EXHIBIT 10.4
TENNECO INC. THREE YEAR
LONG TERM PERFORMANCE UNIT AWARD AGREEMENT
(______-______Performance Period)

______________________
Participant

Effective as of ______________, the Participant has been granted a Cash
Incentive Award (the “Award”) under the Tenneco Inc. 2006 Long-Term Incentive
Plan (the “Plan”) in the form of long term performance units (“Performance
Units”). The Award shall be subject to the following terms and conditions
(sometimes referred to as this “Award Agreement”) and the terms and conditions
of the Plan as the same may be amended from time to time. Terms used in this
Award Agreement are defined elsewhere in this Award Agreement; provided,
however, that capitalized terms used herein and not otherwise defined shall have
the meaning set forth in the Plan.
1.General Terms of the Award. The following terms and conditions apply to the
Award:
Performance Period:            January 1, 201__ to December 31, 201__

Target Value of Award:        $ (the “Total Target Value”)

Earning of Award:    
50% based on Relative TSR performance
30% based on Cumulative EBITDA performance
20% based on Cumulative FCF performance

Appendix A of this Award Agreement, which is incorporated herein and forms a
part of this Award Agreement, sets forth the manner in which TSR performance,
EBITDA performance and FCF performance are calculated for purposes of this Award
Agreement for the Performance Period.

2.    Earning of Award. The Participant will earn the Award based on
satisfaction of performance targets as determined in accordance with the
following:
(a)
TSR Target Value. For purposes hereof, the Participant’s “TSR Target Value” is
50% of his or her Total Target Value. The extent to which the Participant will
earn his or her TSR Target Value is based on the Company TSR Percentile Ranking
(calculated as described in Appendix A) for the Performance Period based on the
following chart:

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Company TSR Percentile Ranking
Percent of TSR Target Value Earned
> 75th
200% (maximum)
50th
100% (target)
40th
50% (threshold)
<40th
0%

(b)
EBITDA Target Value. For purposes hereof, the Participant’s “EBITDA Target
Value” is 30% of his or her Total Target Value. The extent to which the
Participant will earn his or her or her EBITDA Target Value is based on the
Cumulative EBITDA (calculated as described in Appendix A) for the Performance
Period against the Cumulative EBITDA Target established by the Committee for the
Performance Period based on the following chart:

Cumulative EBITDA as Percentage of Cumulative EBITDA Target
Percent of EBITDA Target Value Earned
120%
200% (maximum)
100%
100% (target)
80%
50% (threshold)
<80%
0%

(c)
FCF Target Value. For purposes hereof, the Participant’s “FCF Target Value” is
20% of his or her Total Target Value. The extent to which the Participant will
earn his or her FCF Target Value is based on the achievement by the Company of
Cumulative FCF (calculated as described in Appendix A) for the Performance
Period against the Cumulative FCF Target established by the Committee for the
Performance Period based on the following chart:

Cumulative FCF as Percentage of Cumulative FCF Target
Percent of FCF Target Value Earned
120%
200% (maximum)
100%
100% (target)
80%
50% (threshold)
<80%
0%

(d)
Interpolation. Interpolation shall be used to determine the Percent of TSR
Target Value Earned, the Percent of EBITDA Target Value Earned and/or the
Percent of FCF Target Value Earned, as applicable, in the event the Company TSR
Percentile Ranking, Percent of EBITDA Target Value Earned and/or Percent of FCF
Target Value Earned, as applicable, does not fall directly on one of the ranks
listed in the above applicable charts.

3.    Form and Timing of Payments Under Award.

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(a)
The payment of amounts earned as calculated pursuant to Paragraph 2 of this
Award Agreement shall be paid to the Participant following the end of the
Performance Period and no later than two and one-half months after the end of
the Performance Period. Payment of such amounts shall be made subject to the
following:

(i)
The Participant shall have no right with respect to any payments or other
amounts in respect of this Award until such payments of amounts are actually
paid or otherwise delivered to the Participant.

(ii)
If the Committee determines, in its sole discretion, that the Participant at any
time has willfully engaged in any activity that the Committee determines was or
is harmful to the Company or any of its Subsidiaries, any unpaid portion of the
Award will be forfeited and the Participant shall have no rights with respect
thereto.

(iii)
Notwithstanding anything to the contrary contained herein other than Paragraph 4
hereof (subject, however, to any applicable provisions of any written employment
agreement between the Participant and the Company and the provisions hereof
related thereto), if the Participant’s Termination Date occurs on or before the
end of the Performance Period other than as a result of Retirement, death or
Total Disability, the Participant will forfeit this Award and shall have no
rights with respect thereto.

(b)
Amounts earned as calculated pursuant to Paragraph 2 of this Award Agreement
shall be paid out to the Participant in cash; provided, however, that, pursuant
to the terms of the Plan, the Committee may elect to settle the Award in shares
of Common Stock based on the Fair Market Value of shares of Common Stock at the
time of payment.

4.    Death, Total Disability and Retirement. Notwithstanding anything to the
contrary contained herein or in any written employment agreement between the
Company and the Participant, if the Participant’s Termination Date occurs on or
before the end of the Performance Period (a) as a result of the Participant’s
death or Total Disability (as defined below), the Participant will be entitled
to a payment equal to 100% of the Total Target Value assigned to the Participant
under this Award, which amount shall be paid to the Participant, in cash, within
60 days after the date of the Participant’s death or termination for Total
Disability, or (b) as a result of Retirement (as defined below), the Participant
will be entitled to a payment equal to the payment that he or she would have
earned under this Award Agreement had the Participant continued to be employed
by the Company and its Subsidiaries through the end of the Performance Period
multiplied by a fraction, the numerator of which is the number of full months of
the Participant’s employment during the Performance Period prior to his or her
Retirement and the denominator of which is the number of full months in the
Performance Period, which amount shall be paid to the Participant, in cash, at
the time determined under Paragraph 3. For purposes hereof, the term
"Retirement" means the Participant’s Termination Date which occurs after the
date on which he or she attains age 65 or the date on which the

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Participant attains age 55 and has completed at least 10 years of service with
the Company and its Subsidiaries (and is not a result of termination by the
Company or any of its Subsidiaries for cause), and the term "Total Disability"
means the Participant’s permanent and total disability as determined under the
rules and guidelines established by the Company in order to qualify for
long-term disability coverage under the Company's long-term disability plan in
effect at the time of such determination.
5.    Payment of Fair Market Value in Certain Cases. If the Participant is
entitled to receive payment for the fair market value of this Award pursuant to
Article 6 of the Plan (relating to Change in Control), that fair market value
will be equal to the amount the Participant would have received hereunder as if
(a) his or her service had continued through the end of the Performance Period
and (b) he or she had earned 100% of his or her Total Target Value.
6.    Withholding.  All distributions under the Plan, including any distribution
in respect of this Award, are subject to withholding of all applicable taxes,
and the delivery of any cash or other benefits under the Plan or this Award is
conditioned on satisfaction of the applicable tax withholding obligations.
Except as otherwise provided by the Committee, such withholding obligations may
be satisfied, at the Participant’s election, (a) through cash payment by the
Participant, (b) through the surrender of shares of Common Stock which the
Participant already owns, or (c) through the surrender of shares of Common Stock
to which the Participant is otherwise entitled under the Plan; provided,
however, that (i) the amount withheld in the form of shares of Common Stock
under this Paragraph 6 may not exceed the minimum statutory withholding
obligation (based on the minimum statutory withholding rates for Federal and
state purposes, including, without limitation, payroll taxes) unless otherwise
elected by the Participant, (ii) in no event shall the Participant be permitted
to elect less than the minimum statutory withholding obligation, and (iii) in no
event shall the Participant be permitted to elect to have an amount withheld in
the form of shares of Common Stock pursuant to this Paragraph 6 that exceeds the
maximum individual tax rate for the employee in applicable jurisdictions.
7.    Transferability.  This Award is not transferable except as designated by
the Participant by will or by the laws of descent and distribution or pursuant
to a qualified domestic relations order.
8.    Heirs and Successors.  If any benefits deliverable to the Participant
under this Award Agreement have not been delivered at the time of the
Participant’s death, such rights shall be delivered to the Participant’s estate.
9.    Administration.  The authority to administer and interpret this Award
Agreement shall be vested in the Committee, and the Committee shall have all the
powers with respect to this Award Agreement as it has with respect to the Plan. 
Any interpretation of the Award Agreement by the Committee and any decision made
by it with respect to the Award Agreement is final and binding on all persons.
10.    Adjustment of Award.  This Award may be adjusted by the Committee in
accordance with the terms of the Plan to reflect certain corporate transactions
which affect the number, type or value of the Performance Share Units.

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11.    Notices.  Any notice required or permitted under this Award Agreement
shall be deemed given when delivered personally, or when deposited in a United
States Post Office, postage prepaid, addressed, as appropriate, to the Company
at its principal offices, to the Participant at the Participant’s address as
last known by the Company or, in either case, such other address as one party
may designate in writing to the other.
12.    Governing Law.  The validity, construction and effect of this Award
Agreement shall be determined in accordance with the laws of the State of
Illinois and applicable federal law.
13.    Amendments.  The Board may, at any time, amend or terminate the Plan, and
the Committee may amend this Award Agreement, provided that, except as provided
in the Plan, no amendment or termination may, in the absence of written consent
to the change by the affected Participant (or, if the Participant is not then
living, the affected beneficiary), adversely affect the rights of any
Participant or beneficiary under this Award Agreement prior to the date such
amendment or termination is adopted by the Board or the Committee, as the case
may be.  Without limiting the generality of the foregoing, the Committee may
amend or terminate this Award at any time in its sole discretion to exercise
downward discretion in the amount payable under this Award if the Committee
determines that the payout yielded or that would be yielded by this Award for
the Performance Period does not accurately reflect the Company's performance for
the Performance Period because the payout is too great.
14.    Award Not Contract of Employment.  The Award does not constitute a
contract of employment or continued service, and the grant of the Award will not
give the Participant the right to be retained in the employ or service of the
Company or any Subsidiary, nor any right or claim to any benefit under the Plan
or this Award Agreement, unless such right or claim has specifically accrued
under the terms of the Plan and this Award Agreement. 
15.    Severability.  If a provision of this Award Agreement is held invalid by
a court of competent jurisdiction, the remaining provisions will nonetheless be
enforceable according to their terms.  Further, if any provision is held to be
overbroad as written, that provision shall be amended to narrow its application
to the extent necessary to make the provision enforceable according to
applicable law and enforced as amended.
16.    Plan Governs/Other Terms.  The Award evidenced by this Award Agreement is
granted pursuant to the Plan, and the Performance Units and this Award Agreement
are in all respects governed by the Plan and subject to all of the terms and
provisions thereof, whether such terms and provisions are incorporated in this
Award Agreement by reference or are expressly cited. Additionally, all Awards
are subject to the Company’s recoupment or clawback policies as applicable and
as in effect from time to time.
17.    Counterparts. This Award Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.

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18.    Special Section 409A Rules.  Notwithstanding any other provision of this
Award Agreement to the contrary, if any payment or benefit hereunder is subject
to section 409A of the Code, and if such payment or benefit is to be paid or
provided on account of the Participant’s termination of employment (or other
separation from service):
(a)
and if the Participant is a specified employee (within the meaning of section
409A(a)(2)(B) of the Code) and if any such payment or benefit is required to be
made or provided prior to the first day of the seventh month following the
Participant’s separation from service or termination of employment, such payment
or benefit shall be delayed until the first day of the seventh month following
the Participant’s termination of employment or separation from service; and

(b)
the determination as to whether the Participant has had a termination of
employment (or separation from service) shall be made in accordance with the
provisions of section 409A of the Code and the guidance issued thereunder
without application of any alternative levels of reductions of bona fide
services permitted thereunder.

 
ACCEPTED:
 
 
TENNECO INC.
 
 
 
 
 
 
 
 
__________________________________
 
 
______________________________________
 
 
Type or Print Legal Name
 
 
Senior Vice President Global Human Resources
 
 
 
 
 
 
 
__________________________________
 
 
 
 
 
(Date)
 
 
 
 
 
 
 
 
 
 
 
__________________________________
 
 
 
 
 
Signature
 
 
 
 
 
 
 
 
 
 
 
__________________________________
 
 
 
 
 
Social Security Number or National ID
 
 
 
 
 
 
 
 
 
 
 
__________________________________
 
 
 
 
 
Street Address
 
 
 
 
 
 
 
 
 
 
 
__________________________________
 
 
 
 
 
City/State/Zip/Country
 
 
 
 

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APPENDIX A

DEFINITIONS AND CALCULATION METHODOLOGIES

Calculation of TSR.

“TSR”
=
Change in Stock Price + Dividends Paid
 
 
Beginning Stock Price

(i)
Beginning Stock Price shall mean the average of the Closing Prices for each of
the twenty (20) trading days immediately prior to the first day of the
Performance Period;

(ii)
Ending Stock Price shall mean the average of Closing Prices for each of the last
twenty (20) trading days of the Performance Period;

(iii)
Change in Stock Price shall equal the Ending Stock Price minus the Beginning
Stock Price;

(iv)
Dividends Paid shall mean the total of all dividends paid on one (1) share of
stock during the Performance Period, provided that dividends shall be treated as
though they are reinvested;

(v)
Closing Price shall mean the last reported sale price on the applicable stock
exchange or market of one share of stock for a particular trading day; and

(vi)
In all events, TSR shall be adjusted to give effect to any stock dividends,
stock splits, reverse stock splits and similar transactions.

Calculation of Company TSR Percentile Ranking.
The Company TSR Percentile Ranking is computed by (A) computing the Company’s
TSR for the Performance Period and (b) computing the TSR for the Performance
Period of each company that was in the S&P 500 Index as of the end of the
Performance Period (the “S&P Group”), provided that if a company declares
bankruptcy at any time during the Performance Period, the company will be
removed from the S&P Group, and if a company does not have publicly reported
stock prices for the whole Performance Period, the company will be removed from
the S&P Group. The Company TSR Percentile Ranking is the percentage of TSRs of
the S&P Group calculated that are lower than the Company’s TSR (e.g., if the
Company’s TSR is greater than 75% of the TSRs of the members of the S&P Group,
the Company TSR Percentile Ranking is the 75th percentile).

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Calculation of Cumulative EBITDA.
(i)
The Company’s Cumulative EBITDA means the sum of the Company’s EBITDA for each
of the three fiscal years included in the Performance Period.

(ii)
EBITDA means the Company’s earnings before interest, taxes, depreciation,
amortization and noncontrolling interests, adjusted for (a) asset write-downs,
(b) litigation or claim judgments or settlements, (c) the effect of changes in
tax laws, accounting principles, or other laws or provisions affecting reported
results, (d) accruals for reorganization and restructuring programs,
(e) extraordinary nonrecurring items as described in Accounting Principles Board
Opinion No. 30 and/or in management’s discussion and analysis of financial
condition and results of operations appearing in the Company’s annual report to
stockholders for the applicable year, and (f) acquisitions or divestitures.

Calculation of Cumulative FCF.
(i)
The Company’s Cumulative FCF means the sum of the Company’s FCF for each of the
three fiscal years included in the Performance Period.

(ii)
FCF means divisional cash flow less cash interest payments, net cash tax
payments and distributions to non-controlling interest partners, excluding the
impact of acquisitions and divestitures.

ii