaction Steps assume that the tender offer will not be extended or earlier terminated. 21 Project Liza Transaction Steps Page 17 19. On the Distribution Date following the consummation of step C(17), Industrial Company will participate in the Debt Realignment as follows: a. Industrial Company will borrow $347,000,000 under a new credit facility an amount equal to the amount necessary to fund, after payment of credit facility expenses, a dividend to Tenneco (see step C(19)(d)) which, when used by Tenneco to fund the retirement of debt pursuant to the Tenneco debt tender offer, will cause the Actual Energy Debt Amount to be equal to the Base Amount, as estimated on the Distribution Date. b. Industrial Company's offer to exchange up to $1,950,000,000 face amount of Industrial Company debt for certain Tenneco debt will expire at 5:00 p.m. New York City time on December 10, 1996 (the "expiration time").(7) Pursuant to the exchange offer, Industrial Company will accept for exchange Tenneco debt validly tendered and not withdrawn as of the expiration time, and will acquire such Tenneco debt by issuing new debt in exchange therefor on the first NYSE trading day following the expiration time (the "issuance date," which is also the Distribution Date). On the Distribution Date, Industrial Company will deliver the new debt certificates to The Chase Manhattan Bank as exchange agent for the holders of Tenneco debt participating in the exchange. The exchange agent will deliver the new debt certificates to such holders on the third trading day following the expiration time (the "exchange date"). Also on the Distribution Date, Industrial Company will transfer cash (from the funds received in step C(19)(a)) to the exchange agent equal to the amount of interest accrued on the exchanged Tenneco debt up to but excluding the issuance date; provided that Tenneco, and not Industrial Company, will pay accrued interest up to the issuance date on exchanged Tenneco debt for which the record date for any interest payment is prior to the Distribution Date and for which the payment date for such interest payment is after the issuance date. Interest on the new debt will accrue from and including the issuance date ("straddle interest"). To document Tenneco's payment of straddle interest on the exchange debt as required by the exchange offer, Tenneco will transfer funds equal to the required payment of straddle interest from a Tenneco Inc. account to the account to be used by The Chase Manhattan Bank as exchange agent for the payment of such interest pursuant to the exchange offer. c. Tenneco will transfer to Industrial Company in exchange for the Tenneco debt acquired by Industrial Company in step C(19)(b) an amount of funds equal to the fair market value of the debt issued by Industrial Company to acquire the Tenneco debt in step C(19)(b), plus the accrued interest to be paid by Industrial Company on the Tenneco debt, plus any fees and expenses incurred by Industrial Company in connection with the exchange. d. Industrial Company will transfer to Tenneco as a dividend the funds received in steps C(19)(a) and C(19)(c) remaining after payment of accrued interest on the tendered Tenneco debt and expenses related to the credit facility and debt exchange. To document that the funds received in step C(19)(a) and transferred to Tenneco in step C(19)(d) were used by Tenneco to retire debt, the funds will be transferred directly from Morgan Guaranty - ---------- (7) These Transaction Steps assume that the exchange offer will not be extended or earlier terminated. 22 Project Liza Transaction Steps Page 18 Trust Company of New York as administrative agent for the lenders under the Industrial Company credit facility of The Chase Manhattan Bank as Depositary for the Tenneco debt tender offer (see step C(20)(b)). The funds to be received by Industrial Company in step C(19)(c) and then transferred to Tenneco in step C(19)(d) will be arranged under a daylight overdraft facility. 20. On the Distribution Date following the consummation of step C(17), Tenneco will participate in the Debt Realignment as follows: a. Tenneco will borrow $2,164,000,000 under a new credit facility (the "Tenneco Credit Facility") an amount equal to the amount necessary to cause the Actual Energy Debt Amount to be equal to the Base Amount, as estimated on the Distribution Date, taking into account funds utilized in the Debt Realignment. b. Pursuant to a tender offer made on November 8, 1996, Tenneco will purchase the debt of Tenneco and TCC validly tendered by the holders (and not withdrawn) at or prior to 5:00 p.m. New York City Time on December 10, 1996 (the "Expiration Time").(3) From the funds received in step C(20)(a), on the Distribution Date Tenneco will transfer to The Chase Manhattan Bank as Depositary for the tender offers an amount of funds sufficient to fund the purchases of the tendered Tenneco and TCC debt, taking into account the funds deposited with Chase as Depositary as described in steps C(10B) and C(19)(d) and the utilization of a portion of such funds as contemplated by step C(16B)(a). Chase will use such funds to effect the purchases of the tendered Tenneco and TCC debt on behalf of Tenneco. c. Tenneco will transfer to TCC the debt of TCC acquired in step C(20)(b) in exchange for cash equal to Tenneco's cost of acquiring the TCC debt, including accrued interest plus any fees and expenses incurred by Tenneco in connection with the acquisition of the TCC debt. Tenneco will use the cash to repay its intercompany loan from TCC or to make an intercompany advance to TCC. Step C(20)(c) will be accompanied using a daylight overdraft. d. Tenneco will repay all of its outstanding bank debt and commercial paper, pay transaction expenses, transfer funds to Shipbuilding Company and TGP as necessary to fund the Guaranteed Shipbuilding Cash Amount and the Guaranteed Energy Cash Amount, respectively (as defined in the Debt and Cash Allocation Agreement), and fund cash expenditures of Tenneco and its affiliates for the Distribution Date. To the extent the Shipbuilding Group cash and cash equivalents on the Distribution Date (taking into account all of the foregoing transactions) exceeds the Guaranteed Shipbuilding Cash Amount, the excess shall be transferred by Shipbuilding Company to Tenneco as a dividend. To the extent the Energy Group cash and cash equivalents on the Distribution Date (taking into account all of the foregoing transactions, and including the dividend described in the previous sentence) exceeds the Guaranteed Energy Cash Amount, Tenneco shall transfer such excess to Industrial Company as a contribution to capital. e. Tenneco will transfer to TGP as a contribution to capital all of its assets other than the stock of TGP and the note receivable from I.C.H. Corporation, and all of its liabilities other than - ------------------ (3) These Transaction Steps assume that the tender offer will not be extended or earlier terminated. 23 Project Liza Transaction Steps Page 19 the Consolidated Debt issued by Tenneco (as defined in the Debt Realignment Plan attached as Exhibit C to the Merger Agreement, including the untendered portions of Tenneco public debt and the Tenneco Revolving Debt incurred under the Tenneco Credit Facility), accrued taxes, and unpaid dividends. Following step 20, Tenneco should have no assets other than the stock of TGP and the note receivable from I.C.H. Corporation, and no liabilities other than the Tenneco Credit Facility, the untendered portion of the Tenneco Consolidated Debt, accrued taxes, and unpaid dividends. Tenneco shall not acquire any assets following the consummation of step 20, and Tenneco and TGP will enter into an agreement pursuant to which any assets inadvertently acquired by Tenneco following the consummation of step 20 will be deemed contributed to the capital of TGP immediately upon acquisition without any further action by the parties. 21. Effective as of November 30, 1996, TGP will transfer to Tenneco Asheville Inc., a newly formed wholly owned subsidiary of TGP, as a contribution to capital the assets and liabilities associated with the Walker Manufacturing property located in Asheville, NC. TGP will then transfer the stock of Tenneco Asheville Inc. to Tenneco Corporation as a contribution to capital, and Tenneco Corporation will transfer the stock of Tenneco Asheville Inc. to Industrial Company as a contribution to capital. 22. Effective as of November 1, 1996, Tenneco Liquidation Company (formerly Tenneco Business Services Inc.) will transfer all of its assets and liabilities to Tenneco Business Services Inc. (formerly Tenneco Technology Services Inc.). Tenneco Liquidation Company will change its name to Tenneco Business Services Holdings Inc. 23. On the Distribution Date immediately before the Distributions, Industrial Company and Shipbuilding Company will issued a stock dividend to Tenneco as provided in Section 2.02 of the Distribution Agreement. D. DISTRIBUTIONS AND MERGER 1. On the Distribution Date following the consummation of steps C(1) through C(23), Tenneco will distribute all of the stock of Industrial Company and Shipbuilding Company to Tenneco shareholders as a distribution with respect to stock (i.e., return of contributed surplus) pro rata on the basis of one share of Industrial Company stock for one share of Tenneco common stock outstanding and on the basis of one share of Shipbuilding Company stock for five shares of Tenneco common stock outstanding. Cash will be paid in lieu of issuing fractional shares of Shipbuilding Company stock. Each share of stock of Industrial Company and Shipbuilding Company will have attached to it stock purchase rights (the "Rights") which will entitle the holder to purchase certain stock of Industrial Company or Shipbuilding Company, as the case may be, upon the occurrence of certain triggering events. 2. Effective as of the Distribution Date, the account of the employees of the Shipbuilding Business in the Tenneco Thrift Plan will be transferred to a Shipbuilding Company qualified plan (the "Shipbuilding Company Thrift Plan") as of the distribution date. The Shipbuilding Company Thrift Plan will include an employee stock ownership plan ("ESOP"), and Shipbuilding Company 24 Project Liza Transaction Steps Page 20 stock received with respect to Tenneco stock on their accounts will held subject to the terms of the ESOP. 3. Effective as of 8:00 a.m. EST on the day following the Distribution Date, Industrial Company, Acquiror, Acquiror Sub A1, and Acquiror Parent will consummate the merger of Acquiror Sub A1 into Tenneco (the "Merger"). E. POST-MERGER TRANSACTIONS 1. [Despite transfers of 401(k) accounts and communication of opportunity to sell shares of non-employer stock.] 2. [Describe settlement of cash under Debt and Cash Allocation Agreement. If there is a transfer of excess cash from Shipbuilding Company to Industrial Company, the transfer should be treated as dividend by Shipbuilding Company to Tenneco and a contribution by Tenneco to the capital of Industrial Company immediately prior to step D(1). If there is a transfer of cash from Industrial Company to Shipbuilding Company, the transfer should be treated as dividend by Industrial Company to Tenneco and a contribution by Tenneco to the capital of Shipbuilding Company immediately prior to step D(1). Any transfer of cash from Tenneco to Industrial Company should be treated as a contribution by Tenneco to the capital Industrial Company immediately prior to step D(1), and any transfer of cash from Industrial Company to Tenneco should be treated as a dividend by Industrial Company to Tenneco immediately prior to step D(1).] 3. Effective as of December 12, 1996, Tenneco will make arrangements for the funding of the Energy Business cash requirements without flowing cash through Tenneco and without creating any intercompany receivables held by Tenneco. As soon as practical after the Effective Time, Tenneco will close all of its bank accounts. 25 Project Liza Transaction Steps Page 21 Schedule 1 Pursuant to the Corporate Restructuring Transactions, the following assets owned by TGP shall be transferred to Tenneco Management Company. 1. Aviation Assets. a. All fixed wing corporate aircraft (except the Gulfstream G-II, serial number 248, and Rolls Royce Spey Model 511-8 engines, manufacturer's Serial Numbers 9816 and 9844), and spare parts for the aircraft which as of the Effective time will not have a net book value in excess of $1 million. b. Limited partner interest in the Waukegan Corporate Aviation Facilities, an Illinois limited partnership (which owns the Waukegan, Illinois airport hanger facility and common facilities), the furniture, fixtures, and equipment owned by TGP located at the Waukegan aviation facilities, the stock of Corporate Hangar Services, Inc., an Illinois corporation (which is the corporate general partner of Waukegan Corporate Aviation Facility), and TGP's sublease of the aviation facilities from Waukegan Corporate Aviation Facilities. c. Certain furniture, fixtures, and equipment located in the Houston, Texas airport hangar facilities associated with the fixed-wing aircraft described in clause (a), which at the Effective Time will not have a net book value in excess of $1 million. 2. Furniture, Fixtures, and Equipment. Furniture, fixtures, and equipment (including furnishings and computer equipment) which as of the Effective Time will not have a net book value in excess of $2 million located in: a. Greenwich, CT Management Center. b. Washington, D.C. office. c. Houston, Texas office. 3. Albright & Wilson Note. The long-term note receivable from Albright & Wilson Americas Inc. in the amount of $6,936,384 as of October 31, 1996. 26 Exhibit E to the Distribution Agreement 27 ENERGY SUBSIDIARIES Subsidiaries of Tenneco Inc. (Delaware) Tennessee Gas Pipeline Company (Delaware)............................. 100% Altamont Service Corporation (Delaware)............................ 100 Altamont Gas Transmission Canada Limited (Canada)............... 100 (Altamont Service Corporation is the registered holder of all of the issued and outstanding shares of Altamont Gas Transmission Canada Limited, as Trustee for Altamont Gas Transmission Company, a Joint Venture) Border Gas Inc. (Delaware) (a close corp.)......................... 37.5 (Tennessee Gas Pipeline Company owns 100% of the Class A Common Stock, 37.5% of the total equity, and 37.5% of the total voting stock; unaffiliated companies (Texas Eastern Transmission Corporation, El Paso Natural Gas Company, Transcontinental Gas Pipe Line Corporation, Southern Natural Gas Company, and Florida Gas Transmission Company) own the remaining stock and equity. Eastern Insurance Company Limited (Bermuda)........................ 100 East Tennessee Natural Gas Company (Tennessee)..................... 100 Tenneco East Natural Gas L.P. (Delaware Limited Partnership).... 1 (East Tennessee Natural Gas Company, as General Partner, owns 1%; and Tenneco East Corporation, as Limited Partner, owns 99%) Energy TRACS, Inc. (Delaware)...................................... 100 Greater Houston Small Business Equity Funds, Inc. (Texas).......... ?? Kern County Land Company (Delaware)................................ 100 Tenneco Equipment Corporation (Delaware)........................ 100 Marlin Drilling Co., Inc. (Delaware) Bluefin Supply Company (Delaware)......................... 100 Marlin do Brasil Perfuacees Maritimas Ltda. (Brazil)...... 0.16 (in dissolution) (Bluefin Supply Company owns 0.16%; and Marling Drilling Co., Inc. owns 99.84%) Marlin do Brasil Perfuacees Maritimas Ltda. (Brazil)...... 99.84 (in dissolution) (Marlin Drilling Co., Inc. owns 99.84%; and Bluefin Supply Company owns 0.16%) Tenneco Equipment Holding I Company (Delaware)............... 100 Tenneco Equipment Holding II Company (Delaware).............. 100 Tenneco Equipment Holding III Company (Delaware)............. 100 Tenneco Equipment Holding V Company (North Dakota)........ 100 Tenneco Equipment Holding IV Company (Wisconsin)............. 100 Tenneco Equipment Holding VI Company (Illinois).............. 100 Tenneco West, Inc. (Delaware)................................... 100 Kern County Land Company, Inc. (California).................. 100 Kern River Corporation (Delaware).................................. 0.01 Land Ventures, Inc. (Delaware)..................................... 100 MESBIC Financial Corporation of Houston (Texas).................... ?? Midwestern Gas Marketing Company (Delaware)........................ 100 Mont Belvieu Land Company (Delaware)............................... 100
1 28 ENERGY SUBSIDIARIES Subsidiaries of Tenneco Inc. Subsidiaries of Tennessee Gas Pipeline Company New Tenn Company (Delaware)...................................... 100 (New Tenn Company and New Tennessee Gas Pipeline are in the process of being merged into Tennessee Gas Pipeline Company.) New Tennessee Gas Pipeline Company (Delaware).................... 100 (New Tenn Company and New Tennessee Gas Pipeline are in the process of being merged into Tennessee Gas Pipeline Company.) S.K. Petroleum Company (Delaware)................................ 100 Sandbar Petroleum Company (Delaware)............................. 100 Tennchase Inc. (Texas)........................................... 100 Tenneco Alaska, Inc. (Alaska).................................... 100 Tenneco-Altamont Corporation (Delaware).......................... 100 Altamont Gas Transmission Company (Delaware Joint Venture).... 53,34 (Tenneco-Altamont Corporation owns 53-1/8%; Amoco Altamont Company, an unaffiliated company, owns 33-1/8%; and Entech Altamont, Inc., an unaffiliated company, owns 13-1/8%.) Tenneco Argentina Corporation (Delaware)......................... 100 Tenneco Baja California Corporation (Delaware)................... 100 Tenneco Communications Corporation (Delaware).................... 100 Tenneco Corporation (Delaware)................................... 100 (Tennessee Gas Pipeline Company owns 100% of the Common Stock; Tenneco Credit Corporation owns ___% of the Second Preferred Stock; Tenneco Equipment Corporation owns ___% of the Second Preferred Stock; and Tenneco International Inc. owns ___% of the Second Preferred Stock.) Channel Industries Gas Company (Delaware)...................... 100 Tenneco Energy Marketing Company (Kentucky)................. 100 Creole Gas Pipeline Corporation (Louisiana).............. 100 Entrade Pipeline Company (Kentucky)...................... 100 Channel Gas Marketing Company (Delaware).................... 100 Oasis Pipe Line Company (Delaware)....................... 30 (Channel Gas Marketing Company owns 100% of the issued and outstanding Series B Preference Stock and 30% of the Common Stock, 30% of total equity; Dow Chemical Company, an unaffiliated company owns 100% of the issued and outstanding Series A Preference Stock and 70% of the Common Stock, 70% of total equity.) Tenneco Gas Processing Company (Delaware)................... 100 Tenneco Independent Power I Company (Delaware).............. 100 Tenneco Independent Power II Company (Delaware)............. 100 Tenneco Insurance Ventures (Delaware)....................... 100 Tenneco Offshore Gathering Company (Delaware)............... 100 Tenneco Gas Marketing Company (Delaware).................... 100
2 29 ENERGY SUBSIDIARIES
Subsidiaries of Tenneco Inc. (Delaware) Tennessee Gas Pipeline Company (Delaware) .............................. 100% Altamont Service Corporation (Delaware) ............................. 100 Altamont Gas Transmission Canada Limited (Canada) ................ 100 (Altamont Service Corporation is the registered holder of all the issued and outstanding shares of Altamont Gas Transmission Canada Limited, as Trustee for Altamont Gas Transmission Company, a Joint Venture) Border Gas Inc. (Delaware) (a close corp.) ......................... 37.5 (Tennessee Gas Pipeline Company owns 100% of the Class A Common Stock, 37.5% of the total equity, and 37.5% of the total voting stock; unaffiliated companies (Texas Eastern Transmission Corporation, El Paso Natural Gas Company, Transcontinental Gas Pipe Line Corporation, Southern Natural Gas Company, and Florida Gas Transmission Company) own the remaining stock and equity. Eastern Insurance Company Limited (Bermuda) ......................... 100 East Tennessee Natural Gas Company (Tennessee) ...................... 100 Tenneco East Natural Gas L.P. (Delaware Limited Partnership) ..... 1 (East Tennessee Natural Gas Company, as General Partner, owns 1%; and Tenneco East Corporation, as Limited Partner, owns 99%.) Energy TRACS, Inc. (Delaware) ....................................... 100 Greater Houston Small Business Equity Fund, Inc. (Texas) ............ ?? Kern County Land Company (Delaware) ................................. 100 Tenneco Equipment Corporation (Delaware) ......................... 100 Marlin Drilling Co., Inc. (Delaware) Bluefin Supply Company (Delaware) .......................... 100 Marlin do Brasil Perfuacees Martimas Ltda. (Brazil) ....... 0.16 (in dissolution) (Bluefin Supply Company owns 0.16%; and Marlin Drilling Co., Inc. owns 99.84%) Marlin do Brasil Perfuacees Martimas Ltda. (Brazil) ...... 99.84 (in dissolution) (Marlin Drilling Co., Inc. owns 99.84%; and Bluefin Supply Company owns 0.16%) Tenneco Equipment Holding I Company (Delaware) ................ 100 Tenneco Equipment Holding II Company (Delaware) ............... 100 Tenneco Equipment Holding III Company (Delaware) .............. 100 Tenneco Equipment Holding V Company (North Dakota) ......... 100 Tenneco Equipment Holding IV Company (Wisconsin) .............. 100 Tenneco Equipment Holding VI Company (Illinois) ............... 100 Tenneco West, Inc. (Delaware) .................................... 100 Kern County Land Company, Inc. (California) ................... 100 Kern River Corporation (Delaware) .................................. 0.01 Land Ventures, Inc. (Delaware) ...................................... 100 MESBIC Financial Corporation of Houston (Texas) ..................... ?? Midwestern Gas Marketing Company (Delaware) ......................... 100 Mont Belvieu Land Company (Delaware) ................................ 100
1 30 ENERGY SUBSIDIARIES
Subsidiaries of Tenneco Inc. Subsidiaries of Tennessee Gas Pipeline Company New Tenn Company (Delaware) ......................................... 100 (New Tenn Company and New Tennessee Gas Pipeline are in the process of being merged into Tennessee Gas Pipeline Company.) New Tennessee Gas Pipeline Company (Delaware) ....................... 100 (New Tenn Company and New Tennessee Gas Pipeline are in the process of being merged into Tennessee Gas Pipeline Company.) S.K. Petroleum Company (Delaware) ................................... 100 Sandbar Petroleum Company (Delaware) ................................ 100 Tennchase Inc. (Texas) .............................................. 100 Tenneco Alaska, Inc. (Alaska) ....................................... 100 Tenneco-Altamont Corporation (Delaware) ............................. 100 Altamont Gas Transmission Company (Delaware Joint Venture) ..... 53.34 (Tenneco-Altamont Corporation owns 53 1/3%; Amoco Altamont Company, and unaffiliated company, owns 33 1/3%; and Entech Altamont, Inc. and unaffiliated company, owns 13 1/3%) Tenneco Argentina Corporation (Delaware) ............................ 100 Tenneco Baja California Corporation (Delaware) ...................... 100 Tenneco Communications Corporation (Delaware) ....................... 100 Tenneco Corporation (Delaware) ...................................... 100 (Tennessee Gas Pipeline Company owns 100% of the Common Stock; Tenneco Credit Corporation owns ___% of the Second Preferred Stock; Tenneco Equipment Corporation owns ___% of Second Preferred Stock; and Tenneco International Inc. owns ___% of the Second Preferred Stock.) Channel Industries Gas Company (Delaware) ........................ 100 Tenneco Energy Marketing Company (Kentucky) ................... 100 Creole Gas Pipeline Corporation (Louisiana) ................ 100 Entrade Pipeline Company (Kentucky) ........................ 100 Channel Gas Marketing Company (Delaware) ...................... 100 Oasis Pipe Line Company (Delaware) ......................... 30 (Channel Gas Marketing Company owns 100% of the issued and outstanding Series B Preference Stock and 30% of the Common Stock, 30% of total equity; Dow Chemical Company, an unaffiliated company owns 100% of the issued and outstanding Series A Preference Stock and 70% of the Common Stock, 70% of total equity.) Tenneco Gas Processing Company (Delaware) ..................... 100 Tenneco Independent Power I Company (Delaware) ................ 100 Tenneco Independent Power II Company (Delaware) ............... 100 Tenneco Insurance Ventures (Delaware) ......................... 100 Tenneco Offshore Gathering Company (Delaware) ................. 100 Tennessee Gas Marketing Company (Delaware) .................... 100
2 31 ENERGY SUBSIDIARIES Subsidiaries of Tenneco Inc. Subsidiaries of Tennessee Gas Pipeline Company Subsidiaries of Tenneco Corporation Subsidiaries of Channel Industries Gas Company Tenneco Power Generation Company (Delaware)....................... 100 Orange Acquisition, Inc. (Delaware)............................. 100 Orange Cogeneration Limited Partnership (Delaware Limited Partnership).................................................. 49.5 (Orange Acquisition Inc. owns 49.5% as a Limited Partner; CSW Orange, Inc., an unaffiliated company, owns _____% as a Limited Partner, and Orange Cogeneration GP, Inc. owns _____% as General Partner.) Orange Cogeneration GP II, Inc. (Delaware).................... 50 (Tenneco Power Generation Company owns 50%; and CSW Development-I, Inc., an unaffiliated company, owns 50%.) (Orange Cogeneration G.P., Inc. (Delaware)................... 100 Polk Power GP II, Inc. (Delaware).............................. 50 (Tenneco Power Generation Company owns 50% and CSW Development-I, Inc., an unaffiliated company, owns 50%.) Polk Power GP, Inc........................................... 100 Tenneco Ethanol Company (Delaware)............................. 100 Tenneco Ethanol Services Company (Delaware).................... 100 West Campus Cogeneration Company (Delaware).................... 100 Midwestern Gas Transmission Company (Delaware)................... 100 Deepsea Ventures, Inc. (Delaware).............................. ?? Entrade Engine Company (Kentucky).............................. 100 H.T. Gathering Company (Texas)................................. 50 (Midwestern Gas Transmission Company owns 50% of the issued and outstanding Class A Voting Stock and 20% of the Class B Nonvoting Stock, 29% of the total equity; and Houston Pipe Line Company, an unaffiliated company, owns 50% of the issued and outstanding Class A Voting Stock and 80% of the Class B Nonvoting Stock, 71% of the total equity.) New Midwestern Inc. (Delaware)................................. 100 Petro-Tex Chemical Corporation (Delaware) (in dissolution)..... 100 (Certificate of Dissolution was filed in Delaware on January 18, 1995, Final dissolution date will be January 18, 1998, subject to settlement of any other outstanding business.) SWL Security Corp. (Texas)..................................... 100 Tenneco Midwest Natural Gas L.P. (Delaware Limited Partnership)................................................. 1 (Midwestern Gas Transmission Company, as General Partner, owns 1%; and Tenneco Midwest Corporation, as Limited Partner owns 99%.) Tenneco Minerals Company - California (Delaware)............... 100 Tenneco Minerals Company - Nevada (Delaware)................... 100 Tenneco OCS Company, Inc. (Delaware)........................... 100 Tenneco Oil Company (Delaware)................................. 100
3 32 ENERGY SUBSIDIARIES Subsidiaries of Tenneco Inc. Subsidiaries of Tennessee Gas Pipeline Company Subsidiaries of Tenneco Corporation Subsidiaries of Midwestern Gas Transmission Company Tenneco Polymers, Inc. (Delaware)............................ 100 Tenneco Eastern Realty, Inc. (New Jersey).................... 100 Tennessee Overthrust Gas Company (Delaware).................. 100 Overthrust Pipeline Company (Delaware General Partner).... 18 (Tennessee Overthrust Gas Company owns an 18% general partnership interest; unaffiliated parties own 82% partnership interest) TGP Corporation (Delaware)................................... 100 Tenneco Credit Corporation (Delaware).............................. 100 TenFac Corporation (Delaware)................................... 100 Tenneco Deepwater Gathering Company (Delaware)..................... 100 Tenneco Delta XII Gas Co., Inc. (Delaware)......................... 100 Tenneco East Corporation (Delaware)................................ 100 Tenneco East Ntural Gas L.P. (Delaware Limited Partnership)..... 99 (Tenneco East Corporation, as Limited Partner, owns 99%; and East Tennessee Natural Gas Company, as General Partner, owns 1%) Tenneco Energy Europe Inc. (Delaware).............................. 100 Tenneco Energy Hungary Inc. (Delaware).......................... 99 [Tenneco Energy Hungary B.V. (Netherlands)................... ??] Tenneco Energy Ltd. (Canada)....................................... 100 Tenneco Energy Services Company (Delaware)......................... 100 GreyStar Corporation (Texas).................................... 50 (Tenneco Energy Services Company owns 50%, and unaffiliated parties own 50%. Tenneco Energy Services Company owns 1,135,294 shares of Series B Preferred Stock, $0.01 par value per share.) Tenneco Energy AIRCO Inc. (Delaware)............................ 100 Tenneco Energy OGS Inc. (Delaware).............................. 100 Tenneco Energy TEPSCO Inc. (Delaware)........................... 100 Tenneco Energy Inc. (Delaware)..................................... 100 Tenneco EIS Company (Delaware).................................. 100 Tenneco EIS Canada Ltd. (Alberta)............................ 100 Tenneco Gas Transportation Company (Delaware)................... 100 Tenneco Gas Canada, Ltd. (Ontario)................................. 100 Tenneco Gas International Inc. (Delaware).......................... 100 Tenneco Energy China Inc. (Delaware)............................ 100 Tenneco Gas Brazil Corporation (Delaware)....................... 100 Tenneco Gas International Servicos do Brasil Ltda (Brazil)... 100 Tenneco Gas Chile Corporation (Delaware)........................ 100 Tenneco Energy International (East Asia/Pacific) Inc. (Delaware)................................................... 100 Tenneco Gas Services (Chile) Corporation (Delaware)............. 100 Tenneco Gas Transportes S.A. (Chile)......................... 100 Tenneco Gas Latin America Inc. (Delaware)....................... 100
4 33 ENERGY SUBSIDIARIES Subsidiaries of Tenneco Inc. Subsidiaries of Tennessee Gas Pipeline Company Tenneco Gas Louisiana Inc. (Delaware) ................................ 100 Martin Exploration Company (Delaware) ............................. 100 Tenneco Gas Production Corporation (Delaware) ........................ 100 Tenneco Gas Properties Inc. (Delaware) ............................... 100 Tenneco Gas Services, Inc. (Delaware) ................................ 100 Tenneco Gas Supply Corporation (Delaware) ............................ 100 Tenneco Gas Australia Inc. (Delaware) ................................ 100 Tenneco Holdings Pty. Ltd. (Australia) ............................ 100 Sulawesi Energy Pty Ltd. (Australia) ........................... 50 (Upon the acquisition of the Energy Equity subsidiaries contemplated for the South Sulawesi Project, Tenneco Holdings Pty. Ltd. will own 50%, and an unaffiliated company will own 50%.) PT Energi Sengkang (Indonesia)............................... 95 (Upon the acquisition of the Energy Equity subsidiaries contemplated for the South Sulawesi Project, Sulawesi Energy Pty. Ltd. will own 95%, and an unaffiliated company will own 5%.) Tenneco Energy Australia Pty. Limited (Australia) .............. 100 Tenneco Energy Queensland Pty. Limited (Australia) .......... 100 Tenneco Energy South Australia Pty. Limited (Australia) ..... 100 Tenneco Energy Operations and Maintenance Pty. Ltd. ............ 100 Energy Management Technical Systems Pty. Ltd. (Australia) ... 50 (Upon the acquisition of the Energy Equity subsidiaries contemplated for the South Sulawesi Project, Tenneco Energy Operations and Maintenance Pty. Ltd. will own 50%, and an unaffiliated company will own 50%.) Tenneco Sulawesi Gas Pty. Ltd. (Australia) ..................... 100 Energy Equity (Sengkang) Pty. Ltd. (Australia) .............. 50 (Upon the acquisition of the Energy Equity subsidiaries contemplated for the South Sulawesi Project, Tenneco Sulawesi Gas Pty. Ltd. will own 50%, and an unaffiliated company will own 50%.) Galtee Limited (Cayman Islands) ................................... 100 Tenneco International Inc. (Delaware) ................................ 100 Tenneco Nederland B.V. (Netherlands) .............................. 100 Tenneco Offshore Netherlands Company (Delaware) ................... 100 Tenneco Liquids Corporation (Delaware) ............................... 100 Tenneco Marketing Services Company (Delaware) ........................ 100 Tenneco MLP Inc. (Delaware) .......................................... 100 Polk Power Partners, L.P. (Delaware Limited Partnership) ....... 100 (Tenneco MLP Inc. owns __% as a Limited Partner, CSW Mulberry, Inc., an unaffiliated company, owns __% as a Limited Partner; GPSF-A Inc., an Unaffiliated company owns __% as Preferred Limited Partner; and Polk Power GP, Inc. owns __% as the General Partner.) Tenneco MTBE, Inc. (Delaware) ........................................ 100
5 34 ENERGY SUBSIDIARIES Subsidiaries of Tenneco Inc. Subsidiaries of Tennessee Gas Pipeline Company Tenneco Midwest Corporation (Delaware)............................. 100 Tenneco Midwest Natural Gas L.P. (Delaware Limited Partnership)................................................. 99 (Tenneco Midwest Corporation, as Limited Partner, owns 99%; and Midwestern Gas Transmission Company, as General Partner, owns 1%.) Tenneco Pittsfield Corporation (Delaware).......................... 100 Tenneco Portland Corporation (Delaware)............................ 100 Tenneco Realty, Inc. (Delaware).................................... 100 Tenneco SNG Inc. (Delaware)........................................ 100 Tenneco Texas Acquisition Inc. (Delaware).......................... 100 Tenneco Trinidad LNG, Inc. (Delaware).............................. 100 Tenneco Ventures Bolivia Corporation (Delaware).................... 100 Tenneco Ventures Corporation (Delaware)............................ 100 Tenneco Ventures Poland Corporation (Delaware)..................... 100 Tenneco Western Market Center Corporation (Delaware)............... 100 The Western Market Center Joint Venture (Joint Venture)......... 50 (Tenneco Western Market Center Corporation owns 50%; Entech Gas Ventures, Inc., an unaffiliated company, owns 15%; Questar WMC Corporation, an unaffiliated company, owns 25%; and Fuels WMC Corporation, an unaffiliated company, owns 10%.) Tenneco Western Market Center Service Corporation (Delaware)....... 100 TennEcon Services, Inc. (Delaware)................................. 100 Tenneco Energy Technology Consulting Services Inc. (Delaware)... 100 Tennessee Gas Transmission Company (Delaware)...................... 100 Tennessee Storage Company (Delaware)............................... 100 Tennessee Trailblazer Gas Company (Delaware)....................... 100 Ten Ten Parking Garage Inc. (Delaware)............................. 100 The Fontanelle Corporation (Louisiana)............................. 100 The F and E Oyster Partnership (Louisiana Partnership).......... 64 (The Fontanelle Corporation owns 64% as General Partner; and Expedite Oyster, Inc., an unaffiliated company, owns 36% as General Partner.) The LaChute Corporation (Louisiana)................................ 100
6 35 ENERGY SUBSIDIARIES Subsidiaries of Tenneco Inc. Subsidiaries of Tennessee Gas Pipeline Company Tenneco Midwest Corporation (Delaware)................................ 100 Tenneco Midwest Natural Gas L.P. (Delaware Limited Partnership).... 99 (Tenneco Midwest Corporation, as Limited Partner, owns 99%; and Midwestern Gas Transmission Company, as General Partner, owns 1%). Tenneco Pittsfield Corporation (Delaware)............................. 100 Tenneco Portland Corporation (Delaware)............................... 100 Tenneco Realty, Inc. (Delaware)....................................... 100 Tenneco SNG Inc. (Delaware)........................................... 100 Tenneco Texas Acquisition, Inc. (Delaware)............................ 100 Tenneco Trinidad LNG, Inc. (Delaware)................................. 100 Tenneco Ventures Bolivia Corporation (Delaware)....................... 100 Tenneco Ventures Corporation (Delaware)............................... 100 Tenneco Ventures Poland Corporation (Delaware)........................ 100 Tenneco Western Market Center Corporation (Delaware).................. 100 The Western Market Center Joint Venture (Joint Venture)............ 50 (Tenneco Western Market Center Corporation owns 50%; Entech Gas Ventures, Inc., an unaffiliated company, owns 15%; Questar WMC Corporation, an unaffiliated company, owns 25%; and Fuels WMC Corporation, an unaffiliated company, owns 10%.) Tenneco Western Market Center Service Corporation (Delaware).......... 100 TennEcon Services, Inc. (Delaware) ................................... 100 Tenneco Energy Technology Consulting Services Inc. (Delaware)...... 100 Tennessee Gas Transmission Company (Delaware)......................... 100 Tennessee Storage Company (Delaware).................................. 100 Tennessee Trailblazer Gas Company (Delaware).......................... 100 Ten Ten Parking Garage Inc. (Delaware)................................ 100 The Fontanelle Corporation (Louisiana). .............................. 100 The F and E Oyster Partnership (Louisiana Partnership)............. 64 (The Fontanelle Corporation owns 64% as General Partner; and Expedite Oyster, Inc., an unaffiliated company, owns, 36% as General Partner.) The LaChute Corporation (Louisiana)................................... 100
6 36 EXHIBIT G TO THE DISTRIBUTION AGREEMENT 37 INDUSTRIAL SUBSIDIARIES Subsidiaries of Industrial Company Subsidiaries of Tenneco Automotive Inc. Tenneco Automotive Italia S.r.l. (Italy)............................ 15 (Tenneco Automotive Inc. owns 85%; and Monroe Auto Equipment France, S.A. owns 15%) Monroe Auto Pecas S.A. (Brazil)................................... 2.82 (Tenneco Automotive Inc. owns 2.82%; Monroe do Brazil Industria e Comercio Ltda. Owns 82.71%; and Monteiro Aranha S/A, an unaffiliated company, owns 14.47%) Monroe-Mexico S.A. de C.V. (Mexico).............................. 99.99 (Tenneco Automotive Inc. owns 99.99%; and Industrial Company owns 0.01%) Precision Modular Assembly Corp. (Delaware)........................ 100 Rancho Industries Europe B.V. (Netherlands)........................ 100 Tenneco Automotive Foreign Sales Corporation Limited (Jamaica)..... 99 (Tenneco Automotive Inc. owns 99%; and Industrial Company owns 1%) Tenneco Automotive International Sales Corporation (DE-In Dissolution)............................................. 100 Tenneco Automotive Italia S.r.l. (Italy)........................... 85 (Tenneco Automotive Inc. owns 85%; and Monroe Auto Equipement France, S.A. owns 15%) Tenneco Automotive Japan Ltd. (Japan).............................. 100 The Pullman Company (Delaware)..................................... 100 Axios Produtos de Elastomeros Limitada (Brazil)................. 99 (99% The Pullman Company; 1% Peabody International Corporation) Clevite Industries Inc. (Delaware).............................. 100 Peabody International Corporation (Delaware).................... 100 Axios Produtos de Elastomeros Limitada (Brazil).............. 1 (99% The Pullman Company; 1% Peabody International Corporation) Barasset Corporation (Ohio).................................. 100 Peabody Galion Corporation (Delaware)........................ 100 Peabody Gordon-Piatt, Inc. (Delaware)........................ 100 Peabody N.E., Inc. (Delaware)................................ 100 Peabody World Trade Corporation (Delaware)................... 100 Pullmex, S.A. de C.V. (Mexico)........................... 0.1 (99.9% The Pullman Company; 0.1% Peabody World Trade Corporation) Peabody-Myers Corporation (Illinois)......................... 100 Pullman Canada Ltd. (Canada)................................. 61 (61% Peabody International Corporation; 39% The Pullman Company) Pullman Canada Ltd. (Canada).................................... 39 (61% Peabody International Corporation; 39% The Pullman Company) Pullman Standard, Inc. (Delaware)............................... 100
2 38 INDUSTRIAL SUBSIDIARIES Subsidiaries of Industrial Company Pullmex, S.A. de C.V. (Mexico).................................. 99.9 (99.9% The Pullman Company; 0.1% Peabody World Trade Corporation) Tenneco Automotive Trading Company (Delaware)......................... 100 Tenneco Brake, Inc. (Delaware)..................................... 100 Tenneco Brazil Ltda. (Brazil)......................................... 100 Monroe do Brazil Industria e Comercio Ltda. (Brazil)............... 100 Monroe Auto Pecas S.A. (Brazil)................................. 82.71 (Monroe do Brazil Industria e Comercio Ltda. Owns 82.71%; (Tenneco Automotive Inc. owns 2.82%; and Monteiro Aranha S/A, an unaffiliated company owns 14.47%) Tenneco Business Services Holdings Inc. (f/k/a Tenneco Business Services Inc.)..................................................... 100 (Tenneco Business Services Inc. (f/k/a Tenneco Technology Services Inc.).................................................. 100 Tenneco Deutschland Holdinggesellschaft mbH (Germany)................. 99.97 (Industrial Company owns 99.97%; and Atlas Bermoegensverwaltung, an unaffiliated company, owns 0.03%) GILLET Unternehmesverwaltungs (Germany)............................ 100 Heinrich Gillet GmbH & Co. KG (Germany)......................... 0.1 (GILLET Unternehmesverwaltungs GmbH owns 0.1%; and Tenneco Deutschland Holdinggesellschaft mbH owns 99.9%) Heinrich Gillet GmbH & Co. KG (Germany)............................ 99.9 (Tenneco Deutschland Holdinggesellschaft mbH owns 99.9%; and GILLET Unternchmesverwaltungs GmbH owns 0.1%) Gillet-Abgassysteme Zwickau Gmbh (Germany)...................... 100 Mastra-Gillet Industria e Comercio Ltda. (Brazil)............... 50 (Heinrich Gillet GmbH & Co. KG owns 50%; and Mastra Industria e Comercio Ltda., an unaffiliated company, owns 50%) Omni-Pac Ekco GmbH Verpackungsmittel (Germany)..................... 100 Omni-Pac Poland Sp. z o.o. (Poland)............................. 100 PCA Embalajes Espana, S.L. (Spain).............................. 1 (Omni-Pac Ekco GmbH Verpackungsmittel owns 1%; and PCA Verpackungsmittel GmbH owns 99%) Omni-Pac GmbH (Germany)............................................ 99 (Tenneco Deutschland Holdinggesellschaft mbH owns 99%; and Industrial Company owns 1%) Omni-Pac Ap5 (Denmark).......................................... 100 Omni-Pac A.B. (Sweden).......................................... 100 Omni-Pac S.A.R.L. (France)...................................... 3 (Omni-Pac GmbH owns 3%; and Industrial Company owns 97%) Walker Deutschland GmbH (Germany).................................. 99 (Tenneco Deutschland Holdinggesellschaft mbH owns 99%; and Industrial Company owns 1%) Walker Gillet (Enrope) GmbH (Germany).............................. 100 Tenneco Foam Products Company......................................... 100 Tenneco Inc. (Nevada)................................................. 100
3 39 INDUSTRIAL SUBSIDIARIES Subsidiaries of Industrial Company Tenneco International Holding Corp. (Delaware)........................ 100 Monroe Australia Pty. Limited (Australia).......................... 100 Monroe Springs (Australia) Pty. Ltd. Australia)................. 100 Monroe Superannuation Pty. Ltd. (Australia)..................... 100 Walker Australia Pty. Limited (Australia)....................... 100 S.A. Monroe Europe N.V. (Belgium).................................. 100 Borusan Amortisor Imalat Ve Ticaret A.S. (Turkey)............... 16.67 (S.A. Monroe Europe N.V. owns 16.67%; Borusan Holding AS, an unaffiliated company, owns 83.03%; and various unaffiliated individual stockholders own 0.3%) Monroe Europe Coordination Center N.V. (Belgium)................ 99.9 (S.A. Monroe Europe N.V. owns 99.9%; and Monroe Auto Equipment France, S.A. owns 0.1%) Monroe Europe (UK) Limited (United Kingdom)..................... 18 (S.A. Monroe Europe N.V. owns 18%; and Tenneco United Kingdom Holdings Limited owns 82%) Monroe Packaging N.V. (Belgium)................................. 99.9 (S.A. Monroe Europe N.V. owns 99.9%; and Monroe Auto Equipment France, S.A. owns 0.1%) Tenneco Canada Inc. (Ontario)...................................... 51.28 (Tenneco International Holding Corp. Owns 100% of the issued and outstanding Common Stock, 51.28% of total equity; and Tenneco United Kingdom Holdings Limited owns 100% of the Class A Stock, 48.72% of total equity) 98174 Ontario Limited (Ontario)................................. 100 Tenneco Canada Wholesale Finance Company (Alberta).............. 100 Tenneco Credit Canada Corporation (Alberta)..................... 100 Tenneco Espana Holdings, Inc. (Delaware)........................... 100 Louis Minuzzi F. Hijos S.A.I.C. (Argentina)..................... 100?? Monroe Springs (New Zealand) Pty. Ltd. (New Zealand)............ 100 Monroe Spain, S.A. (f/k/a Tenneco Espana, S.A.) (Spain)...... 100 Gillet Iberica, S.A. (Spain)................................. 100 Manufacturas Fonos, S.L. (Spain)............................. 100 Omni-Pac Embalajes S.A. (Spain).............................. 100 Reknowned Automotive Products Manufacturers Ltd. (India)........ 51 Thibault Investments Limited (Mauritius)........................ 100 Hydraulics Limited (India)................................... 51 (Thibault Investments Limited owns 51% and Bangalore Union Services Limited, an unaffiliated company, owns 49%) Tenneco Holdings Danmark A/S (Denmark)............................. 100 Gillet Exhaust Technologie (Proprietary) Limited (South Africa).................................................. 100 Gillet Lazne Belohrad, S.T.O. (Republic of Czechoslovakia)....... 100 Hemrich Gillet Portuguesa - Sistemas de Escape, Lda. (Portugal)...................................................... 100 Walker Danmark A/S (Denmark).................................... 100
4 40 INDUSTRIAL SUBSIDIARIES Subsidiaries of Industrial Company Subsidiaries of Tenneco International Holding Corp. (Delaware) Subsidiaries of Tenneco Holdings Danmark A/S (Denmark) Walker Inapal Escapes, S.A. (Portugal)............................ 90 (Tenneco Holdings Danmark A/S owns 90%; Inapal, Industria Nacional de Acessorios Para Automoveis, SA, an unaffiliated company, owns 9.99%; and Walker Danmark A/S owns 0.01% Walker France S.A. (France)....................................... 100 Constructions Metallurgiques de Wissembourg - Wimetal (France)....................................................... 100 Societe Europeenne des Ensembles-Montes (France)............ 100 Gillet Tubes Technologies G.T.T. (France)...................... 100 Walker Sverige A.B. (Sweden)...................................... 100 Tenneco Management Company (Delaware)................................ 100 Tenneco Moorhead Acquisition Inc. (Delaware)......................... 100 Tenneco Packaging Hungary Holdings Inc. (Delaware)................... 100 Tenneco Packaging Inc. (Delaware).................................... 100 A&E Plastics, Inc. (Delaware)..................................... 100 Alupak A.G. (Switzerland)......................................... 100 American Cellulose Corporation (Delaware)......................... 100 (Tenneco Packaging Inc. owns 50%; and Larry E. Homan, an unaffiliated individual, owns 50%) The Corinth and Counce Railroad Company (Mississippi)............. 100 Marinette Tomahawk & Western Railroad Company (Wisconsin)...... 100 Valdosta Southern Railroad Company (Florida)................... 100 Dahlonega Packaging Corporation (Delaware)........................ 100 Dixie Container Corporation (Virginia)............................ 100 Dixie Convoy Corporation (North Carolina)......................... 100 Dongguan PCA Packaging Co., Ltd. (Peoples Republic of China)...... 50 (Tenneco Packaging Inc. owns 50%; and Dongguan Dong Ya Color Printing and Packaging Factory, an unaffiliated company, owns 50%) EKCO Products, Inc. (Illinois).................................... 100 E-Z Por Corporation (Delaware).................................... 100 Hexacomb Corporation (Illinois)................................... 100 Hexacomb International Sales Corporation (U.S. Virgin Islands)....................................................... 100 Packaging Corporation of America (Nevada)......................... 100 PCA Box Company (Delaware)........................................ 100 PCA-Budafok (Kartongyar) Kft. (Hungary)........................... 100 PCA Hydro, Inc. (Delaware)........................................ 100 PCA Romania Srl (Romania)......................................... 50 (Tenneco Packaging Inc. owns 50%; and Kraftcorr Inc., an unaffiliated company owns 50%) PCA Tomahawk Corporation (Delaware)............................... 100 PCA Valdosta Corporation (Delaware)............................... 100
5 41 INDUSTRIAL SUBSIDIARIES Subsidiaries of Industrial Company Subsidiaries of Tenneco Packaging Inc. PCA Verpackungsmittel GmbH (Germany)............................... 100 PCA Embalajes Espana S.L. (Spain)............................... 99 (PCA Verpackungsmittel GmbH owns 99%; and Omni-Pac Ekco GmbH Verpackungsmittel owns 1%) PCA West Inc. (Delaware)........................................... 100 Coast-Packaging Company (California General Partnership)........ 50 (PCA West Inc. owns 50%, as General Partner; and J.G. Haddy Sales Company, an unaffiliated company, owns 50%, as General Partner) Pressware International, Inc. (Delaware)........................... 100 Revere Foil Containers, Inc. (Delaware)............................ 100 Tenneco Packaging-Romania S.R.L. (Romania)......................... 100 Tenneco Plastics Company (Delaware)................................ 100 798795 Ontario Limited (Ontario)................................... 100 PCA Canada Inc. (Ontario)....................................... 100 Tenneco Retail Receivables Company (Delaware)......................... 100 Tenneco Romania Holdings Inc. (Delaware).............................. 100 Tenneco United Kingdom Holdings Limited (Delaware).................... 100 Monroe Europe (UK) Limited (United Kingdom)........................ 82 (Tenneco United Holdings Limited owns 82%; and S.A. Monroe Europe N.V. owns 18%) Omni-Pac U.K. Limited (United Kingdom)............................. 100 Packaging Corporation of America (UK) Limited (Scotland)........... 100 Alpha Products (Bristol Limited (United Kingdom)................ 100 Calendered Plastics Limited (United Kingdom).................... 100 Delyn Packaging Limited (United Kingdom)........................ 100 Penlea Plastics Limited (United Kingdom)........................ 100 Polbeth Packaging Limited (Scotland)............................ 100 Brucefield Plastics Limited (Scotland)....................... 100 Polbeth Packaging (Corby) Limited (Scotland)................. 100 Tenneco Canada Inc. (Ontario)...................................... 48.72 (Tenneco United Kingdom Holdings Limited owns 100% of the Class A Stock, 48.72% of total equity; and Tenneco International Holding Corporation owns 100% of the issued and outstanding common stock, 51.28% of total equity) Tenneco Europe Limited (Delaware).................................. 100 Tenneco Asia Limited (United Kingdom)........................... 100 Tenneco International Finance Limited (United Kingdom)............. 100 Tenneco International Finance B.V. (Netherlands)................ 100 Tenneco Management (Europe) Limited (United Kingdom)............... 100 Tenneco Packaging (UK) Limited (United Kingdom).................... 100 Tenneco West Limited (United Kingdom).............................. 100 Thompson and Stammers Dunmow (Number 6) Limited (United Kingdom)... 100 Thompson and Stammers Dunmow (Number 7) Limited (United Kingdom)... 100
6 42 SHIPBUILDING SUBSIDIARIES Subsidiaries of Newport News Shipbuilding Inc. (Delaware) (formerly known as Tenneco InterAmerica Inc.) Newport News Shipbuilding and Dry Dock Company (Virginia)................100% Ashville Industries Inc. (North Carolina)..............................100 Greenville Industries Inc. (Virginia)..................................100 Newport News GlobalCorporation (U.S. Virgin Islands)...................100 Newport News Industrial Corporation (Virginia).........................100 Newport News Industrial Corporation of Ohio (Ohio)...................100 Newport News Reactor Services, Inc. (Virginia).........................100 Tenneco Tanker Holding Corporation (Delaware)..........................100 The James River Oyster Corporation (Virginia)..........................100 NNS Delaware Management Company (Delaware)...............................100 EX-99.1 6 LIST OF LENDERS UNDER CREDIT AGREEMENT 1 EXHIBIT 99 Lenders - ------- 1. The Chase Manhattan Bank 2. ABN AMRO Bank, N.V. - Houston Agency 3. Australia and New Zealand Banking Group Limited 4. Bank of America Illinois 5. Bank of Montreal 6. The Bank of New York 7. The Bank of Nova Scotia, Atlanta Agency 8. The Bank of Tokyo-Mitsubisi, Ltd. 9. Banque Nationale de Paris, Houston Agency 10. Barclays Bank PLC 11. Bayerische Vereinsbank AG, Los Angeles Agency 12. Caisse Nationale de Credit Agricole 13. CIBC Inc. 14. Citibank, N.A. 15. Commerzbank Aktiengesellschaft, Atlanta Agency, 16. Credit Lyonais New York Branch 17. Credit Suisse 18. The Dia-Ichi Kangyto Bank, Ltd. 19. Deutshce Bank AG New York and/or Cayman Islands Branches 20. Dresdner Bank AG, New York Branch 21. First National Bank of Boston 22. The First National Bank of Chicago 2 23. The Fuji Bank, Limited-Houston Agency 24. The Industrial Bank of Japan Trust Company 25. Kredietbank N.V., Grand Cayman Branch 26. The Long-term Credit Bank of Japan, Ltd. 27. Mellon Bank, N.A. 28. Morgan Guaranty Trust Company of New York 29. National Westminster Bank Plc 30. NationsBank of Texas, N.A. 31. Norinchukin Bank, New York Branch 32. PNC Bank, National Association 33. Royal Bank of Canada 34. The Sakura Bank, Limited - New York Branch 35. The Sanwa Bank Limited, Dallas Agency 36. Societe Generale 37. The Sumitomo Bank, Limited, Houston Agency 38. The Tokai Bank, Limited, New York Branch 39. Toronto Dominion (Texas), Inc. 40. Union Bank of Switzerland, Houston Agency 41. The Yasuda Trust & Banking Co., Ltd. -2- EX-99.2 7 PRESS RELEASE DATED 12/23/96 1 EXHIBIT 99.2 FOR IMMEDIATE RELEASE EL PASO ENERGY CORPORATION; KCS SETTLEMENT IS FAIR AND POSITIVE FOR ALL PARTIES HOUSTON, TEXAS, DECEMBER 23, 1996 -- El Paso Energy Corporation (NYSE:EPG) announced today that it has reached a settlement that resolves its gas purchase contract disputes with KCS Energy. Under the terms of the settlement, El Paso agreed to dismiss its lawsuits claiming that KCS illegally boosted the Btu content of the natural gas it delivers to meet contract specifications and that KCS increased natural gas deliveries from the properties in bad faith. This action terminates KCS' further challenge to a jury's verdict entered recently in Tennessee Gas Pipeline's favor in the Btu injection case. As a consideration for these dismissals, KCS agreed to the early termination of the natural gas purchase contract that was set to expire in 1989, ending the company's contractual obligation to pay more than $50 million of premium prices for future natural gas purchases. The settlement also lowers the total gas supply realignment costs to be paid by customers of Tennessee Gas Pipeline. The company is very pleased that this settlement resolves major litigation facing the company and allows it to move forward with plans to build on the momentum created by its acquisition of Tenneco Energy. El Paso Energy Corporation provides total energy solutions worldwide through four business units: El Paso Natural Gas Company, Tennessee Gas Pipeline Company, El Paso Energy Resources Company and El Paso Energy International Company. With offices across the country, the company has operations in interstate natural gas transmission, gas gathering and processing, energy marketing, and international energy development. ### Media relations contact: Christine LeLaurin (713) 757-3325 -----END PRIVACY-ENHANCED MESSAGE-----