SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
OWENS-ILLINOIS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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[LOGO]
OWENS-ILLINOIS, INC.
NOTICE AND PROXY STATEMENT
FOR
THE ANNUAL MEETING OF SHARE OWNERS
TO BE HELD
WEDNESDAY, MAY 9, 2001
YOUR VOTE IS IMPORTANT
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN
THE ENCLOSED ENVELOPE.
OWENS-ILLINOIS, INC.
ONE SEAGATE
TOLEDO, OHIO 43666
-------------------
NOTICE OF ANNUAL MEETING OF SHARE OWNERS
-------------------
Dear Share Owner:
You are cordially invited to attend the Annual Meeting of Owens-Illinois'
share owners which will be held on Wednesday, May 9, 2001, at 2:00 p.m. in the
auditorium of the Owens-Illinois World Headquarters Building, One SeaGate,
Toledo, Ohio for the purpose of considering and voting upon the following
matters:
1. The election of four directors for a term of three years.
2. Such other business as may properly be presented for action at the
meeting or any adjournment thereof.
Enclosed is a Proxy Statement which provides information concerning the
Company and the Board of Directors' nominees for election as directors. Also
enclosed is a copy of the Company's Annual Report which describes the results of
our operations during 2000 and provides other information about the Company
which will be of interest.
The Board of Directors fixed the close of business on March 12, 2001, as the
record date for the determination of share owners owning the Company's Common
Stock, par value $.01 per share, entitled to notice of and to vote at the Annual
Meeting.
Enclosed is a proxy card which provides you with a convenient means of
voting on the matters to be considered at the meeting whether or not you attend
the meeting in person. All you need do is mark the proxy card to indicate your
vote, sign and date the card, then return it in the enclosed envelope as soon as
conveniently possible. If the shares are held in more than one name, all holders
of record should sign. If you desire to vote for all of the Board of Directors'
nominees, you need not mark your votes on the proxy card but need only sign and
date it and return it in the enclosed envelope. As an alternative to returning
the proxy card, you may choose to make use of the Internet or telephone voting
options described in the enclosed Proxy Statement and on the proxy card.
Management sincerely appreciates your support. We hope to see you at the
Annual Meeting.
By order of the Board of Directors,
Joseph H. Lemieux
Chairman of the Board
James W. Baehren
Secretary
March 31, 2001
Toledo, Ohio
OWENS-ILLINOIS, INC.
ONE SEAGATE
TOLEDO, OHIO 43666
------------------------
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHARE OWNERS
TO BE HELD MAY 9, 2001
------------------------
The Annual Meeting of the share owners of Owens-Illinois, Inc. (herein
called the "Company") will be held on Wednesday, May 9, 2001, at 2:00 p.m. in
the auditorium of the Owens-Illinois World Headquarters Building, One SeaGate,
Toledo, Ohio. At the Annual Meeting, share owners will elect four directors for
a term of three years, as more fully described below.
This Proxy Statement has been prepared in connection with the solicitation
by the Company's Board of Directors of proxies for the Annual Meeting and
provides information concerning the persons nominated by the Board of Directors
for election as directors, and other information relevant to the Annual Meeting.
The Company intends to commence distribution of this Proxy Statement and the
materials which accompany it on or about March 31, 2001.
The record of share owners entitled to notice of and to vote at the Annual
Meeting was taken as of the close of business on March 12, 2001 (the "record
date"), and each share owner will be entitled to vote at the meeting any shares
of the Company's Common Stock, par value $.01 per share ("Common Stock"), held
of record at the record date.
VOTING
Shares can be voted at the annual meeting only if the share owner is present
in person or represented by proxy. If shares are owned of record in the share
owner's name, the share owner may cast a vote one of three ways:
- Vote by Internet: A share owner can choose to vote shares at any time over
the Internet site listed on the accompanying proxy card. The Internet site
will give the share owner the opportunity to make selections and confirm
that instructions have been followed. The Internet voting procedures have
been designed to authenticate the share owner's identity by use of a
unique control number found on the accompanying proxy card. If a vote is
cast over the Internet, the share owner does not need to return the proxy
card.
- Vote by Telephone: A share owner can also vote by telephone at any time by
calling the toll-free number (for residents of the U.S. and Canada) listed
on the proxy card. To vote, the share owner must enter the control number
listed on the proxy card and follow the recorded instructions. If a vote
is cast by telephone, the share owner does not need to return the proxy
card.
- Vote by Mail: If the share owner chooses to vote by mail, the share owner
is required to complete, date and sign the accompanying proxy card and
return it promptly in the enclosed envelope.
Share owners who hold their shares beneficially in street name through a
nominee (such as a bank or broker) may be able to vote by telephone or the
Internet as well as by mail. The share owner should follow the instructions
received from the nominee to vote these shares.
1
The proxy card lists each person nominated by the Board of Directors for
election as director. Proxies duly executed and received in time for the meeting
will be voted in accordance with share owners' instructions. If no instructions
are given, proxies will be voted (a) to elect James H. Greene, Jr., George R.
Roberts, Robert J. Dineen and Thomas L. Young as directors of the Company for a
term of three years, and (b) in the discretion of the proxy holders as to any
other business which may properly come before the meeting.
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for a
classified Board of Directors consisting of three classes as nearly equal in
size as practicable. Each class holds office until the third Annual Meeting for
selection of directors following the election of such class. The Board of
Directors of the Company (the "Board") currently consists of nine members, four
of whom are Class I directors whose terms expire at this year's Annual Meeting,
three of whom are Class II directors whose terms expire at the 2002 Annual
Meeting, and two of whom are Class III directors whose terms expire at the 2003
Annual Meeting. All of the directors listed herein, including the nominees, have
served as directors since the last Annual Meeting.
The Board is searching for qualified candidates to serve as additional
outside directors. Once suitable candidates are identified, the Board will
expand the size of the Board to eleven directors and appoint such qualified
candidates to fill the resulting vacancies.
The Board has nominated four persons for election as Class I directors to
serve for a three-year term expiring at the Annual Meeting of share owners to be
held in 2004 and until their successors have been elected and qualified. The
four nominees of the Board are James H. Greene, Jr., George R. Roberts,
Robert J. Dineen and Thomas L. Young, each of whom is currently serving as a
director of the Company. If for any reason any of them should be unavailable to
serve, proxies solicited hereby may be voted for a substitute as well as for the
other nominees. The Board, however, expects all nominees to be available.
The nominees and the directors whose terms of office continue after this
year's Annual Meeting are listed below with brief statements setting forth their
present principal occupations and other information, including directorships in
other public companies.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT THE SHARE OWNERS
VOTE FOR THE FOUR NOMINEES IDENTIFIED BELOW.
CLASS I: NOMINEES FOR 3-YEAR TERM
James H. Greene, Jr. Director since 1987
Member of KKR & Co. L.L.C., Age 50
the general partner of
Kohlberg Kravis Roberts & Co., L.P.
Mr. Greene was a general partner of Kohlberg Kravis Roberts & Co., L.P. from
January 1, 1993 until January 1, 1996, when he became a member of the limited
liability company which is the general partner of Kohlberg Kravis Roberts & Co.,
L.P. Mr. Greene has been a general partner of KKR Associates, L.P. since
January 1, 1993, and prior thereto was a limited partner of KKR Associates, L.P.
and an executive of Kohlberg Kravis Roberts & Co., L.P. Mr. Greene is a director
of Accuride Corporation, Intermedia Communications, Inc. and Safeway Inc. He is
a member of the Compensation Committee.
2
George R. Roberts Director since 1987
Managing Member of KKR & Co. L.L.C., Age 57
the general partner of
Kohlberg Kravis Roberts & Co., L.P.
Mr. Roberts is a Founding Partner of Kohlberg Kravis Roberts & Co., L.P. and,
effective January 1, 1996, he became a managing member of the limited liability
company which is the general partner of Kohlberg Kravis Roberts & Co., L.P. Mr.
Roberts also is a general partner of KKR Associates, L.P. Mr. Roberts is a
director of Accuride Corporation, Amphenol Corporation, Borden, Inc., The Boyds
Collection, Ltd., DPL Inc., Evenflo Company Inc., IDEX Corporation, KinderCare
Learning Centers, Inc., KSL Recreation Group, Inc., PRIMEDIA, Inc., Safeway Inc.
and Spalding Holdings Corporation. He is a member of the Executive Committee.
Robert J. Dineen Director since 1994
Chairman of the Board of Directors Age 71
Layne Christensen Company
Mr. Dineen has been Chairman of the Board of Directors of Layne Christensen
Company since 1992. Prior to 1993, Mr. Dineen was President and Chief Executive
Officer of The Marley Company for more than five years. Mr. Dineen is a director
of Layne Christensen Company. He is a member of the Audit Committee.
Thomas L. Young Director since 1998
Executive Vice President Age 57
Owens-Illinois, Inc.
Mr. Young has been Executive Vice President, Administration and General Counsel
since 1998. He previously served the Company as Executive Vice President,
Administration, General Counsel, and Secretary (1993-1998). Mr. Young is a
director of Manor Care Inc.
CLASS II: TERM EXPIRES IN 2002
Edward A. Gilhuly Director since 1987
Member of KKR & Co. L.L.C., Age 41
the general partner of
Kohlberg Kravis Roberts & Co., L.P.
Mr. Gilhuly was a general partner of Kohlberg Kravis Roberts & Co., L.P. from
January 1, 1995 until January 1, 1996, when he became a member of the limited
liability company which is the general partner of Kohlberg Kravis Roberts & Co.,
L.P. Mr. Gilhuly has been a general partner of KKR Associates, L.P. since
January 1, 1995, and prior thereto was a limited partner of KKR Associates, L.P.
and an executive of Kohlberg Kravis Roberts & Co., L.P. Mr. Gilhuly is a
director of Layne Christensen Company and Rockwood Specialties, Inc. He is
Chairman of the Audit Committee and a member of the Executive and Compensation
Committees.
3
Robert J. Lanigan Director since 1987
Chairman Emeritus Age 73
Mr. Lanigan was the Chairman of the Board of Directors of the Company from 1984
to 1991 and the Chief Executive Officer of the Company from 1984 to 1990.
Mr. Lanigan is a founding partner of Palladium Equity Partners. Mr. Lanigan is a
director of DaimlerChrysler AG and IMS Health Incorporated.
John J. McMackin, Jr. Director since 1994
Member Age 49
Williams & Jensen, P.C.
Mr. McMackin has been a member of Williams & Jensen for more than five years. He
is a member of the Audit Committee.
CLASS III: TERM EXPIRES IN 2003
Joseph H. Lemieux Director since 1987
Chairman of the Board and Age 70
Chief Executive Officer
Owens-Illinois, Inc.
Mr. Lemieux has been Chairman of the Board of the Company since 1991 and Chief
Executive Officer of the Company since 1990. Mr. Lemieux was President and Chief
Operating Officer of the Company and its predecessor from 1986 to 1990. Mr.
Lemieux is a director of Manor Care Inc. He is chairman of the Executive
Committee.
Michael W. Michelson Director since 1987
Member of KKR & Co. L.L.C., Age 49
the general partner of
Kohlberg Kravis Roberts & Co., L.P.
Mr. Michelson has been a member of the limited liability company which is the
general partner of Kohlberg Kravis Roberts & Co., L.P. since January 1, 1996.
Prior thereto, he was a general partner of Kohlberg Kravis Roberts & Co., L.P.
Mr. Michelson also is a general partner of KKR Associates, L.P. Mr. Michelson is
a director of Amphenol Corporation, AutoZone, Inc. and KinderCare Learning
Centers, Inc. He is chairman of the Compensation Committee and a member of the
Executive Committee.
FUNCTIONS OF THE BOARD AND ITS COMMITTEES
The Board has the ultimate authority for the management of the Company's
business. The Board selects the Company's executive officers, delegates
responsibilities for the conduct of the Company's operations to those officers,
and monitors their performance.
Important functions of the Board are performed by committees comprised of
members of the Board. Subject to applicable provisions of the Company's By-Laws,
the Board as a whole appoints the members of each committee. The Board may, at
any time, change the authority or responsibility delegated to any committee.
There are three regularly constituted committees of the Board: the Executive
Committee, the Audit Committee and the Compensation Committee. The Company does
not have a nominating committee or any regularly constituted committee
performing the functions of such a committee.
4
The Executive Committee is empowered to exercise the authority of the Board
in the management of the Company between meetings of the Board, except that the
Executive Committee may not fill vacancies on the Board, appoint or remove
officers, amend the Company's By-Laws or exercise certain other powers reserved
to the Board or delegated to other Board committees.
The Audit Committee recommends to the Board the firm of independent auditors
to audit the Company's financial statements for each fiscal year; reviews with
the independent auditors the general scope of this service; reviews the nature
and extent of the non-audit services performed by the independent auditors; and
consults with management on the activities of the Company's independent auditors
and the Company's internal control structure.
The Compensation Committee administers the Amended and Restated Stock Option
Plan, the 1997 Equity Participation Plan and certain other benefit plans of the
Company and makes recommendations to the Board with respect to the compensation
to be paid and benefits to be provided to directors, officers and employees of
the Company.
During 2000, the Board held three formal meetings, the Audit Committee held
three formal meetings and the Compensation Committee held two formal meetings.
The Executive Committee held no meetings in 2000. During 2000, each member of
the Board attended 75% or more of the aggregate number of meetings of the Board
and of committees of the Board of which he was a member, except Robert J.
Lanigan and George R. Roberts. In addition to the formal meetings indicated
above, the Board and the committees of the Board consulted frequently and often
acted by written consent taken without a meeting.
5
DIRECTOR AND EXECUTIVE COMPENSATION AND OTHER INFORMATION
DIRECTOR COMPENSATION
Directors of the Company who are not Company officers are paid a fee of
$35,000 annually plus expenses associated with meetings of the Company's Board.
SUMMARY COMPENSATION TABLE
The following table shows, for the years ended December 31, 1998, 1999 and
2000, the cash compensation paid by the Company and its subsidiaries, as well as
certain other compensation paid or accrued for those years, to the Company's
Chief Executive Officer and the four most highly compensated executive officers
of the Company (the "named executive officers") in all capacities in which they
served.
ANNUAL COMPENSATION
--------------------------------------
OTHER
ANNUAL
NAME AND SALARY BONUS COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3)
- ------------------------------------- -------- -------- -------- --------------
Joseph H. Lemieux.................... 2000 $650,797 $137,500 $346,287
Chairman and Chief 1999 625,697 278,500 77,681
Executive Officer 1998 601,400 387,500 76,028
Peter J. Robinson (10)............... 2000 471,726(11) 405,879 0
V.P., General Manager, 1999 480,168 463,543 0
Asia Pacific Operations 1998 275,981 126,755 0
R. Scott Trumbull.................... 2000 292,500 180,000 104,202
Executive V.P.--International 1999 277,500 160,000 29,846
Operations/Corp. Development 1998 262,500 200,000 28,869
Terry L. Wilkison.................... 2000 292,500 200,000 33,005
Executive V.P.--Plastics 1999 277,500 160,000 11,791
Group General Manager 1998 99,375 90,000 4,532
Thomas L. Young...................... 2000 292,500 200,000 85,921
Executive V.P.--Administration 1999 276,333 160,000 29,057
and General Counsel 1998 255,000 200,000 15,320
LONG TERM COMPENSATION
-------------------------------------------
AWARDS PAYOUTS
------------------------------ ----------
RESTRICTED SECURITIES LONG-TERM
STOCK UNDERLYING INCENTIVE ALL OTHER
NAME AND AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION ($) (#)(4) ($)(5) ($)(6)
- ------------------------------------- ---------- -------------- ---------- --------------
Joseph H. Lemieux.................... $ 856,286(7) 160,000 $100,358 $ 64,163(8)(9)
Chairman and Chief 2,322,094 160,000 105,651 54,243
Executive Officer 746,825 160,000 119,951 57,056
Peter J. Robinson (10)............... 0(12) 100,000 124,616 4,446(13)
V.P., General Manager, 558,750 100,000 0 4,555
Asia Pacific Operations 0 100,000 0 4,152
R. Scott Trumbull.................... 0(14) 75,000 94,502 12,594(9)
Executive V.P.--International 419,063 75,000 97,718 11,100
Operations/Corp. Development 0 75,000 109,418 10,500
Terry L. Wilkison.................... 0(15) 75,000 73,093 5,956(9)
Executive V.P.--Plastics 419,063 75,000 78,778 883
Group General Manager 0 75,000 89,279 3,975
Thomas L. Young...................... 0(16) 75,000 91,763 12,948(9)
Executive V.P.--Administration 558,750 75,000 93,600 11,053
and General Counsel 0 75,000 100,152 10,200
- ----------------------------------
(1) Includes amounts deferred at the election of the named executive officer
pursuant to the salary reduction provisions of the Stock Purchase and
Savings Program.
(2) Except as otherwise provided in footnote 11 below, the amounts disclosed in
this column represent awards under the Owens-Illinois, Inc. Senior
Management Incentive Plan for the year indicated. Except as otherwise
provided in footnote 7 below, amounts, if any, deferred at the election of a
named executive officer are included in the year earned.
(3) The amounts disclosed in this column represent amounts reimbursed during
the year for the payment of taxes.
(4) No SAR's were granted to any of the named executive officers during 2000.
(5) The amounts disclosed in this column represent awards under the
Owens-Illinois, Inc. Performance Award Plan for the year indicated. Except
as otherwise provided in footnote 7 below, amounts, if any, deferred at the
election of an executive officer are included in the year earned.
(6) Except as otherwise provided in footnote 13 below, the amounts disclosed in
this column for 2000 represent matching cash contributions by the Company to
the Stock Purchase and Savings Program ("SPASP") and the Executive Savings
Plan, both defined contribution plans. The SPASP is a tax-qualified defined
contribution plan intended to satisfy the requirements of Section 401(k) of
the Internal Revenue Code of 1986. The Company contributes to each
participant's account maintained under the SPASP an amount of Company stock
equal to 50% of the participant's contributions to the SPASP but not more
than 4% of (a) the participant's earnings or (b) $170,000 for 2000,
whichever is lower. The difference between the theoretical Company matching
contribution under the SPASP for each participant, without regard to the
legally imposed maximum, and the maximum contribution permitted under law is
used to determine the number of theoretical shares of Company Common Stock
which would have been purchased for the participants account in the absence
of the IRS limitation on participant's earnings in excess of $170,000 for
2000. In 2000, the Executive Savings Plan was terminated and all amounts
held thereunder were distributed to the plan participants.
(7) Represents 96,104 shares of restricted stock granted to Mr. Lemieux under
the Company's 1997 Equity Participation Plan in lieu of cash payments in the
amounts of $412,500 and $301,072 pursuant to elections by Mr. Lemieux under
the Company's Senior Management Incentive Plan and Performance Award Plan,
respectively. See "Board Compensation Committee Report on Executive
Compensation--Annual Incentive" and "--Long-Term Incentives" below. As of
December 31, 2000, Mr. Lemieux held 149,212 shares of restricted stock of
the Company with a value of $848,643 (determined by the closing price of the
Common Stock on the New York Stock Exchange on December 31, 2000).
(8) Also includes a premium of $29,100 paid by the Company on a whole life
insurance policy owned by Mr. Lemieux.
6
(9) Includes the following amounts equal to the value of premiums paid by the
Company in connection with life insurance policies issued pursuant to the
Owens-Illinois Executive Life Insurance Plan and Participation Agreements
entered into between the Company and certain named executive officers during
2000: Mr. Lemieux, $9,031; Mr. Trumbull, $894; Mr. Wilkison, $1,531; and
Mr. Young, $1,248.
(10) Mr. Robinson became an employee of the Company in May 1998 upon the
purchase by the Company of the packaging businesses of BTR plc. His
compensation for 1998 is for the period from May 1, 1998 through
December 31, 1998.
(11) Includes payment in the amount of $93,089, which payments were made to
Mr. Robinson in lieu of contributions on his behalf to a superannuation fund
to provide post-retirement pension benefits. Mr. Robinson's bonus is
provided under a separate bonus plan relating to the Company's Asia Pacific
business.
(12) As of December 31, 2000, Mr. Robinson held phantom stock units under the
Company's 1997 Equity Participation Plan with respect to 20,000 shares of
Common Stock of the Company with a value of $113,750 (determined by the
closing price of the Common Stock on the New York Stock Exchange on
December 31, 2000).
(13) Represents the statutory minimum amounts contributed by the Company to a
superannuation fund on behalf of Mr. Robinson.
(14) As of December 31, 2000, Mr. Trumbull held 15,000 shares of restricted
stock of the Company with a value of $85,313 (determined by the closing
price of the Common Stock on the New York Stock Exchange on December 31,
2000).
(15) As of December 31, 2000, Mr. Wilkison held 15,000 shares of restricted
stock of the Company with a value of $85,313 (determined by the closing
price of the Common Stock on the New York Stock Exchange on December 31,
2000).
(16) As of December 31, 2000, Mr. Young held 20,000 shares of restricted stock
of the Company with a value of $113,750 (determined by the closing price of
the Common Stock on the New York Stock Exchange on December 31, 2000).
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
The following table provides information on option grants in 2000 to the
named executive officers.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ---------------------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES
SECURITIES % OF TOTAL OF STOCK PRICE
UNDERLYING OPTIONS/SARS APPRECIATION FOR
OPTIONS/SARS GRANTED TO EXERCISE OR OPTION TERM(3)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% 10%
- -------------------------------- ------------ ------------ ----------- ---------- ---------- ----------
Joseph H. Lemieux............... 160,000(2) 9.0% $13.50 05/02/10 $1,358,412 $3,442,484
Peter J. Robinson............... 100,000(2) 5.6% 13.50 05/02/10 849,008 2,151,552
R. Scott Trumbull............... 75,000(2) 4.2% 13.50 05/02/10 636,756 1,613,664
Terry L. Wilkison............... 75,000(2) 4.2% 13.50 05/02/10 636,756 1,613,664
Thomas L. Young................. 75,000(2) 4.2% 13.50 05/02/10 636,756 1,613,664
- ------------------------------
(1) No SAR's were granted to any of the named executive officers during 2000.
(2) Exercises of one-half of the options are permitted after each of the fifth
and sixth anniversaries of the date of the grant; provided, options shall
become exercisable after the first anniversary of the date of the grant
thereof at the time when the average fair market value per share (as
evidenced by the closing price of the underlying stock on the principal
exchange on which it is traded) for any period of 20 consecutive trading
days (commencing after such first anniversary) is at least equal to the
product of the fair market value per share on the date of grant times the
amount shown below under "Stock Price Multiple" as to the percentage of the
shares of stock initially subject to the option shown below under "Exercise
Percentage."
STOCK PRICE RESULTING
MULTIPLE STOCK PRICE EXERCISE PERCENTAGE
120% $16.20 25%
144% 19.44 50%
172% 23.22 75%
206% 27.81 100%
Under the Second Amended and Restated Stock Option Plan for Key Employees of
Owens-Illinois, Inc., for all options granted between January 1, 1992 and
December 31, 1996, rights to receive Additional Options, as defined in the
Second Amended and Restated Stock Option Plan for Key Employees of
Owens-Illinois, Inc., are attached to each option and Additional Options
will be granted upon exercise, subject to certain conditions, if the
exercise price is paid using shares of Common Stock owned by the optionee or
the related tax obligation is paid using shares of Common Stock owned by the
optionee or by relinquising Common Stock which the optionee is entitled to
receive upon the exercise of the options. Under the 1997 Equity
Participation Plan of Owens-Illinois, Inc., for all options granted under
the plan, rights to receive Additional Options, as defined in the 1997
Equity Participation Plan of Owens-Illinois, Inc., are attached to each
option and Additional Options will be granted upon exercise, subject to
certain conditions, if the exercise price is paid using shares of Common
Stock owned by the optionee or the related
7
tax obligation is paid using shares of Common Stock owned by the optionee or
by relinquishing Common Stock which the optionee is entitled to receive upon
the exercise of the options.
(3) Based on actual option term and annual compounding. The assumed annual rates
of appreciation of 5 and 10 percent would result in the price of the
Company's Common Stock increasing to $21.991 and $35.016, respectively.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
Shown below is information with respect to the unexercised options to
purchase the Company's Common Stock granted in 2000 and prior years to the named
executive officers and held by them at December 31, 2000. No options were
exercised by named executive officers in 2000.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
DECEMBER 31, 2000 AT DECEMBER 31, 2000(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
Joseph H. Lemieux......................................... 325,000 630,000 $0 $0
Peter J. Robinson......................................... 0 300,000 0 0
R. Scott Trumbull......................................... 47,500 218,250 0 0
Terry L. Wilkison......................................... 0 225,000 0 0
Thomas L. Young........................................... 83,491 281,250 0 0
- ------------------------------
(1) Based on the closing price of the Company's Common Stock on the New York
Stock Exchange on that date of $5.6875.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
The named executive officers are covered by the Company's Performance Award
Plan ("PAP") under which eligible employees receive annual cash awards payable
at the end of the three-year period covered by the grant of the award. Award
payouts under PAP are based on the average annual attainment of the performance
objectives set by the Compensation Committee of the Board. For the 2000-2002
award period, performance will be evaluated in comparison to the Company's
attained level of earnings per share relative to objectives for that period. The
target amounts shown below are earned by Company performance at the level of
100% of the established objectives, with such payment percentage increasing or
decreasing four percentage points for each single percentage point increase or
decrease, respectively, in performance.
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
PERIOD UNTIL NON-STOCK PRICE-BASED PLANS
MATURATION --------------------------------
NAME OR PAYOUT THRESHOLD TARGET MAXIMUM
- ---- ------------ --------- -------- ---------
Joseph H. Lemieux........................................... 2000-2002 $101,250 $506,250 (1)
Peter J. Robinson........................................... 2000-2002 33,053 165,267 (1)
R. Scott Trumbull........................................... 2000-2002 24,480 122,400 (1)
Terry L. Wilkison........................................... 2000-2002 24,496 122,480 (1)
Thomas L. Young............................................. 2000-2002 24,400 122,000 (1)
- ------------------------------
(1) The maximum dollar amount that may be earned under PAP is not capped.
8
PENSION PLANS
The following table illustrates the estimated annual benefits payable under
the Owens-Illinois Salary Retirement Plan (the "Retirement Plan") and
nonqualified retirement plans in various average earnings classifications upon
normal retirement at age 65:
YEARS OF CREDITED SERVICE
HIGHEST THREE-YEAR ---------------------------------------------------------------------
AVERAGE ANNUAL EARNINGS 20 25 30 35 40 45
- ----------------------- -------- -------- -------- ---------- ---------- ----------
$ 200,000 $ 52,690 $ 65,862 $ 79,035 $ 92,207 $ 104,327 $ 116,447
400,000 109,019 136,274 163,529 190,784 213,607 237,847
600,000 166,162 207,703 249,243 290,784 322,887 359,247
800,000 223,305 279,131 334,958 390,784 432,167 480,647
1,000,000 280,448 350,560 420,672 490,784 541,447 602,047
1,200,000 337,591 421,989 506,386 590,784 650,727 723,447
1,400,000 394,734 493,417 592,101 690,784 760,007 844,847
1,600,000 451,877 564,846 677,815 790,784 869,287 966,247
1,800,000 509,019 636,274 763,529 890,784 978,567 1,087,647
2,000,000 566,162 707,703 849,243 990,784 1,087,847 1,209,047
2,200,000 623,305 779,131 934,958 1,090,784 1,197,127 1,330,447
The above pension table illustrates benefits calculated on a straight-life
annuity basis, and reflects the greater of the regular benefit or the
"grandfathered" benefit available under the formula in effect prior to
January 1, 1989. The regular benefit does not contain an offset for social
security or other amounts, whereas the "grandfathered" benefit does provide for
a partial offset for social security benefits.
The compensation covered by the plans under which the benefits are
summarized in the table above equals the sum of base salary, Senior Management
Incentive Plan and Performance Award Plan payments, as reported in the Summary
Compensation Table for the named executive officers for the last three fiscal
years, and is equal to the highest three-year average of such amounts. At
January 31, 2001, Mr. Lemieux had 43 years of credited service, Mr. Trumbull had
29 years of credited service, Mr. Wilkison had 2 years of credited service and
Mr. Young had 24 years of credited service under the Retirement Plan. To the
extent that benefits in the preceding table cannot, under the limitations of the
Code, be provided under the Retirement Plan, such benefits will be provided
under the Company's Supplemental Retirement Benefit Plan (the "SRBP"). Peter J.
Robinson is not covered by a Company-sponsored pension plan.
A significant portion of the pension benefits payable to certain named
executive officers is provided under the SRBP. Such benefits have historically
represented an unfunded liability of the Company. In 2000, the Company amended
the SRBP to provide for funding of the retirement benefits then due under the
SRBP, including any additional or enhanced benefits under the Retirement Plan or
the SRBP to which the named executive officer would have been entitled had he
retired or otherwise terminated his employment with the Company. Pursuant to
such amendment, in 2000 the Company entered into agreements with certain named
executive officers under which the liabilities for the accrued SRBP benefits
were funded through accounts established by the Company for each such named
executive officer in the Harbor Money Market Fund, a mutual fund to which Harbor
Capital Advisors, Inc., a wholly owned subsidiary of the Company acts as
investment advisor. The amounts funded pursuant to such agreements for the named
executive officers were as follows: Mr. Lemieux, $9,407,000; Mr. Trumbull,
$2,784,000; Mr. Wilkison, $272,000; and Mr. Young, $2,147,000. The foregoing
funding arrangements offset the liabilities under the SRBP at the time of such
funding. Additionally, as consideration for such funding
9
commitments each of such named executive officers entered into a non-competition
and non-solicitation agreement covering the term of his employment plus three
years.
EMPLOYMENT AGREEMENTS. The Company entered into employment agreements with
certain officers, including the named executive officers listed above, that
entitle the participants to receive their base salaries and to participate in
designated benefit plans of the Company. The agreements provide for termination
of employment at any time, with or without cause, and the benefit plans
designated therein and each employee's rights to receive salary and bonuses
pursuant thereto are subject to modification by the Company in its sole
discretion.
CERTAIN TRANSACTIONS
During 2000, the law firm of Williams & Jensen, P.C., of which Mr. McMackin
is a member, received fees for legal services in connection with various
matters. It is anticipated that the Company will continue to utilize the
services of Williams & Jensen, P.C. on various Company matters.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The following non-employee directors serve on the Compensation Committee of
the Company's Board of Directors: Edward A. Gilhuly, James H. Greene, Jr. and
Michael W. Michelson (chair). Until June 1987, Mr. Gilhuly and Mr. Greene were
officers of the Company. Messrs. Greene, Michelson and Gilhuly are members of
KKR & Co. L.L.C., the general partner of Kohlberg Kravis Roberts & Co., L.P.,
which provides management, consulting and financial services to the Company for
an annual fee. In 2000 the payment for the management fee and expenses was
$1,672,966. Such services include, but are not necessarily limited to, advice
and assistance concerning any and all aspects of the operation, planning and
financing of the Company and its subsidiaries, as needed from time to time.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Company's Board of
Directors establishes the Company's policies regarding the compensation of its
executive officers and other key managers, and oversees the compensation
practices employed pursuant to those policies. The Committee also administers
the Company's Equity Participation Plan, the Performance Award Plan ("PAP"),
and, with the Chief Executive Officer, the Senior Management Incentive Plan
("SMIP"). The Committee has direct responsibility for the compensation of the
Chief Executive Officer.
The Company's principal objective is to increase share owner value over
time. The Committee's executive compensation policies are intended, and have
been structured, to achieve this objective by emphasis on and adherence to the
following principles: (1) focus on a significant equity orientation among
executives to align their interests with those of all other share owners,
(2) linkage of compensation with achievement of certain specific financial,
strategic and operating goals which underlie long-term share owner value,
(3) maintenance of plans which are intended to be competitive with those of
other successful companies of comparable size, particularly those in the
industries in which the Company competes, and (4) effective communication and
straightforward administration of plans that are well understood and not unduly
complex. Additionally, because the Company in 2000 confronted numerous external
financial and related issues, including the bankruptcy filings of several
companies with long tail asbestos liabilities, the Committee determined that it
was also necessary to take appropriate steps to secure and incentivize the
retention of key executives and managers, particularly those who are retirement
eligible.
10
The components of the Company's executive officer compensation are:
- Base Salary
- Annual Incentive
- Long-Term Incentives
- Benefits
BASE SALARY. Base salaries are set at levels intended to be competitive
with industrial companies of comparable size in a broad range of American
industries, which the Committee believes are the Company's competitors for
executive talent. The Committee reviews salaries annually and provides salary
adjustments based on periodic reviews of competitive considerations. In 2000,
Mr. Lemieux was granted a $50,000 increase in base salary, representing a 7.6%
adjustment on an annualized basis.
ANNUAL INCENTIVE. The Company's SMIP establishes target annual incentives
for key executives in the form of a percentage of base salary (up to a maximum
target incentive of 100% in the case of the Chief Executive Officer). The SMIP
provides for annual incentive awards consisting of a corporate performance
component based on annual rate of return on net assets ("RONA") and an earnings
per share ("EPS") targets, on an equally weighted basis, established by the
Board as the performance objectives for the year, an operating unit RONA
performance component (for executive positions at the unit level), and a
discretionary component. Each performance component and, in the aggregate, the
discretionary components are contingent on the Company's performance relative to
the corporate RONA and EPS objectives for the year.
The SMIP establishes quantitative relationships between performance and
payout percentages within defined minimum/maximum ranges. The total bonus pool
available for distribution to all covered executives, including the Chief
Executive Officer, cannot exceed 150% of the total of all target bonuses for the
covered executives.
A recipient of an SMIP payment may elect to receive restricted stock in lieu
of cash for all or a portion of such payment. Such restricted stock is issued
under the terms of the 1997 Equity Participation Plan of Owens-Illinois, Inc.,
which plan was approved by the share owners at the 1997 Annual Meeting. A
recipient who so elects receives a number of shares of restricted stock equal to
120% of the amount of cash forgone divided by the closing price of the Common
Stock on the last trading day prior to the date on which the cash amount would
have been paid. Except as otherwise provided in the 1997 Equity Participation
Plan of Owens-Illinois, Inc., such restricted stock vests on the third
anniversary of the date on which the cash amount would have been paid.
Based on the Committee's evaluation of the Company's RONA and EPS
performance relative to its 2000 RONA and EPS objectives, and further based on
the Committee's evaluation of certain other performance factors relating to the
Chief Executive Officer, Mr. Lemieux was granted an SMIP award of $550,000 for
2000.
LONG-TERM INCENTIVES. There are two forms of long-term incentives utilized
for key executives: PAP, which provides cash awards, and the Company's Equity
Participation Plan, which provides for grants of stock options and restricted
stock.
The PAP establishes target cash awards for key executives based on a
percentage of base salary at the time of the award (up to a maximum target award
of 75% in the case of the Chief Executive Officer). The PAP is based on a
three-year performance cycle. Award payouts are based on the average annual
11
attainment of the performance objectives set by the Board for each year of each
award period. The Board establishes the performance criteria under this Plan and
sets the relative weighting where multiple criteria are applicable. For the
1999-2001 and 2000-2002 award period, performance will be evaluated in
comparison to the Company's attained level of EPS relative to objectives for
these periods. Under the Plan, performance at the level of 100% of these
established objectives results in a 100% payment of the PAP award, with such
payment percentage increasing or decreasing four percentage points for each
single percentage point increase or decrease, respectively, in performance.
A recipient of a PAP payment may elect to receive restricted stock in lieu
of cash for all or a portion of such payment on the same terms described above
with respect to SMIP payments.
The Committee previously approved a PAP allotment to Mr. Lemieux for the
1998-2000 award period of $468,960, and the Committee determined, in the manner
described in the immediately preceding paragraph, that performance in 1998-2000
award period relative to the earnings per share objective established for this
period warranted a 85.6% payout of Mr. Lemieux's 1998-2000 PAP allotment.
In 2000, the Committee approved a PAP allotment to Mr. Lemieux for the
2000-2002 award period of $506,250.
The Company Equity Participation Plan provides executives with the
opportunity to acquire an equity interest in the Company and to share in the
appreciation of the value of the stock. Stock options only have value if the
stock price appreciates from the date the options are granted. Furthermore,
under the form of Stock Option Agreement currently approved by the Committee,
exercisability of options is not available until the fifth year after the grant
date unless exercisability has been accelerated by virtue of increase(s) in the
Company stock price.
Each year the Committee determines the total number of options to be awarded
to all eligible key employees as a group. The Committee determined that in 2000
a pool approximately equal to 1.2% of the total number of outstanding shares of
common stock of the Company was sufficient to achieve the overall goals of the
plan. The number of options awarded to each eligible key employee, including the
Chief Executive Officer and each executive officer, is based on the opportunity
for such individual to enhance share owner value through the effective
performance of such individual's job responsibilities. Consideration is also
given to the total number of options previously granted to such individual. In
2000, Mr. Lemieux was granted options on 160,000 shares.
BENEFITS. In 2000, the Company instituted the Owens-Illinois Executive Life
Insurance Plan (or, in the case of covered employees living outside the United
States, the Owens-Illinois Death Benefit Plan) under which covered employees,
including the named executive officers, are provided life insurance with a death
benefit equal to three times the covered employees then-current base salary. The
Company retains a collateral interest in each insurance policy under which the
Company receives, out of the death benefits payable under the policy, an amount
equal to the premiums paid by the Company, plus interest on such payments at the
rate prescribed under the plan from each premium payment date. The Company, with
the Committee's approval, also took steps to fund the previously unfunded
portion of the pension liabilities for its executive officers as further
described above in the discussion of "Pension Plans."
Other benefits offered to executive officers are essentially the same as
those offered to all salaried employees of the Company. The level and nature of
such benefits are reviewed from time to time to ensure that they are
competitive, tax efficient, and otherwise appropriate in the judgment of the
Committee.
12
The Committee believes that the executive compensation policies and programs
described above serve the interest of all share owners and the Company and
substantially link the compensation of the Company's executives with the
Company's performance.
TAX DEDUCTIBILITY COMPENSATION. During 1993, the Internal Revenue Code of
1986 was amended by adding a new Section 162(m), which denies a tax deduction to
a publicly held corporation for compensation paid to its Chief Executive Officer
and its other four most highly compensated officers to the extent any such
compensation exceeds $1 million in a taxable year after 1993. Such denial of tax
deductibility is subject, however, to an exception for "performance-based
compensation." The Internal Revenue Service has issued regulations purporting to
interpret and implement the provisions of Section 162(m).
Mr. Lemieux is the only executive whose compensation under the Company's
cash compensation plan is potentially subject to the provisions of
Section 162(m). Mr. Lemieux has elected, pursuant to the Company's 1997 Equity
Participation Plan, to defer into restricted stock an amount of his incentive
compensation for 2000 such that his total compensation will not exceed the
$1 million deductibility limit in 2001. Of the amount deferred by Mr. Lemieux
for 2000, $713,572 was taken in the form of restricted stock under the 1997
Equity Participation Plan. Notwithstanding the prior deferral by Mr. Lemieux of
a portion of his incentive compensation for 1999, as a result of the one-time
accelerated payments made to Mr. Lemieux under the Company's Supplemental
Retirement Benefit Plan and certain other payments made to Mr. Lemieux upon the
termination of the Company's Officers Deferred Compensation Plan, a portion of
the compensation payable to Mr. Lemieux in 2000 will be subject to the
limitation on deductibility imposed under Section 162(m).
Michael W. Michelson, Chairman
Edward A. Gilhuly
James H. Greene, Jr.
13
BOARD AUDIT COMMITTEE REPORT
The Audit Committee assists the Board of Directors in its oversight of the
Company's financial statements. Management is responsible for the financial
statements and the financial reporting process. The independent auditors are
responsible for expressing an opinion on the conformity of the Company's audited
financial statements to accounting principles generally accepted in the United
States.
In this context, the Audit Committee has reviewed and discussed the audited
financial statements with management and the independent auditors. The Audit
Committee has discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). In addition, the Audit Committee has received from the independent
auditors the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and discussed
with the independent auditors their independence from the Company and its
management. The Audit Committee has also considered whether the independent
auditors' provision of non-audit services to the Company is compatible with the
auditors' independence.
In reliance on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Report on Form 10-K for the period ended
December 31, 2000, for filing with the Securities and Exchange Commission.
All current members of the Audit Committee of the Company's Board of
Directors are eligible to serve on the committee under the independence
standards contained in the current New York Stock Exchange Listing Standards.
The Board of Directors has adopted a Charter for the Audit Committee. A copy of
the Charter is attached to this Proxy Statement as Appendix A.
Edward A. Gilhuly, Chairman
Robert J. Dineen
John J. McMackin, Jr.
14
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG OWENS-ILLINOIS, S&P 500 AND PACKAGING GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
OWENS-ILLINOIS S&P 500 REVISED PACKAGING GROUP PREVIOUS PACKAGING GROUP
1995 $100.00 $100.00 $100.00 $100.00
1996 $156.90 $122.96 $126.79 $129.70
1997 $261.64 $163.98 $162.86 $166.63
1998 $211.21 $210.84 $131.17 $139.78
1999 $172.84 $255.23 $113.03 $138.82
2000 $39.23 $232.00 $71.90 $93.27
The above graph compares the performance of the Company's Common Stock with
that of a broad market index (the S&P 500 Composite Index) and a packaging group
consisting of companies with lines of business or product end uses comparable to
those of the Company for which market quotations are available.
The revised packaging group presented above reflects changes from the
previous packaging group that was presented in the prior year performance graph.
American National Can Group, Inc. and U.S. Can Corp. were removed because market
quotations ceased to be available in 2000. Their elimination from the packaging
group in 2000 did not have a significant effect on total returns for prior
periods. Avery Dennison Corp. and Multi-Color Corp. were removed because their
products are no longer comparable to those of the Company following the
Company's January 2001 sale of its labels business. The elimination of Multi-
Color Corp. did not have a significant effect on total returns of the group. The
elimination of Avery Dennison Corp. had a significant effect on the total return
of the group in 1999 and 2000, since, based on market capitalization, it
accounted for over 25% of the previous packaging group's weighted average
return. The performance of the group as constituted before the elimination of
Avery Dennison Corp. and Multi-Color Corp. is shown above as the previous
packaging group.
The revised packaging group consists of: AptarGroup, Inc., Ball Corp., Bemis
Company, Inc., BWAY Corp., Chesapeake Corp., Crown Cork & Seal Company, Inc.,
Liqui-Box Corp., Owens-Illinois, Inc., Sealed Air Corp., Silgan Holdings Inc.,
Sonoco Products Co., and Vitro Sociedad Anonima (ADSs).
15
The comparison of total return on investment for each period is based on the
change in market value of the stock, including additional shares assumed
purchased through reinvestment of dividends, if any.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 12, 2001 (except as otherwise noted in
the footnotes below) by each beneficial owner of more than five percent of the
Company's outstanding Common Stock known to the Company, each of the Company's
directors and nominees for director, each of the named executive officers and
all directors and executive officers of the Company as a group. No director,
nominee for director, named executive officer or other executive officer
beneficially owned any of the Company's preferred stock.
NUMBER OF
NAME AND ADDRESS SHARES BENEFICIALLY
OF BENEFICIAL OWNER OWNED(1) PERCENTAGE
- ------------------------------------------------------------ ------------------- ----------
KKR Associates, L.P.(2)..................................... 36,000,000 24.7%
9 West 57th Street
New York, New York 10019
Alliance Capital Management L.P.(3)......................... 18,358,327 12.6
1290 Avenue of the Americas
New York, New York 10104
Capital Research and Management Company(4).................. 15,307,970 10.5
333 South Hope Street
Los Angeles, California 90071
State Street Bank and Trust Company(5)...................... 19,055,460 13.0
225 Franklin Street
Boston, MA 02110
Joseph H. Lemieux(1)........................................ 1,021,953(6)(7) 0.7
Thomas L. Young(1).......................................... 162,693(6)(7) 0.1
Robert J. Dineen(1)......................................... 27,282 --
Edward A. Gilhuly(2)........................................ 10,000 --
James H. Greene, Jr.(2)..................................... -- --
Robert J. Lanigan(1)........................................ 353,278 0.2
John J. McMackin, Jr.(1).................................... 28,019 --
Michael W. Michelson(2)(8).................................. 20,000 --
George R. Roberts(2)........................................ -- --
Peter J. Robinson(1)........................................ 28,000(6)(7) --
R. Scott Trumbull(1)........................................ 183,686(6)(7) 0.1
Terry L. Wilkison(1)........................................ 58,951(6)(7) --
All directors and executive officers as a group (other than
as set forth in relation to KKR Associates, L.P.) (29
persons)(1)............................................... 2,845,464(6)(7) 2.0
- ------------------------
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of a given date if such person has
the right to acquire such shares within 60 days after such date. For
purposes of computing the percentage of outstanding shares held by each
person or group of persons named above on a given date, any security which
such person or persons has the right to acquire within 60 days after such
date is deemed to be outstanding, but is not deemed to be
16
outstanding for the purpose of computing the percentage ownership of any
other person. The information includes: all currently exercisable options
granted to Messrs. Lemieux, Young, Dineen, Lanigan, McMackin, Robinson,
Trumbull and Wilkison. The number of shares beneficially owned includes
325,000 shares subject to options granted to Mr. Lemieux; 83,491 shares
subject to options granted to Mr. Young; 18,182 shares subject to options
granted to Mr. Dineen; 75,000 shares subject to options granted to Mr.
Lanigan; 18,391 shares subject to options granted to Mr. McMackin; 47,500
shares subject to options granted to Mr. Trumbull; and 953,589 shares
subject to options granted to all directors and officers as a group (other
than as set forth in relation to KKR Associates, L.P.). Mr. Robinson and
Mr. Wilkison hold no options exercisable within 60 days. For purposes of
this table, Mr. Robinson is deemed to have "beneficial ownership" of 20,000
phantom stock units issued under the Company's 1997 Equity Participation
Plan.
(2) Shares shown as owned by KKR Associates, L.P. are owned of record by three
limited partnerships of which KKR Associates, L.P. is the sole general
partner and as to which it possesses sole voting and investment power. KKR
Associates is a limited partnership of which George R. Roberts, Michael W.
Michelson, James H. Greene, Jr., Edward A. Gilhuly (all directors of the
Company), Henry R. Kravis, Robert I. MacDonnell, Paul E. Raether,
Michael T. Tokarz, Perry Golkin, and Scott Stuart are the general partners.
Such persons may be deemed to share beneficial ownership of the shares shown
as owned by KKR Associates, L.P. The foregoing persons disclaim beneficial
ownership of such shares of the Company.
(3) The Schedule 13G received by the Company from AXA Financial, Inc. indicated
that Alliance Capital Management L.P. is the beneficial owner of 18,358,327
shares of the Common Stock on behalf of client discretionary investment
advisory accounts, with sole power to vote or to direct the vote on
9,722,025 shares, shared power to vote or direct the vote on 1,765,308
shares and the sole power to dispose or to direct the disposition of
18,358,327 shares. Alliance Capital Management L.P. is majority owned by AXA
Financial, Inc. In turn, AXA Financial, Inc. is majority owned by AXA, which
is controlled by AXA Conseil Vie Assurance Mutuelle, AXA Insurance I.A.R.D.
Mutuelle, AXA Assurances Vie Mutuelle and AXA Courage Assurance Mutuelle.
(4) The Schedule 13G received by the Company from Capital Research and
Management Company indicated it is beneficial owner of 15,307,970 shares of
Common Stock with sole dispositive power with respect to 15,307,970 shares
of Common Stock, shared dispositive power with respect to 0 shares of Common
Stock, sole voting power with respect to 0 shares of Common Stock and shared
voting power with respect to 0 shares of Common Stock. The foregoing 13G
indicated that the shares reported by Capital Research and Management
Company included 257,970 shares resulting from the assumed conversion of
271,800 shares of the 4.75% Convertible Preferred stock of the Company.
(5) The Schedule 13G received by the Company from State Street Bank and Trust
Company ("State Street"), acting in various fiduciary capacities, indicated
it is beneficial owner of 19,055,460 shares of Common Stock, with sole
voting power with respect to 922,991 shares of Common Stock, shared voting
power with respect to 17,961,545 shares of Common Stock, sole dispositive
power with respect to 11,322,258 shares of Common Stock, and shared
dispositive power with respect to 7,733,202 shares of Common Stock. The
majority of the shares with respect to which State Street is the beneficial
owner are owned on behalf of (a) the Owens-Illinois Hourly Supplemental
Retirement Plan, (b) the Owens-Illinois Non-Union Retirement and Savings
Plan, (c) the Owens-Illinois Stock Purchase and Savings Program, and
(d) the Owens-Illinois Long Term Savings Plan. State Street expressly
disclaims beneficial ownership of all of the shares of Common Stock reported
in the Schedule 13G pursuant to Rule 13D-4.
17
(6) The table includes the number of shares of Common Stock that Joseph H.
Lemieux, Thomas L. Young, R. Scott Trumbull, Terry L. Wilkison and all
directors and officers as a group (other than as set forth in relation to
KKR Associates, L.P.) held in the Stock Purchase and Savings Program as of
February 28, 2001. No shares are held in such program for Peter J. Robinson.
(7) The number of shares shown as beneficially owned includes the following
number of shares of unvested restricted stock over which the following
persons or group had voting, but not investment, power as of March 12, 2001;
Mr. Lemieux--230,105 shares; Mr. Young--20,000 shares; Mr. Trumbull--15,000
shares; Mr. Wilkison--15,000 shares; and all directors and officers as a
group (other than as set forth in relation to KKR Associates, L.P.)--403,352
shares. The number of shares shown as beneficially owned by Mr. Robinson
includes 20,000 phantom stock units issued under the Company's 1997 Equity
Participation Plan.
(8) Does not include 3,000 shares of Common Stock held in an irrevocable trust
created by Mr. Michelson for the benefit of his children with respect to
which Mr. Michelson disclaims any beneficial ownership.
The limited partnership agreements pursuant to which two of the limited
partnerships noted in footnote 2 above (the "KKR Partnerships") were organized,
by their terms, expired on December 31, 2000. The limited partnership agreement
may be amended by all of the limited partners to extend the term beyond such
date. No such amendment has been adopted. There can be no assurance that KKR
Associates, L.P., as general partner of the KKR Partnerships, will seek an
amendment or, if sought, that an amendment will be approved by the limited
partners. In connection with the dissolution and winding up of the limited
partnerships, KKR Associates, L.P. has sole discretion regarding the timing
(which may be one or more years after the expiration of the partnership
agreements) and manner of the disposition of any Common Stock held by such
limited partnerships, including public or private sales of such Common Stock,
the distribution of such Common Stock to the limited partners of the limited
partnerships or a combination of the foregoing.
GENERAL INFORMATION
AUDITORS
The Board, upon the recommendation of the Audit Committee, has approved the
selection of Ernst & Young LLP as the Company's independent auditors for 2001.
Ernst & Young LLP fees and expenses for the 2000 annual audit were $2.8 million
and all other fees were $4.5 million, including audit related services of
$2.2 million, and nonaudit services of $2.3 million. Representatives of Ernst &
Young LLP will attend the Annual Meeting, will have the opportunity to make a
statement if they desire to do so, and will be available to respond to
appropriate questions.
OUTSTANDING STOCK
An aggregate of 144,954,443 shares of the Company's Common Stock was
outstanding at the close of business on March 12, 2001. Each share entitles its
holder of record to one vote on each matter upon which votes are taken at the
Annual Meeting. Shares of Common Stock held by the trustee under the Company's
401(k) plans must be voted by the trustee in accordance with written
instructions from participants in such plan or, as to those shares for which no
instructions are received, in a uniform manner as a single block in accordance
with the instructions received with respect to the majority of shares for which
instructions were received from participants. No other securities are entitled
to be voted at the Annual Meeting.
18
REVOCABILITY OF PROXIES
Any proxy solicited hereby may be revoked by the person or persons giving it
at any time before it has been exercised at the Annual Meeting by giving notice
of revocation to the Company in writing or at the 2001 Annual Meeting.
SOLICITATION COSTS
The Company will pay the cost of preparing and mailing this Proxy Statement
and other costs of the proxy solicitation made by the Board. Certain of the
Company's officers and employees may solicit the submission of proxies
authorizing the voting of shares in accordance with the Board's recommendations,
but no additional remuneration will be paid by the Company for the solicitation
of those proxies. Such solicitations may be made by personal interview,
telephone and telegram. Arrangements have also been made with brokerage firms
and others for the forwarding of proxy solicitation materials to the beneficial
owners of Common Stock, and the Company will reimburse them for reasonable
out-of-pocket expenses incurred in connection therewith.
VOTING PROCEDURES
The By-laws of the Company (the "By-laws") provide that a majority of the
Common Stock issued and outstanding and entitled to vote at the Annual Meeting,
the holders of which are present in person or represented by proxy, shall
constitute a quorum at any Annual Meeting.
Votes cast at the Annual Meeting will be tabulated by the persons appointed
by the Company to act as inspectors of election for the Annual Meeting. The
inspectors of election will treat shares of voting stock represented by a
properly signed and returned proxy as present at the Annual Meeting for purposes
of determining a quorum, without regard to whether the proxy is marked as
casting a vote or abstaining. Likewise, the inspectors of election will treat
shares of voting stock represented by "broker non-votes" (i.e., shares of voting
stock held in record name by brokers or nominees as to which (i) instructions
have not been received from the beneficial owners or persons entitled to vote,
(ii) the broker or nominee does not have discretionary voting power under
applicable New York Stock Exchange rules or the instrument under which it serves
in such capacity, and (iii) the recordholder has indicated on the proxy card or
otherwise notified the Company that it does not have authority to vote such
shares on that matter) as present for purposes of determining a quorum.
The By-Laws provide that all matters to come before the Annual Meeting
require the approval of the vote of the holders of a majority of the stock
present in person or represented by proxy, unless the question is one upon which
by express provision of law, or the Certificate of Incorporation, or the
By-Laws, a different vote is required, in which case such express provision
shall govern and control the decision of such question. On any such matters,
abstentions as to particular proposals will have the same effect as votes
against such proposals. Broker non-votes as to particular proposals, however,
will be deemed shares not having voting power on such proposals. Accordingly,
broker non-votes will not be counted for purposes of determining whether the
requisite majority vote has been received in favor of a particular proposal.
The By-Laws further provide that all elections shall be had and all
questions decided by a plurality vote. Therefore, directors will be elected by a
favorable vote of a plurality of the shares of Common Stock present and entitled
to vote, in person or by proxy, at the Annual Meeting. Accordingly abstentions
or broker non-votes as to the election of directors will not affect the election
of the candidates receiving the plurality of votes.
19
If a properly signed proxy form is returned to the Company and is not
marked, it will be voted in accordance with management's recommendations on all
proposals.
OTHER MATTERS
Management of the Company does not know of any matter that will be presented
for action at the 2001 Annual Meeting other than the election of directors.
However, if any other matter should be brought to a vote at the meeting, all
shares covered by proxies solicited hereby will be voted with respect to such
matter in accordance with the proxy holders' discretion.
SECTION 16 BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership (Forms 3, 4 and 5) with the Securities and
Exchange Commission and the New York Stock Exchange. Officers, directors and
greater-than-ten-percent holders are required by SEC regulation to furnish the
Company with copies of all such forms which they file. To the Company's
knowledge, based solely on review of the copies of such reports furnished to the
Company and written representations that no reports were required, all of its
directors and executive officers made all required filings on time during 2000,
except that for 2000, Philip McWeeny and Peter J. Robinson each filed one report
late covering, in each case, one transaction.
SHARE OWNER PROPOSALS AND NOMINATIONS FOR 2002 ANNUAL MEETING
A share owner desiring to submit a proposal for inclusion in the Company's
Proxy Statement for the 2002 Annual Meeting must deliver the proposal so that it
is received by the Company no later than December 1, 2001. The Company requests
that all such proposals be addressed to James W. Baehren, Secretary,
Owens-Illinois, Inc., One SeaGate, Toledo, Ohio 43666, and mailed by certified
mail, return receipt requested.
REPORTS TO SHARE OWNERS
The Company has mailed this Proxy Statement and a copy of its 2000 Annual
Report to each share owner entitled to vote at the Annual Meeting. Included in
the 2000 Annual Report are the Company's consolidated financial statements for
the year ended December 31, 2000.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2000, INCLUDING THE FINANCIAL STATEMENT SCHEDULES, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, MAY BE OBTAINED WITHOUT CHARGE BY
SENDING A WRITTEN REQUEST THEREFOR TO OWENS-ILLINOIS, INC., INVESTOR RELATIONS,
ONE SEAGATE, TOLEDO, OHIO 43666.
Toledo, Ohio
March 31, 2001
20
APPENDIX A
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
1. PURPOSE
The Audit Committee shall provide assistance to the members of the Board of
Directors in fulfilling their responsibility to shareholders, potential
shareholders, and the investment community relating to the Company's accounting
and reporting practices, and the quality and integrity of its financial reports.
The Audit Committee's primary duties and responsibilities are to:
- Oversee that management has maintained the reliability and integrity of
the accounting policies and financial reporting and disclosure practices
of the Company.
- Oversee that management has established and maintained processes to assure
that an adequate system of internal control is functioning with the
Company.
- Oversee that management has established and maintained processes to assure
compliance by the Company with all applicable laws, regulations and
corporate policies.
The Audit Committee will fulfill these responsibilities primarily by carrying
out the activities enumerated in Section IV of this Charter.
To the extent necessary to discharge its duties hereunder, the Audit
Committee shall have the authority to retain special legal, accounting or other
consultants to advise the Committee. The Audit Committee may request any officer
or employee of the Company or the Company's outside counsel or independent
auditor to attend a meeting of the Committee or to meet with any members of, or
consultants to, the Committee.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall meet the independence and experience
requirements of the New York Stock Exchange.
The members of the Audit Committee shall be appointed by the Board. Unless a
Chairperson is elected by the full Board, the members of the Audit Committee may
designate a Chairperson by majority vote of the full Audit Committee membership.
III. MEETINGS
The Audit Committee shall meet as frequently as circumstances dictate. As
part of its responsibility to foster open communication, the Audit Committee
should meet at least annually with management, the director of the internal
auditing department and the independent auditors separately to discuss any
matters that the Audit Committee or each of these groups believe should be
discussed privately. In addition, the Audit Committee or its Chairperson should
meet with the independent auditors and management as requested to review the
Company's financial statements consistent with Section IV.3 below.
A-1
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
1. Review and reassess, at least annually, the adequacy of this Charter.
Make recommendations to the Board, as conditions dictate, to update this
Charter.
2. Review with management and the independent auditors the Company's annual
financial statements, including a discussion with the independent
auditors of the matters required to be discussed by auditing standards
generally accepted in the United States.
3. At the request of the independent auditors or management, review with
the independent auditors and management the Company's quarterly financial
statements, including any discussion with the independent auditors of any
matters required to be discussed by auditing standards generally accepted
in the United States. The Chairperson of the Audit Committee or such
other member of the Audit Committee designated by the Chairperson may
represent the entire Audit Committee for purposes of this review.
4. Review the performance of the independent auditors and make
recommendations to the Board regarding the appointment or termination of
the independent auditors. The Audit Committee and the Board have the
ultimate authority and responsibility to select, evaluate, and where
appropriate, replace the outside auditor. The independent auditors are
ultimately accountable to the Audit Committee and the entire Board for
such independent auditors' review of the financial statements and
controls of the Company. On an annual basis, the Audit Committee should
review and discuss with the independent auditors all significant
relationships the independent auditors have with the Company to determine
the independence of the independent auditors.
5. Oversee independence of the independent auditors by:
- receiving from the independent auditors, on a periodic basis, a
formal written statement delineating all relationships between the
independent auditors and the Company consistent with requirements
of the Independence Standards Board;
- reviewing, and actively discussing with the Board, if necessary,
and the independent auditors, on a periodic basis, any disclosed
relationships or services between the independent auditors and the
Company or any other disclosed relationships or services that may
impact the objectivity and independence of the independent
auditors; and
- recommending, if necessary, that the Board take appropriate action
to satisfy itself of the independence of the independent auditors.
6. In consultation with the Company's Chief Financial Officer, the
independent auditors and the internal auditors, review the integrity of
the Company's financial reporting processes, both internal and external.
7. Establish regular systems of reporting to the Audit Committee by each of
management, the independent auditors and the internal auditors regarding
any significant judgments made in management's preparation of the
financial statements and any significant difficulties encountered during
the course of the review or audit, including any restrictions on the
scope of work or access to required information.
A-2
8. Review any significant disagreement among management and the independent
auditors or the internal auditing department in connection with the
preparation of the financial statements.
9. Obtain from the independent auditors assurance that Section l0A of the
Private Securities Litigation Reform Act of 1995 has not been implicated.
10. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
11. Review, with the Company's General Counsel, any legal matter that could
have a material impact on the Company's financial statements.
12. Report through its Chairperson or his designee to the Board following
meetings of the Audit Committee.
13. Maintain minutes or other records of meetings and activities of the
Audit Committee.
V. GENERAL
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
Nor is it the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations.
A-3
[LOGO]
OWENS-ILLINOIS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P The undersigned hereby appoints Edward C. White, Jeffrey A. Denker and
James W. Baehren and each of them, or if more than one is present and acting
R then a majority thereof, as Proxies with full power of substitution, and
hereby authorize(s) them to represent and to vote, as designated below, all
O shares of common stock of Owens-Illinois, Inc. held of record by the
undersigned on March 12, 2001, at the Annual Meeting of Share Owners to be
X held on May 9, 2001, or at any adjournment thereof.
Y Election of Directors, Nominees:
Class I: 1. Robert J. Dineen, 2. James H. Greene, Jr.,
3. George R. Roberts and 4. Thomas L. Young
(PLEASE MARK THIS PROXY AND SIGN AND DATE IT ON THE REVERSE SIDE HEREOF AND
RETURN IT IN THE ENCLOSED ENVELOPE)
SEE REVERSE
SIDE
PLEASE MARK YOUR
X VOTES AS IN THIS
EXAMPLE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHARE OWNER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
FOR WITHHELD
1. Election of Directors / / / / WITHHOLD AUTHORITY to vote for all 2. In their discretion, the Proxies are
FOR nominees listed nominees listed on reverse side authorized to vote upon such other
on the reverse side business as may properly come before
(except as marked to the meeting.
the contrary).
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
___________________________________________________
Please sign exactly as name appears
hereon. When shares are held by joint
owners, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by
President or other authorized officer.
If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
______________________________________
Signature
______________________________________
Signature, if held jointly DATE